RELIANCE FINANCIAL SERVICES NSW PTY LIMITED v SOBBI & ANOR

RELIANCE FINANCIAL SERVICES NSW PTY LIMITED v SOBBI & ANOR - [2009] NSWSC 1375 - NSWSC 2009 case summary — Zoe

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(a) The issue of "benefit" 20 The Sobbis, in answer to the plaintiff's claim, relied, inter alia, on the provisions of the Contracts Review Act 1980. As earlier stated, the abovementioned application to amend the cross-claim was made following but before completion of the cross-examination of Mr Ghandi Sobbi. It was made in response to evidence adduced at the commencement of the hearing on 28 September 2009 by the plaintiff to the effect that the loan transaction was one which intended to give, and did in fact give, a benefit to the defendants as the shareholders of Lemery. 21 I note that the plaintiff raised the issue of "benefit" in response to the defence on the first day of the hearing. 22 The plaintiff's case was that Mr Ghandi Sobbi approached the plaintiff requesting a loan "… so that a company, which the first and second defendants were shareholders in, could purchase the business stock of a business that was being operated by the first and second defendants' daughter and son-in-law" (transcript, 28 September 2009, p.1). 23 Mr M A Ashhurst SC, for the plaintiff company, in his opening submissions, stated that Mr Cassaniti, a director of Reliance, denied that he was aware that Mr Alan Sobbi was a bankrupt at the time the transaction took place. If he had been aware of that fact, it was asserted on his behalf, he would have had the first and second defendants as the borrowers themselves, "given that the transaction was for their benefit". Mr Ashhurst proceeded to say that, in any event, it was an irrelevant fact "because the transaction was not for the benefit of Mr Alan Sobbi, it was for the benefit of Lemery Holdings, being the defendants" (transcript, 28 September 2009, p.1) 24 The principal evidentiary basis for the "benefit" contention relied upon by the plaintiff arose from two affidavits that had been sworn by Mr Ghandi Sobbi and relied upon by him in earlier unrelated proceedings in the Equity Division of this Court. In the course of his submissions, Mr Menzies indicated that it was primarily this evidence which now led the defendants to seek effectively to rebut the proposition that they obtained a benefit from the transaction. They sought to do so by seeking leave to amend the cross-claim. By the proposed amendments, they would seek to recast their case in fundamental respects. If leave were granted, it is claimed that it would meet the plaintiff's case in relation to the issue of "benefit". (b) Evidence given by the first defendant in earlier proceedings 25 The evidence establishes that Lemery, the defendants, Reliance and Mr Cassaniti have been involved in a number of proceedings as follows:-

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29 In evidence in the present proceedings is a Sale Agreement was entered into between House of Diamonds, as vendor, and Lemery as purchaser on 24 May 2002. The recitals to that agreement include the following:- "C. The Vendor has agreed to sell and the Purchaser has agreed to purchase all of the Vendor's stock in trade ('the Stock') and the fixtures and fittings for the sum of $800,000." 30 The agreement recorded that Lemery would pay the vendor the sum of $800,000 on the signing of the agreement. A copy of the agreement is in the plaintiff's bundle of documents at p.50. 31 As at the date of the Sale Agreement of 24 May 2002, Mr and Mrs Sobbi were the shareholders of Lemery. At that time, House of Diamonds was a company owned and operated by the Sobbi's daughter and son-in-law, Ms Sheriene Sobbi and Mr Masoud Malek. 32 Reliance also relied upon Mr Ghandi Sobbi's affidavit of 4 October 2002 in Equity proceedings between Lemery (plaintiff) and John Vouris and House of Diamonds (defendants). In that affidavit (Exhibit B), Mr Ghandi Sobbi provided an account of the conduct of the business of Lemery and of House of Diamonds. 33 In paragraph [13], he stated that, on or about 12 May 2002, he received a call from his daughter, Sheriene Sobbi, who stated that her husband, Masoud Malek, and Alan Sobbi had been fighting almost every day and that Alan Sobbi was not happy with the way Mr Malek was running the business. Mr Malek said to her that he was going to close the doors of the shop and was going to sell the stock for whatever he could get for it and walk away. 34 Mr Ghandi Sobbi recorded the remainder of the conversation in the following terms:- "GS: I can't allow that to happen because he owes a lot of people money including people that I deal with. SS: I don't know what we can do. He's very stressed at the moment. He owes a lot of debts and people are chasing us for money. GS: Perhaps the easiest way out is if I purchase all of the stock and buy the business from you. The money that I pay for the stock hopefully can pay out all the creditors. He can go and work for someone else and you can work for me if you want. Alan can run the shop on behalf of Lemery. SS: I'll speak to Masoud and see if I can talk him into that arrangement." 35 In paragraph [14] of the last-mentioned affidavit, Mr Ghandi Sobbi said he again spoke to Sheriene Sobbi who put to him that, if they could sell the stock at cost, that would be sufficient to clear creditors of the business and her husband could go and do something else. 36 Mr Ghandi Sobbi then recorded (in paragraph [14]):- "GS: Okay, I'll organise to do that. SS: We also have another problem and that is rent hasn't been paid for some time. I'm not sure how much is owing but Westfield are threatening to kick us out. We need to do something with Westfield very quickly." 37 In paragraph [15] of the same affidavit, Mr Ghandi Sobbi recorded:- "15. Following that conversation, I recall having a conversation with my son Alan and said to him words to the following effect:- GS: Lemery is going to take over. Who is going to purchase the House of Diamonds business? He will pay for the stock but I also have to ensure that the creditors get paid because I don't want them chasing me afterwards. Would you please ascertain who all the creditors are. You also need to speak to Westfield and tell them that we will pay the outstanding rent and ensure that they don't close the shop. 16. I instructed my accountants, Cassaniti & Associates, to arrange to prepare a simple draft contract for the sale to the plaintiff of the business. Exhibited hereto and marked ' GFS-2 ' is a copy of that Contract for Sale. 17. The sale was completed on the evening of 23 May 2002. A handwritten stock sheet was generated by myself, my son, Alan, and Masoud during the course of the day and on the evening of 23 August 2002. The total value of the stock at cost amounted to approximately $800,200." 38 Reliance's case is that it acted on the directions of Mr Ghandi Sobbi and provided the cheques as requested by the defendants to the various persons and entities identified in paragraph [20]. 39 Mr Menzies QC, on behalf of the defendants, stated that his clients wished the opportunity to call evidence as to what he understood was "probably the truth" (transcript, 18 November 2008, p.30). Mr Menzies there stated "… it appears on the version that I now have that some of the evidence Mr Ghandi Sobbi has given in these proceedings and others might be false. Therefore, he needs to be warned under s.128 but before I take the step of opening up all of this in evidence, I need to have his instructions about it. It has become apparent to us from information we received from Mr Alan Sobbi" (transcript, 18 November 2008, p.30).

