Jaken Properties Australia Pty Limited v Naaman

Supreme Court of NSW|2022-11-22|Before: Richmond J, Mr P, Kunc J

Solicitors: KB Legals Pty Ltd (Defendant and Cross-Claimant) Jeresyn Legal (Samanril parties) Platinum Lawyers (RHG parties) File Number(s): 2019/24203

Mr Naaman's motion

The relief sought by Mr Naaman is as follows: 1. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Grand Royal Nominees Pty Ltd (Grand Royal Nominees), RHG Properties Pty Ltd (RHG Properties), RHG Nominees Pty Ltd (RHG Nominees), RHG Trading Pty Ltd (RHG Trading), Hotel Grand Holdings Pty Ltd (Hotel Grand Holdings) and Royal Granville Operations Pty Ltd (RGO) from disposing of, further encumbering, diminishing the value of or otherwise dealing with the land known as lot 100 in deposited plan 747211 (Royal Hotel Granville); 2. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Grand Royal Nominees, RHG Properties, RHG Nominees, RHG Trading, Hotel Grand Holdings and RGO from disposing of, further encumbering, diminishing the value of or otherwise dealing with the business conducted from the Royal Hotel Granville except in the usual and ordinary course of business. 3. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Peter Sleiman, Jake Sleiman, RHG Properties and Grand Royal Nominees from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the RHG Properties Unit Trust or any trustee (including custodian) of the RHG Properties Unit Trust. 4. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Peter Sleiman, Jake Sleiman and RHG Trading from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the RHG Trading Trust or any trustee (including custodian) of the RHG Trading Trust. 5. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Peter Sleiman, Jake Sleiman and Grand Royal Nominees from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the Grand Royal Trust or any trustee (including custodian) of the Grand Royal Trust. 6. An order pending final determination of the proceedings (including any appeal) or further order of the Court restraining Peter Sleiman, Riley Panetta-Sleiman and Samanril from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the Samanril Unit Trust or any trustee (including custodian) of the Samanril Unit Trust. 7. An order pending final determination of the proceedings or further order of the Court restraining RHG Trading Pty Ltd (ACN 637 585 972), Royal Granville Operations Pty Ltd (ACN 638 176 137), Grand Royal Nominees Pty Ltd (ACN 637 582 855), Hotel Grand Holdings Pty Ltd (CAN 638 176 128), RHG Properties Pty Ltd (ACN 637 586 095), PSJK Holdings Pty Ltd (ACN 133 251 537), Samanril Pty Ltd (ACN 632 720 113), Peter Sleiman, Samantha Sleiman, Riley Panetta-Sleiman and Jake Sleiman from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any terms of the below trusts or any trustee or appointor of those trusts:- 1. RHG Nominees Pty Ltd as custodian for The RHG Properties Unit Trust 2. The RHG Properties Unit Trust 3. The RHG Trading Unit Trust 4. The Grand Royal Trust 5. Samanril Unit Trust 6. The Jaklers Trust 7. The PSJK Holding Trust; and 8. Petejake Family Trust, Pete Jake 1 Unit Trust and Pete Jake 2 Unit Trust. 8. An order pending final determination of the proceedings (including any appeal) or further order of the Court pursuant to rule 25.11 of the Uniform Civil Procedure Rules 2005 (UCPR) in the terms annexed to these orders and marked "A" against Grand Royal Nominees, RHG Trading, Hotel Grand Holdings and RGO.
In summary: 1. Prayers 1 and 2 seek orders to restrain the named companies from engaging in any dealings with the land at which the Royal Hotel Granville is situated or the business conducted on that land. 2. Prayers 3 to 6 seek orders to restrain the named persons from making any variation to the trust deed of four trusts or the trustee of any such trust, being the RHG Properties Unit Trust, the RHG Trading Trust, the Grand Royal Trust and the Samanril Unit Trust. 3. Prayer 7 seeks an order to restrain the named persons from varying the terms of the trust deed for certain named trusts or any trustee or appointor of those trusts. 4. Prayer 8 seeks freezing orders against the four named companies, up to the amount in each case of $4,783,343 (being the same amount applicable to the freezing orders in order 9 of the orders made by Rees J on 3 November 2020).
These asset preservation orders relate to the Royal Hotel Granville which was acquired as part of the transaction in which the Kings Head Tavern was sold by Powerhouse (see [15(29) and (32)] below) except for proposed Order 6 and proposed Order 7(5) which relate to the sale of the Granville Land to Samanril Pty Ltd (see [15(37)] below).

