Mehajer v Weston

Federal Court of Australia|2018-04-26|Before: Lee J

The application for interim relief be dismissed.
By 1 June 2018, the applicant file and serve any further evidence upon which he proposes to rely at final hearing, including any opinion evidence on the question of solvency.
By 15 June 2018, the respondents file and serve any further affidavit evidence upon which they propose to rely at final hearing.
By 4:00 pm on 19 June 2018, the parties file and exchange any outline of opening submissions upon which they propose to rely at final hearing.
The matter be listed for final hearing at 10:15 am on 21 June 2018 with an estimate of two days.
The costs of the interlocutory hearing on 26 April 2018 be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A Introduction 1 On 17 April 2018, the applicant, Salim Mehajer, filed an originating application joining his trustee in bankruptcy, Paul Weston (Trustee), and a number of other respondents, two of which are the fourth respondent, Prime Marble & Granite Pty Ltd (Prime), and the fifth respondent, the Deputy Commissioner of Taxation (DCT). The primary relief sought in the application is an order pursuant to s 153B(1) of the Bankruptcy Act 1966 (Cth) (Act) annulling the bankruptcy of Mr Mehajer. 2 A claim for interim relief was made in the originating application, which was expressed as follows (interim application): Claim for interim relief The Applicant also claims interim relief. 1. An order staying, until further order, the sequestration order made against the estate of the Applicant on 20 March 2018. 2. An order restraining the First Respondent, until further order, from exercising any powers in respect of the estate and property of the Applicant. 3. Such further or other orders as the Court thinks fit. 4. Costs. (Uncorrected, bolding in original) 3 Together with the originating application, the Court received a letter from Mr Mehajer's solicitor, and the proceeding came before me as the Commercial & Corporations Duty Judge. The letter from Mr Mehajer's solicitor was in the following terms: I act for the applicant in these proceedings. The applicant seeks an urgent hearing for the Claim for Interim Relief as set out in the Application because he needs to be able to have full control of his affairs as to prove his solvency and to limit the expenses incurred by the Trustee in Bankruptcy. (Uncorrected) 4 Through my Associate, I indicated to Mr Mehajer's solicitor that I would list the matter at 9.30 am on 23 April 2018. Shortly thereafter, my Associate received a further communication from Mr Mehajer's solicitor which noted, for reasons that are unnecessary to recount, that the solicitor was unable to attend on the return date and that given the respondents had had late notice of the application, and made a request that the matter "be listed Thursday 19 April 2018". The reference to 19 April was clearly a reference to 26 April, given that the email was sent on 20 April 2018. The communication went on to state that "Mr Mehajer is still collating documents for his evidence and I am instructed this shall be ready by ready by (sic) Tuesday". 5 As a consequence of this communication, I arranged administratively for the interlocutory hearing to be deferred until 9.30 am on 26 April 2018. When the matter was initially called on today, Mr Hume, counsel for Mr Mehajer, informed me that the affidavit material to be read was still in the process of finalisation and swearing. Accordingly, I stood the matter down to 2.15 pm in order to allow that material to be completed and for it to be filed and served. 6 When the matter was re-called, each of Mr Marshall SC (who together with Mr Maconachie appeared for the Trustee), Ms Petch (who appeared for Prime), and Ms Whan (who appeared for the DCT) indicated that despite late service, they were able to meet the interim application today.

