Solicitors:
Walker & George Lawyers (Plaintiff)
File Number(s): 2019/114262
[2]
Judgment - ex tempore (revised 29 august 2019)
By Amended Originating Process filed on 28 May 2019, Jayada Logistics Pty Ltd (in liq) ("Company"), by its liquidator Mr Michael Smith ("Liquidator"), sought a range of relief as against Mr Emad Awad, the sole director of the Company. The relief sought was narrowed in the course of submissions so that the Company now seeks, as its primary relief, an order that Mr Awad pay the Company the fair market value for two vehicles previously owned by the Company. Alternative orders were sought that might have brought about the possession of the vehicles, which may have involved a range of practical difficulties so far as third party interests may have intervened. They are not presently pressed, if the primary relief sought by the Company is obtained.
Mr Awad has never appeared in the proceedings, although he is plainly on notice of them and has been in correspondence with the Liquidator from time to time and with the Court at least once. An order for the arrest of Mr Awad was issued, but that arrest has not to date been effected. The circumstances of those matters are noted in my judgments delivered on 12 April 2019 and 17 June 2019. In the second of those judgments, I noted that Mr Awad had been given a significant period in which to comply with orders previously made by the Court to disclose the whereabouts of the relevant trucks, and had failed to do so over that significant period. I ordered that an arrest warrant be issued, and stayed for a period to allow Mr Awad a further opportunity to comply with those orders or to appear. That arrest warrant came into effect when Mr Awad did not do so but, as I noted, it has not been executed. Mr Awad again does not appear today.
Mr Smith relies on his affidavit sworn 11 April 2019, which refers to the contention that the Company is the owner of the two trucks. I am satisfied that the Company's ownership of the trucks has been established, on the balance of the evidence. I draw that conclusion because, first, there is evidence that the Company had secured both trucks to the Commonwealth Bank of Australia, which now accepts that its security interest was not properly registered and has released that security. Second, in the correspondence between the Liquidator and Mr Awad, where Mr Awad has given various contradictory explanations of how the trucks came to be disposed of, he has never suggested that the Company did not own both of them. Information provided by the Roads and Maritime Services raises a possibility that the Company or Mr Awad may previously have disposed of one of the trucks without lodging a notice of disposal. It appears that Mr Awad also purportedly disposed of the second truck. Mr Smith also referred in that affidavit to the steps which had then been taken by the Company and the Liquidator, without success, to seek to recover the trucks. As I have noted, there has been no further success in the period which has since passed.
An affidavit of Mr Duck dated 11 April 2019 refers to a conversation with Mr Awad immediately after the Liquidator was appointed, and to attempts then made to locate the trucks. By his affidavit dated 20 May 2019, Mr Germanos gives evidence of attempts to effect service upon Mr Awad. Mr Awad's knowledge of the proceedings is in any event apparent from correspondence, including his confirmation, on one occasion, that he would attend Court in order to avoid the risk of arrest. As I have noted above, he ultimately did not do so.
By his further affidavit dated 20 August 2019, Mr Smith refers to steps which have been taken to obtain a valuation of each of the vehicles. One of those vehicles, a 2015 Isuzu truck, has been valued by a motor vehicle auctioneer with a value of at least $24,000, albeit without sighting the vehicle, which is adopted by Mr Smith in his affidavit. It seems to me that that value for the vehicle has been established, where there is evidence that the vehicle was financed at a substantially higher value in 2015; the auctioneer is experienced in the auction sale of vehicles; and Mr Awad has had ample opportunity to lead evidence of the condition and value of the vehicle, if he wished to establish that it had a lower value. In those circumstances, it seems to me that the purported transfer of the vehicle by Mr Awad for a nominated value of $3,750, which was not paid to the Company, provides no evidence of its value. Mr Smith refers to an estimated value for the second vehicle of at least $15,000, also provided by the auctioneer without sighting the vehicle. It seems to me that that value has also been established, for the same reasons.
