Elite Realty Development Pty Ltd v Sadek

[2022] NSWSC 1333

Supreme Court

New South Wales

Medium Neutral Citation:

Elite Realty Development Pty Ltd v Sadek [2022] NSWSC 1333

Hearing dates:

25 – 29 July, 3 August 2022; further written submissions 5 August 2022

Decision date:

30 September 2022

Jurisdiction:

Equity

Before:

Peden J

Decision:

(1) In the KPI Proceedings (2018/383933):

(a) The proceedings are dismissed.
(b) The plaintiffs to pay the defendants’ costs as agreed or assessed.

(2) In the Afyouni Proceedings (2020/114103):

(a) Judgment for the second plaintiff against the first and second defendant in the sum of $60,000.
(b) Judgment for the second plaintiff against the first defendant in the sum of $20,000.
(c) The Statement of Claim is otherwise dismissed.
(d) Defendants to pay the plaintiffs’ costs as agreed or assessed.

Catchwords:

TORTS — General principles — Intentional torts — Joint tortfeasors — Assault — Common design — Procurement — Agency — Damages — Exemplary damages — Aggravated damages — Whether accessory procured or had common design with principal wrongdoer to threaten accessory’s business partner with a gun

CONTRACTS — Duress — Forms — Duress to the person — Gun attack — Whether will deflected in entering into termination agreement after a gun attack — Whether termination agreement was affirmed

PARTNERSHIPS AND JOINT VENTURES — Joint venture agreements — Rights and duties between joint venturers — Fiduciary relationship — Position of conflict

EQUITY — Fiduciary duties — Breach — Whether company director in a joint venture entered into termination agreement — Whether entry into termination agreement was a breach of the no conflict principle — No termination agreement on the facts — No real and sensible possibility of conflict — No breach of statutory directors’ duties

Legislation Cited:

Australian Consumer Law s 20

Civil Liability Act 2005 (NSW) s 3B

Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 59, 60

Corporations Act 2001 (Cth) ss 180, 181, 182, 185, 1317H

Evidence Act 1995 (NSW) s 138

Surveillance Devices Act 2007 (NSW) s 7

Uniform Civil Procedure Rules 2005 (NSW) rr 1.2, 6.1, 6.9, 10.20, 14.3, 14.26, 16.2, 16.7, 18.5, 29.7, 36.6, 42.8

Cases Cited:

Affleck v Kennedy [2010] QDC 332

Antonio v Antonio [2010] EWHC 1199

Archer v Brown [1985] QB 401

Ashford v Ashford (1970) 44 ALJR 195

Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (No 3) [2021] FCA 363

Barclay v Penberthy (2012) 246 CLR 258

Barton v Armstrong (1969) 2 NSWLR 451

Barton v Armstrong [1976] AC 104

Boardman v Phipps [1967] 2 AC 46

Brook v Kempton [2017] VSC 661

Cameron v Cole (1944) 68 CLR 571

CBS Songs Ltd v Amstrad Consumer Electronics PLC [1988] AC 1013

Chan v Zacharia (1984) 154 CLR 178

Chelini v Northern Territory Port Authority (1976) 12 ALR 519

Chew v R (1992) 173 CLR 626

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40

Croucher v Cachia [2016] NSWCA 132

Dean v Phung [2012] NSWCA 223

Defteros v Google Inc (2017) 54 VR 592

De Reus v Gray (2003) 9 VR 432

Dessent v Commonwealth of Australia (1977) 13 ALR 437

Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24

Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

Farjudi v Cheng [2015] NSWDC 297

Fish & Fish Ltd v Sea Shepherd UK [2015] AC 1229

Graves v West (No 2) [2015] NSWSC 306

Gray v Motor Accident Commission (SA) (1998) 196 CLR 1

Griffiths v Kerkemeyer (1977) 139 CLR 161

Hamlyn v John Houston & Co [1903] 1 KB 81

Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298

Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd [2011] FCA 1154

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41

Hutton v West Cork Railway Co (1883) 23 Ch D 654

In the matter of Central Management (NSW) Pty Ltd (in liquidation) [2017] NSWSC 1258

James v James (No 3) [2020] NSWDC 797

Kallouf v Middis [2008] NSWCA 61

Lamb v Cotogno (1987) 164 CLR 1

Livingstone v Rawyards Coal Co (1880) 5 App Cas 25

Louis Vuitton Malletier SA v Toea Pty Ltd (2006) 156 FCR 158

MacDougal v Mitchell [2015] NSWCA 389

Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 565

Maguire v Makaronis (1997) 188 CLR 449

Malcolm Anthony Braam v BBC Hardware Ltd [2020] VSCA 164

Maskell v Horner [1915] 3 KB 106

Mason v New South Wales (1959) 102 CLR 108

Matta v Matta [2015] NSWSC 963

McMillen v Brambles Security Services Limited [2001] QSC 271

Mualim v Dzelme [2021] NSWCA 199

Murdock v Betham [2018] NSWDC 192

Mutua v Foreign and Commonwealth Office [2012] EWHC 2678

National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251

New South Wales v Abed [2014] NSWCA 419

New South Wales v Riley (2003) 57 NSWLR 496

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The “Atlantic Baron”) [1979] QB 705

NSW Trustee and Guardian as executor of the Will of Michael Robert Walsh (Dec'd) v Gregory [2012] NSWSC 681

Paff v Speed (1961) 105 CLR 549

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165

R v Hoar (1981) 148 CLR 32

Re Anton Fabrications (NSW) Pty Ltd — Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

Registrar of Titles (WA) v Spencer (1909) 9 CLR 641

Saravinovksa v Saravinovski (No 6) [2016] NSWSC 964

Re Smith and Fawcett Ltd [1942] Ch 304

Rookes v Barnard [1964] AC 1129

Schumann v Abbott and Davis (1961) SASR 149

Smith v William Charlick Ltd (1924) 34 CLR 38

State of New South Wales v Ibbett (2006) 65 NSWLR 168

The Koursk [1924] P 140

Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574

Todorovic v Waller (1981) 150 CLR 402

Unilever PLC v Gillette (UK) Ltd [1989] RPC 583

United Dominions Corporation v Brian Pty Ltd (1984) 157 CLR 1

Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118

Warman International Ltd v Dwyer (1995) 182 CLR 544

Watts v Leitch [1973] Tas SR 16

Whitbread v Rail Corporation New South Wales [2011] NSWCA 130

White v Johnston (2015) 87 NSWLR 779

XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448

Zanker v Vartzokas (1988) 34 A Crim R 11

Texts Cited:

Kit Barker, Peter Cane, Mark Lunney and Francis Trindade, The Law of Torts in Australia (5th ed, 2012, Oxford University Press)

R P Balkin and J L R Davis, Law of Torts (4th ed, 2009, Lexisnexis Butterworths)

Gino Dal Pont, Law of Agency (3rd ed, 2013, Lawbook Co)

Davies, Accessory Liability (2015, Hart)

Joachim Dietrich and Pauline Ridge, Accessories in Private Law (1st ed, 2015, Cambridge University Press)

James Edelman, McGregor on Damages (2020, 21st ed, Sweet & Maxwell)

Felicity Maher, “An Empirical Study of Exemplary Damages in Australia” (2020) 43(2) Melbourne University Law Review 694

Henry Cooper, “Liability for Assisting Torts” (2017) 41(2) Melbourne University Law Review 571

Nelson Enonchong, Duress, Undue Influence and Unconscionable Dealing (3rd ed, 2019, Sweet & Maxwell)

Harold Luntz, Assessment of Damages (4th ed, 2016, Lexisnexis Butterworths)

Category:

Principal judgment

Parties:

2020/114103
Elite Realty Development Pty Ltd ACN 611 829 193 (First Plaintiff)
Hazem Abdallah Afyouni (Second Plaintiff)
Afyouni Holdings Pty Ltd as trustee of the Afyouni-Trust (Third Plaintiff)
Omar Sadek (First Defendant)
Bilal Dennaoui (Second Defendant)
Big Homes Sydney Pty Ltd ACN 624 598 438 (Third Defendant)
Maroubra Road Development Pty Ltd ACN 613 541 754 (Fourth Defendant)
Sadek & Co Pty Ltd ACN 608 231 303 (Fifth Defendant)

2018/383933
Elite Realty Development Pty Ltd ACN 611 829 193 (Plaintiff)
Omar Sadek (First Defendant)
Sadek & Co Pty Ltd ACN 608 231 303 (Second Defendant)

Representation:

Counsel:

2018/383933
F Corsaro SC and T Rogan (Plaintiffs)
A Cheshire SC and F Maghami (Defendants)

2020/114103
F Corsaro SC and T Rogan (Plaintiffs)
A Cheshire SC and F Maghami (First Defendant, Third – Fifth Defendants)

Solicitors:

2018/383933
Eden King Lawyers (Plaintiffs)
Lehman Walsh Lawyers (Defendants)

2020/114103
Eden King Lawyers (Plaintiffs)
Lehman Walsh Lawyers (First Defendant, Third – Fifth Defendants)

File Number(s):

2018/383933; 2020/114103

Publication restriction:

Nil

Judgment

Introduction

Absent defendant

Maroubra Joint Venture

Falling out and Kanebridge/KPI53

Escalation of dispute in May 2018

Gun Attack

Was Mr Sadek involved in the Gun Attack?

Denial of relationship

No money owing

Payment of Mr Dennaoui’s legal fees

Denial of communicating with Mr Dennaoui on day of attack

Inconsistent evidence of knowledge of attack

Denial of provision of home address

Aggression to others

Statements by Mr Dennaoui about Mr Sadek

Was Mr Sadek motivated by a need for funds?

Joint Tortfeasor

Battery

Assault

Joint tortfeasor

Conduct Element

Common Design

Application

Mental Element

Procurement

Agency

Conclusion

Damages for tort

Compensatory damages

General damages

Past and future economic loss

Aggravated and exemplary damages

Quantum of aggravated damages

Quantum of exemplary damages

Mr Sadek

Mr Dennaoui

Duress

Legal principles

Application

Effect of the pressure

Time elapsed between threat and Termination Agreement

Lack of complaint

“Good deal”

Conclusion on duress

Affirmation

Conclusion on affirmation

Elite’s claim of Mr Sadek’s breach of directors’ and fiduciary duties

Avoca Beach Termination Agreement

Was Matraville development a joint venture asset?

Was Condell Park purchased with joint venture funds?

Orders

Judgment

Introduction

1. Hazem Afyouni and Omar Sadek met in 2004 and became good friends. They were building contractors with different expertise. In 2016, through various conversations, they decided they would jointly develop a property for profit. In May 2018, their relationship irretrievably broke down, and this litigation has resulted.

2. The main issues in the proceedings are what the two men orally agreed at the beginning of the business relationship, and the circumstances of the termination of the relationship. These issues depend in large part on the credibility of the two men and which version of events ought to be accepted. This is particularly so in relation to the allegation (which is denied) that Mr Sadek was responsible for a gun attack (Gun Attack) on Mr Afyouni by Mr Bilal Dennaoui. Mr Afyouni alleged the Gun Attack was designed to intimidate him into handing control of the joint venture bank accounts to Mr Sadek and agreeing to terminate their joint venture.

3. On 8 February 2022, Sackar J ordered that the two distinct proceedings Mr Afyouni has brought, namely matters 2020/114103 (Afyouni Proceedings) and 2018/383933 (KPI Proceedings), be heard together.

4. The Afyouni Proceedings relate to the joint venture between Mr Afyouni and Mr Sadek, including the Gun Attack. The KPI Proceedings concern a claim by Mr Afyouni’s company, Elite, against Mr Sadek for allegedly breaching directors’ duties and obtaining benefits for himself.

