By Originating Process filed on 10 March 2023 Mr Islam and Australian Real Estate Relation Pty Ltd ("ARER") commenced or, in the case of ARER, purportedly commenced proceedings in the Corporations List (I say "purportedly" commenced in respect of ARER because of the issues which arise in respect of the validity of the commencement of the proceedings in the name of ARER to which I refer below). The Defendants in those proceedings are three individuals which appear to be associated with a real estate franchisor, which operates under the business name of "Raine & Horne" and a fourth defendant, Raine Horne Corporation, which it appears does not exist under that name.
Mr Islam claims, and seeks to have ARER claim, that the conduct of the three individuals and the corporate Defendant in granting a franchise to Mr Ratul, a former co-director with Mr Islam of ARER, and Mr Ratul's wife Ms Diba, was unconscionable conduct for the purposes of certain statutes or general law and a declaration that the grant of that franchise was fraudulent. Mr MacCallum, who appears for the individual Defendants (and would have appeared for the corporate Defendant if it existed) points to the fact that these allegations of fraud would ordinarily be required to be pleaded with particularity. An order is sought in the Originating Process that the Defendants pay general and special damages not less than $AUD50 million and certain other relief is sought.
The claims made in the Originating Process are supported by an affidavit dated 1 March 2023 of Mr Islam which largely comprises propositions as to the conduct of the parties, rather than any narrative account of events in which Mr Islam was personally involved.
The matter has now been listed before the Court, initially before an Equity Registrar and subsequently before the Corporations Judge, on several occasions. On 23 May 2023, Registrar Walton directed that Mr Islam file and serve a Statement of Claim by 26 May 2023. That did not occur and the Registrar referred the matter to me as Corporations Judge. On 5 June 2023, I noted that the Defendants then sought to have the proceedings dismissed under Uniform Civil Procedure Rules 2005 (NSW) r 12.7, which related to the failure to prosecute them with diligence. On 14 June 2023, by agreement of the parties, I again directed Mr Islam to file and serve a Statement of Claim by 4pm on 19 June 2023.
On 19 June 2023, Mr Islam filed a Statement of Claim, which bore the case number of these proceedings, but also indicated that it was brought in the Common Law Division. It appears that document was electronically filed and, so far as I understand Mr Islam's explanation, the information he provided at the point of filing led to it being filed in the Common Law Division, and allocated a new proceedings number in the Common Law Division. Mr Islam says that was inadvertent, although I do note that the steps he took were consistent with the fact that the Statement of Claim identified the proceedings as brought in the Common Law Division. In the event, by 19 June, Mr Islam had not complied with the order to file a Statement of Claim in these proceedings, first made by Registrar Walton and then made by me; but had filed new proceedings in the Common Law Division.
I explored with Mr Islam, in the course of submissions this morning, what he wished to do, bearing in mind his submission that the commencement of the proceedings in the Common Law Division was inadvertent. The three options appeared, obviously enough, to be, first, the discontinuance or dismissal of the Equity Division proceedings and the continuance of the new proceedings in the Common Law Division; second, the discontinuance or dismissal of the Common Law Division proceedings and the continuance of the existing proceedings in the Equity Division, on the basis that the Statement of Claim that Mr Islam had filed in the Common Law Division could have been treated as a document filed in these proceedings; or, third, subject to principles of abuse of process which I drew to Mr Islam's attention, an attempt to continue the proceedings in parallel in both Divisions of the Court.
Mr Islam chose the third of those options. In submissions in reply he explains that choice, in vivid terms, by reference to the choice of which bar one drinks at, and the fact that, if the bar does not serve the drink one wishes, one might choose another bar. The difficulty with that proposition is, of course, that the delivery of justice in a Court system is somewhat different from the delivery of alcohol in a bar, and is subject to principles of abuse of process, and to the obligation to conduct proceedings, applying both to the Court and to Mr Islam, in a manner that promotes the just, quick and cheap resolution of the real issues in dispute in the proceedings. Mr Islam's proposition amounts to no more and no less than that he can commence proceedings or continue them in parallel in two Divisions of the Court, so that he can then choose the result that he prefers, implicitly on the basis that inconsistent results may be reached. That may be legitimate when one is choosing a bar to drink at, which offers different products, but it is not legitimate in terms of the conduct of proceedings in this Court.