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(c) Evidence given by the first defendant in the present proceedings 40 The effect of the defendants' evidence in the present proceedings was that the loan obtained from Reliance was for the benefit of Mr Alan Sobbi, rather than Lemery, to acquire the stock in the House of Diamonds. 41 In the affidavit of Mr Ghandi Sobbi sworn 12 September 2007, he deposed that the purpose of the loan transaction was to raise funds so that Mr and Mrs Sobbi's son, Alan Sobbi, could purchase their son-in-law's shop. 42 The circumstances surrounding the defendants' execution of the guarantee and mortgage are set out at paragraphs [16] to [19] of the affidavit:- " 16. In about May or early June 2002, I had a conversation with my son Alan to the following effect:- Alan: 'I need to borrow $600,000 to buy Masoud's shop.' Me: 'Why don't you go to the bank and apply for a loan?' Alan: 'Because with the bank it will take too long. I have already talked to Sam Cassaniti and he can organise the loan. But he has asked that you and mum guarantee the loan.' Me: 'What kind of loan will it be?' Alan: 'It will be an interest only loan for a term of 2 or 3 years, at an interest rate of 8% per annum.' Me: 'How will you be paying the loan and the interest?' Alan: 'From the income I'll be deriving from Masoud's shop.' Me: 'You go ahead with Sam, and you mother and I will guarantee the loan.' 17. I was not involved in any discussions or negotiations with Cassaniti in respect of the loan which Alan had arranged to obtain from him as deposed to in the conversation set out in the preceding paragraph. 18. On 11 June 2002 I had a conversation with Alan to the following effect: Alan: 'Dad, you and mum have to go see Sam Cassaniti tonight to sign the documentation for the loan. Go to his office at about 6:00 so that he can tell you what to do.' Me: 'OK'' 19. I informed my wife Zakiyeh that Alan needed to get a loan in order to buy Masoud's shop and that we would assist him guaranteeing the loan. I informed her that we would need to see Cassaniti that night ." 43 Accordingly, the version of events advanced by Mr Ghandi Sobbi in the above affidavit to the effect was that the purpose of the loan was to generate funds for his son, Alan, to buy the shop and business belonging to his son-in-law and daughter.

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(b) A meeting in relation to the loan transaction 51 Exhibit B contains a file note dated 17 May 2002. The note records the presence at a meeting held in the offices of Cassaniti & Associates of Mr Sam Cassaniti, Mr Gino Cassaniti, Mr Sobbi (Snr) and Alan (Jnr). The reference to Mr Sobbi (Snr), the plaintiff contends, is a reference to Mr Ghandi Sobbi and Alan (Jnr) is said to be Mr Ghandi Sobbi's grandson, Alan Askari. The file note recorded:- " Ghandi upset and crying. Very upset with Alan Snr. Phone calls from F Ibrahim - other (threat). Pension. He has no $, will transfer shares to SPC. Needs 550K on his home to pay out Ibrahim. Needs a home loan and will sell property and buy smaller home. Ghandi worried Alan (snr) not only owes Fadi $ but C'wealth bank process server … Alan is a liar. SPC will finance $550k pay out Ibrahim and own shares in Lemery in reduction of his o/s debt to SPC/Reliance. Ghandi will pay Ibrahim $300k within a week ." 52 Mr Ashhurst contended that the file notes dated 17 May 2002 and 23 May 2002 put beyond argument that Mr Ghandi Sobbi was aware of the matters discussed at meetings to which those file notes related. That was a matter to be taken into account in considering whether leave should be now granted to amend the cross-claim in respect of the "Ibrahim matters". Mr Menzies, on the other hand, contended that there was evidence which he relied upon which would throw doubt upon the accuracy of the file notes and that, at the end of the day, these were matters to be determined as trial issues. 53 The following file note in the bundle was dated 23 May 2002 and recorded that Gino Cassaniti, Sam Cassaniti, Alan Sobbi, Ghandi Sobbi, Alan Jnr and Fadi Ibrahim with bodyguard were present. The file records reference to a number of threats allegedly made by Fadi Ibrahim in relation to Alan Sobbi. The above file notes, the plaintiff contends, establish the true purpose of the loan, namely, to enable Alan Sobbi to pay Fadi Ibrahim. 54 Reliance disputed any claim by Mr Ghandi Sobbi that he knew nothing about the threats made by Mr Ibrahim. As I have previously mentioned, Mr Ashhurst submitted that the above file notes constituted evidence that demonstrated that Ghandi Sobbi had knowledge of the threats attributed to Mr Ibrahim, the file note recording his presence at the meetings on 17 and 23 May 2002 at which the above matters were discussed. 55 In response to the plaintiff's submission, Mr Menzies contended that the file note of 17 May 2002 was a "fabrication" (t.270, 271-272). I note, however, that that was not a matter raised at the time the document was tendered. Insofar as the file note recorded the presence of Mr Ghandi Sobbi and his grandson, Alan Askari, at the meeting, Mr Menzies submitted the document was false (t.272). The evidence said to support this latter contention was the evidence of Mr Ghandi Sobbi and Mr Alan Askari (grandson) who both denied their presence at such a meeting and additionally evidence of Mr Cassaniti in cross-examination. 56 During Mr Ghandi Sobbi's cross-examination on 2 October 2009, the following exchange occurred in respect of the file notes (transcript, 18 November 2009, p.36):- " Q. … Mr Sobbi, on 17 May 2002, did you have a meeting with Mr Sam Cassaniti and Mr Gino Cassaniti at Mr Cassaniti's office? A. INTERPRETER: No.