5. The evidence tendered in both cases spanned many thousands of pages and I informed the parties that I would not have regard to material to which I was not taken to during cross-examination or submissions.

6. Mr Afyouni:

1. is a plaintiff in his personal capacity; and

2. controls the corporate plaintiffs, Elite Realty Development Pty Ltd (the First Plaintiff in the Afyouni Proceedings and the Plaintiff in the KPI Proceedings) and Afyouni Holdings Pty Ltd (the Third Plaintiff in the Afyouni Proceedings).

7. Mr Sadek:

1. is a defendant in his personal capacity; and

2. controls the corporate defendants, Big Homes Sydney Pty Ltd (the Third Defendant in the Afyouni Proceedings), Maroubra Road Development Pty Ltd (the Fourth Defendant in the Afyouni Proceedings), and Sadek & Co Pty Ltd (the Fifth Defendant in the Afyouni Proceedings and the Second Defendant in the KPI Proceedings).

Absent defendant

8. At the hearing, the defendants raised a concern that it may be inappropriate for the Court to proceed with the hearing against Mr Bilal Dennaoui (the Second Defendant in the Afyouni Proceedings), in circumstances where he has not taken an active part in these proceedings and may have been unaware of the hearing dates.

9. On 11 June 2020, Mr Dennaoui was served with the sealed Statement of Claim at his place of employment. He did not enter an appearance as governed by Uniform Civil Procedure Rules 2005 (NSW) r 6.9 (UCPR) or file a defence (UCPR r 14.3). Pursuant to UCPR r 6.1, he would have been unable to take any step in the proceedings (including any appearance in court) without the leave of the court. He was not an "active party" in the proceedings: UCPR r 1.2.

10. Since Mr Dennaoui did not file a Defence, he is "in default": UCPR r 16.2(1)(a). In addition, by his failure to file a defence traversing the allegations of fact in the Statement of Claim, each of those allegations of fact is taken to be admitted as against him: UCPR r 14.26(1)(a).

11. On 28 July 2020, the plaintiffs filed a Notice of Motion for Default Judgment for Unliquidated Damages against Mr Dennaoui, pursuant to UCPR r 16.7. For unknown reasons, the Motion was not considered by the Court and no default judgment was entered. However, the plaintiffs did not approach the Court seeking information about the motion, nor did they press for it to be heard.

12. At no time since the proceedings commenced has Mr Dennaoui appeared himself or been represented by a legal practitioner. On the first day of the hearing, the matter was called outside the Court and no appearance was made for Mr Dennaoui.

13. UCPR r 29.7 sets out the procedure to be followed if a party is absent. It relevantly provides:

29.7 Procedure to be followed if party is absent

(1) This rule applies when a trial is called on.

(2) If any party is absent, the court—

(a) may proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or

(b) may adjourn the trial.

14. Therefore, it is first necessary to decide whether it is appropriate to proceed to judgment against Mr Dennaoui in his absence, or adjourn, where no explanation was provided for his absence.

15. It has been held that in order for the Court to proceed with a hearing pursuant to r 29.7(2), a party must be “absent” within the meaning of r 29.7, which will not be found unless that party has knowledge or notice of the date of the trial: see eg NSW Trustee and Guardian as executor of the Will of Michael Robert Walsh (Dec'd) v Gregory (2012) 18 BPR 35,153; [2012] NSWSC 681 at [18]-[22]. In reaching that conclusion, Hallen AsJ (as his Honour then was) relied upon a passage by Rich J in Cameron v Cole (1944) 68 CLR 571 at 589:

It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside, and a court which finds that it has been led to purport to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside. ... In such a case that has been no valid trial at all.

16. While I certainly accept that natural justice must be observed, with great respect to Hallen J, I do not agree that UCPR r 29.7 requires a plaintiff to notify a defendant of the date of the trial in order for the defendant to be “absent” and the hearing to proceed.

17. The factual situation in Cameron v Cole was quite different. The issue being considered by Rich J at 589 was whether a sequestration order was valid, or whether it was a nullity and without jurisdiction, in circumstances where:

1. the debtor, Mr Cameron, had been served with the relevant sequestration order;

2. the allocated hearing was adjourned at Mr Cameron’s request, with a direction that the Registrar of the Court notify both parties about the new hearing date once allocated;

3. a date was fixed by the Court, but notice was not provided to Mr Cameron; and

4. on the adjourned hearing date, a sequestration order was made against Mr Cameron in his absence.

18. In that case, Latham CJ also stated at 584:

In the present case the sequestration order … was made without any notice to the appellant of the adjourned date of hearing. Was notice “a condition of jurisdiction”? … In my opinion it was. The failure to give notice … made the order a nullity. [In] Craig v Kanssen… it was held by the Court of Appeal that failure to serve process where service of process is required renders null and void… an order made against the party who should have been served…

See also Williams J at 604.

19. The High Court evidently considered that the Court’s own order to notify the parties of the hearing date had not been complied with by the Registrar, and that was the basis for determining that there was an issue of fairness with the Bankruptcy Court proceeding ex parte on that adjourned hearing date.

20. In my opinion, UCPR r 29.7 does not require service by a plaintiff on the defendant of notice of the hearing dates. UCPR Part 10 provides for service of documents. Importantly, r 10.20(2) provides that “[e]xcept as otherwise provided by these rules (a) any originating process … in proceedings in the Supreme Court … must be personally served”. There is unchallenged evidence in this case, which I accept, that the originating process was served on Mr Dennaoui.

21. Rule 10.1 provides as an imperative that “[u]nless the court orders otherwise, a party that files a document must as soon as practicable serve copies of the document on each active party”. However, Mr Dennaoui was not an “active party”, as he at no time ever filed an appearance or a defence.

22. The only other documents that must be served personally are irrelevant here:

1. Notices of motion must be served on non-active parties: UCPR r 18.5.

2. A sealed copy of a judgment must be served on the person against whom the orders are sought: UCPR r 42.8.

23. However, there is no rule that requires a party to serve on another party (whether active or not) a notice of the Court’s listing dates. Here, there was no Court order requiring the plaintiffs (or the registry) to notify Mr Dennaoui of the hearing dates.

24. Where the Court chooses to proceed rather than adjourning, that does not foreclose an absent party from being heard once and for all. UCPR r 36.16(2)(b) allows the Court to set aside or vary a judgment or order after it has been entered if it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order.

25. Therefore, I do not consider that there is any impediment to the Court proceeding against Mr Dennaoui, who was absent on the allocated hearing dates. Instead, I consider the effect of UCPR r 29.7 is to provide power to the Court to either adjourn or proceed where a party is absent at the hearing. As no evidence was received providing a good reason for the absence of Mr Dennaoui in circumstances where the proceedings have been on foot since 2020, there is no justification for an adjournment, which would also be contrary to the overriding purpose of civil litigation in ss 56 - 60 of the Civil Procedure Act 2005 (NSW). That there is a right to an opportunity to be heard does not equate to a right to frustrate the hearing of proceedings by not attending them: Matta v Matta [2015] NSWSC 963 at [7] (Black J); In the matter of Central Management (NSW) Pty Ltd (in liquidation) [2017] NSWSC 1258 at [2] (Black J). In my opinion, there is no basis, nor utility, in adjourning the proceedings against Mr Dennaoui in the absence of any reasons for him not having filed an appearance or a defence or appearing at the hearing. There is no basis for assuming that he would have appeared at any adjourned hearing.

26. Accordingly, I am prepared to proceed to determine the case against Mr Dennaoui, despite his absence. If Mr Afyouni proves his case for damages for assault, he is entitled to relief: Re Anton Fabrications (NSW) Pty Ltd — Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd (2011) 248 FLR 384; [2011] NSWSC 186 at [11] (Ward J). In circumstances where I am determining the whole case, there is no need for the notice of motion for default judgment to be separately determined.

Maroubra Joint Venture

27. In 2016, Mr Sadek and Mr Afyouni were close friends. Mr Afyouni called Mr Sadek his “brother”. Their families went on holidays together and Mr Afyouni’s children called Mr Sadek “uncle” and let him into their home without question.

28. In early 2016, Mr Afyouni and Mr Sadek agreed to carry out a property development together (Maroubra JV). The terms and termination of the agreement are key issues in dispute.

29. The terms of the joint venture were never recorded in writing and Mr Afyouni and Mr Sadek’s respective versions of the conversations about formation and termination are different. The parties did sign a “Memorandum of Understanding” (MOU) on 30 December 2016, which merely recorded their respective financial contributions to the purchase of the joint venture property at Maroubra, with a statement that those contributions were to be treated as “a long term liability to be settled at the end of the job”. There was no reference to interest. However, it was common ground that in terms of the Maroubra JV they agreed:

1. the parties would share the profits 50/50; and

2. the parties would be entitled to receipt of the cost of the materials they contributed to the project: Mr Afyouni for air-conditioning and Mr Sadek for dry trades.

30. While there were also disagreements about whether Mr Sadek was entitled to be paid for his materials and work along the way or only at the end, that does not matter since the project has been finished and Mr Sadek retained all proceeds of the sale of the Maroubra units.

31. At the beginning, the joint venture went well.

32. On 13 April 2016, with the assistance of an accountant, Robert Saade, Mr Afyouni and Mr Sadek created Elite Realty Development Pty Ltd (Elite) as the builder. Mr Afyouni and Mr Sadek were the only directors. Afyouni Holdings Pty Ltd, a company related to Mr Afyouni, held 50% of the shares in Elite, and Sadek & Co Pty Ltd, a company related to Mr Sadek, held the other 50% of the shares. There is no dispute that these companies are the alter egos of the individual men.

33. By July 2016, Mr Afyouni and Mr Sadek had identified a property in Maroubra, with a pre-existing development approval for 9 units, as a suitable development site (the Maroubra Property). They incorporated Maroubra Road Development Pty Ltd (MRD) to own the development site. Both Mr Afyouni and Mr Sadek were directors of MRD, and each held 50 shares through their own corporate entities.

34. On 13 July 2016, MRD purchased the Maroubra Property for $3.2 million. It raised finance using the principals’ businesses and a property of Mr Afyouni as security. As recorded in the MOU, Mr Afyouni contributed approximately $170,000 towards the purchase and Mr Sadek contributed approximately $1,140,000. At the beginning, both men were alternative signatories on the bank accounts of Elite and MRD.

35. MRD, as owner, contracted with Elite, as builder, to carry out the construction work. A September 2017 Development Application Notice of Determination forecast the total costs of the development to be $7.558 million. Prior to construction commencing in late 2017, all units were sold off the plan, except unit 9. Those sales settled in late January 2019 for a total sum of $8,613,272.56. In 2017, a real estate agent valued the then unfinished unit 9 at $1,275,000. Unit 9 is currently owned by MRD, which is now completely owned by Mr Sadek.

Falling out and Kanebridge/KPI53

36. In May 2018, the parties fell out. The impetus to this falling out was a dispute over how to settle claims the parties’ companies had against KPI53 Pty Ltd (KPI53).

37. Both Messers Afyouni and Sadek had provided their individual building services to Kanebridge Constructions NSW Pty Ltd (Kanebridge). KPI53 was a subsidiary of Kanebridge.

38. By November 2016, Kanebridge still owed Mr Afyouni’s company (Conditionex) about $200,000. Kanebridge owed Mr Sadek’s company (Render and Paint) about $1,300,000.