Samanril parties' motion

By order 25 of the orders made by Kunc J on 1 July 2022, his Honour extended until further order of the Court orders 1 and 2 of the orders his Honour had previously made on 28 January 2022. The Samanril parties' motion only seeks the discharge of these orders in so far as they apply to the Samanril parties, being Samanril Pty Ltd, Saphire Mortgage Solutions Pty Ltd, Samantha Panetta and Riley Panetta-Sleiman. The last two persons are the wife and son of Peter Sleiman respectively and are directors of Samanril Pty Ltd (which holds the Granville Land as trustee of the Samanril Unit Trust).
Orders 1 and 2 made by Kunc J which affect those parties are as follows: 1. NOTE the undertakings given to the Court in terms of prayers 7(a), (b), (c) and (d) of the Notice of Motion filed on 23 December 2021 (Motion) given by each of Superior Family Investments Pty Ltd, Samantha Panetta, Samanril Pty Ltd and Riley Panetta-Sleiman are to continue, without admission, until the final determination of these proceedings, or further order. 2. NOTE the undertakings given to the Court through their Senior Counsel by: … d. Samanril Pty Limited without admission, until the final determination of these proceedings, or further order, that it will not: i. in any way dispose of, deal with, further encumber, lease or diminish its legal or beneficial interest in any of its assets with a value in excess of $500,000 without first giving fourteen (14) days' notice in writing of its intention to do so to the solicitors for the defendant; ii. in any way dispose of, deal with, further encumber, lease or diminish its legal or beneficial interest in the property at 15 Cowper Street, Granville 2142. e. Samantha Panetta, without admission, until the final determination of these proceedings, or further order, that she will not in any way dispose of, deal with, further encumber, lease or diminish her legal or beneficial interest in any of her assets with a value in excess of $500,000 without first giving fourteen (14) days' notice in writing of her intention to do so to the solicitors for the defendant. f. Riley Panetta-Sleiman, without admission, until the final determination of these proceedings, or further order, that he will not in any way dispose of, deal with, further encumber, lease or diminish his legal or beneficial interest in any of his assets with a value in excess of $500,000 without first giving fourteen (14) days' notice in writing of his intention to do so to the solicitors for the defendant. … h. Saphire Mortgage Solutions Pty Ltd without admission, until the final determination of these proceedings, or further order, that it will not dispose of, further encumber or in any way diminish the value of any of its assets (owned either legally or beneficially) up to the unencumbered value of $516,000 without first having given fourteen (14) days' notice in writing of its intention to do so to the solicitors for the defendant.
Order 1 refers to undertakings in prayers 7(a), (b), (c) and (d) of the Notice of Motion filed on 23 December 2021. While the undertakings which are sought to be discharged relate only to prayers 7(b), (c) and (d), I will set out prayer 7 in full because para 7(a) sets out relevant definitions for the remaining sub-paragraphs: 7 An order pending final determination of the proceedings or further order of the Court restraining: a. Superior Family Investments Pty Ltd (Superior) from disposing of, encumbering (including to create a charge or security interest over), diminishing the value of or otherwise dealing in any way with any of the proceeds of the sale of the property at 15 Cowper Street, Granville NSW 2142 (Granville Property); b. Samantha Panetta, Superior's Director, from causing Superior to dispose of, encumber (including to create a charge or security interest over), diminish the value of or otherwise deal in any way with any of the proceeds of the sale of the Granville Property; c. Samanril Pty Ltd ACN 632 720 113 (Samanril) from disposing of, encumbering (including to create a charge or security interest over), diminishing the value of or otherwise dealing in any way with the Granville Property; and d. Riley Panetta-Sleiman, Samanril's director, from causing Samanril to dispose of, encumber, diminish the value of or otherwise deal in any way with the Granville Property.
In summary: 1. The undertakings given by three of the Samanril parties in Order 1 made on 28 January 2022 restrain them from causing or engaging in (as appropriate) any dealing with a property at 15 Cowper Street, Granville (Granville Land) which was originally acquired by JPG in 2006 (see [15(5)] below), and transferred to Superior in 2012 and then to Samanril in 2019 (see [15(16) and (37)] below); 2. The undertakings given by each of the Samanril parties in Order 2 made on 28 January 2022 restrain them from any dealing with any of their assets with a value in excess of $500,000 or $516,000 (as appropriate), without giving 14 days' notice in writing of their intention to do so to Mr Naaman. In addition, Samanril Pty Ltd undertook not to engage in any dealing affecting its interest in the Granville Land.

RHG parties' motion

By Order 24 of the orders made by Kunc J on 1 July 2022, his Honour extended Orders 1 to 9 of the orders made by Rees J on 3 November 2020 until further order of the Court. Orders 1 to 9 made by Rees J were as follows: 1 An order pending final determination of the proceedings or further order of the Court restraining Powerhouse Corporation Pty Ltd (Powerhouse) from disposing of, encumbering, diminishing the value of or otherwise dealing with any of the proceeds of the sale of the property known as Lots 2, 3 and 4 in Deposited Plan 30390 comprised in folio identified auto consol 8347-210 (Kings Head Tavern). 2 An order pending final determination of the proceedings or further order of the Court restraining Connells Point Holdings Pty Ltd (Connells) from disposing of, encumbering, diminishing the value of or otherwise dealing with any of the proceeds of the sale of the Kings Head Tavern. 3 An order pending final determination of the proceedings or further order of the Court restraining Angela Michael, Powerhouse's director, from causing Powerhouse to dispose of, encumber (including to create a charge or security interest over), diminish the value of or otherwise deal with any of the proceeds of the sale of the Kings Head Tavern. 4 An order pending final determination of the proceedings or further order of the Court restraining Peter Sleiman and Jake Sleiman, Connells' directors, from causing Connells to dispose of, encumber (including to create a charge or security interest over), or diminish the value of or otherwise deal with any of the proceeds of the sale of the Kings Head Tavern. 5 An order pending final determination of the proceedings or further order of the Court restraining the other Cross Defendants, each of those Cross Defendants from further dealing with any of the proceeds of the sale of the Kings Head Tavern that they have received. 6 An order pending final determination of the proceedings or further order of the Court restraining RHG Nominees Pty Ltd (RHG) and RHG Properties Pty Ltd (RHG Properties) from disposing of, further encumbering, diminishing the value of or otherwise dealing in any way with the land known as lot 100 in deposited plan 747211 (Royal Hotel Granville). 7 An order pending final determination of the proceedings or further order of the Court restraining Peter Sleiman, Tony Sleiman and Jaken Properties Australia Pty Ltd (JPA) from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the Sly Fox Family Trust, Sly Fox 1 Unit Trust or Sly Fox 2 Unit Trust or any trustee of those trusts. 8 An order pending final determination of the proceedings or further order of the Court restraining Peter Sleiman, Jake Sleiman and Connells from causing or entering into any further document, instrument or deed to change or purport to change, vary or amend any of the terms of the trust deed for the Petejake 1 Unit Trust, Petejake 2 Unit Trust and Petejake Family Trust. 9 An order pending final determination of the proceedings or further order of the Court pursuant to rule 25.11 of the Uniform Civil Procedure Rules 2005 (UCPR) in the terms annexed to these orders and marked "A" against Powerhouse, Connells, RHG and RHG Properties.
The RHG parties' motion seeks the discharge of some of the orders made by Rees J being those made in Orders 2, 3, 4 and 6 above against the RHG parties, (RHG Nominees Pty Ltd, RHG Properties Pty Ltd, Connells Point Holdings Pty Ltd, Angela Michael and Jake Sleiman). In addition, the RHG parties seek an enquiry as to damages.