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60 The High Court of Australia in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 enunciated the principles that apply to the power to permit amendments and considered that case management principles were relevant considerations in determining whether leave should have been granted to amend the pleadings in the case. The proceedings concerned an action between the ANU and its insurers and Aon, its insurance broker. Leave to amend the pleadings against Aon was granted by the trial judge, notwithstanding that the explanations for delay were not, his Honour stated, entirely satisfactory. The High Court ordered that leave to amend should have been refused. 61 The majority of the High Court concluded that on an application for leave to amend a pleading, all matters relevant to the exercise of the power should be weighed. These included considerations of case management, costs and delay, as explained at [111] as follows:- "111. … The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases … On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future. 112. A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate." 62 The extent of delay and the costs associated with it, together with the prejudice that might reasonably follow and which is demonstrated, are to be weighed against the grant of leave to amend (at [102]). In the circumstances of the case, it was significant that the effect of the ANU's delay in applying to amend was that a trial was lost and litigation substantially recommenced. The grant of leave to amend would impact upon other litigants seeking a resolution of their cases. Critically, the matters relevant to a just resolution of ANU's claim required ANU to provide some explanation for its delay in seeking the amendment if the discretion was to be exercised in its favour. 63 In Samaan bht Samaan v Kentucky Fried Chicken Pty Ltd [2009] NSWSC 1265, Rothman J considered an application to amend pleadings, and, inter alia, observed:- "24 The requirements of justice, and the criteria to be considered in dealing with an application for an amendment, operate within the framework of an ordered progression to a fixed trial date: Aon at [32]. The Court is not obliged to accept the addition of new claims at the last moment before trial, and, a fortiori, during the course of the trial: Aon, ibid. 25 Compensation, by way of an order for costs, even indemnity costs, to a party, who has wasted resources, or will waste resources, on account of an amendment, will often be inadequate. And even though the Court may be able to fashion an order that could properly compensate the aggrieved party, there is a fundamental public interest in ensuring the efficient use and operation of the courts and an irreparable element of unfair prejudice to the other party in unnecessarily delaying proceedings: Aon at [5], [30] (per French CJ), [99]-[101] (per Gummow, Hayne, Crennan, Kiefel and Bell JJ), and [137]-[138] (per Heydon J)." 64 Accordingly, in the present case, I must consider the following factors in determining whether to grant leave to amend the further amended cross-claim:-

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(d) Amendments to the further amended cross-claim 66 The second further amended cross-claim seeks to address two issues arising out of Mr Alan Sobbi's affidavit of 12 November 2009. The proposed amendments are in the following terms:- " 6. The facts and circumstances relating to each of the cross-claimants at the time that each of them executed the purported Guarantee and purported Mortgage and at all material times were as follows: … (h) prior to the execution of the purported Guarantee and Mortgage: … (iv) the cross-claimants were not aware of the following matters: (a) the purpose of the loan to Alan Sobbi was to repay monies allegedly owed to Fadi Ibrahim; (b) the purpose of the loan to Alan Sobbi was not to purchase jewellery; (c) Alan Sobbi was indebted to the Cross Defendant at least in the amount of $400,000; (d) Alan Sobbi was an undischarged bankrupt; … (g) Alan Sobbi did not have the financial means to make payment to Fadi Ibrahim; (h) Alan Sobbi did not have the financial means to repay the loan to the Cross Defendant; (i) Alan Sobbi had been physically harmed by persons on behalf of Fadi Ibrahim; and (j) Alan Sobi had been threatened with further physical harm if he did not make payment of $600,000 to Fadi Ibrahim. (k) Further or in the alternative, the Cross Claimants were in a position of special disadvantage in that:- … (viii) The First Cross-Claimant knew that Alan Sobbi had been physically harmed by persons on behalf of Fadi Ibrahim. (ix) The First Cross-Claimant knew that Alan Sobbi had been threatened with further physical harm if he did not make payment of $600,000 to Fadi Ibrahim; and (x) The First Cross-Claimant agreed to guarantee the loan to Alan Sobbi so that Alan Sobbi could make payment to Fadi Ibrahim and would not be further physically harmed. (l) The Cross Claimants received no benefit from the entering into the Guarantee and the Mortgage ." 67 In his submissions opposing the application to amend, Mr Ashhurst did frankly acknowledge that, in relation to the proposed amendments in paragraph 6(iv)(a), (b), (c) and (d), that the proposed amendments in those respects would not occasion difficulties to the plaintiff. 68 Similarly, Mr Ashhurst stated that the proposed paragraph 6(iv)(i) (an allegation of physical harm caused by persons acting on behalf of Fadi Ibrahim) and 6(iv)(j) (an allegation of threats to Alan Sobbi if he did not pay $600,000 to Fadi Ibrahim) would not present any difficulties to the plaintiff. 69 Accordingly, in respect of the abovementioned paragraphs, Mr Ashhurst frankly acknowledged that the plaintiff could deal with the issues proposed to be raised concerning what was referred to in the course of submissions as the "Ibrahim matters" (t.259) or as the "third version" as to the alleged purpose of the loan. 70 I am of the view that, notwithstanding the admission into evidence, unopposed, of the file notes to which I have referred above which relate to the meetings concerning the "Ibrahim matters", that in order to ensure that all relevant matters arising in the proceedings are dealt with, I should accept the submission made by Mr Menzies that, at the end of the day, whether or not the file notes are true and accurate are matters to be determined as issues at trial. 71 In relation to the discretion generally, there is much to be said against the grant of the application to amend on the basis argued by Mr Ashhurst, namely, that the defendants in the present proceedings must be taken as having made a deliberate decision to rely upon affidavit evidence which discloses a completely different purpose for the loan transaction and unrelated to the matters concerning Mr Ibrahim and Alan Sobbi. 72 I, however, consider that, as the proposed amendments concerning the "Ibrahim matters" would not occasion any particular prejudice to the plaintiff nor be likely to occasion the need for extensive evidence or delay, I should grant the application for leave to amend to include such matters. (6) The application to adduce further evidence