39. In March 2017, an agreement was signed whereby, in consideration for Mr Afyouni and Mr Sadek’s companies releasing Kanebridge from the amounts owing, another Kanebridge subsidiary, KPI37, entered into a joint venture with Elite to develop a property at Avoca Beach (Avoca Beach JV Agreement).

40. Under the Avoca Beach JV Agreement, 50% of KPI53’s interest in the land at Avoca (Avoca Property) was to be transferred to Elite. Elite was thereafter to partner with KPI37 to develop the property, on the basis that KPI37 would provide all capital contributions towards the construction up to $1,350,000, and thereafter Elite would contribute on a 50-50 basis. In effect, Messers Afyouni and Sadek were agreeing to purchase an interest in the project land for Elite by forgiving the debts owed to their companies. However, Elite would be responsible for contributing towards the development costs going forward.

41. In November 2017, Messers Afyouni and Sadek became aware that construction activity was proceeding at the Avoca Property without Elite’s knowledge or involvement. Further, 50% of the Avoca Property had not been transferred to Elite as agreed. In an email dated 9 November 2017, Elite’s lawyer Jason Cameron wrote to the directors of Kanebridge in the following terms:

We note that we have lodged a caveat on the land on before [sic] of Elite Realty Development Pty Ltd in this regard.

We further understand that development activities have been going on at the site, but without any notice of involvement with Elite. The joint venture agreement provided for monthly meetings and a process of decision making that involved all parties.

Can you please advise your intentions in this regard.

42. In an email dated 30 April 2018, Mr Cameron complained to Kanebridge about KPI53’s alleged breaches of the joint venture agreement. Mr Cameron also wrote:

Further following another unsuccessful attempt yet again to organise a meeting to discuss the project our client was informed that you have sold the property to another entity. This came as a surprise to our client as there has been no discussion whatsoever between the parties in this regard. When our client indicated that this was a breach of the joint venture agreement, our client received a cryptic text message back which said included [sic] a suggestion that “the deal was never done”.

Your conduct constitutes a repudiation of the contract between the parties.

43. Elite’s case is that Mr Sadek breached his director’s duties to it in entering into a 2019 deed with the Kanebridge companies, whereby his company, Render and Paint, was compensated for the previous debts (March 2019 Deed). This is considered further below.

Escalation of dispute in May 2018

44. Tensions between the parties escalated particularly from May 2018.

45. On 3 May 2018, KPI53’s former directors, Mr Simon Loulach, Mr George Najjar and Mr Marwan Rahme, met with Messers Afyouni and Sadek over a meal to discuss the Avoca Beach JV Agreement. Mr Afyouni recorded his recollection of the meeting in an email, noting:

1. KPI53 had sold the land or entered into some agreement with a third-party entity named “Arlan” because it did not have sufficient finance (“mortgage problem… not having funds to pay [the] mortgage”).

2. Mr Afyouni’s belief he could set aside any transfer of land to a third party because of the existence of the Avoca Beach JV Agreement.

3. KPI53 wanting to do a “deal” by paying the amounts which had been owing to Mr Afyouni and Mr Sadek’s companies, prior to entry into the Avoca Beach JV Agreement, with an allowance for interest – part in cash, and part in kind in the form of interests in units under development.

4. Mr Afyouni told them that he wanted “my legal share [of the project] with its profit” and insisted that he keep his “25% share in the project” and Mr Sadek instead wanted $750,000 for his share and to walk away from the Avoca Beach JV Agreement.

46. I was not taken to any documentary evidence to demonstrate that Elite could have performed its obligations under the Avoca JV Agreement, and what, if any, profit would have been realised. Further, it appears that KPI37 was not able to continue with the project as it did not have the finance and had in fact sold the land. If that is correct, then it would not have been possible for Elite to force the continuation of the joint venture and instead would have been left to pursue legal redress instead.

47. On 7 May 2018, Mr Sadek emailed Jason Cameron, Elite’s lawyer, asking him to “finish Elite between us”, and copied in Mr Afyouni.

48. That same day, Mr Cameron wrote in reply:

If this is an agreed position, we could propose that a withdrawal of caveat form and deed of settlement be exchanged simultaneously with the receipt of a bank cheque. That way, both sides get what is promised.

49. Shortly after, Mr Afyouni wrote back:

Jason, this is not agreed by me, it was omar initiative.

I am taking them to court.

50. On 8 May 2018, Mr Sadek emailed Mr Afyouni and Mr Cameron to suggest either:

1. they accept the KPI53 cash/property offer: “Ok let’s finish this, everyone gets his money and back to normal”; or

2. Mr Afyouni pay out the debt owed by KPI53 to Mr Sadek’s company and Mr Afyouni could sue the Kanebridge entities: “I have about 90% of that deal and I’m in need for those money now if Hazem can pay me those money now and take the deal and fight the way he wants, more than welcome”.

51. On 8 May 2018, Mr Afyouni also changed access to the Elite bank account (but not the MRD account), so that money could only be withdrawn if both men signed. Before that time, Mr Sadek, with the consent of Mr Afyouni, had been responsible for the construction of the Maroubra development, including engaging contractors and paying them. Up until about April 2018, Mr Afyouni had been taking care of the book-keeping with the assistance of Vicky Trassieh, who worked out of Mr Afyouni’s factory. However, after Ms Trassieh left, Mr Sadek took over the book-keeping and the payment of invoices with the assistance of Fatima Berry, who worked out of Mr Sadek’s business premises.

52. In cross-examination, Mr Afyouni said that he took the step to “block” the Elite accounts to protect his interests because he was now in a “fighting situation” concerning the dispute with KPI53 and needed to protect his assets. He denied he took this step to improve his negotiating position vis-à-vis Mr Sadek, but did say his intention was to “secure my interest” and that “I was putting pressure on him so … we can resolve it” and to hold up the Maroubra project.

53. The practical effect of Mr Afyouni’s actions was that Mr Sadek could not use the blocked account without consulting Mr Afyouni. There is no evidence that Mr Sadek ever sought Mr Afyouni’s consent to make any payment, nor informed him that payments were due to particular persons.

54. On 9 May 2018, Mr Afyouni made a “without prejudice” offer to Mr Sadek, with documents to be sent to his accountant, Mr Simon Khattar:

… [who can do] the figures for Elite in Maroubra and one of us finishes it. Omar will be compensated with interest for his surplus of money.

Part of the offer was also that they would make a counteroffer to KPI53.

55. Mr Afyouni accepted that, when he made that offer to Mr Sadek, he was not intimidated. However, his evidence was he “was scared of talking to [Mr Sadek]” because Mr Sadek is “very aggressive”, or “I was not scared, I was avoiding him”. I do not accept that Mr Afyouni was particularly scared of Mr Sadek at this stage, but it was an agreed fact that Mr Sadek used “aggressive language from time to time”.

56. On 10 May 2018, Mr Sadek visited Mr Afyouni’s home because Mr Afyouni was not answering Mr Sadek’s calls, but Mr Afyouni was not there.

57. On 15 May 2018, Mr Sadek sent an email to accountant, Mr Khattar, and copied in Mr Afyouni and Mr Sadek’s lawyer, setting out his point of view, including:

In regards to Avoca Elite Kanbridge [sic] Deal, Render and Paint/Omar has $1,350mil in there and Hazem/Conditionex has 200k and after the meeting last night with Kanbridge with the offer we received of the full payment of the lot and your client refused and Kanbridge took the offer back and put it back to sleep. The JV will stay there and no deal/offer at this time.

In regards to Maroubra Elite your client invested 200k and used one of his properties as the security for 400k and since that date Omar has been funding Maroubra Project, paying the loans, fees and everyday on site doing the construction when Hazem wasn’t doing anything or paying anything. At some stage we were trying to get the construction loan for the project the bank asked us for the tax portal for the two of us, Omar had ot go and pay Hazem Afyouni/Conditionex tax bill of 250k to obtain the loan plus paid 450k from Render and paint to Conditionex as a loan. Now Hazem/Conditionex owns [sic] Omar 700k since 15/05/2016 exactly two years to date.

…

In the recent couple of days your client has stopped the Elite bank account and has caused inconvenience to our trades and labourers waiting on funds which has impacted the whole project.

We are expecting a reply within 48 hours to inform us on the offer you are expecting also we need the bank account working back to normal because we have people waiting for their money.

58. Mr Afyouni understood from the final paragraph of this email that Mr Sadek was suggesting that the block on the bank account was causing problems with the site, but did not accept it in fact was, because he considered that contractors often wait for a few months to be paid and, in his words, “I know how it works”.

59. Mr Afyouni agreed that Mr Sadek’s email was not threatening, but he said the offer was “illogical” or “unfair”, but his meaning was not explored.

60. On 15 May 2018, Mr Sadek also sent Mr Afyouni a text message:

You are a very bad person and that’s why you lost everything and should lose the rest of it

When you couldn’t get anything from Kanebridge you came after my kids money? I helped you way more than what you deserve

No explanation was given for “my kids money”, but I consider it is likely to refer to the Maroubra Property, into which Mr Sadek had invested over $1 million in cash. Mr Sadek did use the joint venture bank accounts “as his own” in transferring money between them and his other companies’ accounts.

61. On 16 May 2018, Mr Sadek sent Mr Afyouni a text message:

Answer you fucking dog

Mr Afyouni accepted that he was not speaking to Mr Sadek at the time and that these text messages were not threatening his life, but were “intimidating”.

62. Mr Sadek did not concede that the language indicated he was aggressive and angry. He said:

[B]ut when someone’s blocked the – your bank account to stop your project - $11 million project and all your life saving and your wife’s savings for weeks and weeks and weeks and not answering the phone calls, okay, of course it’s going to get you to a point where you’re going to say things.

63. On 17 May 2018, Mr Khattar outlined Mr Afyouni’s position to Mr Sadek:

… we hereby propose the following offer for Hazem to walk away from the project at Maroubra:

1. Upon completion of the Maroubra project, Unit 9/315 Maroubra Road Maroubra is to be transferred to Hazem at no cost.

2. Hazem to receive his cash contribution (estimated to be approx. $300,000) back from the Maroubra project.

3. Hazem to receive his unit 1/12 Cape Three Point Avoca as security for Maroubra project back free of any mortgages.

Please note if the above offer is agreed to, Hazem will release the funds to complete the project and will have no further involvement in the project. This will only be done once you exchange contracts for Unit 9/315 Maroubra Road Maroubra to Hazem Afyouni and once you provide a written agreement to refund Hazem back his cash contributions to the project as well as his secured unit clear of any mortgages.

Please also note that the above offer is based on the information provided by you without verification and should the offer be rejected, then a thorough investigation would be carried out in relation to the costing of the project. This would lead to further delays and costs to the project.

The above offer is for Maroubra venture only and any monies lent to Hazem and his companies by Omar can be dealt with when the Avoca issue is resolved.

We await your response to the above offer.

64. Mr Afyouni accepted that he had not been threatened or intimidated by Mr Sadek at this stage even though, in his words, the “negative energy was building up” and he and Mr Sadek were clearly in a dispute.

65. While Mr Afyouni was making relinquishment of his involvement in the bank account conditional upon Mr Sadek accepting his offer, it is not clear whether he would have agreed to pay invoices that were due if he had been asked, which he was not.

66. Mr Sadek said he found Mr Afyouni’s offer “outrageous”.

Gun Attack

67. On 20 May 2018 at about 7.45pm, Mr Bilal Dennaoui, the Second Defendant in the Afyouni Proceedings, intimidated Mr Afyouni with a firearm, and demanded money. While Mr Dennaoui has not appeared in these proceedings, the parties do not dispute that the Gun Attack occurred. As detailed further below, Mr Afyouni described it as involving a struggle with arms, the pointing of a handgun at him and a verbal demand that Mr Afyouni pay Mr Dennaoui $50,000 or “unlock the bank account”, so that Mr Sadek could pay Mr Dennaoui.

