Ayoub v The Recyclers & Anor

Background facts

1. The substantive proceedings were heard in 2015 and 2016 by Justice Ward CJ in Eq and Justice Stevenson. The matter has been fiercely litigated and involved multiple procedural decisions that it is not worth setting out in detail here, for completeness I refer to The Recyclers (NSW) Pty Ltd v Ayoub (No 3) [2016] NSWSC 576, The Recyclers (NSW) Pty Ltd v Ayoub (No 5) [2016] NSWSC 864, The Recyclers (NSW) Pty Ltd v Ayoub [2016] NSWSC 144, The Recyclers (NSW) Pty Ltd v Ayoub [2017] NSWSC 844.
2. Briefly, in 2011, Aus Wide Recycling acquired the property known as Kembla Garage. In 2015 The Recyclers and Aus Wide entered into a lease with respect to the property, at this time Mr Ayoub was in possession of the property. Mr Ayoub claimed, that the director of Aus Wide Recycling, Mr Faddoul, had agreed that Kembla Garage was held on trust for one of Mr Ayoub's companies and further that the lease had been obtained by fraud. The Recyclers sought possession of the property as well as a claim for damages for trespass and nuisance, as well as a variety of other orders. Mr Ayoub denied any wrongdoing, asserting that any actions taken with respect to the property had been authorised by Aus Wide Recycling and Mr Faddoul. He further asserted in cross-claim, that the Recyclers had dumped asbestos material at the property.
3. Mr Stewart was the director of The Recyclers. Mr Ellicott acted as the defendants' solicitor in the matters involving Mr Ayoub. Mr Donnelly was appointed to act as the plaintiff's tutor and solicitor by Justice Darke in 2015.
4. Ultimately, as noted above, Mr Ayoub had judgement entered against him, had his cross-claims dismissed and was ordered to pay costs.
5. On 14 March 2017, the New South Wales Civil and Administrative Tribunal found Mr Donnelly to be guilty of professional misconduct and ordered that his name be removed from the roll. That finding was apparently unrelated to any matter involving Mr Ayoub or these proceedings.
6. As previously mentioned, the substance of this case rests on the alleged corrupt agreement between Mr Donnelly and Mr Stewart together with Mr Ellicott. Mr Ayoub alleges, that there was some sort of agreement in place whereby which Mr Donnelly would 'throw the case' for a sum of money. Mr Ayoub also alleged that Mr Donnelly actively ignored the asbestos dumping issue as part of this agreement to run his case irregularly. The basis of this allegation rests on a letter supposedly sent by Mr Donnelly to Mr Stewart. The letter, dated 20 February 2018, reads in part: During the time on which I was acting for Michael Ayoub, he was very ill and mentally damaged. While in that state of health both physically and mentally, you know that Michael was not able to notice any irregularity in running his case. When you first approached me in relation to Michael's matter, you saw an opportunity for a deal which was beneficial to both of us. Given my age and the fact that I was about to retire and given the problems I had, I agreed with you. However, it seems that you are now trying to ignore me. …As I became anxious about payment, I had a short meeting with you and Mr Ellicott in the City in which you both assured me that you would pay me after you obtain a judgement against Mr Ayoub. Now, you have commenced bankruptcy proceedings against Michael and yet, you have not paid me a cent… I believe that Michael Ayoub has now reasonably recovered. He has confronted me and demanded that I explain my failure when I was his solicitor and tutor. Michael has confronted me regarding the manner in which I handled his matter. I tried to fool him to cover up my agreement with you and Tom Ellicott but unfortunately Michael has not sufficiently recovered and he can no longer be fooled around like when he was ill. I am sure you understand my predicament. You and your solicitor have refused to pay me. On the other hand, Michael has threatened me with a big action for damages. I am very concerned that Michael will soon find out about our agreement.
7. It appears, on the evidence, that this letter was first discovered when Mr Ayoub attempted to deploy the letter in one of his affidavits in Federal Court bankruptcy proceedings (affidavit of Mr Ellicott, 1 May 2019 [24]). Mr Ayoub stated that he had found the letter when collecting various papers from Mr Donnelly (affidavit of Mr Ayoub, 25 April 2019 [129]). After reading Mr Ayoub's affidavit and the attached letter, Mr Ellicott contacted Mr Stewart to ask if he ever received the letter (affidavit of Mr Stewart, 2 May 2019 [32]). Mr Ellicott denied ever receiving the letter or reaching any arrangement with Mr Donnelly (affidavit of Mr Ellicott, 1 May 2019 [9]-[10]). Mr Stewart denied ever receiving the letter and denied ever reaching any arrangement with Mr Donnelly (affidavit of Mr Stewart, 2 May 2019 [33]-[40]). Mr Ellicott immediately responded to Mr Donnelly denying any agreement, and then reported the matter to the police and the Law Society (affidavit of Mr Ellicott, 1 May 2019 [29]).
8. On 12 June 2018, Mr Ellicott wrote to Mr Donnelly regarding the February 2018 letter, Mr Ellicott informed Mr Donnelly he would be referring the matter to the police. The letter in part reads (CB178): The implication in the letter that there is some conspiracy between yourself, the writer, and Mr Stewart against Mr Ayoub, is scandalous and abhorrent. For the avoidance of doubt, we wholly reject the allegations and implications of the letter, and confirm that neither we nor Mr Stewart have seen it prior to 7 June 2018. …..
9. Mr Donnelly responded to Mr Ellicott's letter by email on 17 June 2018, stating "I refer to your letter of 12 June 2018. There would have been no need for my letter of 20 February 2018 had the agreement been complied with" (CB181).
10. It appears then that Mr Donnelly agreed to be interviewed in about October 2018, in relation to the letter by two employees of Mr Ayoub. The transcript of that interview was attached to Mr Donnelly's affidavit sworn 8 February 2019 (transcript) (CB65). In the interview, Mr Donnelly denied writing the letter although recognised his signature on the bottom of the document. He could not recall sending the letter, but admitted to reaching some agreement with Mr Stewart to pay for Mr Ayoub's costs.
11. The matter was later investigated be DSC Simpson, in January 2019. DSC Simpson spoke to Mr Donnelly on the phone, Mr Donnelly stated he had no knowledge of the letter and denied any arrangement with Mr Stewart. Mr Donnelly confirmed this in an official police statement (Ex D1). DSC Simpson later spoke to Mr Ayoub, Mr Ayoub refused to give a statement to police (CB397).