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(a) The alleged "concoction" or "conspiracy" in relation to evidence 73 The second application made on 18 November 2009 was said to be "to seek to rely upon the further evidence of Mr Alan Sobbi which is in an affidavit which is being served on my friend and … to seek leave to ask some further questions in chief of Mr Ghandi Sobbi before the conclusion of cross-examination rather than my re-examination" (transcript, p.25). 74 In relation to this matter, leave to adduce the further evidence was sought upon the basis of an alleged conspiracy between Mr Cassaniti, Mr Nikolaidis, solicitor, and Mr Ghandi Sobbi to create false evidence to defraud the liquidator of House of Diamonds. 75 As I understood Mr Menzies' submission, what was sought to be established by the further evidence was that, at a time after the loan that is the subject of the present proceedings, Mr S Cassaniti suggested that the Sobbis should use the evidence of the loan as a means of setting up or creating a fraud against the liquidator regarding the stock of the House of Diamonds business. The fraud was said to be that, although Lemery had not purchased the stock, a fraud would be created to make it look as though it had done so. 76 I note that Mr Ashhurst, in opposing the grant of leave to adduce additional evidence, in effect, argued, firstly, that the allegation that Mr Cassaniti caused the alleged fraud is based only upon the account of Mr Ghandi Sobbi and Mr Alan Sobbi in circumstances in which they themselves have raised issues about the integrity of their own evidence in earlier affidavits and Mr Ashhurst raised, in the course of submissions, the question as to what possible advantage it would have been to Mr Cassaniti to have created the alleged conspiracy, given that he did not own the stock that the liquidator was making a claim for and he had no interest in the stock at all. 77 Mr Menzies described what was referred to in submissions as the "concoction" or "conspiracy" in the following terms (at transcript, 19 November 2009, p.240):- "… The concept of Lemery being, in effect, effectively the borrower was created by Mr Alan Sobbi and Mr Cassaniti for the purpose of saving the jewellery or stock in the House of Diamonds business which was about to go into liquidation." 78 In his submissions, Mr Menzies stated:- "Let me come to deal … then in that context (with) the relevance of the concoction. It is relevant for two purposes. One is the consideration of what was the purpose of the loan. The second is to rebut the proposition which is advanced now that the cross-claimants obtain the benefit." 79 The alleged "concoction" or "conspiracy" allegation, accordingly, concerned the alleged falsification of the loan transaction of June 2002 to make it appear that Lemery was the entity that received a "benefit" when in truth it was Alan Sobbi who received it. Mr Ghandi Sobbi, accordingly, wishes to allege and prove that Mr Cassaniti suggested in September 2002 to Mr Alan Sobbi that they concoct a story in relation to the purpose of the loan as being to fund Lemery's purchase of the stock from the House of Diamonds. According to the conversation recorded at paragraph [107] of Alan Sobbi's affidavit, the "concoction" invented by Mr Cassaniti was as follows:- "… In May 2002 Masoud removed the jewellery from Burwood and closed the shop, he did not pay the rent and unpaid suppliers were looking for him then your father spoke to Masoud and he agreed to sale [sic] the Jewellery and the business to Lemery for $800,000, and the money from the sale will be used to pay out the creditor and whatever is left can go to Masoud. You have to say that your father had $200,000 to $300,000 and to unable [sic] Lemery to buy the business from Masoud your father asked you to borrow $500,000 to $600,000 against his house from a bank. You came to see me to help you to borrow the money. I told you I can do the loan for you … Then you have to say that you told your father and he agreed and I arranged the loan in your name and your parents gave a mortgage and the money was use [sic] by Lemery to buy the business from Masoud…" 80 Mr Menzies outlined the case to be raised if the amendment was granted. This was that loan documents were allegedly falsified to give effect to or create the concocted story. Mr Alan Sobbi allegedly told his father of the concoction before swearing his affidavit in the Equity proceedings and Mr Ghandi Sobbi acquiesced in swearing them, they supporting the version of events involving Lemery as to the entity that benefited from the loan transaction. It was, accordingly, this concoction or conspiracy which is said to have given rise to Mr Ghandi Sobbi swearing the affidavits to the effect that the purpose of the loan was for the benefit of Lemery. The evidence of Alan in this recent affidavit (and any additional evidence from Ghandi Sobbi) will demonstrate, it was contended, that the defendants did not obtain a benefit from the transaction, even though the affidavits sworn in the Equity Division proceedings, sated that it was Lemery that derived a benefit.

