Daniel Ghalloub & Anor v Joseph Ghalloub & Ors

Supreme Court of NSW|2012-08-08|Before: Lindsay J

INTRODUCTION 1In proceedings commenced by Summons and supported by a Commercial List Statement (both filed on 22 June 2012), in general conformity with the requirements of paragraph 8 of the Court's Practice Note SC Eq 3, the Defendants have served a draft, but not yet filed, a Response contemplated by paragraph 10 of the Practice Note. 2Each side of the record has moved the Court for interlocutory orders designed to influence the terms upon which questions in dispute are to be debated. 3Those Motions have been heard together. 4By their Amended Notice of Motion (filed on 3 August 2012) the Plaintiffs seek, in substance: (a) an order for discovery, limited to categories of documents: Uniform Civil Procedure Rules, 2005 (NSW), rule 21.2. (b) an order for summary judgment (based on admissions) on a claim for relief in debt: UCPR rules 13.1 and 13.3. Cf, rule 17.7. 5The claim for summary judgment is no longer the subject of contest. After the Plaintiffs' Notice of Motion was filed, but before it was heard, the Defendants intimated an intention to consent to a grant of relief on that claim. Accordingly, judgment will be entered for the First Plaintiff in the sum of $650,000.00, by way of a partial disposal of the proceedings, and the proceedings are to be continued as regards the balance of the Plaintiffs' claims for relief. 6In consenting to this judgment the Defendants have put the Plaintiffs on notice that its entry will, in their contention, preclude any further claim in debt being made on the same account in the future. Rejecting that contention, the First Plaintiff reserves such rights as he might have to claim further amounts in debt. It is not necessary for the court to entertain this controversy at this stage of the proceedings in circumstances in which the parties have made informed forensic choices, and I do not do so. 7By their Notice of Motion (also filed on 3 August 2012) the Defendants claim, in substance: (a) an order that identified paragraphs of the Plaintiffs' Commercial List Statement be struck out: UCPR rule 14.28. (b) an order that the Plaintiffs provide particulars of identified paragraphs of the Commercial List Statement: UCPR rule 15.10. (c) an order that all of one subpoena, and part of another, issued by the Court at the request of the Plaintiffs for the purpose of obtaining access to accounting information be set aside): UCPR rule 33.4.

A General Perspective 8In the case management of these proceedings a constant factor to be borne in mind is that the primary litigants are three brothers, sons of the Late Ray Ghalloub, said to have died on 4 June 2002 and the subject matter of their disputation concerns the operation of a business, and the ownership of assets, largely inherited by the boys from their father. 9The Plaintiffs' Commercial List Statement identifies the "business" as that of "a wholesale and produce merchant" at the Flemington Markets in Sydney, and separately identified "assets" as comprising real properties in New South Wales and the Northern Territory. 10The First Plaintiff is Daniel Ghalloub. The First Defendant is Joseph Ghalloub. The Second Defendant is Robert Ghalloub. The other parties to the proceedings are corporations (mostly corporate trustees) apparently related to one or the other, or all, of those three brothers. 11At a higher level of abstraction than appears in the Commercial List Statement, and stripped bare of complexity that necessarily attends presentation of a commercial dispute about the ownership or control of a business or assets deployed through the vehicles of corporations and trusts, the case sought to be made by the Plaintiff in the Commercial List Statement is not unduly obscure. 12In fact, the Commercial List Statement sets out in graphic detail, and from more than one perspective, a matrix of facts not uncommonly found in disputes between members of family engaged in business activities together. 13In substance, the Commercial List Statement sets out a complaint that the First and Second Defendants are alleged to have taken advantage of the First Plaintiff - a man said to have been operating under a form of disability and to have been dependent upon them, both financially and socially, in the conduct of business activities through a partnership or quasi-partnership structure - to divert away from him, and towards themselves, income derived from the family business and, potentially, assets associated with the brothers' joint enterprise. 14In substance, the First Plaintiff alleges that, at the time of his father's death, he and his brothers were equal "partners" in the family business established by their father, with a common understanding that, whatever form the business might take, it would be conducted for their collective benefit in equal shares. 15In substance, the First Plaintiff complains that: (a) by decisions taken by his brothers (or, more especially, by the First Defendant with the acquiescence of the Second Defendant) his status as an equal partner in the family business was converted into that of an object of a discretionary trust through which his brothers (or, more especially, the First Defendant) have placed themselves in a position to exclude him from participation in, or benefits to be derived from, conduct of the business. (b) in fact, the family business has been conducted by the Defendants in a manner that has marginalised, if not excluded, him. (c) by misleading and deceptive representations made to him by the First Defendant, he has been induced to resign a directorship, and to transfer shares in a family company - allegedly for his benefit, but, in reality, to facilitate his exclusion from all decision-making and benefits. 16This case is pleaded in the Commercial List Statement in terms that incorporate, inter alia, allegations about the operation of a partnership, breaches of fiduciary duty, an exercise of undue influence, and oppressive conduct of the affairs of a corporate trustee. 17At this early stage of the proceedings it would be premature to speculate about whether the Plaintiffs are likely to be able to make out the case pleaded in the Commercial List Statement. However, the case for which they contend is, in my assessment, pleaded with sufficient clarity to permit, and to require, the Defendants to file a Response unattended by any formal requirement that the Plaintiffs' allegations be re-pleaded or supported by further particularisation.