Background

In order to address the arguments raised by the parties, it is necessary to set out some background to the dispute.
The following is a summary of key events prior to delivery of the Judgment: 1. On 21 June 2005, a discretionary trust known as the Sly Fox Family Trust (Sly Fox Trust) was established with JPG as trustee. Peter Sleiman was identified in the schedule to the deed as the specified beneficiary, the default beneficiary and appointor. The transactions referred to below to which JPG (or its successor as trustee, Jaken) was a party were entered into by each of them in their capacity as trustee of the Sly Fox Trust. 2. On 23 June 2005, a discretionary trust known as the PeteJake Family Trust (PJF Trust) was established with Powerhouse Corporation Pty Ltd (Powerhouse) as trustee. Peter Sleiman was identified in the schedule to the deed as the specified beneficiary, the default beneficiary and appointor. The transactions referred to below to which Powerhouse was a party were entered into by it in its capacity as trustee of the PJF Trust. 3. On 15 July 2005, JPG entered into a Deed of Guarantee and Restraint with Mr Naaman from which the dispute the subject of the 2019 proceedings arose. 4. In November 2005, JPG purchased a property in William Street, Kings Cross and the business located at that property known as "O'Malley's Hotel" (the Kings Cross Property). JPG granted a mortgage over the Kings Cross Property and a fixed and floating charge over all JPG's assets (including the business known as the O'Malley's Hotel) to St George Bank to secure funds borrowed for the purchase. 5. In April 2006, JPG purchased the Granville Land for $750,000. JPG gave a mortgage over the Granville Land to St George Bank to secure a borrowing to fund the purchase. 6. In October 2006, Powerhouse purchased the Kings Head Tavern (Kings Head Tavern) at Hurstville for $13m. 7. In November 2006, Mr Naaman commenced proceedings in the Common Law Division of this Court against JPG for judgment in the sum of $2m relying upon, among other things, the Deed (Common Law proceedings). JPG did not file a defence to those proceedings. 8. On 13 February 2007, a deed of appointment of new trustee was entered into between JPG, Jaken Properties Australia Pty Ltd (Jaken) and Peter Sleiman under which JPG retired as trustee of the Sly Fox Trust and Jaken was appointed in its place. Under cl 1.5, Jaken indemnified JPG against all debts which JPG had incurred as trustee and agreed to discharge such debts out of the assets of the trust. 9. On 27 February 2007, a liquidator was appointed to JPG in a voluntary winding up by creditors, which resulted in the Common Law proceedings being stayed. 10. In March 2007, Mr Naaman lodged a caveat over the Kings Cross Property and the Granville Land. 11. In October 2008, Jaken became the registered proprietor of the Kings Cross Property and the Granville Land in its capacity as trustee of the Sly Fox Trust. 12. On 20 March 2009, the trust deed of the Sly Fox Trust was amended to replace Peter Sleiman with his brother, Tony Sleiman, as specified beneficiary, default beneficiary and appointor. 13. In July 2009, Mr Naaman commenced proceedings against Peter Sleiman and Jaken as trustee of the Sly Fox Trust seeking, amongst other things, judgment against Jaken in the sum of $2m (2009 proceeding) 14. On 17 June 2011, Jaken purportedly granted a lease of the Kings Cross Property to O'Malley's Hotel Pty Ltd (a company then controlled by Tony Sleiman) for a term of 10 years commencing on 20 June 2011. Kunc J found that the lease could not possibly have been entered into on its purported date of 17 June 2011 and it was likely to have been prepared in around May 2014 for the purpose of attempting to persuade the Court that the Kings Cross Property was worth less than it in fact was: Judgment, [318]-[321]. 15. In October 2011, Jaken borrowed $8.75m from National Australia Bank (NAB), which was used to repay the amount owing to St George Bank. NAB took a mortgage over the Kings Cross Property and the Granville Land to secure the borrowing. Around the same time, Powerhouse (the owner of the Kings Head Tavern) also entered into a loan facility agreement with NAB for $13,250,000. Jaken and Powerhouse gave cross-guarantees to NAB in respect of their borrowings. 16. On 5 October 2012, Jaken transferred the Granville Land to Superior Family Investments Pty Ltd (Superior) as trustee for the Superior Family Investments Trust, for $500,000. Kunc J found in the Judgment that no consideration was paid by Superior, or received by Jaken, for the transfer of the Granville Land, which was a transaction undertaken for no apparent commercial purpose and void under s 37A of the Conveyancing Act 1919: Judgment at [429]. 17. In 2013, the registration of JPG (which had been liquidated) was reinstated and orders were made adding it as a defendant in the 2009 proceedings. 18. On 3 March 2014, Pembroke J determined part of the 2009 proceedings, and made, relevantly, the following orders in favour of Mr Naaman: 1. Give judgment against [JPG] in the sum of $2m, together with interest for the period of 15 July 2006 to 3 March 2014 in the sum of $1,291,246.58. 2. Order [JPG] to pay the plaintiff's costs. 3. Adjourn the proceedings to a date to be fixed with the intention that the claim against the first and second defendants proceeds on another date. Note that the further hearing should not take any more time than the remaining time that has been allocated for the hearing this week. 4. Order the plaintiff to pay the costs thrown away and occasioned by the adjournment. 1. On 17 March 2014, Peter Sleiman and Jaken filed a Notice of Motion in the 2009 proceeding seeking to set aside Pembroke J's orders against JPG. 2. On 18 June 2014, Rein J made orders which, among other things, set aside orders 1, 2 and 4 made by Pembroke J on 3 March 2014 and made asset preservation orders against Jaken in relation to the Kings Cross Property. 3. On 8 September 2014, Jaken and Powerhouse entered into a number of transactions referred to in the Judgment as the "3.6 Million Drawdown" which are central to the decision of Kunc J and also the present application. These transactions were: 1. Jaken borrowed $12m from NAB which was paid into an account in the name of Powerhouse of which $10.525m was used by Powerhouse to reduce its debt owing to NAB to nil, and the balance of $1.4722m was paid to an account in the name of Jaken. 2. Powerhouse borrowed $7m from NAB which was deposited to an account in the name of Jaken, and Jaken then deposited $8.4m into its loan account with NAB to clear it. Kunc J found in the Judgment that firstly, the net effect of these transactions was that Jaken's indebtedness on its loan account with NAB had increased from $8.4m to $12m (i.e. an increase of $3.6m) and Powerhouse's indebtedness on its loan account with NAB had been reduced to $7m; secondly, as a consequence, Jaken paid $3.6m to Powerhouse for no apparent commercial purpose which was in breach of s 37A of the Conveyancing Act 1919; and thirdly, this gave rise to a liability on various bases to JPG enforceable by Mr Naaman against Jaken, Powerhouse, Peter Sleiman and Tony Sleiman. It was also a breach of the asset preservation orders made by Rein J: Judgment at [460] - [470]. 1. In December 2014, the 2009 proceedings were heard by Stevenson J and on 24 December 2014, his Honour delivered judgment dismissing Mr Naaman's claims. 