68. On 23 May 2018, Mr Dennaoui was arrested and charged with using an offensive weapon with intent to commit an indictable offence, namely intimidation of Mr Afyouni, and not having approved safe storage for firearms in his possession in accordance with requirements under the Firearms Act 1996 (NSW). It appears charge negotiations took place. On 25 October 2019, Mr Dennaoui was arraigned and pleaded guilty. He was sentenced to a term of imprisonment of 2 years 9 months. Mr Dennaoui served about three months in prison on remand and then a 33-month good behaviour bond. In his letter to the sentencing judge dated 12 December 2019, he wrote, inter alia, “I thought that if I scared Hazem he will turn around and pay what he owes me. I was never going to harm him. I accept what I did would have terrified him and I am extremely sorry for what I have done.”

69. Mr Afyouni has sought damages from Mr Dennaoui for the tort of assault. He also sought damages from Mr Sadek on the basis that he procured the Gun Attack or Mr Dennaoui was Mr Sadek’s agent. The plaintiffs submitted there was no difference between procurement and express agency. The law in relation to each is set out further below.

70. When asked whether he had a clear recollection of the Gun Attack, Mr Afyouni replied “to a certain extent”. In fact, Mr Afyouni gave various accounts of the incident in his “000” call just after the event, his police statement and then to various other people (including psychologists) and in his affidavits.

71. In the “000” call he said, inter alia:

they never shoot us but they threaten us, they hit, they hit my friend, my old man…

there is some dispute over some work somewhere…

Because there is some dispute between me and their friend at work, we have a development together and there is some dispute over the, the property…

I know him yeah, this guys [sic] he works … a labourer of my partner…

Because I froze the bank accounts

72. Mr Afyouni also gave a statement to the police that same day:

Bilal stopped about 1 metre away from me and pulled a silver pistol out of his pocket and racked the gun. He had it pointed on an angle towards the ground and made a show of racking it … Bilal then came closer to me and pointed the gun at my stomach area and we had the following conversation:

I said: “Bilal what are you doing here?”

Bilal said: “Why you not paying me my money?”

I said: “What money?”

Bilal said: “You and Omar owe me fifty thousand, you blocked the account”

I said: “Bilal move this away, Bilal move the gun away, don’t do this”

Bilal said: “Just pay me my money”

I said: “Ok, ok, I’ll pay you tomorrow Bilal, just keep this away”

Bilal said: “Make sure you pay me tomorrow, otherwise I’ll be back here tomorrow. You know me”.

…

[Other man punched Mr Afyouni’s friend in the face].

I am not sure if Bilal is owed money from the business as I do not oversee the construction stie. Omar would be able to determine if Bilal was owed money. …

As a result of this incident I am fearful for my safety and the safety of my family. I am worried that Bilal may come back tomorrow.

73. Mr Afyouni’s evidence was that he gave the statement because Constable Harding asked him to before he fled the country. Mr Afyouni said he did not want to put Mr Sadek on the police statement because he said that the police officer told him that if he mentioned Mr Sadek then he could be put in prison. He later indicated that he “could have had Omar arrested many times”. When asked why he did not seek protection from the police from Mr Sadek his evidence was that he believed that if he left the country that would protect his family because he would not be around. The police records do include references to Mr Sadek being a “P/N” (person of note) and after the attack the police advised Mr Afyouni not to take calls from either Mr Dennaoui or Mr Sadek and to sleep somewhere other than his home. Mr Afyouni did not leave the country around that time.

74. Mr Afyouni’s evidence in cross-examination was slightly different to his 000 call and police statement. When pressed, he said he precisely remembered Mr Dennaoui saying:

1. “Open the account so Omar can pay me”;

2. “You have to open the account otherwise I will come back tomorrow”; and

3. “I’ll give you until Thursday, no no I come back tomorrow”.

This evidence was consistent with his affidavit in these proceedings and his 2019 affidavit in support of his (unsuccessful) AVO application against Mr Sadek. It also bears some resemblance to an intercepted telephone call Mr Afyouni had with Mr Dennaoui at the police’s request on 22 May 2018.

75. I consider that Mr Afyouni was an honest, but not always impressive witness. He appeared to be fixated with the Gun Attack and what he perceived to be ongoing threats from Mr Sadek and the litigation. Mr Afyouni stated that the most significant event is the Gun Attack, which has “changed his life” – “that was the big one”.

76. That may well be because he continues to suffer some psychological effects of that attack, even though the evidence of the psychiatrists giving evidence, Dr Robertson and Dr Parmegiani, was over a year old and was not very precise. Associate Professor Dr Michael Robertson, Psychiatrist, gave evidence that “events associated with threatened or actual harm to self are much greater in causing psychopathological states than other stressors… It is possible a person can develop an adjustment disorder because of financial threats or uncertainty or disputes with employers or co-workers”.

77. Mr Afyouni rambled at times when giving evidence. He also laughed from time to time when giving evidence, which he described as a “sorrow laugh” and “not a happy laugh”. Psychologist Dr Julian Parmegiani gave evidence that such a reaction was an odd, but human mannerism in some people who have experienced trauma.

78. Mr Afyouni would not accept that his police statement was wrong, even though he accepted that there was a clear difference in the exact language used in his various versions of the attack. I consider a fair reading of his statement was that Mr Dennaoui was communicating that he had not been paid because the account was blocked and that Mr Afyouni was to resolve the situation by unblocking the accounts and paying, rather than being a demand that Mr Afyouni pay Mr Dennaoui directly from another source of funds.

79. The defendants emphasised the fact that Mr Afyouni’s affidavit did not contain the word “open”, but rather “unblock” the account and that Mr Afyouni could not explain that inconsistency, other than saying that the meaning is the same. English is not Mr Afyouni’s first language and I do not consider anything turns on the difference between the use of “open” and “unblock”.

80. The defendants also tried to discredit Mr Afyouni by pointing out other inconsistencies in the different versions of his account, which I do not consider are particularly relevant, as they do not deal with real differences of substance; it was not suggested that the Gun Attack was not a scary event and Mr Afyouni conceded that there were differences in form because he was “under a big shock” and he was “shivering when I was talking to her [the 000 operator]”. Some examples of inconsistences were:

1. On the “000” call he said there were 2 men who had attacked him with 2 guns, but in fact it was just one gun, which he accepted in cross-examination.

2. On the call he said they hit his friend with the “butt”, but in fact his friend was punched.

I do not consider these inconsistencies indicate that Mr Afyouni was an untruthful witness. I also accept he would have been in shock at the time of the incident and when calling 000 and giving the police statement. I consider the substance of what he said to be consistent across his various accounts.

Was Mr Sadek involved in the Gun Attack?

81. Mr Afyouni accepted that even if Mr Dennaoui had said that he wanted the bank account opened, that did not necessarily mean that Mr Sadek had told Mr Dennaoui to attack Mr Afyouni. However, he was convinced that Mr Sadek had sent Mr Dennaoui to threaten him. In his words, Mr Dennaoui “was a tool”.

82. As detailed below, while Mr Sadek admitted that he told Mr Dennaoui to go and speak with Mr Afyouni so he could be paid, he denied having told Mr Dennaoui to make any threat or use a gun. He did not accept that any other pleaded conduct amounted to an assault or could be considered conduct amounting to duress.

83. I do not consider Mr Sadek was a credible witness. He appeared to be making up his answers as he went, and at times took an incredibly long time to answer simple questions. Mr Sadek denied many matters, where documentary evidence was all the other way. While I am conscious of the need to carefully assess evidence of all witnesses on each matter (see eg Saravinovksa v Saravinovski (No 6) [2016] NSWSC 964 at [468] (Kunc J)), I do not accept Mr Sadek’s evidence on the issue of the Gun Attack.

84. Mr Sadek’s affidavit evidence was he told Mr Dennaoui:

[Hazem] has blocked the bank account. We are having an argument about a different deal and he will not let me use the bank account until it is over.

…

Me and Hazem did a deal with these guys who owed us money on invoices. They said they would give us a share of a project in Avoca but now they have sold it to someone else. We have been trying to sort it out. We can’t agree and we are going to go our separate ways. He’s got his accountant emailing me trying to work out how much money he should get. He has blocked this account to put pressure on me.

…

85. Mr Sadek’s evidence was that Mr Dennaoui then said, “I’ll go and speak with him” and Mr Sadek responded, “Please do. Tell him to release all the money”. Mr Sadek asserted that “I did not ask Bilal to do this [the Gun Attack]”. However, in cross-examination, Mr Sadek did not emphatically deny he told Mr Dennaoui to intimidate him; instead he said:

Q. When you say, "Go talk to him," you knew, if he approached Mr Afyouni, it wasn't just going to be to speak words. It was to intimidate him, to heavy him, to force him to pay; correct?

A. Not really.

86. I consider that Mr Sadek asked Mr Dennaoui to go and intimidate Mr Afyouni for the following reasons.

Denial of relationship

87. Mr Sadek denied he was close to Mr Dennaoui and tried to suggest that Mr Dennaoui was instead very close to Mr Afyouni. Mr Sadek said in cross-examination that he knew Mr Dennaoui from him working with Mr Afyouni. However, the Telstra telephone records in evidence demonstrated that Mr Sadek and Mr Dennaoui were frequently in contact by phone calls and text messages. When presented with those records, Mr Sadek changed his position and said the contact was just to do with work, but then admitted they were “close”. It would seem the only reason for Mr Sadek’s original denial was to attempt to distance himself from Mr Dennaoui.

No money owing

88. Mr Sadek asserted in his affidavit that Mr Dennaoui (or his company, Advanced Trades Pty Ltd) was owed $70,000 by Elite or MRD at the time of the Gun Attack. I do not accept that Mr Dennaoui was owed any money for the following reasons.

89. Before the trial, the plaintiffs had sought from Mr Sadek documents demonstrating that Mr Dennaoui was in fact owed money at the time of the Gun Attack and nothing had been produced. During the hearing, 4 invoices, said to have been issued by Advanced Trades to Elite, were produced in answer to a call. Those invoices are suspicious for the following reasons.

90. First, Mr Dennaoui had never been a director, nor shareholder, of Advanced Trades Pty Ltd. Therefore, he was not ‘owed’ any money, and, at most, the company was owed money. There was no evidence from Elite’s records of any work having been carried out by the company other than the fact of a payment of $760 in January 2018 for setting up fencing on a single day.

91. Secondly, no one from Advanced Trades gave evidence as to the existence of any debt. There were no references in any of the Maroubra financial records to a debt being owed to Advanced Trades, or that debt having been paid off later by Mr Sadek, despite his assertion that he had later paid all the contractors.

92. Thirdly, those invoices have odd features:

1. The invoice numbers are not all dated and are numbered 1, 2 and 3, and the fourth one unnumbered, but out of date order.

2. They do not include reference to “Bilal Dennaoui”, but rather “Bill” and “Ahmed”. The phone number next to “Bill” on those invoices was not that of Mr Dennaoui.

3. The solicitor for the plaintiffs’ evidence was that the metadata appeared to demonstrate that the invoices were created on either 20 December 2018 or 14 October 2019, suggesting they did not exist in May 2018. A submission was made that one could speculate that they were re-issued in 2019, however, it might equally be said that there would have been no reason to re-issue them in 2019 as the project was finished, and they would not have been needed by Mr Sadek. In any event, no explanation was given for the failure to produce the invoices earlier in compliance with the notice to produce.