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(b) The privilege in respect of self-incrimination and the provisions of s.128, Evidence Act 81 In relation to any additional or further evidence from Mr Ghandi Sobbi as to the possible falsity of his evidence in the Equity proceedings, Mr Menzies on his behalf sought the protection of a certificate pursuant to s.128 of the Evidence Act 1995. 82 The affidavit of Ghandi Sobbi sworn 26 May 2003 in the proceedings in Equity was tendered on behalf of the plaintiff in the present proceedings and it was admitted on 28 September 2009 without objection (Exhibit A). 83 The affidavit of Ghandi Sobbi sworn 4 October 2002 was also tendered (Exhibit B). Objection was taken to the tender of that affidavit. Mr Ashhurst indicated that the plaintiff wished to rely upon paragraphs 10, 13, 15, 16 of the affidavit as evidence in the nature of admissions by one or both of the defendants insofar as it went to the defendants' contention that a benefit flowed from the loan transaction. Paragraph 20 was also relied upon as evidence in the nature of an admission or as evidence of the relationship with Mr Masoud, the Sobbis' son-in-law. Those paragraphs were relevant in that respect, and accordingly, were admitted. The remaining paragraphs were only relied upon as providing the context of the loan transaction. Accordingly, I admitted those paragraphs on that limited basis. 84 The two affidavits, Exhibits A and B, were, accordingly, relevant to a fact in issue, namely, whether the Sobbis derived a benefit from the loan transaction and they were admitted into evidence in these proceedings on that basis. The contention of the defendants on this application is that the affidavits do not contain accurate evidence of the facts concerning the loan transaction due to the fact that certain matters concerning the transaction deposed to therein are false. That contention, as earlier noted, was one not raised as a ground of objection when the affidavits were tendered. They were, accordingly, admitted unopposed on the basis of that they were evidence of fact relevant to the purpose of the loan. In the context of the present application, the affidavit evidence on that matter is now said not to be evidence of the purpose of the loan. 85 The issue of adducing additional evidence to prove the falsity of earlier evidence raises the question of s.128 of the Evidence Act, and whether a certificate is available. That section is in the following terms:- " 128 Privilege in respect of self-incrimination in other proceedings (1) This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness:- (a) has committed an offence against or arising under an Australian law or a law of a foreign country, or (b) is liable to a civil penalty. (2) The court must determine whether or not there are reasonable grounds for the objection. (3) If the court determines that there are reasonable grounds for the objection, the court is to inform the witness: (a) that the witness need not give the evidence unless required by the court to do so under subsection (4), and (b) that the court will give a certificate under this section if: (i) the witness willingly gives the evidence without being required to do so under subsection (4), or (ii) the witness gives the evidence after being required to do so under subsection (4), and (c) of the effect of such a certificate. (4) The court may require the witness to give the evidence if the court is satisfied that: (a) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and (b) the interests of justice require that the witness give the evidence. (5) If the witness either willingly gives the evidence without being required to do so under subsection (4), or gives it after being required to do so under that subsection, the court must cause the witness to be given a certificate under this section in respect of the evidence. (6) The court is also to cause a witness to be given a certificate under this section if: (a) the objection has been overruled, and (b) after the evidence has been given, the court finds that there were reasonable grounds for the objection. (7) In any proceeding in a NSW court or before any person or body authorised by a law of this State, or by consent of parties, to hear, receive and examine evidence: (a) evidence given by a person in respect of which a certificate under this section has been given, and (b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence, cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence. … (8) Subsection (7) has effect despite any challenge, review, quashing or calling into question on any ground of the decision to give, or the validity of, the certificate concerned. … (11) A reference in this section to doing an act includes a reference to failing to act." 86 For s.128 to apply, the witness, in this case, the first defendant and/or Alan Sobbo. must "object" to giving particular evidence. There is, as I will examine below, no consistent approach to the question as to whether s.128 operates where a witness objects to giving evidence in chief. 87 In Cornwell v The Queen (2007) 231 CLR 260, the accused declined to answer a question in examination-in-chief on the ground that it might incriminate him. The majority of the High Court questioned whether s.128 applied where a witness sets out to adduce evidence in chief revealing the commission of criminal offences. The High Court was concerned in this respect as to:- " Whether witnesses who are eager to reveal some criminal conduct in chief, because it is thought the sting will be removed under sympathetic handling from their own counsel or for some other reason, are to be treated in the same way as witnesses who, after objection based on genuine reluctance, give evidence in cross-examination about some crime connected with the facts about which evidence is given in chief ." (at [111]). 88 It was not necessary for the High Court to finally decide this issue since the appeal was allowed on other grounds and there was no dispute between the parties on the question. In Uniform Evidence Law (8th ed), by S Odgers, at p.629, the learned author expressed the view that, on the analysis in Cornwell (supra), a majority of the court is likely to hold, if and when the question does fall for decision, that s.128 does not apply in such a situation. 89 A similar approach was taken in Meiko Australia Pacific Pty Limited v Adam Samuel Hinchliffe [2009] NSWSC 354. In that case, Einstein J granted a certificate under s.128 in respect of evidence given by the first defendant. Subsequently, the first defendant sought the certificate which had been granted to extend to all affidavit evidence of the first defendant in the proceedings. His Honour held that a retroactive application of s.128 was "unwieldy" and was not contemplated by the section (at [186]). Once evidence has been given, it cannot be said that the witness has been compelled. His Honour explained that as a consequence, "it appears that a certificate should extend only to questions to which objection might be taken, that is, to questions put in cross-examination" (at [188]). 90 In respect of the affidavits, his Honour found that the material was freely sworn, filed and read by the first defendant. Accordingly, his Honour said at [190]-[191]:- " 190. All of the affidavits were read in the course of evidence in chief of the first defendant and so cannot be said to have in any way been the subject of an objection, implied or otherwise. 191. In Ross v Internet Wines Pty Ltd (2004) 60 NSWLR 436 at [104] the purpose of s.128 was identified as being to protect against self-incriminatory disclosures by compulsion. In the present proceedings, the first defendant was not compelled to read the affidavits. For this further reason, no certificate should be granted in respect of the first defendant's affidavit evidence . " 91 A different approach, however, has been taken in relation this aspect of s.128 in other cases. In Ferrall v Blyton; A-G (Cth) (Intervener) [2000] FCA 1442, a Family Court trial judge granted a certificate under s.128 to the husband during an application by the wife for property settlement and spousal maintenance. On the evidence given with the protection of the certificate, injunctions were granted. The evidence concerned a scheme devised by a third party to protect the husband from any order the Family Court might make against his assets. The third party concerned appealed to the Full Family Court on the basis that a certificate should not have been granted where the husband sought to give evidence and was not objecting to doing so. 92 The Full Family Court held that the trial judge was correct in granting the certificate for the following reasons:- "[89] We think the trial judge was clearly correct in holding that it was within his discretion to grant such a certificate. First, we think it would be unrealistic to limit the availability of a certificate to a situation where a witness is asked a particular question in cross-examination. We think the availability of a certificate clearly applies to evidence given in chief, otherwise an inappropriate forensic advantage would rest with the other party who would be in a position to prevent the question of an objection arising by simply not seeking to cross-examine. [90] In the particular circumstances of the Family Court of Australia, evidence-in-chief is normally given by affidavit. We think that in the circumstances of the present case, the witness was objecting, in the sense required by s.128, by indicating that he would not file the affidavit unless a certificate was given. We see the situation as no different from that which would have been the case if he had been sworn in and asked to answer questions concerning the matter in evidence-in-chief, and had objected to doing so without the issue of such a certificate."