2. On 20 January 2015, a Deed of Change of Trustee was purportedly executed appointing AVS Group Australia Pty Limited as the trustee of the Sly Fox Trust. 3. On 1 September 2015, the Court of Appeal allowed Mr Naaman's appeal against JPG and Jaken, and the proceedings were remitted to the trial division for an assessment of damages. 4. On 22 February 2016, Young AJ made various orders in favour of Mr Naaman, the plaintiff, to dispose of the 2009 proceeding, including the following: 4. That judgment be entered for the plaintiff against [JPG] in the amount of $3,446,755.55. 5. Declare that [JPG] is entitled, as against [Jaken] and generally, to be indemnified out of the assets of the Sly Fox Family Trust for liabilities incurred by it in its capacity as trustee of the Sly Fox Family Trust, including in respect of the judgment entered against [JPG] in these proceedings. 6. Further declare that the plaintiff is subrogated to the rights of [JPG] for its entitlement to be indemnified from the assets of the Sly Fox Family Trust for its liability to the plaintiff in respect of the judgment to be entered in these proceedings, subject only to the costs and expenses of the liquidator of the creditors voluntary winding up of [JPG] and the claim of $2,500 which has been referred to in the evidence. Also, an asset preservation order was made against Jaken to restrain it from disposing of or dealing with, other than in the usual course of business, or further encumbering or diminishing the value of the Kings Cross Property until further order. The judgment debt of $3,446,755.55 remains outstanding. 1. On 13 March 2016, Mr Naaman lodged a caveat over the Kings Cross Property in support of his claim to be subrogated to JPG's right of indemnity from the assets of the Sly Fox Trust. 2. On 23 January 2019, Jaken commenced the 2019 proceedings by summons in which the principal relief sought was the removal of the caveat lodged by Mr Naaman. 3. On 29 March 2019, Mr Naaman filed a cross claim in the 2019 proceedings, in which he brought claims against Jaken and Powerhouse challenging the effectiveness of the $3.6 Million Drawdown and claims against Jaken and Superior regarding the transfer of the Granville Land to Superior, all which were ultimately upheld in the Judgment. 4. On 13 December 2019, a transaction was entered into by, among others, Powerhouse and Red Cape Hotel Group Pty Ltd, an unrelated third party, which was documented by 4 contracts all expressed to be interdependent, with completion of one depending on completion of all the others. The first part of the transaction was the sale of the Kings Head Tavern by Powerhouse for a total price of $27 million under two contracts: 1. A contract by which Powerhouse as vendor agreed to sell the Kings Head Tavern land and associated hotelier's licence to MAHF Custodian Pty Ltd as purchaser for $20,630,550 apportioned as to $7,910,550 for the land and $12,720,000 for the licence; 2. A contract by which Connells Point Hotel Pty Ltd as vendor agreed to sell the business conducted on that land trading as "Kings Head Tavern" to Red Cape Hotel Group Pty Ltd as purchaser, for a total purchase price of $6,369,450. In the Statement of Claim (see [18] below), Mr Naaman disputes that Connells Point Hotel Pty Ltd (a company registered on 15 January 2019) was the owner of the Kings Head Tavern business and contends that it remained at all times the property of Powerhouse. The second part of the transaction was the purchase of the Royal Hotel Granville for a total price of $51m by two companies of which Jake Sleiman, Peter Sleiman's son, was the sole director (RHG Nominees Pty Ltd and RHG Trading Pty Ltd) from Red Cape Hotel Group Pty Ltd. This was also documented by two contracts: 1. A contract by which MAHF Custodian Pty Ltd as vendor agreed to sell the Royal Hotel Granville land and associated hotelier's licence to RHG Nominees Pty Ltd as purchaser for $27m (apportioned as to $11m for the land $16m for the licence). 2. A contract under which Red Cape Hotel Group Pty Ltd as vendor to sell the business conducted on that land trading as "Royal Hotel Granville" to RHG Trading Pty Limited (as trustee for the RHG Trading Unit Trust) for a purchase price of $24m. 1. On 5 February 2020, Powerhouse retired as trustee of the PJF Trust and Connells Point Holdings Pty Ltd was appointed in its place. 2. On 28 February 2020, the ANZ Bank provided a letter of offer to Grand Royal Nominees Pty Ltd (as trustee of the Grand Royal Trust) as borrower for a facility in the total amount of $31,200,000 to fund the purchase of the Royal Hotel Granville, as well as another facility to Royal Granville Operations Pty Ltd for $100,000. 3. On 11 March 2020, settlement of the 4 contracts referred to at (29) above occurred. According to the settlement sheets, after adjustments: 1. Powerhouse received $20,629,716.56 on settlement for the Kings Head Tavern land from which $6,684,147.94 was paid out, including $6,040,797.88 to repay NAB. 2. Connells Point Hotel Pty Ltd received $6,246,650.98 from Red Cape Hotel Group Pty Ltd for the Kings Head Tavern business. 3. RHG Nominees Pty Ltd paid $26,969,691.54 to MAHF Custodian Pty Ltd for the Royal Hotel Granville land. 4. RHG Trading Pty Ltd paid $23,469,515.15 to Red Cape Hotel Group Pty Ltd for the Royal Hotel Granville business. In the Statement of Claim (see [18] below), Mr Naaman alleges that this transaction involved a transfer by Powerhouse of property (held by it as trustee of the PJF Trust) to RHG Nominees Pty Ltd and RHG Trading Pty Ltd for no consideration and challenges it on various grounds including that it is void under s 37A of the Conveyancing Act 1919. In particular, he alleges that the total price of $51 million paid by them for the Royal Hotel Granville land and business was funded by a borrowing from the ANZ Bank under the facility referred to at (31) above and as to the balance, by Powerhouse transferring to them its entire "equity" in the Kings Head Tavern (being the total price of $27 million less the liability to NAB of $6,040,797.88). 1. On 3 November 2020, Rees J made asset preservation orders, including relevantly those set out at [12] above, in relation to the proceeds of sale of the Kings Head Tavern and the Royal Hotel Granville which was purchased with those proceeds. 2. On 16 November 2020, the hearing of the 2019 proceedings before Kunc J commenced and judgment was reserved on 27 November 2020. 3. On 16 March 2021, NAB appointed receivers to, among other things, the Kings Cross Property. 4. On 1 July 2021, Superior granted a lease of the Granville Land to Litt Up Management Pty Ltd, a related company, on 1 July 2021 for a term of 5 years with an option to renew for a further 5 years at a rent of $120,000 per annum. 5. On 4 August 2021 (while Kunc J was still reserved), Superior entered into a contract for the sale of the Granville Land to Samanril (as trustee of the Samanril Unit Trust) for a price of $1.3m. The contract was settled on 5 November 2021. At settlement, payments were made on behalf of Superior in an amount of $263,500 to NAB to discharge a loan by it, and in an amount of $516,261.15 to Saphire Mortgage Solutions Pty Ltd, a company of which Samantha Sleiman and Jake Sleiman were directors (SMS Payment). In the Statement of Claim (see [18] below) Mr Naaman challenges the sale of the Granville Land (and the lease granted on 1 July 2021) on various grounds. 6. On 28 January 2022, Kunc J made asset preservations orders against inter alia the Samanril parties (see [8] above).