93. Fourthly, Mr Sadek’s evidence about the size of the alleged debt changed without explanation. The invoices amount to a sum of about $64,984, which is close to the $70,000 referred to in his affidavit. However, only about $40,000 of the invoice sums are referable to the time between the project commencing and May 2018. In cross-examination, Mr Sadek’s evidence was that $35,000 was owed rather than $70,000. In a telephone call recorded by the police on 22 May 2018, Mr Dennaoui asserted that $50,000 was owing, which is consistent with Mr Afyouni’s recollection of the demand made during the Gun Attack. I do not accept that Mr Sadek would not have known the amount truly owing, if it was, when he was the person engaging the trades and paying them.

94. Fifthly, at the relevant time, there was money available to Mr Sadek to pay Mr Dennaoui, had he been owed money:

1. On 2 May 2018, Mr Sadek had transferred $50,000 to himself.

2. Mr Sadek continued to have access to MRD’s bank account, which had $68,000 in it as of 8 May 2018. Although Mr Sadek initially denied having access to the MRD account and claimed that both the Elite and MRD accounts were blocked by Mr Afyouni, he subsequently accepted that, on 15 May 2018, he “took it” and had withdrawn $65,000 from the MRD account and paid that sum into his own account from the Elite account.

3. His evidence was that he often paid money from his company, Render and Paint, and then later reimbursed that company. He had invested over $1 million cash into the development.

95. There was no evidence that money was owing to any particular contractors other than Mr Dennaoui and Mr Sayed Jan (who only sought $720). This is despite Mr Sadek saying he had “[p]aid the concrete build, paid the steel bill, pay a lot of bills… There’s all the invoices. There’s all documents, all statement, they’re all contactors, you know, I can fill up this room with 100 different factors [sic – contractors] can prove what I’m saying now”. Further, when, on 29 May 2018, Mr Sadek recovered control of the Elite bank accounts, he did not move large amounts of money to pay contractors, which tells against any having demanded payment that could not be made at 20 May 2018. Even in relation to Mr Dennaoui, despite the plethora of text messages between him and Mr Sadek, there are none about money owing or of Mr Dennaoui threatening Mr Sadek to pay outstanding invoices.

96. I do not accept that the invoices are accurate reflections of any sums owed by Elite or MRD to Advanced Trades as at May 2018. Neither do I accept that Mr Dennaoui had verbally threatened Mr Sadek for not paying money owed.

Payment of Mr Dennaoui’s legal fees

97. Mr Sadek attended Mr Dennaoui’s bail hearing without providing an explanation why he did so, particularly where his original evidence was that they were not “close”.

98. Mr Sadek’s sworn evidence was that he caused Elite to pay $10,500 towards Mr Dennaoui’s legal fees. However, in fact, in December 2019 and January 2020, well after the Maroubra development was complete and it would be expected that all contractors had been paid, Mr Sadek’s company Big Homes paid $45,000 for Mr Dennaoui’s legal fees in circumstances where Big Homes did not owe Mr Dennaoui any money. Mr Sadek’s explanation was that he was paying the legal fees because Mr Afyouni had promised to do so, which I do not find credible, particularly where Mr Sadek’s own affidavit evidence was that he told Mr Afyouni, “I need to cover Bilal’s legal fees”.

99. Mr Sadek said that he paid the legal fees instead of the money owing for work. However, in Mr Dennaoui’s letter to the sentencing judge in December 2019, he stated: “The $50,000 debt is outstanding and I don't believe I will ever recover that money.” It is not possible that Mr Dennaoui and Mr Sadek were both truthful on this issue, but both could be lying.

Denial of communicating with Mr Dennaoui on day of attack

100. Mr Sadek denied he spoke to Mr Dennaoui on the day of the Gun Attack. However, the telephone records clearly demonstrate that the two men communicated and in fact met on that day before the Gun Attack, as Mr Sadek finally conceded in cross-examination.

101. The relevant chain of text messages between the men that day was:

7.10am

Sadek:      Need to see you today. It’s so urgent.

9.27am

Dennaoui:   Done I’ll c Yu soon

11.56am

Sadek:      Still coming?

Dennaoui:   Yes I’m in Greenacre Yu need anything before I come

Sadek:      No thanks Waiting for you

Dennaoui:    Won’t be long

Sadek:      [thumbs up emoji] Leaving soon Need to get the kids some stuff

Dennaoui:   Driving now wallah 10 Come out

4.29pm

Sadek:    Please don’t forget me tonight

Dennaoui:    All good working on something now Our best player is gone

Sadek:    What’s the other options?

7.04pm

Dennaoui:    Hey bro just checking for the contract of sale … I came to ur house ur wife answered said you not home

Sadek:    I’m working on it

Dennaoui:    Yu told me to come get it … I’m going home I’ll c Yu in the morning bro

102. Mr Sadek’s explanation for these text messages was unconvincing. His explanation for the “urgency” of seeing Mr Dennaoui at 7.10am on a Sunday was that it concerned work and the fact that Mr Dennaoui was “behind on work”. Mr Sadek accepted that Mr Dennaoui had come to see him, but again said it was about work. Mr Sadek’s explanation of why he asked Mr Dennaoui to “not forget” him that evening was that Mr Dennaoui was having a barbecue with his workers and Mr Dennaoui should not forget to tell Mr Sadek how many people are coming to the barbecue. The “best player” was said to be a good worker who was unavailable and “other options” only concerned other workers available to help finish work on the site.

103. In Mr Sadek’s words:

If someone’s going to get someone to go after someone for a gun, he’s not going to go and put it in writing and say, look, oh, look, my best brother is going to kill that guy tomorrow, and yeah. No, no, no.

104. It is difficult to understand the message about the “contract of sale”: Mr Sadek said he was separately negotiating with Mr Dennaoui to sell a property and Mr Sadek was working on that document, even though he had lawyers preparing it.

105. If Mr Dennaoui was having a barbecue with his workers, it seems unlikely that Mr Dennaoui would have been at Mr Sadek’s home at 7pm asking about a “contract for sale”. While Mr Dennaoui’s message said that he was going home, he did not, as he went to Breakfast Point and attacked Mr Afyouni. The telephone records also demonstrated that Mr Dennaoui was back in Mr Sadek’s suburb by 8.36pm following the Gun Attack.

106. I do not consider it credible that Mr Dennaoui would be prepared to visit Mr Sadek and discuss work throughout Sunday and into the evening and “urgently” make arrangements to ensure that there would be workers on site the next day, if he was owed so much money that he was prepared to verbally threaten Mr Sadek and to attack Mr Afyouni. Mr Sadek could not credibly explain this.

107. Further, I note that Mr Sadek’s suggestion that their meetings on 20 May 2018 were about work for the next week was inconsistent with what Mr Dennaoui told a psychologist, Dr de Santa Brigda, who prepared a report to assist him in sentencing, where he asserted he had other jobs to do:

Mr. Dennaoui stated that the first invoice was unpaid and then the second invoice was unpaid. He reported that Omar and Hazem Afyouni then had a disagreement and he started to become extremely concerned about non-payment of the invoice. He reported that initially he used his own funds to pay staff, but his funds then ran out. He reported that there were other jobs which were due to start, but he did not have the funds to buy the materials for the work.

Inconsistent evidence of knowledge of attack

108. Mr Sadek said he did not find out about the Gun Attack until “way after” and that he could not speak to Mr Dennaoui because he was “locked up”. He also said: “He only called me and told me from custody”. However, his affidavit evidence was that he found out about the attack from Mr Dennaoui’s family after he had been arrested. Also inconsistent with this is Mr Sadek’s evidence of his conversation with Mr Afyouni on the evening of 22 May 2018, when Mr Sadek claims he said, “I need to cover Bilal’s legal fees”, when, at that point in time, Mr Dennaoui had not yet been arrested. I consider this a further example of Mr Sadek inventing his evidence to suit himself.

109. I consider that Mr Dennaoui either met with Mr Sadek or called him shortly after the Gun Attack. It is likely that they discussed it the next day also. For example, Mr Sadek called but did not get through to Mr Dennaoui the day after the Gun Attack on 21 May 2018 at 7.27am and their text messages indicate that they also met that evening.

110. Further, the recorded telephone call between Mr Dennaoui and Mr Afyouni on 22 May 2018 had Mr Dennaoui ending the call stating, “I’m gunna go see [Sadek] now”. The telephone records also show that the men spoke at 6.20pm on 22 May 2018.

111. I do not accept that Mr Sadek did not speak to Mr Dennaoui about the Gun Attack shortly after the Gun Attack, and I consider Mr Sadek’s various inconsistent answers were an attempt to avoid admitting his involvement.

Denial of provision of home address

112. Mr Sadek denied he had provided Mr Dennaoui with Mr Afyouni’s home address. His affidavit evidence was, “I never gave anyone Hazem’s home address”, and “I did not tell Bilal where Hazem lived”. I consider that evidence false, at least because:

1. He sent text messages to Mr Sayed Jan with Mr Afyouni’s home and business addresses and phone number, and Mr Jan was only owed $720.

2. In circumstances where Mr Sadek’s affidavit evidence was he told Mr Dennaoui, “Hazem is the one holding up payment, go speak with him about your money” or “Hazem controls the money, speak with him about your money”, I consider Mr Sadek also provided Mr Dennaoui with Mr Afyouni’s home address so he could “speak with him”.

Aggression to others

113. The plaintiffs rely on other evidence said to demonstrate that Mr Sadek was aggressive and threatening, to support the submission that it can be more easily found that Mr Sadek was responsible for the Gun Attack.

114. On 26 June 2018, Mr Afyouni withdrew $200,000 from the Elite bank account, which he considered was his first payment of the settlement sum of $700,000 (discussed further below).

115. Two of Mr Afyouni’s employees, Mr Stuart O’Reilly and Mr Mohammed Ali gave evidence that, in June 2018, at a time when Mr Dennaoui was in jail on remand, Mr Sadek said to them:

To Mr O’Reilly:   Your boss is a dog. He is a coward. I try call him, he won’t answer I want my work done and you guys get the fuck off my job. Who does your boss think he is taking money from our account and he doesn’t think I will notice. I have sent one guy to jail and have no problem sending another. Watch when all this is sorted, Hazem will flee to Lebanon because he knows I will kill him for what he has done. He has made big mistake fucking with me.

To Mr Ali:    Hazem thinks he can mess with me. I will show him. He thinks he can steal money from me and I won’t notice. If I can send one person to jail, I can send another one no problem. Just wait til this finishes, he will have to leave the country.

116. Both Messers O’Reilly and Ali were cross-examined about their evidence, but I accept they were honest and credible witnesses and I accept their accounts. It is likely that Mr Sadek was angry because Mr Afyouni had taken money without regard to him. However, his reference to sending someone to jail and Mr Afyouni needing to flee the country is consistent with Mr Dennaoui being in jail and threats being made to Mr Afyouni when he “crossed” Mr Sadek.

117. I also note that, in cross-examination, Mr Sadek volunteered that Mr Ali and Mr O’Reilly’s evidence was incorrect because “they know, if [Afyouni] goes to Lebanon – Lebanon will be easier if I want to get at him”. His subsequent qualification, “That’s if – if that - I’m that type of person”, appeared to me to be an afterthought and it is quite telling that he even suggested his ability to “get at” Mr Afyouni like that.

