Solicitors:
Stojanovic Solicitors (plaintiff/cross-defendant/applicant)
Consolidated Lawyers Pty Limited t/as Madison Marcus Law Firm (defendant/cross-claimant/respondents)
File Number(s): 2012/395458
[2]
Judgment
Khalid Daftar commenced proceedings against Firaass Al-Khamisy for moneys payable pursuant to certain loans and for the value of some gold alleged to be owned by Mr Daftar. Mr Al-Khamisy filed a cross-claim. The evidence in the trial of the proceedings concluded last Thursday, 19 June 2014, and a timetable for written submissions has been directed. Last Friday, 20 June 2014, Mr Daftar's solicitor became aware that Mr Al-Khamisy had sold his home. Mr Daftar sought freezing orders ex parte on Monday, 23 June 2014. I abridged the time for service of the application and made it returnable yesterday, Wednesday, 25 June 2014.
Notwithstanding the limited time between Monday and Wednesday, the current form of the application by the end of the hearing of the application was contained in a "further amended notice of motion". Some of the orders sought originally had been abandoned. In summary, the application that remained sought orders:
1. that the defendant, Mr Al-Khamisy, and his estranged wife, Hayfa Zamel, notify Mr Daftar of the name of the solicitor that acted on the sale of the home;
2. that Mr Al-Khamisy notify Mr Daftar of the sale price, the amount paid on settlement, the net amount received by Mr Al-Khamisy and the bank account where the proceeds were deposited;
3. that Mr Al-Khamisy provide the Court with a list of his assets and liabilities including the name of any bank and bank account number in which the moneys are deposited;
4. that Mr Al-Khamisy provide a complete list of all stock held by Heaven Jewellery, which is a business owned by a company (Bright Jewellery Pty Ltd) of which Mr Al-Khamisy is a director and the sole shareholder;
5. that Mr Al-Khamisy and his wife be ordered to pay into court the net proceeds of the sale; and
6. that Mr Al-Khamisy and Ms Zamel be restrained from selling any business owned by Bright Jewellery or any of its assets exceeding $100,000 in any 14-day period without notifying Mr Daftar.
The basis for these orders is asserted to be the sale of Mr Al-Khamisy's house without informing Mr Daftar, and Mr Al-Khamisy not providing satisfactory evidence of its sale price, his equity in the home or up-to-date documentation of his earnings.
Mr Daftar relies upon rr 25.11, 25.12, 25.14 and 25.15 of the Uniform Civil Procedure Rules 2005. Rules 25.11 to 25.15 are as follows:
"25.11 Freezing order
(cf Federal Court Rules Order 25A, rule 2)
(1) The court may make an order (a freezing order), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court's process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.
(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
25.12 Ancillary order
(cf Federal Court Rules Order 25A, rule 3)
(1) The court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the court considers appropriate.
(2) Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes:
(a) eliciting information relating to assets relevant to the freezing order or prospective freezing order,
(b) determining whether the freezing order should be made.
25.13 Respondent need not be party to proceeding
(cf Federal Court Rules Order 25A, rule 4)
The court may make a freezing order or an ancillary order against a respondent even if the respondent is not a party to a proceeding in which substantive relief is sought against the respondent.
25.14 Order against judgment debtor or prospective judgment debtor or third party
(cf Federal Court Rules Order 25A, rule 5)
(1) This rule applies if:
(a) judgment has been given in favour of an applicant by:
(i) the court, or
(ii) in the case of a judgment to which subrule (2) applies - another court, or
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:
(i) the court, or
(ii) in the case of a cause of action to which subrule (3) applies - another court.
(2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(3) This subrule applies to a cause of action if:
(a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and
(b) there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a) the judgment debtor, prospective judgment debtor or another person absconds,
(b) the assets of the judgment debtor, prospective judgment debtor or another person are:
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.
(5) The court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the court is satisfied, having regard to all the circumstances, that:
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(b) a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
(6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so.
25.15 Jurisdiction
(cf Federal Court Rules Order 25A, rule 6)
Nothing in this Division diminishes the inherent, implied or statutory jurisdiction of the court to make a freezing order or ancillary order."
Given the content of rr 25.11 to 25.13, 25.14(6), and 25.15, it appears that r 25.14 is largely illustrative of the circumstance when a freezing order might be made. In any event, these provisions provide the power to make the orders sought. Whether they regulate any pre-existing power in the Court, given the terms of rr 25.14(6) and 25.15 (a matter that was the subject of submissions) might be doubted.
If Mr Daftar obtains a judgment in the proceedings there is, of course, the possibility that the judgment will be wholly or partly unsatisfied. Thus, the powers in r 25.11 to r 25.15 are enlivened and are to be exercised in appropriate circumstances to meet the danger of unsatisfied judgments.