Evidence

1. There were various affidavits filed by both parties in the matter. Much of the material in the affidavits related to the substantive proceedings.
2. I note that the defendant tendered various documents to demonstrate that the 'asbestos issue' was being actively addressed by both parties throughout the litigation. These documents included a Notice to Produce to the company Affective Services filed by Mr Donnelly seeking documents as they related to the disposal of waste material (Ex D3), the October 2016 affidavit of Mr Donnelly (Ex D5), the 11 December 2015 affidavit of Mr Ellicott (Ex D6) and the 17 December 2015 affidavit of Mr Fernandez (Ex D7) that all directly address the dumping of asbestos.
3. Mr Ellicott and Mr Stewart both swore affidavits in the proceedings. Mr Ellicott denied speaking to Mr Donnelly about the alleged agreement. He further provides details of all the dates he attended court and outlines the five brief conversations he had had with Mr Donnelly as related to the running of the case, none of the conversations related to any kind of conspiracy against Mr Ayoub (exhibit to Mr Ellicott affidavit dated 1 May 2019). Mr Ellicott also provides details of all the dates Mr Stewart accompanied him to Court, he states he believes that neither he nor Mr Stewart spoke to Mr Donnelly on those dates (exhibit to Mr Ellicott affidavit dated 1 May 2019). Mr Stewart also denies entering into an agreement with Mr Donnelly, and denies ever speaking to him at Court.
4. Both Mr Ellicott and Mr Stewart maintained this position throughout cross-examination. Mr Ellicott denied talking to Mr Donnelly when they were awarded judgement (T70/42) and denied ever speaking about $50,000 (T70/50) or an arrangement to pay for costs (T77/20). Mr Stewart also denied meeting with Mr Donnelly or entering any discussions about settlement (T102/10-12). Mr Ellicott and Mr Stewart both denied ever receiving the letter (T74/29; T95/43).
5. DSC Simpson confirmed that when he first called Mr Donnelly he had no recollection of the letter (T68/7). He stated that when Mr Donnelly came into the police station to prepare the statement, DSC Simpson stated that "he had his opinions on it and was very clear and concise in the evidence he gave" (T68/25).
6. Mr Donnelly, on the other hand gave inconsistent evidence. In his affidavit filed in these proceedings he confirmed that the interview he had given with Mr Ayoub's employees was a true and accurate reflection of what he believed the facts to be. I note that the transcript of the interview of Mr Donnelly, deployed by Mr Ayoub in an attempt to establish his case was of limited value. Notwithstanding any admissibility issues that arise with seeking to rely on such a document, the actual substance of the interview did not shed significant light on the situation. Again as noted above, Mr Donnelly first denied any knowledge of the letter but the interview proceeded on the basis that he did have such knowledge. Some sort of later agreement was then referred to. I placed little to no reliance upon this document, all it revealed to me was further evidence of Mr Donnelly's unreliability as a witness.
7. During cross-examination Mr Donnelly struggled to recall details surrounding the substantive proceedings, he later stated that the $50,000 had come about after the case between Mr Ayoub and The Recyclers had concluded (T37/25), he stated that the $50,000 related to some agreement between him and The Recyclers that he would not appeal the decision in the substantive proceedings (T37/31-41). He could not recall the details of the conversation with DSC Simpson (T39/39), although stated he had told DSC Simpson the truth (T39/46). He later stated that the first time he saw the February 2018 letter was in the police station (T47/35) and denied writing the letter (T47/38). He did identify his signature on the bottom of the letter (T47/44) and later said he had signed it (T62/9). He also stated that he could not recall when he signed it or how the letter came into existence (T63/27). Mr Donnelly then recalled some arrangement with Mr Ellicott, stating that Mr Ellicott had agreed to pay some of his costs up to $50,000 (T50/38-39), he could not state precisely when this occurred but stated it was after the substantive proceedings had concluded (T54/3; 56/15-32). He did not tell DSC Simpson about the conversation (T57/46). Mr Donnelly could not recall sending the email on 18 June 2018 (T59/13).
8. Significantly, the original 20 February 2018 letter was never produced to the Court. Mr Ayoub stated he could not find the original (T48/12).