118. Mr Ali was also cross examined in relation to certain recordings of telephone calls he had with Mr Sadek, Ms Fatima Berry and Mr Afyouni taken on his phone. Mr Ali gave evidence that, in 2018, he had a practice of using an application on his phone to record telephone conversations and would decide whether to record a particular conversation upon receiving a call.

119. Senior counsel for Mr Sadek objected to the admission of the recordings on the basis that they were, firstly, in breach of s 7(1)(b) of the Surveillance Devices Act 2007 (NSW) (SD Act) and, if the recordings fell into an exception under s 7(3), they should be excluded, unless I allowed them under the general discretion under s 138 of the Evidence Act 1995 (NSW). During the hearing, I decided all recordings (except the first) were admissible either because of the exceptions in the SD Act or pursuant to the discretion under s 138. Nothing turns upon that determination because I consider the recordings of insufficient relevance to place any weight on them in the circumstances of the case as a whole.

120. On 8 August 2018, two unknown men came to Mr Afyouni’s factory, and Mr Afyouni believed they were sent by Mr Sadek, reasoning that he had “never had a problem before” and “it looked awkward … wrong” and “suspicious”, because one had his head down, not looking at the factory security camera, and it made Mr Afyouni’s employees feel uncomfortable or “scared”. It is not obvious from the CCTV footage photos whether the men were there on business. Mr Afyouni also gave evidence that they did not return in relation to business or at all and that the men were people he had never done business with nor been introduced to. It is not possible to determine if these men were sent by Mr Sadek to intimidate Mr Afyouni. Further, in October 2018, bullet casings were found outside Mr Afyouni’s factory. Mr Afyouni also gave evidence that in January 2019, “two men approached” him in Cabarita. I do not consider it possible to conclude that Mr Sadek was responsible for these other incidents. Indeed, Mr Afyouni accepted that under cross-examination.

Q. You have nothing to tie that to Omar, correct?

A. Yes, I mean I'm just saying, I mean, okay. Just saying. I don't know if I 35 have mentioned it to the police.

Q. So am I right that after the incidents that you've described, particularly the cartridges in October 2018, there was nothing that happened, no threat or harassment after that date, that you could tie to Omar, is that right?

A. Yes.

121. I do not put weight on this evidence of aggression to others as demonstrating Mr Sadek was more likely to have been involved in the Gun Attack. However, I do consider the evidence provides a basis for Mr Afyouni’s belief that Mr Sadek was continuing to intimidate him.

Statements by Mr Dennaoui about Mr Sadek

122. On 22 May 2018, the police asked Mr Afyouni to call Mr Dennaoui so they could record the call. As Mr Dennaoui did not know the call was being recorded by the police, I consider that Mr Dennaoui had no reason to lie to Mr Afyouni. That telephone call indicated that:

1. Mr Dennaoui had spoken to Mr Sadek about his confrontation with Mr Afyouni on 21 May 2018 and told Mr Sadek that Mr Afyouni had said “everything’s gunna be sorted”. I accept this evidence means that Mr Sadek was untruthful in his evidence about when he spoke to Mr Dennaoui after the Gun Attack.

2. Mr Dennaoui’s concern was not solely to secure money allegedly owed to him, but rather to see that Mr Sadek and Mr Afyouni reached an agreement to resolve their dispute, about which he knew all the details.

123. Part of the transcript of the call is as follows. It must however be remembered that the transcript does not record the tone of the call or the speed of the conversation, which would obviously be relevant to a complete assessment of the likely impact of the call on Mr Afyouni:

[Dennaoui]   …consider, I have to do what I have to do, I need my money.

…

[Dennaoui]   You know me and I know you, I know your office, I know your house, I know your kids’ school. I know everything, why are you gunna make my life hard for me when, when we know so much about each other?.

…

[Dennaoui]   Listen to me carefully (Fuck Omar, and fuck) the calculations, and fuck everyone. I do the job. I have a family I need to feed. You’re not talking about $1000.00, $2,000.00, $3,000.00. Omar was tellin’ me, I can’t pay you. I’ve already had to put too much into the business this and that (Omar told me everything). (And why you) …just take your three, you can take 300 grand today, and walk away with everything, do you know what I mean…

[Afyouni}   OK. All I’m asking for is to do the calculation with Omar and pay everyone off, that’s all I’m saying.

…

[Dennaoui]   I’ll tell you…. Straight away. I went to Omar yesterday. Omar, after I spoke to you, I went straight to Omar the next day, yesterday. I sent to Omar, I go. Look, and I spoke to him, everything’s gunna be sorted today, ‘cause that’s what you told me. You told me you’re gunna sort everything out for me yesterday.

[Afyouni]    (SIGHING)

[Dennaoui]    Nothing got sorted. …

…

[Dennaoui]   …Omar gave you an offer… you haven’t knocked it back yet

[Afyouni]   I, I did knock it back, all, it’s all knocked back, it’s all not accepted, every, nothing of it is true, none of it.

…

[Dennaoui]   …from what I know, Omar didn’t come up with the numbers out of the blue, I’ll tell youse what…

…

[Dennaoui]   … I know, if you try it or not. There’s 700,000 …the personal money… Yeah, so you owe Omar per, per, that’s what I just said…

…

[Dennaoui]   Brother, I’m not an idiot, I’m not an idiot, I’m not gunna come down… and do what I have to do when I don’t know nothing. I know everything. So, in Avoca, in Avoca there’s 300,000 of yours.   

,,,

[Dennaoui]   OK. I’m gunna call Omar and then I’ll send you a message … Call me back… let me call Omar, I’m gunna sort this out…

[Dennaoui]   Because I’ve got till Thursday, Hazem. I don’t, I’m tellin youse, both…

[Afyouni]   (my dear)

[Dennaoui]   … things will be, things are gunna happen…

[Afyouni]   (My dear) listen, listen…

[Dennaoui]   …Thursday …

[Afyouni]   … there is one thing you can do to solve this situation, is to work out with Simon, give him all the documentation he needs… and let us sort out the payment, and I’m happy to sign off every cheque that there is, and that’s it.

[Dennaoui]   …OK, you know, you know Omar…

…

[Dennaoui]   …you know, you know to me…

[Dennaoui]    ---who, who’s Omar to me, who’s Omar to me?

[Afyouni]   I don’t want to, I don’t want to know anything, all I know is ---

[Dennaoui]   Who’s Omar to me?

[Afyouni]   ---that Simon, let Simon work things out with you.

[Dennaoui]   All right, who’s Omar to me, Hazem, who’s Omar to me?

[Afyouni]   He’s, he’s your brother {what}

[Dennaoui]   He’s my brother.

[Afyouni]   {True}

[Dennaoui]   No-one’s gunna no one is gunna {deprive anyone of what he is entitled to} anyone, not, he’s not gunna deprive you of what you are entitled to and you are not gunna deprive him of what he is entitled to.

[Afyouni]   {Now you got} in between, you are in between to solve the situation

[Dennaoui]   No, no I’m not solving nothing.

[Afyouni]   {Now you are becoming a} mediator

[Dennaoui]   ----I’m just saying----

[Afyouni]   {You have become a} mediator?

[Dennaoui]   No, no, I’m not. I’m just telling you how it is. I’m not making nothing. I’m not saying nothing. I’m saying, at the end of the day) {No one is going to deprive anyone of what he is entitled to}

[Dennaoui]   If there is trouble} brother, bring 'em, bring everyone that you know, bring 'em to me. Bring anyone, you want to call boys, you want to call people, bring 'em , I'm waiting for 'em . I work for anyone.

[Afyouni]   What kind of a talk is this?

[Dennaoui]   No-one is gunna {no one is going to deprive} anyone {of what he is entitled to}, that's the bottom line. I'll speak to youse both?? Hazem, I'm gunna be going to your office a lot. Trust me when I tell you - - -

[Afyouni]   {Alright}

[Dennaoui]   - - - I’m gunna find….I’m gunna be bumping into youse.

…

[Dennaoui]   Youse don’t want this.

{Yea}

….

[Afyouni]   If I have a problem….

…

[Afyouni]   ---with Omar, why should I bump into you?

[Dennaoui]   You, but listen to what I’m telling you, you’ve got a problem with Omar, who’s got a problem with the whole world now, because of your problem with Omar.

both of youse are, both of youse are men. if I have a problem - - -

[Afyouni]    {Dear} all I'm saying is, let him see the accountant - - -

[Dennaoui]   I know, but the thing is, you're not understanding, it's not getting sorted till everything gets sorted, the whole situation, it's not Alek(?), Alek(?) is not just the problem now, there's Avoca that's the problem, there's a 650 grand a year, Omar personally, that's a problem.

124. I consider that this call further demonstrates that Mr Dennaoui had been sent by Mr Sadek to threaten Mr Afyouni on 20 May 2018, and was continuing with language that Mr Afyouni could reasonably understand as threats designed to encourage the termination of the Maroubra JV, and that Mr Dennaoui was indicating that it had to happen quickly: “everythings gotta be sorted by Thursday”, which was 24 May 2018.

Was Mr Sadek motivated by a need for funds?

125. The plaintiffs submitted that another reason why Mr Sadek sent Mr Dennaoui to threaten Mr Afyouni to unlock the bank accounts urgently was because Mr Sadek wanted to use the joint venture bank funds to purchase a different property at Matraville for his own benefit.

126. Mr Sadek had purchased a property at Matraville that was settling on 18 May 2018. Mr Sadek did not have sufficient loan funds to finalise the purchase, and, in the end, Mr Sadek had to seek a short-term high interest loan for about $400,000. It was suggested that, had the bank accounts not been blocked, Mr Sadek would have used the joint venture funds for that purchase. While this may have been a motivation, I do not consider it has been demonstrated that Mr Sadek was going to use the joint venture bank accounts for this purpose as alleged, for example, because the blocked bank account did not contain $400,000.

127. In relation to Matraville, the plaintiffs also alleged that it was intended as “the next joint venture development”. This is considered below.

Joint Tortfeasor

128. Mr Afyouni has sought damages against Mr Sadek and Mr Dennaoui, including aggravated and/or exemplary damages, for personal injury caused to him “at the agency or instigation of the First Defendant”.

129. A main issue is whether Mr Sadek is liable in tort for the Gun Attack, during which it was not in dispute that Mr Dennaoui produced and subsequently cocked a handgun. An unknown individual accompanying Mr Dennaoui also punched Mr Afyouni’s friend in the face. Nothing is made of the presence of the unknown individual. Senior counsel for Elite submitted that there was an assault and a battery during the Gun Attack.

Battery

130. The tort of battery requires a direct, intentional act which causes contact with another person’s body without consent: Binsaris v Northern Territory (2020) 270 CLR 549 at 566 (Gageler J). During the Gun Attack, Mr Afyouni told the police in his statement dated 20 May 2018 that he and Mr Dennaoui held each other’s forearms:

During the conversation Bilal and I had been holding each other’s forearms. I was trying to prevent the gun from pointing at me. Bilal was trying to stop me from gripping his hand and moving it down.

131. It is not entirely clear on the evidence whether Mr Afyouni first initiated contact by holding Mr Dennaoui’s forearms. However, nothing turns on that point.

132. Senior counsel for Mr Sadek accepted that the struggle amounted to a battery. In my view, the existence of the battery, in addition to the assault, has an effect on the damages that may be payable. Plainly, it is the combined effect of the assault and battery during the Gun Attack that has resulted in the psychological damage of which Mr Afyouni complains.

Assault

133. The tort of assault requires a direct and intentional threat by the defendant that places the plaintiff in reasonable apprehension of an imminent contact with his person, either by the defendant or by some person or thing within the defendant’s control: Barker, Cane, Lunney and Trindade, The Law of Torts in Australia (5^th ed, 2012, Oxford University Press) at 44-54. Mr Afyouni must also establish that Mr Dennaoui, as a matter of causation, caused Mr Afyouni’s injury and that such injury is not too remote.

