Sleiman v Afeich & Anor

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1797/04 Gerar Sleiman v Paulette Afeich & Anor JUDGMENT (ex tempore) 1 BRERETON J: On 2 August 2005 judgment was given by consent for the plaintiff Gerar Sleiman against the first defendant Paulette Afeich and the second defendant Peter Solomon for the sum of $100,000, and orders were made that the defendants pay the plaintiff's costs. In addition, a cross-claim brought by Peter Solomon against Gerar Sleiman was dismissed, and Mr Solomon as cross-claimant was ordered to pay the costs of Mr Sleiman as cross-defendant. A short history of the proceedings which resulted in that judgment was contained in my judgment in Sleiman v Afeich [2005] NSWSC 900. 2 The plaintiff has had bills of costs prepared in respect of the costs orders in his favour. Those bills of costs total about $90,000, and were served on C E Jurd, the solicitor acting at least at some stage for the defendants, on or about 7 September 2005. 3 Some time before 11 August 2005, Ms Afeich procured the Registrar General to issue a lapsing notice pursuant to Real Property Act, s. 74J in respect of a caveat which Mr Sleiman had lodged claiming an interest in the Marayong property which had been the subject of the earlier litigation in these proceedings. On 25 August, Mr Sleiman approached McDougall J, sitting as duty judge, for an abridgement for time of service of a summons claiming an extension of that caveat. Ultimately, that application came before me on 30 August 2005. Ms Afeich and Mr Soloman appeared by counsel to oppose the extension. I refused to extend the operation of the caveat Sleiman v Afeich [2005] NSWSC 900. 4 The caveat lapsed on 31 August 2005, and on the same date a mortgage was registered on the Marayong property in favour of Perpetual Trustees Victoria Limited, securing advances of $300,000 to the defendants. No hint of this pending transaction had been given in the caveat proceedings. It is now apparent that, in order to obtain the mortgage loan, the defendants declared that the purpose of their borrowing was "wholly or predominantly for business or investment purposes", and that it was indicated to the lender that the purpose of the proposed loan was "to provide funds for future investment use". In Perpetual's documents, produced on subpoena, there is a valuation which values the Marayong property at $375,000, which means that after the mortgage securing $300,000, an equity of only $75,000 would remain. The plaintiff's solicitor Mr Macree has since established by search in the Land Titles Office that neither of the defendants is registered as proprietor of any other real property in New South Wales than the Marayong property. 5 Although the mortgage to Perpetual appears to have been registered on 31 August, funds were advanced under it apparently not until 2 September 2005. On that day, the vast balance of the proceeds of the loan, $297,000, were paid by direction of the defendants to one B Tawk, and apparently deposited by Mr Tawk in a Commonwealth Bank account BSB 062-334 number 1013-9838 at the Bankstown Square branch of that bank. 6 In the caveat proceedings, though not in these proceedings, Mr Sayed Al-Hawache - also known as Sid Hawach - acted as solicitor for the defendants. He does not act for them in these proceedings at the moment. But it emerged from his evidence today - he having attended in answer to a subpoena served upon him by the plaintiff - that Bechara Tawk is the son of his mother's sister, and lives across the road from Mr Al-Hawache's parents. Nonetheless, Mr Al-Hawache says that he has no idea where the $297,000 is now, and does not know anything about it, except that it was paid by direction of the defendants - for whom he acted in the mortgage transaction - to Mr Tawk. 7 Immediately upon becoming aware of the mortgage of the Marayong property to Perpetual, the plaintiff on 7 September 2005 approached the Court seeking leave to file a Notice of Motion in these proceedings, and ex parte relief restraining the defendants from dealing with the proceeds of the loan. On 7 September 2005, I granted that leave, made the motion returnable on 9 September, and upon the plaintiff by his counsel giving the usual undertaking as to damages, ordered that the defendants be restrained until 9 September from alienating, encumbering, or otherwise dealing with, or removing from New South Wales, any of the proceeds of the advance under the mortgage, to the extent that it would reduce the amount retained in New South Wales in their hands unencumbered below $200,000. Leave was reserved to apply to set aside or vary that order, but advantage was never taken of that leave. 8 On 8 September 2005 Sid Hawache & Co acknowledged receipt of a facsimile from the plaintiff's solicitors of 7 September which served the order, Notice of Motion and affidavit, and later that day acknowledged receipt of hard copies of the same. Mr Al-Hawache now says he was mistaken and he was not acting in those proceedings. 9 Also on 8 September, the defendants executed an authority addressed to Mr Al-Hawache "to hand over all documents in relation to our loan over the property 46 Arnott Road, Marayong and to destroy any copies" in Mr Al-Hawache's possession. Mr Al-Hawache says he handed over the entirety of his files save for the file cover, but concedes that although he directed his office assistant to delete copy correspondence from the computer that may not yet have happened. 10 The matter returned before me on 9 September. Mr Carney of counsel, who then appeared for the defendants, opposed continuation of the injunction, though seeking an adjournment to enable evidence to be adduced. The adjournment was granted, but the injunction continued in the meantime until 14 September. In addition, I made orders for the filing of affidavits setting out what had become of the moneys advanced; provision was made for compliance to be limited to the extent that any question of self-incrimination might arise. 