Legal principles

1. The matter before me requires determination of a narrow factual question, that is the existence of a particular agreement between Mr Donnelly and others. Moreover, the factual finding I am invited to make, involves making extremely serious findings against not only Mr Donnelly, but Mr Stewart and the solicitor Mr Ellicott. In such circumstances it is important to note s 140 of the Evidence Act 1995 (NSW): 140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence, and (b) the nature of the subject-matter of the proceeding, and (c) the gravity of the matters alleged.
2. This of course enshrines the principle as set out in Briginshaw v Briginshaw (1938) 60 CLR 336: The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
3. Moreover, caution should be exercised before finding a particular arrangement existed absent credible, corroborating material. As McClelland J in Watson v Foxman (1995) NSWLR 49 noted (at 319) : Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
4. In a similar vein, Hammerschlag J John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 stated (at [94]): Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

Submissions

1. The plaintiff filed no written submissions in the matter. On 15 October, Mr Tang gave brief oral submissions, noting that, based on the February letter, it is clear that there was an agreement and that agreement was capable of being put into writing (T125/8-15). The letter is evidence of an agreement between people who knew each other and were professionally retained by each other and suggests some sort of conspiracy against Mr Ayoub (T129/40-47). He further submitted that there was a motive on the part of Mr Stewart for entering the agreement, he wanted to ensure that he suffered no sanctions or consequences for dumping the asbestos (T126/20-127/17).
2. The defendant submits that the plaintiff's evidence does not prove the terms of the alleged agreement.
3. The evidence of Mr Stewart and Mr Ellicott that there was no agreement was firm, given without evasion or equivocation, and in Mr Ellicott's case unchallenged.
4. The existence of the agreement depends entirely on the uncorroborated word of Mr Donnelly. The transcript of the interview annexed to Mr Donnelly's affidavit, does not record admissible evidence. Moreover the transcript itself indicates that Mr Donnelly cannot recall key facts about the agreement. The defendant notes that, under s 140 of the Civil Procedure Act and the principle in Briginshaw v Briginshaw and given the serious allegations against Mr Ellicott and Mr Stewart, the Court must feel an actual persuasion that a particular fact is so.
5. Further the plaintiff's evidence is characterised by inconsistency, he gave different evidence in the transcript, to DSC Simpson and in Court. The evidence he gave in Court lacks credibility, it is clearly a recent invention, he could not recall any details of the surrounding circumstances and could not recall any details of the conversation. There is no independent corroboration of the alleged agreement. Mr Donnelly admitted in the signed police statement to DSC Simpson that he had not written the letter, that statement was executed only 9 days before his affidavit in this case.
6. The defendant submitted that there were several problems with the factual assumptions in the February 2018 letter, that suggests it is not a credible source of evidence, namely: 1. The letter states that Mr Donnelly had just become aware of the bankruptcy proceedings, but in fact deposed in a Federal Court affidavit that he had only found out about the proceedings in March (ex D2) 2. Mr Donnelly describes meeting Mr Ellicott in the city on which occasion Mr Ellicott promised payment after obtaining a judgement against Mr Ayoub. However, Mr Ellicott deposed in his affidavit there were only four dates were they were all in the city together; 19 October 2015, 5 May 2016, 14 November 2016 and 16 June 2017. The first of those dates was when Mr Donnelly was appointed tutor and the last is when judgement was awarded, and further during the time in 2016 the case was still being hard fought and fiercely litigated by both sides; it seems unlikely that this conversation would happen on any of these dates.
7. The defendant notes that the plaintiff claims that Mr Donnelly agreed to conduct the case to the advantage of the defendants and not pursue certain issues in particular the alleged dumping of asbestos. The defendant submits that there are several matters that undermine this theory: 1. Mr Donnelly was not the only person who had conduct of Mr Ayoub's case, there were other lawyers and Counsel involved in the matter. There is no evidence from Mr Ayoub that any of his previous lawyers conducted his case irregularly. Nor is there evidence that Mr Donnelly somehow kept the other lawyers in check so as to honour his alleged agreement; 2. Mr Ayoub's legal team including Mr Donnelly were determined in their efforts to pursue Mr Ayoub's case, the litigation was hard fought and contested; 3. Mr Donnelly did in fact raise the matter of the alleged dumping of asbestos in apparent breach of the alleged agreement. He issued a subpoena seeking production of documents related to the treatment of asbestos (Ex D3), and raised the issue in a 10 February 2016 cross claim and a 28 October 2016 affidavit. Both parties proceeded on the basis that the asbestos issue was in play; 4. Counsel for Mr Ayoub made submissions before Justice Stevenson intending to shield Mr Donnelly from personal liability, this would be unnecessary if Mr Donnelly had nothing to fear, apropos costs, as he alleges; and 5. The February 2018 letter, to the extent it is genuine, constitutes a very belated complaint of breach of the alleged agreement.
8. If the alleged agreement was made and adhered to, this conduct was not only superfluous but undertaken in defiance of its purported terms.
9. Finally, the defendant submits that it would have made no sense for Mr Ellicott and Mr Stewart to enter such an agreement with Mr Donnelly, they had already been awarded judgement and costs orders in their favour. They had plenty of bargaining chips to place on the table in order to compromise a potential appeal.
10. It follows that the separate question should be answered in the negative and the proceedings should be dismissed.