B Stay of Sequestration Order 7 As noted above, the primary interim relief sought in prayer 1 of the interim application was an order "staying, until further order, the sequestration order made against the estate" of Mr Mehajer. 8 Even accepting a diminution in emphasis on the quasi-penal nature of bankruptcy and that the contemporary stigma associated with being a bankrupt is not the same as in earlier times, the serious consequences of bankruptcy should not be ignored; it involves the changing of the status of an insolvent person. It is not an ordinary order, nor is a proceeding in bankruptcy mere inter partes litigation. An order sequestrating the estate of a debtor provides for an immediate vesting of the property of the bankrupt in a trustee and changing the status of the bankrupt. When this is understood, an important matter can be readily appreciated: that it is "conceptually incoherent to contemplate a judicial stay order as being available to countermand" the automatic operation of the Act: Endresz v Australian Securities and Investments Commission [2014] FCA 1139 at [8] per Beach J. It follows, as is reflected in s 37(2) of the Act, that there can be no 'stay' of a sequestration order. This is sufficient to determine the relief sought in prayer 1 of the interim application adversely to Mr Mehajer (and also the associated relief which was expressly sought as ancillary to such a stay). To quote more fully from what Beach J said in Endresz at [8]-[11]: [8] It is apparent from the provisions and operation of the [Act] that it is inapposite to talk of a stay of a sequestration order as such. When a sequestration order is made, it takes immediate and automatic effect by force of the Act. There is an immediate vesting of property in the trustee in bankruptcy. Moreover, after-acquired property of the bankrupt vests as soon as it is acquired. See, generally, Nand v Fuji Xerox Australia Pty Ltd [2014] FCA 757 at [3] per Yates J. It is conceptually incoherent to contemplate a judicial stay order as being available to countermand automatic legislative operation where no question of invalidity is involved. [9] In concept, one can only consider whether there should be a stay of any proceedings or action under a sequestration order, rather than a stay of the order itself. So much is made plain by the language of s 52(3) of the Act which uses the language of "stay all proceedings under a sequestration order". I interpolate at this point that s 52(3) also has a time limit of 21 days. Nevertheless, in the Court's appellate jurisdiction under r 36.08, such a time bar does not limit the Court's power thereunder. A separate source of jurisdiction can be invoked, rather than that applicable under s 52(3). [10] Further, reference should also be made to s 37(2)(a) of the Act, which provides that the Court does not have power to suspend the operation of a sequestration order. [11] In summary, the Court only has power to stay proceedings or action under the sequestration order. The present interlocutory applications do not identify what proceedings or action ought to be stayed and why. They fail in limine on this aspect alone. 9 As made plain by his Honour, the Court only has power to stay proceedings or action under the sequestration order. This is not a distinction without a difference and the matter was expressly raised during the course of argument. Despite this, the contention was maintained that I had power to stay the sequestration order. For reasons I have already explained, I reject this contention. Accordingly, this application fails in limine on this aspect alone, and the claim for interim relief must therefore be dismissed.

C Consideration of Stay of Proceedings under the Sequestration Order 10 Having concluded that the primary claim for interim relief ought to be dismissed, against the prospect (which I do not accept) that the interim application should be characterised as an application for a stay of any proceedings or action under the sequestration order, rather than a stay of the order itself, I should go further. 11 Again, as noted by Beach J in the passage extracted above, s 52(3) of the Act contemplates a "stay [of] all proceedings under a sequestration order" (although s 52(3) also has a time limit of 21 days). For the reasons that follow, even if made, I would also have rejected any such application for a stay of all proceedings under the sequestration order made against Mr Mehajer. 12 In the course of his careful and comprehensive submissions, Mr Hume submitted a stay should be granted because it was necessary to preserve the subject matter of the application for annulment and, in this respect, had a close analogy to similar orders made in aid of an appeal brought against the making of a sequestration order. As was explained in Endresz at [9], the provisions of s 52(3) of the Act do not prevent the exercise of a power to stay proceedings under a sequestration order in the Court's appellate jurisdiction under FCR 36.08 in appropriate circumstances. 13 I will assume in favour of Mr Mehajer (without deciding) that the principles relating to an application for a stay of proceedings under an order in the context of an annulment have some analogy (in the sense of the use of the implied power of the Court to preserve the subject matter of the litigation) as apply in relation to an application to set aside a sequestration order on appeal. In any event, all parties approached the matter in this way, and it was common ground that even if relief of the type sought was available, in order to grant relief it was necessary for me to be satisfied that: (a) there was a serious question to be tried; and (b) the balance of convenience favoured the grant of interim relief.

C.1 Serious Question to be Tried 14 In respect of this aspect of the inquiry, Mr Mehajer called in aid three matters said to support an affirmative answer to the question of whether there was a serious question to be tried. The first was that there were defects in the creditors' petition, being erroneous information and an overstatement in the amount of the interest claimed on the judgment debt (Defects Contention); the second was that an adjournment of the hearing of the creditors' petition ought to have been sought and granted, given Mr Mehajer's circumstances (Adjournment Contention); the third was that Mr Mehajer had the ability to pay his debts as at the date of the making of the sequestration order (Ability to Pay Contention). I will consider these three contentions in turn, but while dealing with them I will refrain from expressing a concluded view on any of them, given the interlocutory nature of the present application and against the prospect that I may be required to further consider them in the context of a final hearing.