134. To establish factual causation, the Court can use the “but for” test as a guide: March v Stramare (1991) 171 CLR 506 at 508 (Mason CJ with whom Deane, Toohey and Gaudron JJ agreed). Doubt has been expressed in relation to the place of “common-sense” in the causation analysis: Tapp v Australian Bushmen’s Campdraft and Rodeo Association Ltd [2022] HCA 11 at [101] and the authorities collected therein (Gordon, Edelman and Gleeson JJ). No submissions were made to suggest that Mr Dennaoui’s assault did not cause Mr Afyouni’s injury, or that the harm to Mr Afyouni was too remote. I am satisfied that the Gun Attack caused damage to Mr Afyouni and that damage was not too remote so as to be compensable.

135. It was not submitted that Mr Sadek was liable for the tort of assault in relation to text messages he sent to Mr Afyouni, though I note that words alone can amount to an assault: Barton v Armstrong (1969) 2 NSWLR 451; [1976] AC 104. The imminency of the written threats is a question of degree: R P Balkin and J L R Davis, Law of Torts (4^th ed, 2009, LexisNexis Butterworths) at 45 [3.21] citing Zanker v Vartzokas (1988) 34 A Crim R 11 at 16 (Taylor J).

136. The tort of assault is actionable per se, but Mr Afyouni can also sue for damage if he has suffered it, as discussed further below.

Joint tortfeasor

137. Apart from denying Mr Sadek’s responsibility in Mr Dennaoui’s attack, the defendants submitted that the plaintiffs must be held to their specific pleading, which required the “instigation or encouragement” of specifically the Gun Attack (as pleaded) and it was not open to the plaintiffs to run any case based on common design or agency.

138. The defendants accepted that the plaintiffs had pleaded that:

1. the various conduct including the Gun Attack “constituted threats… to inflict harmful or offensive contact upon Mr Afyouni”; and

2. the conduct was “at the instigation or encouragement” of Mr Sadek; and

3. Mr Sadek had the intention that the conduct “would create in the mind of Mr Afyouni an apprehension that harmful or offensive contact would be carried out against him”.

However, the defendants’ submission was that the material facts making up the common design or agency should have been pleaded and they were not. For example, it was complained that there was no exposition of what the common design was or the type of agency and the scope of that agency.

139. I do not accept that more was required in the pleading for the defendants to understand the case brought against them. The pleading provides that Mr Sadek instigated or encouraged Mr Dennaoui to carry out acts that constituted threats to inflict harmful or offensive contact on Mr Afyouni. I consider that those factual elements are sufficient for the application of legal concepts of at least:

1. procuring a tort of assault; and

2. joint tortfeasors with a common design.

I consider the principles below, noting that the defendants did not cite any authority or develop any submissions on the law.

140. Whether Mr Sadek is liable for Mr Dennaoui’s tort leads into what has been described as “one of the last great unexplored areas of private law”: Joachim Dietrich and Pauline Ridge, Accessories in Private Law (1^st ed, 2015, Cambridge University Press) at xxi; see generally Henry Cooper, “Liability for Assisting Torts” (2017) 41(2) Melbourne University Law Review 571.

141. Halsbury’s Laws of Australia defines “joint tortfeasors” as follows:

Joint tortfeasors are two or more persons who together are held jointly and severally liable for the same tort. Joint liability arises because their acts have combined to produce the one damage, and those acts were intended, or in law were taken as intended, to be one act or design: (1) vicarious liability; (2) the liability of a principal for the tort of the agent; (3) the joint breach of an obligation; and (4) a tort being committed by persons taking ‘concerted action to a common end’. Each of the tortfeasors is liable for the entire loss and satisfaction of the loss by one joint tortfeasor discharges the liability of the others.

Similarly, Professor Paul Davies, in his book Accessory Liability (2015, Hart), wrote at 184:

It is clear that accessory liability can attach to so-called ‘intentional torts’. If a defendant deliberately persuades another to beat up the claimant, imposing accessory liability upon the defendant is uncontroversial.

142. According to Dietrich and Ridge (at 11), accessorial liability has the following features:

1. A primary wrong committed by the principal wrongdoer, which here was the Gun Attack (assault);

2. Some involvement by the accessory in the principal wrongdoer’s commission of the wrong (Conduct element), which Mr Afyouni submitted can be inferred, and is considered further below; and

3. Such involvement is accompanied by a requisite mental state, which is generally knowledge by the accessory of the principal wrongdoer’s conduct or intended conduct that constitutes the wrong (Mental element).

Conduct Element

143. Mr Sadek will be considered a joint tortfeasor with Mr Dennaoui if:

1. he "procured” Mr Dennaoui to commit the tort; or

2. Mr Dennaoui carried out the tort pursuant to a “common design” with Mr Sadek.

144. Although procurement and common design are taxonomically separate categories, the cases often conflate the two. As McCombe J has noted, “the precise ambit [of common design] is … far from clear”: Mutua v Foreign and Commonwealth Office [2012] EWHC 2678 at [91].

291. On 23 March 2019, Mr Sadek entered into an agreement with KPI53, whereby KPI53 agreed to provide Mr Sadek with two units and Mr Sadek agreed to forgive any liability for earlier debts owed to his companies (March 2019 Deed). This is considered further below.

292. On 10 April 2019, Mr Afyouni withdrew $269,000 from MRD’s bank account. Mr Sadek obtained an injunction requiring Mr Afyouni to pay that money into Court, pending a determination of who was entitled to it.

293. On or about 12 April 2019, Mr Afyouni became aware of the March 2019 Deed. On that same day, solicitors for KPI53 wrote alleging that the Avoca Joint Venture was mutually terminated because neither party had performed and “Omar Sadek [had informed KPI53] that Elite could not fulfil its obligations under the JV and the JV was at an end”. The letter also noted that the debt owed to Mr Sadek’s company of $1,300,000 had been settled. Further it noted that Mr Afyouni’s company’s original claim for $200,000 was subject to an offsetting claim of $290,000 for defective and incomplete work, and also that Mr Afyouni’s company was in external administration.

294. On the same day, Mr Afyouni exchanged text messages with one of the KPI53 directors, who said:

I don’t want to fight. We talk face to face. Be rational and calm and clear headed and everything with work out. Trust me. … I just want to finish castlehill/Avoca and keep everyone happy. … You’re fucking up arlan now with caveat… I have a plan to finish everything and keep everyone happy.

297. On 23 April 2019, Mr Afyouni caused Elite to consent to orders that Elite’s caveat over the Avoca Joint Venture Property be removed on the undertaking of KPI53 to the Court that “it will pay into Court the net proceeds, up to an amount of $3,000,000 received by [KPI53] from the sale of any subdivided lots”. KPI53 did not comply with that undertaking and was wound up. Any prospect of obtaining a remedy for the alleged breach of the Avoca Joint Venture from KPI53 was lost.

298. On 16 May 2019, MRD filed a summons seeking repayment of the $269,000 taken by Mr Afyouni. On 29 May 2019 a statement of claim was filed by MRD.

299. On 30 May 2019, Mr Afyouni went to the police and requested a “PVO is taken out for his protection” against Mr Sadek. He told them that his solicitor was encouraging him to “reneg on the settlement” because of duress. The police documentation recorded:

The VIC [victim] advised police that he did not report the above incidents [all the complaints Mr Afyouni has made against Mr Sadek including the Gun Attack, incident at the bail hearing, unknown persons coming to his factory] when they occurred [all before August 2018] because he was intimidated by the POI [person of interest/Sadek]. He believes the POI’s actions are in part because of the fact that the VIC reported the firearm incident to police in the first place and he didn’t want to anger him further for fear of the consequences.

In addition, the VIC hoped that by agreeing the POI could have the majority share of the business funds, the POI would cease his threats. The VIC is concerned that now he is going back on the settlement, the threats will resume.

..

The POI is currently in Dubai, expected to return in mid June. The civil matter is next before the court at that time.

300. On 6 June 2019, Mr Afyouni went to Ashfield Police Station to give a statement to support that application.

301. On 25 June 2019, Mr Afyouni filed a defence to MRD’s claim and a cross-claim pleading duress in relation to the Termination Agreement. That cross-claim was struck out by Kunc J on 4 October 2019.

302. On 27 June 2019, Mr Afyouni completed an application for apprehended personal violence order. Under the heading, “Is there any existing commercial relationship between you and the defendant?”, Mr Afyouni answered, “No”. In cross-examination he stated:

Q. Now it's right, isn't it, that prior to May of 2018, there was a commercial relationship between you, namely your involvement in the Maroubra joint venture, correct?

A. Yes.

Q. The reason why there was no longer a commercial relationship between you, was because you had reached a settlement on 25 May 2018, correct?

A. Yes.

303. On 23 July 2019, Mr Afyouni swore an affidavit in the AVO proceedings against Mr Sadek, in which he included the allegations of threats in 2018 and also included reference to the March 2019 demand for repayment of the debt and said:

At this time I realised that the dispute and threats from [Mr Sadek] were not going to end.

In cross-examination, Mr Afyouni also stated that even though by 2019 Mr Sadek was not doing anything to actually threaten anyone “he had done enough” and there was “underlying” fear and he “fear[ed] for my family’s safety”.

304. On 8 November 2019, Ward CJ in Eq ordered that the most recent iteration of Mr Afyouni’s cross-claim against MRD be struck out and gave judgment for MRD for the money Mr Afyouni had taken: [2019] NSWSC 1639.

305. On 11 March 2020, the AVO proceedings were heard. The magistrate did not make an order for an AVO because she did not consider that Mr Afyouni “in fact fears acts of violence, intimidation and harassment” from Mr Sadek at the time of the hearing, even though she accepted Mr Afyouni’s evidence of the historical “vicious nature of the threats, threats of physical violence to himself and his mother, threats of people being sent around, words such as ‘I will destroy you’”. In determining that there was no current fear, the magistrate referred to Mr Afyouni’s failure to take action for 13 months after the threats and interim meetings between the two men.

Conclusion on affirmation

306. I consider that any effect of duress had ceased by October 2018, which is the latest date that Mr Afyouni alleges Mr Sadek took any inappropriate threatening action. After that point in time, Mr Afyouni appears to have dealt with Mr Sadek as needed in relation to Elite and MRD, including meeting with Mr Sadek and the accountant. Otherwise, Mr Sadek’s evidence was that, after he had paid Mr Afyouni the $500,000, he had no further dealings with Mr Afyouni, and Mr Afyouni did not deny that.

307. I do not accept that Mr Sadek’s claim for the debt in March 2019 was a perpetuation of “threats”, rather than a claim through legal channels. The demand was sent by lawyers and Mr Afyouni engaged lawyers to deal with the litigation. In fact, Mr Afyouni had engaged lawyers from December 2018 to deal with the KPI53 litigation, which appeared to be his focus. Even before the Gun Attack, he was adamant that he wanted to force KPI53 to adhere to the Avoca Joint Venture and he wanted 25%, and his conduct from December 2018 was consistent with that.

308. I consider that from October 2018 Mr Afyouni could have complained about the Termination Agreement, but instead affirmed it in the following ways:

1. He actively sought payment of the final $500,000 payment promised in the Termination Agreement, writing to the conveyancing solicitor, and copying in Mr Sadek. He accepted that payment on settlement of the Maroubra units without complaint.