The Judgment

In the Judgment at [8], Kunc J summarised his key findings in respect of three transactions defined at [7] as the "Impugned Transactions". Relevantly for present purposes the Impugned Transactions include the transfer of the Granville Land to Superior (see [15(16)] above) and the increase of Jaken's indebtedness to NAB by the $3.6 Million Drawdown (see [15(21)] above). So far as relevant, the key findings were: (1) As a former trustee of the Sly Fox Trust, JPG is entitled to indemnity for Mr Naaman's judgment debt from the assets of the Sly Fox Trust. That entitlement is given effect by an equitable lien over the assets of the Sly Fox Trust and confers a proprietary interest in those assets from time to time on JPG. (2) As the successor trustee of the Sly Fox Trust, Jaken owes a fiduciary duty to JPG not to deal with the assets of the trust in a way which destroys, diminishes or jeopardises JPG's right of indemnity from those assets. (3) Mr Naaman is subrogated to JPG's right to enforce that fiduciary duty owed by Jaken to JPG. (4) While Tony Sleiman was the nominal director of Jaken, Peter Sleiman was the de facto and shadow director of Jaken and the architect of the Impugned Transactions. (5) Each of the Impugned Transactions was undertaken with the intention, or at least had the effect, of destroying, diminishing or jeopardising JPG's right of indemnity from the assets of the Sly Fox Trust and, among other things, is liable to be set aside (subject to the rights of secured creditors) pursuant to s 37A of the Conveyancing Act 1919 (NSW)… (6) The transfer of the Granville Land to Superior (a company controlled by Peter Sleiman's wife, Samantha Sleiman) for no apparent commercial purpose and no consideration gives rise to liability on various bases to JPG enforceable by Mr Naaman in Jaken, Peter Sleiman, Tony Sleiman and Superior. … (8) The $3.6 Million Drawdown for no apparent commercial purpose and no consideration, insofar as it increased Jaken's liability to NAB as a primary debtor and involved paying away $3.6 million to Powerhouse, gives rise to liability on various bases to JPG enforceable by Mr Naaman in Jaken, Powerhouse, Peter Sleiman and Tony Sleiman. (9) Furthermore, the $3.6 Million Drawdown was in breach of certain consent freezing orders made by Rein J. However, Mr Naaman's action for tortious interference with the contract underlying those consent orders fails for want of proof of damage.
Kunc J subsequently made final orders (now the subject of the appeal referred to earlier) which inter alia declared that: 1. Mr Naaman has and had an equitable charge or lien over the assets from time to time of the Sly Fox Trust, including but not limited to the Granville Land and the proceeds of the $3.6 Million Drawdown paid to Powerhouse; 2. The transfer of the Granville Land from Jaken to Superior had been effected in breach of the s 37A of the Conveyancing Act 1919 and was void, and each of Jaken, Peter Sleiman and Tony Sleiman effected the transfer in breach of their fiduciary duties; 3. Superior at all relevant times held the whole of the Granville Land on constructive trust for JPG to the extent of all of the liabilities owed by JPG to Mr Naaman; 4. The $3.6 Million Drawdown and the payment of $3.6 million to Powerhouse was in breach of the orders made by Rein J on 18 June 2014 and was also in breach of s 37A of the Conveyancing Act 1919 and void; 5. Jaken, Peter Sleiman and Tony Sleiman effected the $3.6 Million Drawdown in breach of their fiduciary duties; 6. Powerhouse at all relevant times held the proceeds of the $3.6 Million Drawdown on trust for JPG to the extent of its liabilities owed to Mr Naaman.