C.1.1 Defects Contention 15 In turn, three matters were raised in support of this contention: first, that there were defects in the creditors' petition; secondly, that the affidavit verifying [1]-[3] of the creditors' petition contained erroneous information; and thirdly, that there was an overstatement in the amount of interest accruing on the judgment debt. 16 As to the first of these matters, it was said that there was a difficulty because paragraph [1] of the creditors' petition averred that Mr Mehajer owed the applicant creditors (SM Project Developments Pty Limited (In Liquidation) and the liquidator of SM Project Developments Pty Limited (In Liquidation)) the amount of $223,918.49 pursuant to a judgment. However, a calculation was provided which indicated that the total debt amount was $199,519.52, comprising the judgment debt less three part-payments, plus interest accrued (the calculation being demonstrated in Annexure A to the creditors' petition). In short, the argument was that this internal inconsistency in the document was apt to mislead Mr Mehajer and rendered the creditors' petition 'defective'. During the course of submissions, I raised the distinction between a bankruptcy notice, which requires payment within a certain period of an amount specified, and a creditors' petition, which is the process mandated by the Act for the commencement of proceedings in bankruptcy and which is required, by s 47 of the Act, to be in the prescribed form and verified by an affidavit of a person with knowledge of the relevant facts. Mr Hume submitted, that the court, on the hearing of the petition, was required to be satisfied of the amounts set out in s 52 of the Act, which requires that evidence be adduced at the hearing as to: (a) the matters stated in the petition (for which purpose the court may accept the affidavit verifying the petition as sufficient); (b) the service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing. It is only if the court is satisfied with the proof of these matters that it may make a sequestration order against the debtor. 17 Mr Mehajer was represented by counsel at the hearing of the creditors' petition. A notice stating grounds of opposition to the petition was filed on 19 December 2017, which set out two grounds of opposition. By the time of the hearing of the petition, the only ground advanced was that set out in paragraph [1] of that notice (see Exhibit A at [2]). It appears that the only substantive contention advanced at the hearing of the petition was that the relevant bankruptcy notice, in the form in which it was issued by the Official Receiver, was invalid. 18 I raise this issue because there was no issue at the hearing of the creditors' petition in relation to any alleged defect in the petition, nor as to any alleged insufficiency of proof adduced in order to prove the factors set out in s 52 of the Act. This may have been of significance because at the hearing there was the potential of a supporting creditor becoming substituted if the petitioning creditors were unable, for some reason, to rely on the petition. 19 The second matter is connected to the first because the same flaw alleged to be included in the creditors' petition is also included in the affidavit verifying the matters required to be proved in accordance with s 52 of the Act. 20 The third matter arises from the fact that interest seems to be claimed on the amount of the judgment debt from the day on which the judgment was entered. As Mr Hume submitted, if an amount was tendered on the date of judgment, then it could not be said that interest would also have been required to be paid to discharge the judgment debt on that day. 21 I say nothing further about the Defects Contention at this time, and describe it and the surrounding circumstances merely to outline the nature of the argument advanced. There are no authorities known to counsel for Mr Mehajer to support the Defects Contention as justifying annulment in similar circumstances such as are said to be present here. It seems to me that the contention advanced in circumstances such as the present is, without expressing any concluded view, one which could be described as novel.