The Statement of Claim that Mr Islam has filed in the Common Law Division, although bearing the number of the Equity Division proceedings, is a somewhat repetitive document, identifying very substantial claims, now qualified as claims for $110 million, of which it is suggested that a substantial amount will be directed to the Legislative Council of New South Wales, another amount to this Court, and $20 million to Mr Islam personally. It is replete with pejorative characterisations of the Defendants' conduct, who are described, variously, as having been involved in a "nefarious agenda" and as having "callously infringed" upon statutory requirements. It is, however, lacking in identification, in any specific terms, of the facts which are relied upon, particularly so far as allegations are made against individuals in these proceedings. It is not apparent, for example, how Mr Islam has a claim against the First Defendant, who it appears is the chairman of a Raine & Horne company, where that company goes about its ordinary business in granting a particular franchise, where the Statement of Claim does not identify how that chairman is personally involved in or in some way personally culpable in respect of the grant of that franchise.
The First, Second and Third Defendants, the individual Defendants in the proceedings, read Mr MacCallum's affidavit dated 7 June 2023. Mr MacCallum there sets out the nature of the claims brought in the proceedings, as they stood prior to the filing of the Statement of Claim, and refers to the conduct of the proceedings, which involved some occasions on which there was no appearance by Mr Islam and other occasions on which Mr Islam only appeared late, which has continued in his appearances before me. By a second affidavit dated 20 June 2023, Mr MacCallum refers to the orders previously made by the Court, in respect of the filing and service of a Statement of Claim and to the receipt of an email sent by a third party, apparently associated with Mr Islam, which refers to the Statement of Claim now filed by Mr Islam in the Common Law Division and also threatens the commencement of proceedings in overseas jurisdictions including the United States.
Mr MacCallum also refers to an exchange between Mr MacCallum's firm and the liquidator of ARER, who has indicated that Mr Islam is a director of ARER, has no capacity to represent ARER while it is in liquidation and that the liquidator did not consent to and was not aware of the commencement of the proceedings and does not consent to the continuation of the proceedings so far as they relate to ARER. So far as the liquidator there refers to Mr Islam's lack of capacity to represent ARER, he appears to have in mind s 198G of the Corporations Act 2001 (Cth) ("Act") which provides that, while a company is under external administration, an officer of the company must not perform or exercise the functions and power of that office. That prohibition is subject to an exception, not satisfied here, where the external administrator of the company has given approval for the relevant conduct.
[2]
Several difficulties with the proceedings
At the commencement of the hearing today, I drew to Mr Islam's and Mr MacCallum's attention several difficulties which appeared to me to exist in respect of the proceedings, which have not been displaced by the submissions I have since heard from the parties. The first is that there is no evidence that any corporate power of ARER has been exercised, in respect of the commencement of the proceedings, or that there is any board resolution or agreement of the current directors of ARER to authorise the commencement of the proceedings. It appears somewhat unlikely that the ARER board did so, where there is a history of dispute between Mr Ratul and Mr Islam, who are the directors of ARER, and the complaint made in the Originating Process concerns the grant of a franchise to Mr Ratul and his wife.
Second, even if ARER's board had authorised the commencement of the proceedings, that would have contravened s 198G of the Act, where ARER is in liquidation, and ARER's liquidator does not consent to the commencement or continuance of the proceedings.
Third, there appears to be no suggestion that these proceedings should continue, or could continue, as a derivative proceeding, although the Court has a residual discretion to grant leave to bring derivative proceedings, at general law rather than by statute, in respect of a company in liquidation. Mr Islam has not sought to establish any of the matters that would be necessary to support leave to bring a derivative proceeding, or applied for leave to bring a derivative proceeding, and it is not apparent how he could establish those matters, having regard to the present form of the Statement of Claim.
Fourth, it seems to me that the Statement of Claim, so far as it has been filed, albeit in the Common Law Division, falls well short of the requirements for a proper pleading, particularly a proper pleading of fraud, as established in Gunns Ltd v Marr [2005] VSC 251, which I followed in Iacullo v Iacullo [2013] NSWSC 1517 and again in Re Graziers Pastoral Pty Ltd [2021] NSWSC 1680. In particular, a pleading must inform the Defendants of the case they must meet and set out the facts which Mr Islam, or ARER, asserts with sufficient particularity to allow a trial to be conducted fairly to all parties. Here, the need to identify facts is of particular importance, where claims are brought against individuals and the question of how those individuals were involved in the conduct which is alleged to amount to fraud on their part is something that they must, in fairness, be told, so as to give them an opportunity to respond to the claims against them. As I have noted above, it seems to me that, even putting aside the fact that the Statement of Claim was twice ordered to be filed and has not been filed in the Equity Division, the Statement of Claim filed in the Common Law Division does not meet that requirement.
Fifth, and perhaps most simply, a difficulty arises because Mr Islam could have, but has not, chosen to abandon the Common Law Division proceedings and continue the proceedings in the Equity Division, with the Statement of Claim treated as filed in the Equity Division proceedings. That would have been consistent with his contention that he inadvertently filed the proceedings in the Common Law Division, and that he had intended to file the Statement of Claim in the Equity Division proceedings, and I would have permitted that to occur. However, as I have noted above, he has instead chosen to maintain the parallel proceedings in the Equity Division and Common Law Division.
