CL Asset Holdings Pty Ltd v Chamoun Investments Pty Ltd

Introduction

1. By notice of motion filed on 20 November 2020, the first defendant, Chamoun Investments Pty Ltd (the applicant) seeks an order transferring these proceedings to the Federal Court of Australia pursuant to s 5 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) (the Act). CL Asset Holdings Pty Ltd, the plaintiff (the Lender), opposed the transfer. Caroline Chamoun, the second defendant (Caroline), Jack Chamoun, the third defendant (Jack) and Croydon Automotive Repairs Pty Ltd, the fourth defendant (CAR) did not oppose the transfer. Although Jack did not appear at the hearing of the notice of motion, Mr Klooster, who appeared on behalf of the second and fourth defendants, informed me that neither his clients nor the third defendant opposes the transfer.

The factual background to the application

1. The applicant relied on the affidavit of its solicitor, Photios Vouroudis, to which relevant documents were annexed. None of the evidence was controverted. What follows are findings based on limited, uncontroverted evidence. These findings are made for the purposes of this application only.
2. The applicant was registered on 4 September 1995. Its directors and shareholders were Malek and George Chamoun, who were brothers. George is Caroline's husband. The applicant's registered office was Malek's home in Summer Hill. The applicant is the registered proprietor of property on Elizabeth Street, Croydon (the Croydon property).
3. On about 1 May 2020, an Australian Securities and Investments Commission (ASIC) Form 484 was prepared by Horwood Management Pty Ltd (Horwood) on instructions from Caroline and Kadirhan Ilgun (the finance broker). The form, which was lodged with ASIC, recorded that Malek and George had ceased to be officers and members of the applicant from 29 April 2020 and that Caroline became the sole member and officer of the applicant on that date.
4. On about 6 May 2020, a further ASIC Form 484 was prepared by Horwood on Caroline's instructions which changed the registered office from Summer Hill to Caroline and George's home in Cabarita. Neither George nor Malek was aware of the contents of the forms which had been lodged with ASIC.
5. On 14 May 2020, Caroline purported to bind the applicant to a facility agreement whereby money was to be advanced by the Lender and secured by a mortgage over the Croydon property. The money was used by Caroline and Jack to purchase a commercial property at Auburn (the Auburn property), with the assistance of the finance broker. The funds were paid to the finance broker's company, Beatrice St Auburn Pty Ltd (Beatrice), and used to purchase the Auburn property.
6. On about 2 July 2020, the Lender's solicitors, Diamond Conway, wrote to Malek and alleged that there was a default under a mortgage over the Croydon property and demanded the sum of $1.96 million said to be owing. Until receiving this letter, neither George nor Malek was aware that the Croydon property had been encumbered by a mortgage.
7. On 3 July 2020, Mr Vouroudis obtained an ASIC search of the applicant as a result of which George and Malek became aware that they were no longer recorded as members and officers of the applicant and that Caroline was recorded as its sole director, secretary and shareholder.
8. On 8 July 2020, the applicant, George and Malek commenced proceedings in the Federal Court (Federal Court proceedings). The defendants in the Federal Court were Caroline and Jack, CAR, ASIC, Beatrice, the finance broker and Horwood. The Lender is not a party to the proceedings in the Federal Court as the plaintiffs in the Federal Court proceedings do not seek to disturb the mortgage over the Croydon property. Rather they seek a declaration of a constructive trust in their favour over the Auburn property (purchased with the monies advanced under the mortgage), as well as relief under the Corporations Act 2001 (Cth).
9. On 8 July 2020, the applicant, George and Malek sought ex parte freezing orders against Caroline and Jack. In the course of preparing these proceedings and obtaining relevant documents, the applicant became aware that false records had been prepared which indicated, contrary to the fact, that George and Malek had resigned from their positions as directors of the applicant and had sold their shares to Caroline.
10. On 10 July 2020, Mr Vouroudis sent to the Lender's solicitors documents associated with the Federal Court proceedings, including the initiating process, the statement of claim, the affidavit in support of the application for interlocutory relief and a copy of the ex parte orders made by Jagot J on 8 July 2020 and the further orders made on 10 July 2020.
11. On 24 September 2020, the Lender commenced proceedings in this Court under the facility agreement and the mortgage against the applicant, as borrower, and Caroline, Jack and CAR as guarantors (the Supreme Court proceedings). Notwithstanding the Lender's knowledge of the Federal Court proceedings, the Lender purported to serve the statement of claim in the Supreme Court proceedings on the applicant by serving Caroline with the documents (as her home address was registered as the applicant's registered office on the ASIC records). Accordingly, the statement of claim did not come to the attention of the applicant until 5 November 2020. The applicant filed an appearance in the Supreme Court proceedings on 9 November 2020 and its defence on 18 November 2020. The allegations made in paragraphs 38-117 of the applicant's defence filed in the Supreme Court proceedings are substantially similar to the allegations in paragraphs 19-125 of the applicant's statement of claim in the Federal Court proceedings.
12. The common issues in the Supreme Court proceedings and the Federal Court proceedings include whether there was fraud on the part of Caroline, Jack and CAR and whether the Lender had imputed knowledge of the fraud such that it could be deprived of the benefit of the mortgage granted by the applicant in its favour over the Croydon property.
13. No corresponding application for transfer has been filed in the Federal Court. Mr Freeman, who appeared on behalf of the applicant in this Court, informed me that, if the application were unsuccessful, his clients would not move the Federal Court for a transfer. It was not suggested by Ms Daniels, who appeared for the Lender, that the Lender, which is not a party to the Federal Court proceedings, would have standing to make an application to the Federal Court to transfer the Federal Court proceedings to this Court.