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93 In Chao v Chao [2008] NSWSC 584, the plaintiff deposed in an affidavit to having telephone conversations with the defendant which were recorded. A transcript was made and exhibited to the affidavit. Objection was taken primarily on the basis that the evidence was unlawfully obtained and inadmissible by reason of the Telecommunications (Interception and Access) Act 1979 (Cth), or Listening Devices Act 1984. On the voir dire, the plaintiff was asked to explain the circumstances in which the tape recording and transcript were made. The plaintiff objected under s.128, and Brereton J granted the certificate on the basis that the availability of a certificate in connection with evidence a party wishes to adduce has been established in Ferrall (supra) (at [3]). 94 A similar approach was taken in Ollis v Melissari [2005] NSWSC 1016. In that case, during the course of cross-examination of a witness, objection was taken to particular questions which were asked of the witness on the ground that the answers had the tendency to incriminate the witness. Campbell J (as his Honour then was) issued a certificate under s.128. Counsel who called that witness then wished to re-examine him on the same topic as the evidence the subject of the certificate. The question was whether it was possible for the Court to grant a certificate under s.128 in relation to question asked in re-examination. His Honour determined that the Court had the power to do so based on the following reasoning:- " 5. It will be seen that the first step in the application of section 128 is the witness objecting to giving particular evidence, on one of the grounds set out in section 128(1). In my view, the expression 'if a witness objects to giving particular evidence' is not to be construed in a narrow way, by reference only to someone saying 'I object' in response to a particular question, in the course of taking evidence in court, in the way barristers traditionally do. Rather, the expression is to be construed more broadly, so that it also relates to the witness expressing an unwillingness to give the evidence. Further, it seems to me that the 'particular evidence' which is referred to is not confined to particular questions, as they are asked one by one. Rather, it is capable of extending to a witness expressing an unwillingness to giving evidence on particular topics. 6. In the present case, objection has already been taken by the witness to evidence being given on those topics. The re-examination, assuming for the moment that it is proper re-examination, will be confined to those topics which have been opened up by the evidence which has been given by the witness under cover of the section 128 certificate. It seems to me that the objection of the witness to giving evidence on the topic extends also to the giving of evidence on the topic, even in re-examination in response to questions from his own counsel. It is not necessary to go through the artificial procedure of counsel asking the questions, and the witness objecting to the question asked by his own counsel. 7. I am strongly influenced in reaching this conclusion by the evident policy behind section 128. Part of that policy is that a way should be provided in which the claiming of a privilege against self-incrimination does not prevent a court hearing a civil case from obtaining relevant evidence, while at the same time to the extent the New South Wales Parliament has power to do so, not prejudicing in a subsequent criminal trial, the person who gives such evidence. That policy would be carried through only imperfectly if a section 128 certificate were not available concerning evidence given in re-examination. Further it would be a fundamental unfairness if a witness were encouraged by the giving of a section 128 certificate, to give evidence in relation to which he had a right to remain silent, and for the topic so opened up not to be able to be clarified by legitimate re-examination, if the cross-examination on that topic left a misleading or incomplete impression. I decline to believe that it was the intention of parliament to bring about a situation which caused that sort of fundamental procedural unfairness . "