The Statement of Claim

The existing asset preservation orders against the Samanril parties and the RHG parties referred to at [9] and [12] above were made in accordance with the principles stated in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18. In that decision the plurality stated at [53] that discretionary considerations should be carefully weighed before an order is made, including whether, if proceedings are available against the third party and have not been taken, the making of the order should be conditioned upon an undertaking being given by the applicant to commence such proceedings. Such an undertaking was not required for the orders made against the Samanril parties and the RHG parties who are not parties to the 2019 proceedings. At the first hearing of Mr Naaman's motion on 14 September 2022, counsel for Mr Naaman was directed by the Court to commence new proceedings against each of the non-parties in respect of the relief sought and this was done by the Statement of Claim filed on 17 October 2022.
The Statement of Claim commences new proceedings against all but one of the Samanril parties and the RHG parties setting out the nature of Mr Naaman's claims against them, the exception being Mr Jake Sleiman. The only current asset preservation orders against Mr Jake Sleiman are Orders 4 and 8 made by Rees J, which restrain him from causing Connells Point Holdings Pty Ltd (which replaced Powerhouse as trustee of the PJF Trust on 5 February 2020) from disposing of any of the proceeds of the sale of the Kings Head Tavern (Order 4) or from causing or entering into any document to amend the terms of 3 identified trust deeds (Order 8). Each of those orders is made against him in his capacity as a director of Connells Point Holdings Pty Ltd which is a named defendant in the Statement of Claim.
The delay or failure to commence proceedings against a third party who is the subject of asset preservation orders is a discretionary consideration to be taken into account when an application is made for the discharge of that asset preservation order: Lloyds Bowmaker Ltd v Britannia Arrow Holdings plc [1988] 1 WLR 1337 at 1347. I do not regard the delay in commencing proceedings in the present case as a reason to discharge the orders previously made against the Samanril parties and the RHG parties, or to deny Mr Naaman the relief he seeks in his motion, for two reasons. First, Mr Naaman had previously provided "Points of Claim" in the submissions made at the hearing before Rees J on 2 November 2020 which made clear the nature of the claims made against them. Second, the delay in formalising those claims into a pleading is explained by the fact that the claims are predicated on Mr Naaman's success in the 2019 proceedings heard by Kunc J, and that is still to be finalised given the appeal. Nevertheless, it is appropriate given the nature of the asset preservation orders against the Samanril parties and the RHG parties that the "Points of Claim" be formalised into a pleading and this has now occurred.
In the Statement of Claim, Mr Naaman advances claims against the RHG parties and the Samanril parties include the following: 1. In respect of the RHG parties: 1. The transfer of the equity in the Kings Head Tavern by Powerhouse to RHG Nominees Pty Ltd and RHG Trading Pty Ltd was effected with an intention to defraud creditors and is voidable pursuant to s 37A of the Conveyancing Act 1919 and/or was in breach of Powerhouse's fiduciary duties; 2. RHG Nominees Pty Ltd and RHG Trading Pty Ltd knowingly received that property obtained in breach of Powerhouse's fiduciary duties; 3. RHG Nominees Pty Ltd and RHG Trading Pty Ltd hold the Royal Hotel Granville and its business on constructive trust for JPG to the extent of all liabilities owed to Mr Naaman; 4. Angela Michael knowingly assisted in those breaches of fiduciary duties and is liable to compensate Mr Naaman; 1. In respect of the Samanril parties: 1. The transfer of the Granville Land to Samanril and the making of the SMS payment were effected with the intention to defraud creditors and are voidable pursuant s 37A of the Conveyancing Act 1919; 2. Alternatively, those transactions were in breach by Superior of its fiduciary duties; 3. Samanril and Saphire Mortgage Solutions Pty Ltd are accountable to Mr Naaman for their knowing receipt of the Granville Land and the SMS Payment in breach of fiduciary duty and hold that property on constructive trust for JPG and Mr Naaman. 4. Samantha Sleiman (as director of Superior) and Riley Sleiman (as director of Samanril) knowingly assisted in the breaches of fiduciary duty and are liable to compensate Mr Naaman to the extent of the liabilities owed to him by JPG.

Relevant principles

The Court has a broad power to make an asset preservation (or freezing) order under both its inherent jurisdiction and Part 25 of the UCPR. Rule 25.11 confers power to make an order "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". Rule 25.11 does not prescribe the form of the order; rather, the power to make the order is defined by reference to its purpose, consistently with its juridical basis which is the Court's inherent and statutory jurisdiction to make such orders as it considers appropriate to prevent the abuse or frustration of its processes in relation to matters coming within its jurisdiction: Cardile at [41] - [42]; PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36 at [43]. It is accepted that r 25.11 confers a broad and flexible power with the form of the order being crafted to meet the exigencies of the case: Cardile at [41]; Deputy Commissioner of Taxation v Huang (2021) 96 ALJR 43; [2021] HCA 43 at [31].
While the power conferred by r 25.11 is broad, it is a drastic remedy and must not be granted lightly: Cardile at [51].
Three requirements must be satisfied for the grant of an asset preservation order under r 25.11 read with r 25.14: P Biscoe, Freezing and Search Orders (3rd ed. LexisNexis Australia, 2023) at [2.52]. First, the applicant must have a good arguable case on an accrued or prospective cause of action that is justiciable in the Court, or a judgment of the Court. A "good arguable case" is one which is more than barely capable of serious argument, and yet not necessarily one the judge believes to have a better than 50% chance of success: Guan v Li (No 2) [2022] NSWCA 261 at [30]. Second, the Court must be satisfied, having regard to all the circumstances, that there is a danger that the actual or prospective judgment debt will be wholly or partly unsatisfied because any of the events set out in r 25.14(4) or (5), as applicable, might occur. Third, if those two requirements are met, the Court must be satisfied that as a matter of discretion it is in the interests of justice to grant an order bearing in mind, among other things, the balance of convenience and that the jurisdiction is to be exercised with a high degree or caution.