Particular Matters 18The Defendants' principal complaint about the form of the Commercial List Statement is that the allegations it contains are said to be imprecise and not to identify facts which allow the Defendants to respond to a recognised category of legal or equitable obligation. 19Use of the expression "Family business" in paragraphs C2 and C3 of the Commercial List Statement is said to be imprecise because the business is identified by reference only to occupancy rights and shareholdings held by persons other than the Defendants. 20That criticism is, in my opinion, unwarranted. The business of a wholesale and produce merchant conducted at the Flemington Markets is not, unsurprisingly, unrelated to rights of occupancy over areas at the Markets from which the business is conducted. The persons other than the Defendants identified in connection with occupancy rights and shareholdings associated with the business focus on the Defendants' late father, who is said to have established the business and from whom the parties to the present litigation are said to have derived their present entitlements, whatever those entitlements might ultimately be found to be. 21The Defendants also complain about the definition of the Ghalloub Family's joint enterprise by reference to what is said to have been "the common understanding of the surviving members of [Ray Ghalloub's] family" - including the Plaintiff, the First Defendant and the Second Defendant - about how the family business was to be carried on, the occupancy rights at Flemington Markets would be used in the conduct of the family business, and financial benefits produced by the family business would be shared. 22Contrary to the Defendants' contention, in my opinion, use of the expression "common understanding" in paragraph C8 of the Commercial List Statement is reasonably comprehensible in the context in which it appears in that paragraph, and in the broader context of the claims for relief made by the Plaintiff. 23The Defendants complain, further, about imprecision in characterisation of the First Plaintiff (in paragraph C20 of the Commercial List Statement) as a person of "borderline intellectual capacity". 24In my opinion, there would be no utility, at least at this stage of the proceedings, in close attention being given to the precise meaning of the expression "borderline intellectual capacity". It appears in a paragraph of the Plaintiffs' pleading that describes the First Plaintiff, more fully, as "a person of limited education and borderline intellectual capacity" and as a person with financial dependency upon the Family Business and family investments said to have been controlled, in fact, by the Defendants. In substance, the point made by reference to the expression "borderline intellectual capacity" is that the First Plaintiff is said to have been a person under a special disability. 25The Defendants are also critical of the Commercial List Statement insofar as the First Plaintiff alleges that, unknown to him, "the means by which the Family Business was purportedly transferred [away from him as a member of the Family] involved the creation of a discretionary trust structure which, amongst other things, conferred powers upon [a corporate trustee] that were capable, if exercised, of subverting the common understanding" of the Family that the family business would be operated for the equal benefit of the three brothers. 26Whether or not particular steps taken in connection with the operation, or disposition, of the family business were in fact unknown to the First Plaintiff, the thrust of the Plaintiffs' pleading appears, to me, to be sufficiently plain to permit, and require, the Defendants' Response to be filed.

Conclusion 27In my assessment, there is no merit in the Defendants' contentions that the case pleaded by the Plaintiffs in the Commercial List Statement is defective and insufficiently particularised. I propose to dismiss the Defendants' Motion insofar as it seeks orders under, or by reference to, rules 14.28 and 15.10 of the UCPR. 28In my opinion, the case management principles embodied in ss. 56-60 of the Civil Procedure Act 2005 (NSW) require that neither the Court, nor the parties, be deflected by collateral disputation about the terms in which the questions in dispute are to be defined. Accordingly, I propose to give directions for the Defendants' Response to be filed and served without further delay.