[61]

and not being convinced that the interpretation adopted in Ferrall is plainly wrong, I would follow Ferrall and grant a certificate under s.128 of the Evidence Act , but for the reliance on s.87 of the Civil Procedure Act which I deal with below." 97 Section 87 of the Civil Procedure Act 2005 follows the form of s.128 of the Evidence Act but is focused on interlocutory matters. Rein J found that s.87 specifically contemplates a certificate in respect of an affidavit, and was available in the circumstances of the case (at [14]-[16]). On that basis, his Honour granted a certificate under s.87, but noted that in his view, a certificate could also be granted under s.128 of the Evidence Act. As a result, his Honour's observations on the operation of s.128 are in effect obiter dicta. 98 The recent decision of Ward J in Ying v Song [2009] NSWSC 1344 considered the operation of s.128 in relation to evidence sought to be given by one of the defendants in chief by affidavit. Her Honour discussed the relevant authorities, and the weight to be given to them in the situation wherein two apparently contradictory positions had been articulated in respect of s.128. The conclusion her Honour reached was to consider the proper construction of s.128 in light of the observations of the High Court in Cornwell (supra), rather than the approach taken in Ferrall (supra). 99 In that case, Ward J found there was no compulsion upon the witness to give the evidence he sought to give. In circumstances in which the witness is under no legal compulsion to give evidence, her Honour was concerned as to whether the witness could be said to be objecting to that evidence. The words "objects" and "objection" in s.128 meant, in her Honour's view, "an expressed unwillingness … to give evidence where otherwise required to do so, on the ground that that evidence would tend to incriminate" (at [39]). 100 The observations of Ward J are apposite in the present case (at [51]:- " 51 I accept that if the whole of what the defendants contend is the relevant evidence in relation to the transaction(s) upon which the plaintiff sues is not placed before the court then the interests of justice may not be served in this case. However, I am unable to conclude that, on its proper construction, s.128 is enlivened in the present circumstances. Someone who chooses to adduce incriminating evidence (albeit because he or she feels forced to make such a disclosure to defend a claim made against him or her) is not in any real sense 'unwilling' or averse to doing so. At common law such a person would not have been able to invoke the privilege against self-incrimination unless under a legal compulsion to give such evidence and I do not read s.128(1) as introducing a right to claim privilege which otherwise would not have existed. 52 In those circumstances, while I am conscious of the deference to be shown to the approach in Ferrall, I am of the view that the reasoning which led to the grant of the certificate in that case is not correct and, with respect, I adopt the reasoning towards which the majority in Cornwell appear to have been disposed ." 101 I turn to the question which arises as to whether evidence can be adduced from Mr Ghandi Sobbi as to any falsity in his evidence in the Equity proceedings. Mr Ghandi Sobbi was cross-examined on the inconsistencies between the affidavits sworn by him in those (Exhibits A and B) and the principal affidavit sworn by him in the present proceedings. Against that background, the giving of evidence by him by way of additional evidence in chief for the purpose of establishing false evidence by him in his previous affidavits, would, in my opinion, amount to him giving evidence willingly, not unwillingly. 102 Following the reasoning of the High Court in Cornwell (supra), although strictly obiter, s.128 was not intended to apply to parties who wish to adduce evidence in chief or by way of affidavit. On this basis, I have concluded that a certificate cannot be granted to Mr Ghandi Sobbi if the evidence he "objects" to giving is evidence he seeks to give as evidence in chief. 103 I turn to examine whether any such evidence could be considered to be given "unwillingly" if it were adduced in re-examination of Mr Ghandi Sobbi. 104 Re-examination, of course, must in some way arise out of cross-examination. Re-examination is permitted wherever an answer in cross-examination would, unless explained, leave the Court with an impression of the facts, whether they be facts in issue or facts relating to credibility, which is capable of being construed unfavourably to the party calling the witness and which represents a distortion or incomplete account of the truth as the witness is able to present it: Regina v Lavery (No 2) (1979) 20 SASR 430 at 4350; Regina v Szach (1980) 23 SASR 504 at 568; Regina v Phair [1986] 1 Qd R 136; Regina v Clune and Gergis (1999) 72 SASR 420 at [118]. 105 Evidence sought to be led from Mr Ghandi Sobbi as evidence by way of re-examination under objection may possibly be considered as having a connection with matters raised in cross-examination. Answers given by him in cross-examination in relation to inconsistencies in his evidence were capable of negatively affecting his credibility. 106 However, it cannot be said that in the particular circumstances of this case that Ghandi Sobbi would be objecting to giving evidence (ie, "unwillingly") whether it was given as evidence in chief or in re-examination. It is clear that Mr Ghandi Sobbi is not unwilling to give the evidence, but rather, he is seeking leave to give evidence that recasts or reformulates his case. By giving evidence as to the falsity of earlier affidavits, Mr Ghandi Sobbi would be seeking to establish that the version of events in those affidavits were false. Even if the evidence was to be given by way of re-examination, the effect would essentially be to give a wholly new version of the facts which is not the permissible function of re-examination. 107 As was the case in Ying v Song (supra), the argument raised by the defendants, in effect, is that if Mr Ghandi Sobbi is not given the benefit of a certificate, relevant evidence as to the true nature of the transaction upon which the plaintiff sues will not be placed before the Court, which is not in the interests of justice. However, Mr Ghandi Sobbi, in choosing to adduce incriminating evidence as he apparently proposes to do in respect of other evidence he has given, is not in any real sense unwilling or averse to doing so. In those circumstances, I am of the opinion that there is no basis upon which a certificate under s.128 may be given.. 108 The additional evidence sought to be called from Alan Sobbi is that contained in his affidavit sworn 12 November 2009. Mr Ashhurst stated that paragraphs 1 to 53 of that affidavit do not present any difficulty for the plaintiff (transcript, p.254) and nor do paragraphs 123 to the end of the affidavit. In the circumstances, I am prepared to grant leave to adduce evidence in terms of those paragraphs. 109 However, in relation to paragraphs 54 to 122, Mr Ashhurst maintained that those paragraphs would present a number of difficulties to the plaintiff which were detailed in the course of his submissions. 110 I have concluded that the defendant should not be permitted to rely upon the additional evidence sought to be relied upon in terms of paragraphs 54 to 122 of Mr Alan Sobbi's affidavit sworn 12 November 2009. 111 The reasons or circumstances which are alleged to have led to Mr Ghandi Sobbi swearing the two affidavits (Exhibits A and B), in my opinion, should not be admitted and leave, accordingly, should be refused. 112 The issue as to the circumstances that are alleged to have influenced Mr Ghandi Sobbi to give false evidence in the Equity proceedings is not a matter which should properly be admitted. Firstly, the concoction or conspiracy allegation was not a matter that was raised with Mr Cassaniti in his lengthy cross-examination. Secondly, the circumstances that are alleged to have induced or persuaded Mr Ghandi Sobbi to commit perjury is not relevant to a fact in issue but could only be relevant to the credibility of Mr Cassaniti. Thirdly, if it were admitted, it would require the issue of Mr Cassaniti's alleged role in the "conspiracy" to be thoroughly investigated including the further cross-examination of Mr Cassaniti. It would also require the role of Mr Fordice and Mr Nikolaidis to be investigated. 113 The allegation made by Mr Alan Sobbi as to the alleged "concoction" or "conspiracy" is a complex one which would require substantial and in-depth investigation of all of the circumstances involving the liquidator. That would undoubtedly involve a substantial exercise which would necessarily give rise to significant expense and delay. 114 As stated above, there was no attempt made by the defendants (or Mr Alan Sobbi) to raise the question of the affidavit evidence of Ghandi Sobbi in the Equity proceedings until 18 November 2009. The application now to adduce additional evidence as to the circumstances which the affidavits in the Equity proceedings came into existence is, in reality, an attempt to depart from what was clearly a strategic decision to conduct proceedings on the basis of Mr Ghandi Sobbi's principal affidavit sworn 12 September 2007 and without any attempt before 18 November 2009 to adduce evidence concerning either his affidavits sworn in the Equity proceedings or his principal affidavit in the present proceedings. There is a powerful argument to the effect that the first defendant should not now, at this late stage in the proceedings, be permitted to depart from their strategic decision and be given leave to adduce evidence in relation to the matters addressed in paragraph 54 to 122 of Alan Sobbi's affidavit sworn 12 November 2009.