Consideration

1. The plaintiff's case before me depends on the Court being satisfied that an agreement was reached between Mr Ellicott, Mr Stewart and Mr Donnelly, the effect of which would at least create a basis that the outcomes reached by Stevenson J and Ward CJ in Eq were dishonestly obtained. The plaintiff seeks to overturn those judgements and re-litigate the entire matter on the basis of the alleged conspiracy between his tutor/solicitor at the time and the other party to the proceedings.
2. The difficulty for the plaintiff is that there is in my view no credible or factual basis for agreement. Leaving aside the emphatic denials of Mr Stewart and Mr Ellicott, Mr Ayoub himself was unable to provide any direct evidence and relies entirely on the February 2018 letter.
3. Moreover, the evidence of the alleged author of the letter, Mr Donnelly, was entirely unsatisfactory and on the whole inconsistent. Mr Donnelly on more than one occasion has denied the existence of the agreement. However in relation to the letter itself, his evidence is somewhat bizarre. He accepts that the signature on the letter is his, but denies preparing or sending the letter. The latter is corroborated by the fact that Mr Ellicott and Mr Stewart deny ever receiving it. They further deny entering into any arrangement with Mr Donnelly whatsoever.
4. Mr Donnelly in his evidence before the Court, for the first time, seemed to suggest that there was an arrangement with him and Mr Ellicott for the payment of some of his costs and further that this course was consistent with some old practice. His evidence, which I don't accept as credible or reliable is further not supported by any contemporaneous diary notes nor any other witnesses. I moreover accept the evidence of Mr Stewart and Mr Ellicott, I accept their denials of receiving the letter and their denials of entering into any arrangement with Mr Donnelly for him to conduct the litigation to their benefit. I accept as a matter of practical possibility that a successful party may pay an unsuccessful party a sum of money in order to prevent any appellate action. However, I do not accept that this occurred in this case.
5. I further note, that the existence of any agreement seems only more unlikely when considering the surrounding factual circumstances. It is totally unclear what actions, if any, Mr Donnelly possibly took to 'throw the case'. I am persuaded, as the defendant pointed out, that both parties were clearly enlivened to the asbestos issue and operated on the basis that it was a contentious issue in the substantive proceedings.
6. I remain unpersuaded that there was any agreement between Mr Donnelly on the one hand and Mr Stewart and Mr Ellicott on the other. I am unable to reach the requisite reasonable satisfaction that events took place as Mr Ayoub suggests. The evidence of the conspiracy is entirely dependent on this letter which, in the absence of any original and in considering the evidence of the other witnesses, I am entirely reluctant to place any weight on. It seems to me that the separate question must be answered in the negative and therefore the proceedings be dismissed.
7. I invite the parties to prepare short minutes reflecting these reasons also noting I have already ordered a stay against the other parties. I will also hear the parties on costs if necessary.

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