However, a freezing order "is a drastic remedy which should not be granted lightly... Its purpose is to preserve the status quo, not to change it in favour of the [applicant]": Frigo v Culhaci [1998] NSWCA 88 at 6. Further, in Finn and Ors v Carelli [2007] NSWSC 261 at [4]:
"an applicant must establish, by evidence and not mere assertion, that there is a real danger that by reason of the respondent absconding or otherwise dealing with assets, the applicant will not be able to have its judgment satisfied."
Merely selling a property does not satisfy this requirement: see Aughey v Poynter [2013] NSWSC 1052 at [5], [35] and Tomasetti v Brailey [2012] NSWCA 6 at [5], [20]. But Mr Daftar does not merely rely on the sale of the home but also on the failure of Mr Al-Khamisy to provide details of the sale and of his income.
There seem to be three difficulties with this submission. First, Mr Al-Khamisy has, through his solicitor's affidavit, provided details about the sale. The evidence discloses that the sale price was $825,000 and Mr Al-Khamisy's equity was $450,000, that the house was in his name alone, that he is presently still the registered proprietor of the property, that he intended to purchase a larger home to cater for himself and his four children, that his business has a large turnover in the order of $800,000 per quarter and that he makes a gross profit (or "net turnover") of $25,000 per week.
Mr Daftar submits that this evidence is weak because it is given in the solicitor's affidavit rather than directly by Mr Al-Khamisy. In an earlier and unsuccessful application by Mr Daftar for a freezing order (see Daftar v Al-Khamisy [2013] NSWSC 34 at [27], [28]), McDougall J thought this matter to be of little significance and, with respect, I agree. This is an interlocutory application and I see no reason why this evidence should be disregarded because it is given by the solicitor recording Mr Al-Khamisy's instructions. Mr Daftar complained that the solicitor had not answered a letter of his concerning these details but plainly a solicitor's letter in response would have had no greater force, and probably less, than the solicitor's affidavit.
The second difficulty arises from whether Mr Al-Khamisy is obliged to provide this information in any event. The fact that Mr Daftar asked for it is not a reason why it must be provided. No satisfactory reason was suggested as to why an obligation arose to provide this information other than an assertion that Mr Al-Khamisy might dissipate his assets. But as I have said, the applicant needs evidence not mere assertion. The sale of one's family home without more is insufficient to establish a purpose of frustrating the court's order.
The third difficulty is that I do not regard details about Mr Al-Khamisy's property sale and his income as particularly material to whether an order should be made. If the equity in the property was small or large or Mr Al-Khamisy's income was small or large it would not by itself be probative of establishing a purpose in Mr Al-Khamisy to frustrate the court's orders.
Nor do I regard the orders sought as bearing a level of reasonableness.
Seeking orders against or that impact significantly upon persons who are not parties to the proceedings lessens the likelihood that the orders sought will be appropriate. The Court has power to make orders against non-parties but that is not a reason why an order should be made. Orders that Hayfa Zamel pay money into court, that she be restrained from selling the goods of Bright Jewellery or that Mr Al-Khamisy provide a list of all stock of Bright Jewellery are orders that impact significantly on third parties, namely Hayfa Zamel and Bright Jewellery. Even if there were more evidence to support this application those particular orders would still likely be overreaching.
I should also note that Mr Al-Khamisy is an Australian citizen, with an Australian passport, with children at school and university in Australia and with a substantial jewellery business apparently with leases over two premises. These are matters that militate against the applicant's assertion, not supported by any evidence, that Mr Al-Khamisy might likely take all his jewellery, gold and other assets and decamp permanently to Dubai.
For all these reasons, I consider the application to be without proper evidentiary foundation. I propose to dismiss it.
Other issues raised by the parties included the significance of the earlier unsuccessful application for a freezing order by Mr Daftar, whether Mr Daftar himself had dissipated or disposed of assets to deny Mr Al-Khamisy the possibility of enforcing his cross-claim, whether Mr Daftar's usual undertaking as to damages was of any value because of his alleged difficult financial position, and whether Mr Daftar had a good arguable claim. In view of the conclusions I have reached I do not need to consider these matters other than to say I was not satisfied of the utility to Mr Al-Khamisy of Mr Daftar's usual undertaking as to damages in the absence of Mr Daftar providing some security. Mr Daftar conceded that if a freezing order was made on the usual undertaking being proffered, provision of security for the undertaking may be appropriate.
As Mr Daftar's application is unsuccessful, he must pay the costs.
The orders of the Court are:
1. Dismiss the plaintiff's further amended notice of motion.
2. Order the plaintiff to pay the costs of and incidental to that notice of motion.
[3]
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Decision last updated: 10 March 2015