11 On 9 September 2005 a Notice to Produce addressed to the defendants was served by facsimile on Mr Al-Hawache's office. Mr Al-Hawache says that he has not informed his clients of that Notice to Produce nor discussed it with them, even though he has discussed other matters with them between 9 September and the present. 12 The matter came before Palmer J on 14 September, when the injunction was extended until today, and orders made requiring compliance with my earlier order for an affidavit disclosing the location of the funds advanced under the mortgage, with greater particularity, by 16 September. Provision was also made for the issue of subpoenas to Mr Al-Hawache, Mr Tawk, and Bassam Tawk. 13 The orders of 14 September were served on the defendants - at least on Ms Afeich, who said she also accepted service for Mr Soloman - personally that day, and on Mr Tawk on 15 September 2005. 14 In response to a subpoena, Mr Tawk has produced a deposit slip evidencing the deposit of the sum of $297,000 into the Commonwealth Bank account to which I have referred. Mr Al-Hawache has produced documents evidencing payment by him of amounts for stamp duty and registration fees. 15 On 16 September 2005, each of the defendants filed an affidavit in purported compliance with the order of 9 September, as subsequently varied, asserting that the mortgage funds were drawn as cheques in favour of Mr Al-Hawache for $1,846.70 and B Tawk for $297,000, and that they did not personally deposit the mortgage funds into any bank account, nor direct anyone to do so. 16 It emerged from evidence of Mr Al-Hawache today that Mr Tawk's family - that is to say, his wife and children - have left Australia. Mr Al-Hawache says he does not know what Mr Tawk's plans are, and has no idea of what if any time-frame might be envisaged for Mr Tawk to leave the country, but that his wife and children left "maybe a fortnight ago". 17 Today Ms Sibtain, who appears for the plaintiff, moves for the further extension of the injunction directed to the defendants, and in addition that an injunction be granted in similar terms restraining Mr Tawk from dealing with the proceeds of the mortgage advance. 18 In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, the High Court held that a Mareva order may be appropriate against a third party in either of two circumstances. The first is if the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including claims and expectancies of the judgment debtor or potential judgment debtor. The second is if some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor pursuant to which, whether by appointment of a receiver, trustee in bankruptcy, liquidator or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor. 19 In this case, prima facie, the $297,000 paid to Mr Tawk is property of the defendants who are now judgment debtors: the proceeds of a loan to them on the security of their property. The relevant third party - Mr Tawk - now holds those moneys, being (apparently) property of the judgment debtor. This brings the case within the first class of case referred to in Cardile. 20 Further, if in fact the $297,000 is not property of the judgment debtors but has been effectively transferred to Mr Tawk, in satisfaction of some pre-existing obligation or otherwise, then there is at least a seriously arguable case that that payment, made when it was, in the context of the judgment given in these proceedings, was one to defeat or defraud creditors and liable to be set aside under Conveyancing Act, s 37A. Alternatively, if the effect of the payment is to make Mr Tawk a debtor of the defendants (as would be the case if it were a loan), then it would be recoverable from him in garnishment proceedings. On any of these bases, the case is within the second class of case referred to in Cardile. 21 Moreover, I am satisfied that there is a sufficiently serious risk of dissipation of the funds to warrant the granting of an injunction against Mr Tawk. His family has departed for overseas. The evidence of Mr Al-Hawache provides no comfort that Mr Tawk will not follow them. The way in which the funds have been dealt with to this point, by their payment to Mr Tawk, coupled with the non-disclosure of the proposed mortgage at the time of the caveat proceedings, evidences a significant risk of further dealings the effect of which may be to remove the funds from the reach of the plaintiff. The failure of the defendants to advance any evidence or argument to the contrary - though they were willing litigants in the caveat proceedings - enables an inference of risk of dissipation to be drawn all the more readily. Together, these matters amply establish a serious risk that, if not restrained, the funds may be dissipated. 22 It is accordingly appropriate that, in addition to extending the operation of the existing injunction against the defendants, a similar injunction should be granted against Mr Tawk, although he is not a party, reserving leave to him to apply to have it set aside or varied. 23 I note the document entitled Short Minutes of Order initialled by me, dated this day and placed with the papers. I have amended paragraph 2 of those short minutes by adding the words: "or would reduce the amount retained in that account below $200,000." I have inserted paragraph 7A, in the following terms: "Grant leave to the plaintiff to serve notice of these orders on the Commonwealth Bank, Bankstown Square branch, by facsimile to number 9708 8380". I have amended paragraph 8 by deleting the words "or 6" where it appears in each of the proposed notices to person bound. Upon the plaintiff by his counsel giving to the Court the usual undertaking as to damages I make orders in accordance with the short minutes as amended. The proceedings are adjourned to 10am on 27 September 2005 before the Duty Judge. I direct that the Registrar settle and sign a minute of these orders forthwith.

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