DISCLOSURE OF DOCUMENTATION 29I do not exclude from consideration the possibility that the Defendants' challenge to the form, and particularisation, of the Commercial List Statement bears a direct relationship to the Plaintiffs' early demands for discovery and access to documents produced to the Court on subpoena. 30The Defendants' resistance to an order for discovery, and their application for the setting aside of subpoenas in whole or part, are based substantially on their criticism of the nature and scope of the Commercial List Statement. 31The fact that that criticism has been rejected in this judgment does not, of course, carry with it an inevitable entitlement in the Plaintiffs to obtain documentation by way of orders for discovery or the subpoena process. I am mindful, in particular, of the Court's Practice Note SC Eq 11 which, generally, requires parties to serve their evidence before obtaining the benefit of an order for the disclosure of documents. 32Although the Court is generally loathe to permit anything savouring of "general discovery" in a case-managed system of litigation, and still more loathe to permit discovery before the close of pleadings, there are, in my opinion, several reasons why the case sought to be made by the Plaintiffs on the present motions should be acceded to. 33First, although a Response has not been filed by the Defendants, they have engaged with the Commercial List Statement sufficiently to have prepared a draft Response and to have analysed the Plaintiffs' case in sufficient detail to challenge it at strategic points. 34Secondly, by paragraphs 6-8 and 10-12 of "Outline of Submissions" (dated 7 August 2012) filed for the purpose of the hearing of the Motions before the Court and supported by detailed affidavits sworn by the Plaintiffs' solicitor, Mr Judd, the Plaintiffs have articulated a legitimate forensic purpose for the documentation sought by way of discovery and subpoenas at this stage of the proceedings. Mr Judd's evidence demonstrates the Plaintiffs' compliance with the requirements of Practice Note SC Eq 11 for establishment of exceptional circumstances. 35Thirdly, there would be no practical utility in requiring the First Plaintiff to serve evidence in the principal proceedings before obtaining the benefit of documentary disclosures, and there would be disutility in holding him to an obligation to do so. The nature of the case the Plaintiffs seek to make has been articulated, in detail, in the Commercial List Statement and elaborated in correspondence between solicitors. That correspondence has explained the Plaintiffs need for documentation in more than passing detail. Although evidence from the First Plaintiff, personally, is likely to be required at any final hearing if the Plaintiffs are to make out their case, that evidence is likely to be required to accommodate the objective reality of documentation. A case of the character sought to be advanced by the Plaintiffs, and any prospective case in answer, are both likely to be built around documents that should, so far as possible, be available from an early stage on both sides of the record. 36Fourthly, the fact that the parties to the proceedings have a close personal connection, as well as (on any view of the current dispute) a close, ongoing business connection, distinguishes this case from one in which a party might be thought to be using the processes of the Court to intermeddle in the affairs of an unrelated party. 37Fifthly, the prospect of these proceedings reaching an early final determination (at a trial the subject of orderly preparation, if not by resort to mediation) is, in my opinion, likely to be enhanced if and to the extent that the documentation sought by the Plaintiffs is made available in a timely fashion.

ORDERS 38In these circumstances, I make the following orders: (a) On the Plaintiffs' Amended Notice of Motion (filed 3 August 2012), ORDERS in terms of paragraphs 1, 2 and 3 of the Motion. (b) On the Defendants' Notice of Motion (filed 3 August 2012), ORDER that the Motion be dismissed. (c) ORDER that the Defendants file and serve on or before 15 August 2012 such Response to the Commercial List Statement (filed 22 June 2012) as they propose to file. (d) ORDER that the Plaintiffs file and serve on or before 24 August 2012 such, if any, Reply as they propose to file in the proceedings. (e) ORDER that the proceedings be listed for directions before the Commercial List Judge for directions on Friday, 31 August 2012. (f) ORDER that the Defendants pay the costs of the two Motions presently before the Court. (g) RESERVE liberty to apply on three days' notice in writing. 39I commend for the consideration of the parties the possibility that their disputes should be the subject of an early mediation. Both sides of the record appear, at least, to be amenable to the prospect of a mediation. They may well resort to one voluntarily sooner rather than later. The principal difference between them appears to be one of timing: the Plaintiffs want access to documentation first; the Defendants, whilst resistant to the provision of documentation, are amenable to an earlier mediation, whether directed to disposition of the whole, or merely part, of the proceedings. 40I refrain from making an order for compulsory mediation at this stage. The desirability, or otherwise, of such an order being made should, I am inclined to believe, be one of the subjects for consideration when the proceedings are next before the Court for directions.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 August 2012

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