The difficulty with that course is that, where Courts (as distinct from bars) are concerned, that approach is a well-established category of abuse of process. In Moore v Inglis (1976) 9 ALR 509 at 515, a plaintiff commenced two court proceedings, one in the High Court of Australia and one in the Supreme Court, and that was treated as giving rise to a potential abuse of process, unless there could be discerned a legitimate reason for allowing the plaintiff to maintain a second proceeding relating to the subject matter already in litigation in another proceeding. Here, Mr Islam does not identify such a legitimate reason; to the contrary, the one reason that he identifies for taking that course is an illegitimate reason, in effect, that he wishes to have the benefit of any better outcome in one of the two parallel proceedings, by analogy with his choice between two bars.
In Wagners Properties Pty Ltd v Atlas House Removers Pty Ltd [2023] QSC 40, where proceedings were brought in parallel in the Queensland Civil and Administrative Tribunal and the Supreme Court of Queensland, Kelly J conducted a comprehensive review of the authorities, and observed at [68]:
"The exercise of the discretion to grant a stay in these types of circumstances is an illustration of the exercise of the Court's general power to control its own proceedings. Hence, a recognised situation where the inherent power to stay may be exercised is [per Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536 (Lord Diplock)] "to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people"."
His Honour there identified, by reference to authority, considerations relevant to granting a stay where multiple proceedings are commenced, and to authority that the law should strive against permitting multiplicity of proceedings in relation to similar issues. His Honour there concluded that it was appropriate to stay the Supreme Court proceedings as an abuse of process, where allowing them to continue in parallel with the Queensland Civil and Administrative Tribunal proceedings would be manifestly unfair to the defendant and would bring the administration of justice into disrepute.
In DR v Secretary, Department of Communities and Justice, GR v Public Guardian [2023] NSWSC 525, Hammerschlag CJ in Eq, when faced with parallel proceedings in the Equity Division and the Common Law Division, took the course of dismissing both proceedings, and not only the proceedings in the Equity Division.
[3]
Determination
I had initially been inclined toward the view that the proper course might well be a stay of these proceedings, for a period, in order to allow Mr Islam to seek to regularise the position in them, but this would require that he abandon the Common Law Division Proceedings, which he does not wish to do.
Having heard submissions, I am now satisfied that a stay of the proceedings is not the proper course, for several reasons. First, Mr Islam has been twice ordered to file a Statement of Claim in these proceedings, and has not done so. While he explains his failure to file the Statement of Claim in these proceedings, on the second occasion, as an error where he intended to do so and in fact filed them in the Common Law Division, he now seeks to maintain the Common Law Division proceedings, as separate proceedings, rather than treat the Equity Division proceedings as ongoing and treat the Statement of Claim as filed in these proceedings. Second, there is no reason to think, as matters now stand, that the liquidator would alter his view to whether ARER's assets (if any) should be exposed by the continuance of these proceedings, and the potential for a costs order against it in these proceedings, so as to consent to the continuance of the proceedings in ARER's name. Third, it is not apparent, and Mr Islam does not articulate, how Mr Islam has a personal claim in respect of the relevant events, as distinct from ARER having any such claim. Fourth, to the extent that the Statement of Claim now filed in the Common Law Division articulates Mr Islam's pleading of these proceedings, it does not seem to me to comply with the requirements of procedural fairness so far as the Defendants are concerned.
Mr MacCallum submits that, in these circumstances, the proper course is to dismiss the Equity Division proceedings, and permit Mr Islam to continue the Common Law Division proceedings which he now has emphasised he wishes to continue. I would likely not have taken that course, had Mr Islam taken the opportunity to treat the Statement of Claim as a Statement of Claim in the Equity Division proceedings and dismiss the Common Law Division proceedings. However, where Mr Islam is explicit about his wish to pursue proceedings in parallel in two Divisions, notwithstanding the difficulties which I have explained to him in respect of that course, it seems to me that these proceedings should be dismissed now, leaving the Common Law Division to determine the position as to the proceedings in that Division. I recognise, of course, that there may be a real prospect that the Common Law Division will see the same difficulties with the commencement of proceedings in that Division in ARER's name, without the liquidator's authority and not pleaded in a proper manner, that I have identified so far as the proceedings were sought to be continued in this Division.
[4]
Orders
Accordingly, I make order that:
Proceedings 2023/80562 be dismissed.
Mr Islam pay the costs of the proceedings, as agreed or assessed.
[5]
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Decision last updated: 27 June 2023