C.1.2 Adjournment Contention 22 The second point made on the question of whether there is arguable merit in the annulment application is one which is somewhat more fact-intensive. A chronology was provided on behalf of Mr Mehajer and was not in contest. It noted that the bankruptcy notice was issued on 28 September 2017, requiring payment of the amount claimed by 19 October 2017. Following the presently unchallenged act of bankruptcy, a creditors' petition was filed in the Federal Circuit Court on 15 November 2017, and returned for a directions hearing in that Court on 19 December 2017. In the intervening period, on 15 December 2017, it is suggested that Mr Mehajer engaged in discussions with a company called Financial Control Lending Pty Ltd in an effort to seek to raise $1 million of what was described as 'working capital'. 23 At the directions hearing, Mr Mehajer was ordered to file evidence as to solvency by 30 January 2018, that is, approximately six weeks following the directions hearing. On 23 January 2018, approximately five weeks after the directions hearing, Mr Mehajer was taken into custody on remand and was held in a holding cell at Surry Hills until 1 February 2018. It was contended that on 25 January 2018, loan approval for the $1 million was obtained, subject to Mr Mehajer signing loan documents. After this, Mr Mehajer was moved to Silverwater Gaol. Around this time, Mr Mehajer instructed his solicitor in the bankruptcy proceedings to apply for an adjournment until after the determination of his bail application in the Supreme Court on 29 March 2018. At some stage in February 2018, arrangements were sought to be made by the proposed lender to visit Mr Mehajer to sign the proposed loan agreement, but the proposed lender was refused entry to Silverwater Gaol. 24 In any event, on 2 March 2018, the creditors' petition was listed for hearing on 20 March 2018, at which time the hearing proceeded and the sequestration order was made. Mr Hume submitted that in these circumstances, it was incumbent upon those acting for Mr Mehajer to act in accordance with their instructions and obtain an adjournment. Again, it is inappropriate that I express any views in relation to this matter, and I have not, of course, heard any evidence from Mr Mehajer's then legal representatives. Having said that, Mr Hume submitted that it followed inexorably that an application for an adjournment would have been granted, particularly in circumstances where the sum of $1 million would be able to be procured in order to pay, at the very least, the petitioning creditors (and also, I infer, Prime). 25 Mr Hume submitted that the task at the final hearing would be for the Court to form a view as to whether or not it was satisfied that a sequestration order "ought not to have been made": see s 153B(1) of the Act. The applicable principles are well-known and were summarised in Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307; (2007) 5 ABC(NS) 122 at 125-126 [12] per Tracey J. Included in those principles, extracted by Tracey J at [12(4)], is the notion that the question of whether a sequestration order "ought not to have been made" is an inquiry which is directed to the question of if, on the facts known at the time of the annulment application, the court would have been bound not to make the sequestration order: see Re Frank; Ex parte Piliszky (1987) 16 FCR 396. The point made by Mr Hume was that in all the circumstances, the only proper exercise of discretion, if all the facts had been brought to the attention of the judge hearing the petition, was to allow an adjournment application and to not to proceed to make the sequestration order.

C.1.3 Ability to Pay Contention 26 The third matter raised on the serious question to be tried is that Mr Mehajer intends to contend that he had the ability to pay his debts at the time the sequestration order was made. In this regard, it is fair to say that the present state of the evidence is unsatisfactory. I was provided with Mr Mehajer's schedule of claimed assets and debts (Schedule), which is based on the affidavit material. In relation to the assets, a number of properties were identified, including seven for which there was no evidence as to whether or not they are the subject of encumbrances. Two of the properties, said to be owned by Mr Mehajer, are offered as security for an undertaking for the stay, and I will deal with these separately. A number of other assets are identified, for which values are asserted, including a series of personal loans, chattels, and an amount of $27 million said to represent an interest in developments being carried out by two companies: SET Services Pty Ltd (SET) and Sydney Project Group Pty Ltd (SPG). The evidence in respect of this last asset is illustrative of the difficulties which beset the evidence. At [38] of her affidavit affirmed on 24 April 2018, Ms Zali Burrows, Mr Mehajer's solicitor, deposed as follows: I am informed by Mr Mehajer that, since October 2017, he has been unsuccessfully attempting to obtain from the external controllers of Sydney Project Group and SET Services Pty Ltd copies of the entities' financial records. However, I am informed by Mr Mehajer that SET Services Pty Ltd is, together with Sydney Project Group Pty Ltd, the proponent of a development which has made approximately $83,000,000 of pre-sales of real estate. I am also informed by Mr Mehajer that he has an interest in developments carried out by SET Services Pty Ltd and Sydney Project Group Pty Ltd to a value of $27,000,000. On or about 18 April 2018, Mr Mehajer obtained caveats against 18 lots in respect of his interest in SET Services Pty Ltd. Now shown to me at Tab [5] of ZB-1 is a copy of those caveats. (Uncorrected) 27 When one goes to the annexure referred to by Ms Burrows, rather than seeing a copy of the caveats, what is annexed at pages 160-162 are copies of registration notices identifying the dealing numbers issued by Land Registry Services. What is notable is that the caveats are not in evidence, which caveats would have identified the nature of the interest sought to be asserted. When I sought clarification of the nature of the interest that was to be asserted, nothing further could be said other than what is extracted above. 28 Two other examples from what might be described as the other side of the ledger further illustrate the difficulties. One is the debt owed to the DCT, which, according to Mr Raguragavan Nithiaseelan, a Senior Manager in the employ of the Trustee, is an amount of $8,604,202.56, not the amount of $8,355,778 referred to in the Schedule. Similarly, in respect of Prime, the amount identified as the debt in the Schedule is $199,519, when it appears from a copy of the bankruptcy notice served on Mr Mehajer that as at 11 October 2017, the debt was $668,276.76. 29 While the material was, no doubt, prepared with some haste, it is fair, at least at present, to describe the evidence as to assets and liabilities as somewhat high, wide and (depending upon the view one takes of it) handsome.