Mr Munro, who appears for the Company in the application, in turn sets out, in submissions, the several statements which have been made by Mr Awad as to the circumstances in which the vehicles were sold, by reference to Mr Smith's affidavit evidence of those matters and correspondence that is in evidence. Those statements included, at varying times, claims that Mr Awad had one vehicle and a friend had the other; that the former staff of the Company had the vehicles in Queensland; that the former staff of the Company had the vehicles in Victoria and Queensland; that the vehicles had been stolen or removed from him by force; or that he had been forced against his will to sign transfer documents for the one vehicle as to which a transfer is recorded. The inconsistencies in those statements plainly undermine the weight that can be given to any explanation by Mr Awad of the circumstances in which the vehicles were transferred, but little turns upon that proposition where there is evidence that, at least, they are no longer in the Company's possession.
Mr Munro in turn draws attention to the circumstances in which a disposition of company property, after the commencement of the winding up by the Court, is void under s 468 of the Corporations Act 2001 (Cth). That has the consequence that, at least in respect of the 2015 Isuzu truck, property in the vehicle will remain with the Company. It seems to me, however, that that is of no practical relevance, where the Company's continuing property in a vehicle which cannot be recovered after a long period of time is of no practical worth to it. For all practical purposes, it seems to me that the Company has been deprived of possession of that vehicle and lost its full value. There is no evidence as to when the other vehicle was disposed of, as distinct from the fact that it is now not in the Company's possession, so it is not clear whether s 468 of the Act would apply to the disposition of that vehicle. It is not necessary to address Mr Munro's other submissions as to the circumstances in which the Company could obtain an order for recovery of the vehicles, where a claim is now put for their value rather than for such an order.
Mr Munro identifies three bases on which a claim is put for the value of the vehicles. The first is that Mr Awad breached his duties owed to the Company, under ss 180 and 181 of the Corporations Act or at general law, in respect of the disposition of the vehicles. It seems to me to be plain that there is, at the least, a breach of Mr Awad's duty of care owed to the Company, and a breach of his duty to act in good faith and for proper purposes, where both vehicles have been permitted to pass out of the Company's possession, so that they are now practically irrecoverable, without payment of their value to the Company.
Second, Mr Munro identifies the possibility that the transactions may amount to uncommercial transactions. It is not necessary to address that possibility, where it would duplicate, for present purposes, the relief that would otherwise be available for a breach of director's duties, under the Corporations Act and at general law.
Third, Mr Munro identifies a claim in conversion, on the basis that Mr Awad's dealings with the trucks were repugnant to the Company's immediate right of possession of the trucks, so far as he caused their disposal, whether by way of sale or otherwise: CHEP Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 at [180]ff. I am satisfied that a claim in conversion would be also established in the present circumstances, so far as Mr Awad's act in disposing of the Company's trucks, without accounting for the proceeds, would be inconsistent with the Company's right of possession in them. I note that the position is a fortiori so far as a disposal was made after the appointment of the Liquidator, at a time that Mr Awad had no capacity to commit the Company to such a disposal. I note, for completeness, that I can properly treat that disposal as Mr Awad's voluntary act, where he has never sought to establish his various allegations that he was forced to dispose of them by leading evidence before the Court.
In these circumstances, I am satisfied that the Company has at least established a claim for breach of director's duties under ss 180 and 181 of the Corporations Act and at general law, and for conversion, against Mr Awad. I am satisfied that the values attributed by Mr Smith's evidence to the trucks, by reference to third party valuations, are properly accepted by the Court, in circumstances that Mr Awad has had the opportunity to lead evidence to the contrary, but has not sought to do so. I am satisfied that the Company's loss is the full value of the trucks, irrespective of whether it still has legal ownership of them, where their location is unknown and there is little or no practical prospect of recovery.
Accordingly, I make the following orders:
There be judgment for Jayada Logistics Pty Ltd (in liq) against the Defendant, Mr Emad Awad, in the amount of $39,000.
The Defendant pay the Plaintiff's costs of these proceedings, as agreed or as assessed.
[3]
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Decision last updated: 06 November 2019