Application for discharge of the existing orders against the Samanril parties and the RHG parties

It is convenient to deal first with the question whether the existing asset preservation orders against the Samanril parties and the RHG parties should be discharged. The Samanril parties and RHG parties, although separately represented, advanced what were in substance the same submissions in support of their contention that the existing asset preservation orders against them should be discharged.
First, they submit that it will be unjust if the Court was to permit Mr Naaman to bring his claims in the Statement of Claim against the Samanril parties and the RHG parties because those claims could and should have been raised in the 2019 proceedings. The submission was based principally on the principles stated in JACS.
It is clear from JACS at [131] - [132] that where a court is invited to make or proposes to make orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined to the proceeding. That principle was infringed in that case because the relief claimed and granted to the plaintiff (a constructive trust over land and the transfer of the land subject to the trust to the plaintiff so as to make the interest transferred indefeasible on registration) directly affected the interests of another person, Walker Corporation, which claimed an interest in the land under an unregistered mortgage.
The Court at [132] approved the following statement of the Full Federal Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524 - 525 (emphasis added): Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.
In my view it cannot be said that the Samanril parties and the RHG parties are directly affected, in the relevant sense, by the orders made by Kunc J for several reasons. First, at the time of the $3.6 Million Drawdown the RHG parties did not claim any interest in the property held by Jaken or Powerhouse, and similarly at the time of the transfer of the Granville Land to Superior, the Samanril parties did not claim any interest in the Granville Land. Accordingly, they cannot be said to "claim an interest in the subject matter" of the 2019 proceeding: Chickabo Pty Ltd v Zphere Pty Ltd [2019] VSC 580 at [120]. Second, at the heart of the decision of Kunc J is that s 37A applied to render both transactions void. The RHG parties and the Samanril parties were not relevant parties to the application of s 37A to those transactions. Third, in relation to the RHG parties, they do not have or claim an interest in the $3.6 million which was paid by Jaken to Powerhouse. Fourth, it is difficult to see on what basis the Samanril parties could have been parties to the 2019 proceeding because at the time of the hearing Superior had not entered into any transaction in respect of the Granville Land with any of the Samanril parties. The principles stated in JACS rest on general principles of natural justice being that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case: JACS at [137], citing Cameron v Cole (1944) 68 CLR 571 at 589, and [153]. There is no denial of natural justice to the Samanril parties in their not being given an opportunity to be heard at a hearing which took place prior to the transaction under which they acquired their interest, particularly where (as here) they can be taken to have had full knowledge of the claims in the 2019 proceeding made by Mr Naaman.
Hence, while the interests of the Samanril parties and the RHG parties were affected in a general way by the decision and orders of Kunc J, they were not directly affected by them in the relevant way: see Chickabo at [44] - [126].
Second, they submit that the claims brought against the Samanril parties and the RHG parties in the Statement of Claim are an abuse of process and precluded by the "Anshun estoppel" principle: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Tomlinson v Ramsey Food Processing Pty Ltd (2016) 256 CLR 507; [2015] HCA 28 at [22].
The Anshun estoppel principle is that if a claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding, the assertion of that claim or the raising of that issue will be precluded in a later proceeding: Anshun at 602-603; Tomlinson at [22]. In my view for the same reasons that it was not necessary for the Samanril parties and the RHG parties to be joined to the 2019 proceeding, it was not unreasonable for the claims brought in the Statement of Claim against the Samanril parties and the RHG parties not to have been raised in the 2019 proceedings.
In so far as the RHG parties submitted that it is an abuse of process for Mr Naaman to bring fresh proceedings against the RHG parties (and the Samanril parties) I understood that this was based on the proposition that the fresh proceedings are based on findings of fact about which the RHG parties (and the Samanril parties) were entitled to be heard and in circumstances where those fresh proceedings could have been determined in the 2019 proceedings. In my view, this submission does not raise any new point to the one based on JACS. The RHG parties and the Samanril parties were not necessary parties to the 2019 proceeding. Given their close relationship to the cross-defendants to the 2019 proceeding there is no apparent unfairness in the failure to join them. Further, no submission was made to me giving a clear indication as to what they would have done differently had they been joined.
Third, they submit that no relief is sought in the Statement of Claim against certain of the Samanril parties (Samantha Sleiman and Riley Panetta-Sleiman) and the RHG parties (Jake Sleiman, Angela Michael, Connells Point Holdings Pty Ltd or Powerhouse Corporation Pty Ltd). I reject that submission. It is clear that relief by way of either declaration or equitable compensation is claimed against each of the Samanril parties and the RHG parties with the exception, as noted above, of Jake Sleiman. The continuation of the limited form of asset preservation order against him referred to at [19] above is, in my view, appropriate given that the entities in relation to which he exercises authority (as a director) are entities in respect of which relief is sought by Mr Naaman.
Fourth, they submit that the Statement of Claim is defective because: (i) it pleads as facts certain of the critical findings in the Judgment which do not bind the Samanril parties and the RHG parties because they were not parties to the 2019 proceedings; and (ii) there are various defects in the pleading. In my view, each of these submissions is misplaced.
In relation to the first point, I have concluded that the Samanril parties and the RHG parties were not directly affected by the 2019 proceedings and hence were not necessary parties to those proceedings. It follows that they are bound by the findings made in the Judgment: see Executor Trustee and Agency Company South Australia Limited v Deputy Commissioner of Taxes (South Australia) (1939) 62 CLR 545 at 562; Chickabo at [129] - [142]; KR Handley, Spencer Bower and Handley: Res Judicata (5th ed, 2019, LexisNexis) at [9.31] - [9.33].
In relation to the second point, what is necessary for the applicant to establish when seeking to preserve an asset preservation order is that he has a good arguable case on an accrued or prospective cause of action that is justiciable in the Court: UCPR r 25.14(1). In my view, the Statement of Claim satisfies this requirement. In particular, it pleads all the elements required to satisfy s 37A of the Conveyancing Act 1919 in relation to the relevant transactions, being the purchase of the Royal Hotel Granville with funds sourced from the sale of the Kings Head Tavern and the transfer of the Granville Land by Superior to Samanril. It is not necessary or appropriate on an interlocutory application of this nature to address potential pleading defects in the Statement of Claim, which is a matter for the defendants to raise on an application to the Court in proceedings either to strike out the Statement of Claim under UCPR r 14.28 or for orders that the defects be cured by amendment.
Finally, I note that I do not need to determine whether the submissions of the Samanril parties and the RHG parties based on JACS, Anshun estoppel or defective pleading are correct as the asset preservation orders are only interlocutory relief. The Samanril parties and the RHG parties can put these arguments in the substantive proceedings, either by seeking to set aside the orders of Kunc J (in the case of the JACS argument) or seeking to strike out the Statement of Claim. For present purposes I only need to be satisfied that none of these arguments have the consequence that Mr Naaman has failed to establish that he has a good arguable case for the relief sought against the Samanril parties and the RHG parties. For the above reasons I am satisfied that none of these arguments detract from the conclusion I have reached that Mr Naaman does have a good arguable case.
For these reasons, in my view the Samanril parties and the RHG parties have not established that the existing asset preservation orders should be discharged. Further, given that, in the meantime, Mr Naaman has the benefit of the findings in the Judgment and orders made by Kunc J, the reasons for the original making of those asset preservation orders remain valid.