C.1.4 Conclusion on Serious Question to be Tried 30 Having said all this, it is not necessary to form conclusions on the present evidence, let alone final views as, for the purpose of this interim application, I will proceed on the basis that there is some serious question to be tried in relation to the second of the three issues that were raised, that is, the Adjournment Contention. This does not mean that the other two points can be definitively described as being devoid of arguable merit, but as Mr Hume frankly acknowledged, further research will need to be done in relation to the first point, and it is anticipated that expert evidence in admissible form will be sought to be adduced in respect of the issue of solvency at the relevant time.

C.2 The Balance of Convenience 31 Having addressed the serious question to be tried, it is necessary to turn to the balance of convenience. There were, in effect, three matters raised on the balance of convenience, the material relevant to which was set out at [26]-[35] of Mr Mehajer's affidavit, which paragraphs are worth extracting in full: Harm I will suffer if a stay is not granted [26] I am a Licenced builder and property developer since 2011. [27] My trade and immediate source of income is as a builder. If a stay is not granted, I will not be able to renew my builders' licence and continue working. [28] I am (through companies I own and control) the property developer and builder in respect of numerous current projects. I have invested large sums of money in those projects of these years, in an amount of approximately $2,900,000.00 in reaching them to "development stage". The success of those projects depends, to a significant extent, on obtaining loan finance in the near future to take them to completion. Unless the stay is granted, I will be significantly impeded in obtaining loan finance. [29] The projects to which I have referred in paragraph 28 are as follows: (a) 13-21 John Street Lidcombe NSW 2141. The owner of this land is Sydney Construction and Developments Pty Ltd and A-Link Technology Pty Ltd. The anticipated start date for this project is mid December 2018. I expect this property to receive approval for approximately 140 units with aid of a VPA. I estimate realisation for the project of $150,000,000.00 (b) 55 Turner Street, Blacktown. The owner of this land is Downtown Project Developments Pty Ltd. The anticipated start date for this project is July 2018. I expect this property to receive approval for 9 town houses. I estimate a gross realisation of $10,000,000.00 (c) 103 Church Street, Lidcombe. The owner of his land is Layal Pty Ltd which is an entity that I am an investor entitles to 100% profit proceed of this company. The anticipated start date for this project is July 2018. I expect this property to receive approval for 5 luxury duplexes. I estimate a gross realisation of $3,000,000.00 (d) 16 Frances Street, Lidcombe. The owner of this land is Frances St Dual Property Trust which is an entity that I am an investor entitles to 100% profit proceed of this company. The anticipated start date for this project is January 2019. I expect this property to receive approval for a luxury dual occupancy or three storey home residence. I estimate a gross realisation of $1,700,000.00 (e) 555 Lyons Bay Rd, Canada Bay. The owner of this land is Mehajer Consolidated Pty Ltd which is an entity that I am an investor entitles to 100% profit proceed of this company. The anticipated start date for this project is July 2019. I expect this property to receive approval for a luxury two storey home. I estimate a gross realisation of $1,500,000.00 [30] I have also been involved in two further projects which are currently under contract negotiations or in mediation. I believe that I am required to be actively involved in negotiations for exchange and refinance for settlement. These projects are developments at 13 John Street, Lidcombe, and 77 Carlingford Street, Sefton. [31] 13 John Street Lidcombe is a Council Parcel Land and is in litigation to secure the sale. [32] I have an active caveat on this property to secure my interest since 2014 or thereabouts. [33] As I have set out in paragraph 11 above, I claim an equitable interest in developments being carried out by SPG and SET and have lodged caveats to protect that interest. If the stay is not granted, I believe I will be restricted in my ability to attend or be part of negotiations between the lender to those projects and the receiver appointed to SPG and SET. I have a deep knowledge of the development and the surrounding transactions. I am the only person who was involved in the developments from the outset. I believe that, without my involvement, those negotiations will not yield a solution that is in the best interests of me and my family. Further, if the stay is not granted, if the lender challenges the caveats I have lodged, I will be hindered in my ability to preserve the caveats. [34] I am also a party to a number of legal proceedings in which I claim money from others. Those proceedings concern breach of contract (against the financier, SC Lowy) and a professional negligence claim to which I anticipate on commencing by the end of next week, against my former accountant Ambrish Dakkar of AD Taxation Services. If a stay is not granted, I am hindered in my ability to pursue those proceedings. Undertaking [35] If the stay I seek is granted, I am willing to offer an undertaking to the following effect as a condition of the stay: The Applicant undertakes to the Court, until further order, not to dispose of, deal in or encumber his interest in 14 Frances Street, Lidcombe and 1 Ann Street, Lidcombe, NSW 2141. (Errors in original, italics and bolding in original) 32 It seems to me that there are a number of difficulties with the evidence relevant to the balance of convenience. 