Relevant statutory provisions

1. Section 5 of the Act relevantly provides: "(1) Where: (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court, and (b) it appears to the Supreme Court that: … (ii) having regard to: … (C) the interests of justice, it is more appropriate that the relevant proceeding be determined by the Federal Court or the Family Court, as the case may be, … the Supreme Court shall transfer the relevant proceeding to the Federal Court or the Family Court, as the case may be. …"

Consideration

1. The Lender accepted that it was in the interests of justice for the Supreme Court proceedings and the Federal Court proceedings to be heard together. It was common ground that both this Court and the Federal Court have jurisdiction to hear both proceedings.
2. Ms Daniels contended that this Court was a more appropriate forum for the Supreme Court proceedings since the relief sought included a writ of possession of real property in New South Wales and a monetary sum. She submitted that this Court's experience through the possession list placed it in a better position to determine whether the alleged exception to indefeasibility had been made out on the facts of the case.
3. Mr Freeman argued that this Court had no particular advantage over the Federal Court in determining such issues. He submitted that both this Court and the Federal Court are superior courts of record which are accustomed to determining factual questions of fraud and actual and imputed knowledge. He instanced the analogous Federal Court jurisdiction to determine whether persons were involved in a contravention under the Australian Consumer Law or the Australian Securities and Investments Commission Act 2001 (Cth) (see Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65) or the issue of knowledge of breach of trust which might arise in commercial cases in the Federal Court as well as in this Court.
4. The relevant principles were established in BHP Billiton Limited v Schultz (2004) 221 CLR 400; [2004] HCA 61 and include the following. There is no onus on the applicant to establish that the transferee court is the preferable court. Priority is not given to the forum in which the proceedings were first commenced. The interests of justice are not the same as the interests of one party. The "centre of gravity" of the proceedings is also a relevant factor: In the matter of HIH Insurance Limited (In Liquidation) [2014] NSWSC 545 at [14] (Brereton J).
5. I consider this Court and the Federal Court to be equally well equipped to determine all issues in dispute in both proceedings. There is a protocol between the Federal Court and this Court for enforcement, including for writs of possession: Federal Court of Australia Enforcement, Endorsement and Contempt Practice Note (GPN-ENF), [2.3]-[3.2].
6. It would appear that the proceedings in this Court and the Federal Court have reached a similar stage of preparedness although the pleadings have closed in this Court but have not yet closed in the Federal Court. It is very much in the interests of justice that the two sets of proceedings be determined by a single court because of the risk otherwise (given the significant overlapping issues) of inconsistent findings. The centre of gravity would appear to be marginally in favour of the Federal Court proceedings because of the larger number of parties and issues in those proceedings. In that sense, the Supreme Court proceedings can be appropriately regarded as a subset of the proceedings in the Federal Court, although the Lender is not a party to the Federal Court proceedings.
7. It is in the interests of justice that both proceedings be heard together. There is no guarantee that, if this application is refused, any corresponding application will be made to the Federal Court.
8. I am persuaded that, on balance, it is in the interests of justice to transfer these proceedings to the Federal Court in order that they can be heard with the Federal Court proceedings.

Costs

1. Ms Daniels and Mr Klooster submitted the appropriate order was that costs be costs in the cause. Mr Freeman submitted that costs ought follow the event in accordance with the general rule in respect of any party who or which opposed the order. Had the Lender not opposed the application, it could have been determined on the papers without the need for an oral hearing. However, as the relevant question is where the interests of justice lie, the Court was assisted by a contradictor. In these circumstances, I am disposed to order that the costs of the application be costs in the cause.

Orders

1. For the reasons set out above, I make the following orders: 1. Order pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) that these proceedings be transferred to the Federal Court of Australia, New South Wales District Registry. 2. The costs of the first defendant's notice of motion filed on 20 November 2020 be costs in the cause.

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