Mr Naaman's motion

The Samanril parties and the RHG parties made the same submissions addressed above in relation to Mr Naaman's motion which I reject for the same reasons.
The Samanril parties also submitted that proposed Orders 6 and 7 were too wide. In relation to Order 6, they submitted that the blanket restraint against any change, variation or amendment of any of the terms of the trust deed for the Samanril Unit Trust takes no account of hypothetical changes, variations or amendments that might have a legitimate commercial and legal justification, and at the very least the ability to make those changes ought to be preserved. In my view, Order 6 (like the other orders) does this because it is expressed to be subject to further order and this allows for the Samanril parties to apply to the Court for a variation of the order to allow for any change to the terms of the trust deed which does not affect the status quo in relation to Mr Naaman's claims.
In relation to proposed Order 7, the Samanril parties submitted that it was too wide in its original form which was expressed to apply to any trust and not just named trusts. Mr Naaman accepted this complaint and the revised version of proposed Order 7 set out at [5] above now limits it to the named trusts each of which, on the evidence, is involved in the transactions in respect of which Mr Naaman brings claims under the Statement of Claim. Accordingly, I do not regard that order as being too wide in its now amended form.
The RHG parties also submitted that Mr Naaman has not established that the four companies the subject of the freezing order in proposed Order 8 have an interest in the Royal Hotel Granville and/or business. I reject that submission. It is apparent from the evidence that one of the companies (RHG Trading Pty Ltd) purchased the Royal Hotel Granville business; that two of them (Grand Royal Nominees Pty Ltd and Royal Granville Operations Pty Ltd) are borrowers under the facility provided by the ANZ Bank to fund the acquisition of the Royal Hotel Granville land and business; and that all four of them were required to provide security to the ANZ Bank in respect of that facility. It is a reasonable inference that this reflects that they have an interest in the Royal Hotel Granville land and business in respect of which Mr Naaman claims a proprietary interest, by way of subrogation, under the Statement of Claim.
I will now turn to the three requirements that need to be satisfied for Mr Naaman to obtain the asset preservation orders set out at [5] above.
In my opinion Mr Naaman has a good arguable case that the transaction by which Powerhouse sold the Kings Head Tavern and RHG Nominees Pty Ltd and RHG Trading Pty Ltd acquired the Royal Hotel Granville land and business involved a transfer of property by Powerhouse to RHG Nominees Pty Ltd and/or RHG Trading Pty Ltd in a manner designed to defeat creditors so that it is void under s 37A of the Conveyancing Act. Similarly, in my opinion Mr Naaman has a good arguable case that the transfer of the Granville Land by Superior to Samanril is liable to be set aside on the same basis.
I am satisfied that there is a danger that a prospective judgment against the parties to the transactions referred to in the previous paragraph will be wholly or partly unsatisfied because assets of those parties are disposed of, dealt with or diminished in value. This is due to the findings in the Judgment indicating that steps have been taken to seek to frustrate the enforcement of the judgment obtained by Mr Naaman in 2016 and that there is a real danger that further steps will be taken to achieve that result.
As to discretion, I am satisfied that it is in the interests of justice to grant the orders sought in Mr Naaman's motion, subject to Mr Naaman giving the usual undertaking as to damages. In particular, as explained in [6] above, each of the orders sought is focused on an aspect of the ownership of the Royal Hotel Granville and will have the effect of preserving the status quo until Mr Naaman's claims in the Statement of Claim in relation to that asset are determined.
At the hearing, it was suggested that the amount of the freezing order to be made against RHG Trading Pty Ltd, Royal Granville Operations Pty Ltd, Grand Royal Nominees Pty Ltd and Hotel Grand Holdings Pty Ltd should be increased from $4,783,343 to $5,033,531.62 (which is the amount of the judgment debt as at 12 September 2022). I will not make that amendment because the effect of granting the orders sought in relation to Mr Naaman's motion is that he will have freezing orders against 8 companies all in the amount of $4,783,343. In the circumstances, that provides him with adequate protection.

Conclusion

For these reasons, I will make orders in accordance with Mr Naaman's motion set out at [5] above subject to Mr Naaman giving the usual undertaking as to damages, and dismiss the motions of the Samanril parties and the RHG parties.
The parties did not make submissions on costs. In my view the appropriate course is to reserve costs in respect of all three motions.

Amendments 27 March 2023 - Minor typographical amendments. [37] Reference to UCPR amended to r 25.14(1). 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: 27 March 2023

Uniform Civil Procedure Rules 2005(NSW)rr 7.35(1), 25.11, 25.14

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (13 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (19)

Cited By (3)