33 First, in respect of the intention of Mr Mehajer to obtain a new builder's licence (in circumstances where the evidence establishes that his current builder's licence has expired), no evidence was adduced as to the likelihood of an undischarged bankrupt being able to renew a builder's licence and continue working, including obtaining insurance and all other preconditions to engaging in substantial building activity. Further, notwithstanding Mr Mehajer's evidence regarding the corporations referred to in [28] of his affidavit (being referred to as "companies I own and control"), s 206B(3) of the Corporations Act 2001 (Cth) provides that as an undischarged bankrupt, Mr Mehajer is disqualified from managing corporations. No evidence was adduced from those who presumably are in current stewardship of the corporations, of their intentions as to development of the properties referred to by Mr Mehajer. 34 Mr Marshall SC described the evidence as 'Panglossian', which in my opinion is an apposite description. It might be thought a somewhat heroic notion that an undischarged bankrupt will be able to secure financing to conduct the building activities referred to in [29] of Mr Mehajer's affidavit. This is in circumstances where, as Mr Mehajer agreed in cross-examination, it was necessary, in order to obtain such finance, that he provide his personal guarantee. It might be thought somewhat unusual that construction finance of the type required would be able to be obtained where a condition precedent was the provision of a personal guarantee, when the proposed guarantor is an undischarged bankrupt (irrespective of whether or not there is a stay of proceedings under the sequestration order). 35 Secondly, it was suggested that Mr Mehajer would be restricted in his ability to negotiate with a lender in respect of the projects to be conducted by SET and SPG (which companies are in voluntary administration). As I previously noted, Mr Mehajer claims what is delphically described as an "interest" in these developments. He has obligations pursuant to the Act to cooperate with the Trustee. In circumstances where he has a valid and valuable interest in these properties, it is not apparent to me why the Trustee would not be able to take appropriate steps to maintain any valid interest that Mr Mehajer would have in properties controlled by those companies, particularly in circumstances where it appears that those companies are controlled by a fellow insolvency practitioner. 36 The third matter raised on the balance of convenience is the undertaking proffered by Mr Mehajer at [35] of his affidavit (extracted at [31] above). The two properties referred to are identified in the Schedule as having a value of between $4.25 and $4.55 million for the property at 14 Frances Street, and between $2.35 and $4.5 million for the property at 1 Ann Street. The evidence adduced by the Trustee in relation to these properties was as follows: Assets of the Bankrupt [16] While the Trustee's investigations are ongoing, to date, the Trustee has become aware of the following assets of the Bankrupt: (a) the Bankrupt is the sole registered proprietor of the whole of the land contained in Folio 430/1135677, being the property known as 14 Frances Street, Lidcombe NSW 2141 (the Frances Street Property). In relation to the equity position of the Frances Street Property, I note the following: (i) on 27 March 2018, solicitors retained by the Trustee obtained a Title Search of the Frances Street Property. Annexed hereto and marked with the letter "RN2" is a copy of that Title Search (the Frances Street Title Search); (ii) the Frances Street Title Search identifies the following interests registered on the title of the Frances Street Property: (1) first registered mortgage to NAB; (2) caveat by JFI Holdings; (3) caveat by Mr Gittany; (4) caveat by Anthony Warner; (5) caveat by Portcullis Capital; and (6) caveat by the Trustee, (iii) on 26 March 2018, I obtained a kerbside appraisal of the Frances Street Property which estimated a value of $3,000,000; (iv) based on the information received by the Trustee to date, including on behalf of NAB, JFI Holdings, Mr Gittany and Portcullis Capital as referred to at paragraph 14 above, I provide the following estimate of the equity position of the Frances Street Property (excluding any amounts payable with respect to the associated costs in the event of a sale): ITEM AMOUNT $ Kerbside Appraisal dated 26 March 2018 3,000,000.00 Less amounts owing to NAB (1,956,399.00) Less amounts owing to JFI Holdings (1,018,271.22) Less amounts owing to Mr Gittany (3,048,717.56) Less amounts owing to Portcullis Capital (2,226,213.89) NET EQUITY (DEFICIENCY) (5,249,601.67)