[62]

(7) Delay 115 In relation to the issue of delay, the chronology of events which has been set out earlier in this judgment includes reference to the fact that it was not until 18 November 2009 that the present applications were foreshadowed. 116 There are two significant issues on the question of delay. The first is that, although the evidence in relation to the issue of "benefit" was tendered at an early stage in the hearing (Exhibits A and B), and reference was made to the issue at the outset of the proceedings, no steps were taken, as referred to in the affidavit of Mr Bowles, solicitor, sworn 18 November 2009 until 27 October 2009 or thereabouts to make the present application. On 27 October, Alan Sobbi contacted Mr Bowles. For whatever reason, Exhibits A and B had apparently not been the subject of particular consideration in terms of the present application until late October 2009. 117 The other issue on delay is an even more fundamental one. The defendants did not seek to raise an evidentiary case of the kind now sought to be raised until last month. The defendants' case up to that time had clearly been based upon a deliberate strategic decision to rely upon Mr Ghandi Sobbi's evidence in his primary affidavit sworn 12 September 2007. The High Court's decision in Aon (supra) indicates that the taking of a deliberate and strategic decision is a weighty matter in determining whether leave ought to be granted to amend a litigant's case. The additional evidence now sought to be led, if permitted, would result in a vastly different case to that which, to date, the defendants have relied upon. 118 Accordingly, the issue of delay is also to be considered by reference to the period prior to the hearing from the time at which the deliberate strategic decision to which I have referred was made. 119 Additionally, the general discretion to exclude evidence conferred by the provisions of s.135 of the Evidence Act, the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might, inter alia, "cause or result in undue waste of time". The expression "probative value" is defined the in the Dictionary to the Act as meaning "the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue". 120 The evidence for which leave is now sought to be adduced to establish the alleged concoction at the alleged instigation of Mr Cassaniti would not, in my view, have sufficient probative value in that it would relate be evidence that goes to a collateral issue, namely, the alleged circumstances that, if true, would explain the origin of the allegedly false account which Mr Ghandi Sobbi is said to have voluntarily adopted when giving evidence in the Equity proceedings. There is no suggestion that Mr Ghandi Sobbi acted under any form of duress or intimidation causing him to adopt or pursue a false account in evidence for the purposes of those proceedings nor any other vitiating circumstances. 121 In exercising the general discretion on the question of leave, I, as discussed above, also take into account the point or stage at which the application to adduce the additional evidence has been made, namely, at a very late stage in the hearing of the proceedings. 122 Accordingly, upon the basis stated below, whilst I am prepared to consider a grant leave for Mr Ghandi Sobbi to give evidence establishing any falsity in the evidence he gave in the Equity proceedings and in the present proceedings (but without the protection of a s.128 certificate), I refuse leave to adduce evidence as to the matters the subject of paragraphs 54 to 122 in Alan Sobbi's affidavit sworn 12 November 2009.

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