(b) the Bankrupt is the sole registered proprietor of the whole of the land contained in Folio 7/A/979289, being the property known as 1 Ann Street, Lidcombe NSW 2141 (the Ann Street Property). In relation to the equity position of the Ann Street Property, I note the following: (i) on 27 March 2018, solicitors acting for the Trustee obtained a Title Search of the Ann Street Property. Annexed hereto and marked with the letter "RN3" is a copy of that Title Search (the Ann Street Title Search); (ii) the Ann Street Title Search identifies the following interests registered on the title of the Ann Street Property: (1) first registered mortgage to NAB; (2) second registered mortgage to ACE Demolition; and (3) caveat by the Trustee, (iii) on 26 March 2018, I obtained a kerbside appraisal of the Ann Street Property which estimated a value of $900,000; (iv) based on the information received by the Trustee to date, including from NAB and ACE Demolition as referred to at paragraph 14 above, I provide the following estimate of the equity position of the Ann Street Property (excluding any amounts payable with respect to the associated costs in the event of a sale): ITEM AMOUNT $ Kerbside Appraisal dated 26 March 2018 900,000 Less amounts owing to NAB (949,010) Less amounts owing to ACE Demolition (6,200,000) NET EQUITY (DEFICIENCY) (6,249,010)

(Uncorrected) 37 Although Mr Hume made the point that the amounts identified as giving rise to the net deficiency of equity in both properties amount to unverified claims, the fact is that he was the one proffering the security. On the basis of the material presently adduced on the interim application, I am simply not satisfied that the undertaking has any commercial worth. It may be that this position changes, depending upon the evidence adduced on the application for final relief. 38 Before passing from the balance of convenience, I should note that, as submitted by Mr Marshall and Ms Petch, there are important public policy considerations when one has regard to staying proceedings under a sequestration order. The whole point of the stay as advanced on the interim application was for Mr Mehajer to return his attention to engaging in substantial commercial activity. This activity would likely have involved him procuring the entry of entities he is said to "control" (a difficulty in itself) into a range of new commitments (if he was able to do so), without it being evident to me that any obligations incurred are able to be paid from available assets (at least on the current evidence). Moreover, he would also, presumably, be seeking to recover loans made to third parties, some of which, the evidence discloses, were advanced as late as February 2018 (that is, following the presentation of the creditors' petition). To the extent that these loans are valuable assets, it is important that they be recovered for the benefit of creditors and not impeding the Trustee facilitates any recoverable assets being got in for the benefit of creditors, in the event that the sequestration order is not annulled.

D Conclusion AND Orders 39 It follows from the above, that I dismiss the interim application. It also follows that even if the interim application had been for a stay of the proceedings on the sequestration order (that is, different from that identified in and persisted in during the claim for interim relief), I would have dismissed any such application. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

SCHEDULE OF PARTIES NSD 617 of 2018 Respondents Fourth Respondent: PRIME MARBLE & GRANITE PTY LTD Fifth Respondent: DEPUTY COMMISSIONER OF TAXATION

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