2. He signed the documents to relinquish his interest in MRD at an accountant’s office without complaint. I do not accept that he did so because he feared for his family’s safety. There is no evidence of any threat being made to his family at any time by Mr Sadek.

309. There is no evidence of complaint until May 2019, despite Mr Afyouni having been involved with lawyers concerning KPI53 since December 2018 and his legal issues with Mr Sadek since he took the $269,000 in March 2019, and despite his experience with police in relation to Mr Dennaoui. I consider it likely that Mr Afyouni commenced complaining in May 2019 because of Mr Sadek’s legal action for the return of the $269,000.

310. On balance I consider that the defendants have not discharged their onus of proving that the duress was not a cause of Mr Afyouni’s decision to enter into Termination Agreement. However, I consider Mr Afyouni affirmed the Termination Agreement and therefore rescission is not available to him.

311. If I am wrong and Mr Afyouni did not affirm the Termination Agreement, then it would be necessary for him to elect whether to rescind and seek an account.

312. In case I am wrong, I make the following findings about the terms of the Maroubra JV that were in dispute:

1. In relation to interest, Mr Sadek’s evidence was that, after the Maroubra JV was formed, Mr Sadek was forced to contribute more than 50% because Mr Afyouni could not afford to contribute 50%. Mr Sadek’s evidence was that Mr Afyouni offered him 15% interest on his cash investment. Mr Afyouni’s evidence was that he did “not recall” offering that interest. Mr Afyouni did offer Mr Sadek an unspecified amount of interest on his “surplus of money” in a settlement offer on 9 May 2018. On 21 May 2018, Mr Sadek emailed Mr Khattar and referred to “your suggestion of 10%” interest on the invested money. I consider that interest was discussed and agreed by the parties, and it is appropriate to adopt 10% being the amount Mr Sadek appeared to have accepted with the accountant.

2. In relation to the work carried out by the parties themselves, I consider that they intended to contribute their work “at cost”, and “cost” included wages paid to employees and other expenses, but no profit component.

Elite’s claim of Mr Sadek’s breach of directors’ and fiduciary duties

313. As set out above, the dispute with Kanebridge and KP153 led to the parties falling out and the May 2018 Termination Agreement between Mr Afyouni and Mr Sadek. On 27 March 2019, Mr Sadek resigned as a director of Elite.

314. Elite made very minimal submissions on its claim that Mr Sadek, in his personal capacity and as a director of his company, Render and Paint, breached his director’s duties owed to Elite in two ways:

1. By entering into an agreement in July of 2017 to terminate the Avoca Beach JV Agreement (Avoca Beach Termination Agreement), and

2. By entering into the March 2019 Deed with KPI53 and other related entities and thereby obtaining a benefit for himself rather than Elite.

315. The principles are well-settled. Directors owe fiduciary duties to the company under the Corporations Act 2001 (Cth) and at general law. Where a breach of those duties is established, profits may be disgorged or equitable compensation ordered: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; Warman International Ltd v Dwyer (1995) 182 CLR 544.

316. Elite’s argument was that Mr Sadek’s entry into the Avoca Beach Termination Agreement constituted a breach of his duties under the general law owed to Elite to act in good faith, not to act for his own benefit and to avoid a conflict between his duty to Elite and his personal interests. As Elite put it:

The scope of Mr Sadek’s Good Faith Duty extended to not causing Elite to terminate existing agreements that it was party to in circumstances where to terminate the agreement would not be in Elite’s best interests.

317. Elite also submitted that Mr Sadek’s conduct amounted to a breach of statutory directors’ duties under the Corporations Act 2001 (Cth) including the duty to exercise care and diligence (s 180), to discharge his duties in good faith and in the best interests of Elite and for a proper purpose (s 181) to not improperly use his position to gain an advantage for himself or cause detriment to Elite (s 182).

318. According to Elite, Mr Sadek’s entry into the Avoca Beach Termination Agreement caused Elite to lose certain rights against KPI53 and related entities or discharged KPI53 from performing its obligations to Elite. Those rights included Elite’s contractual right to have 50% of the Avoca Beach Property transferred to it.

319. Elite sought compensation under the Corporations Act 2001 (Cth) s 1317H for loss particularised as, among other things, the value of 50% of the Avoca Beach Property and wasted costs in performing the Avoca Beach JV.

320. The only parties to the March 2019 Deed were KPI53 and related Kanebridge entities and Mr Sadek and his company Render and Paint. Elite was not a party. The recitals of the March 2019 Deed included:

A.    Sadek is the sole director and shareholder of Render and Paint.

B.    Sadek is a director and shareholder of Elite Realty Developments Pty Ltd (Elite). The other director and shareholder of Elite Realty is Hazem Afyouni.

C.    Hazem Afyouni is also a sole director and shareholder of a company known as Conditionex Pty Ltd (Conditionex).

D.    In or about March 2017, Kanebridge and its related entity KCN were indebted to Render and Paint for the sum of approximately one million and three hundred thousand dollars ($1,300,000) and Conditionex for the sum of approximately two hundred thousand dollar ($200,000) for air-conditioning works provided by Conditionex for the benefit of Kanebridge.

E.    In or about March 2017, Elite and KPl53 Pty Ltd ('KPl53') entered into a joint venture agreement (the JV). The JV was with respect to a development of land known as 14-16 Cape Three Points Road, Avoca Beach NSW. Elite and KPl53 were to redevelopment the land by erecting units over the land and contribute to the JV in equal shares.

F.    The Parties acknowledge that the purpose of the JV was to offset the sum of $1,300,000 owed by Kanebridge to Render and Paint and to offset the sum of $200,000 owed by Kanebridge to Conditionex.

G.    The Parties acknowledge that the whole intention of the JV was ONLY to offset the debt owed to Render and Paint and Conditionex by Kanebridge.

H.    Sadek contends that in July 2017 Sadek in his capacity as director of Elite informed KPl53 that Elite could not fulfil its financial obligations under the JV and that notwithstanding that Elite could not fulfil its obligations under the JV Kanebridge would still be indebted to Render and Paint for the sum of $1,300,000 and to Conditionex for the sum of $200,000. This is accepted by Kanebridge and KPl53.

I.    KPl53 contends that as at July 2017 the JV had broken down and was terminated.

J.    Sadek and Render and Paint acknowledge and agree the JV was terminated in or about July 2017.

K.    Sadek further contends that in August 2017 Sadek, Render and Paint and Elite were aware that the Joint Venture Agreement was terminated and that the shareholders of KPl53 would be selling their share in KPl53.

L.    Notwithstanding Elite, Sadek and Render and Paint's failure to perform under the JV, Sadek and Render and Paint demand in December 2017 that Kanebridge and/or KPl53 pay Render and Paint the sum of $1,300,000 as originally owed to Render and Paint prior to the JV.

M.    Kanebridge and KPl53 disputes it owes Render and Paint the sum of $1,300,000 as alleged and Kanebridge and/or KPl53 alleges that it has a significant damages claim against Sadek and Render and Paint for Elite's failure to perform under the JV.

N.    In or about December 2017 Kanebridge, Hezlett and Render and Paint agreed that Kanebridge would offset any monies owed to Render and Paint, subject to agreeing on an amount, against any purchase price of units sold by Hezlett to Render and Paint or its nominee.

O.    On or about 8 December 2018, Render and Paint received the sum of four hundred thousand $400,000 from Kanebridge as a part payment of the debt owed by Kanebridge to Render and Paint.

P.    Render and Paint alleges that Kanebridge is still indebted to Render and Paint for the sum of approximately $900,000.

Q.    The debt is disputed by Kanebridge and KPI53.

R.    Sadek, Render and Paint, KPl53, Kanebridge, KCN and Hezlett have agreed to resolve the dispute on the terms set out in this Deed.

S.    Elite and Conditionex are not a party to this Deed. KPl53 and Kanebridge are still in dispute with Conditionex and Elite.

321. The March 2019 Deed recorded that in settling the dispute between the parties, Mr Sadek’s company or its nominee was to receive from another Kanebridge entity, KPI Hezlett Pty Ltd, 2 units with a market value of $500,000 each. At some time in 2019 those units were placed into the name of Sadek Co Pty Ltd.

322. Elite’s submissions in relation to the March 2019 Deed were broadly similar to its submissions in relation to the Avoca Beach Termination Agreement. Elite suggested that Mr Sadek had asserted in the March 2019 Deed that the Avoca Beach JV had been terminated in July 2017, relying on the recitals, for example H, I, J and K. In doing so, it was said that Mr Sadek had unilaterally repudiated the Avoca Beach JV and that had the effect of taking an opportunity away from Elite which was not in the interests of Elite. Therefore, it was submitted, Mr Sadek was in breach of his directors’ duties.

Avoca Beach Termination Agreement

323. Elite’s pleaded case in relation to a breach of a directors’ and fiduciary duties is premised on there being a termination at law as a result of Mr Sadek’s conduct, as was accepted by senior counsel for Elite during the hearing. Elite never asserted that the Avoca JV was terminated, nor that the recital in the March 2019 Deed was binding on it. It was KPI that asserted in the proceedings against it, until it was removed because of its liquidation, that the Avoca JV was terminated by agreement in July 2017. However, that was never finally determined.

324. I am not satisfied that Mr Sadek breached any directors’ and concurrent fiduciary duties in relation to the so-called Avoca Beach Termination Agreement. The facts do not allow the conclusion that there has been any termination by Mr Sadek of the Avoca Beach JV. Instead, following the purported termination in July 2017, Mr Sadek acted in a manner consistent with the continuation of the Avoca Beach JV, for example, in the negotiations throughout 2018. As noted above, on 15 May 2018 Mr Sadek emailed Mr Khattar with inter alia “The [Avoca Beach] JV will stay there and no deal/offer at this time”. Further, on 10 December 2018 in an email to Elite’s lawyer, Jason Cameron, Mr Sadek indicated that he considered Elite still had an interest in the Avoca Joint Venture Property by virtue of its caveat:

I have to be clear and honest with you.

As you know I don’t trust those people (and the last few months gave me a big lesson in trusting people)

So we have to be on top of them, as they ready to play more games and the time on their side.

Plus those monies mine and Hazem been with them for years and still nothing, and back to square one

And they sitting on it and it’s not hurting at all

But in saying that we still have the JV and the caveat in our hand. (emphasis added)

325. Although there is a recital included in the March 2019 Deed to the effect that the Avoca JV was terminated in July 2017 (Recital J), there are no operative terms to that effect, remembering that Elite and Mr Afyouni were not parties to the Deed. On its own, I am not satisfied that Recital J establishes there had been any “termination” caused by Mr Sadek.

326. Further, arguably Mr Sadek achieved a positive result for Mr Afyouni, because he obtained an acknowledgement that Mr Afyouni’s company was still owed a debt of $200,000 and further, he did not bargain away any rights that Elite might retain.

327. Mr Afyouni did in fact subsequently seek to pursue KPI53 for Elite’s interests. As noted above, Mr Afyouni engaged lawyers to resist the removal of Elite’s caveat. It was only removed by Court order on an undertaking that KPI53 pay $3,000,000 into Court out of the sale proceeds of the Avoca Property. It was only because KP153 failed to make that payment and entered into administration that Elite could not continue a case against KPI53. Therefore, there has been no determination as to whether KPI53 breached the joint venture or whether Elite had repudiated that Avoca Joint Venture.

328. Elite asserted that Mr Sadek “breached his duties to act in the best interests of Elite and not to allow his personal interests to conflict with his duties to Elite by entering [the March 2019 Deed] and thereby asserting that Elite was unable to perform its obligations under the Avoca Beach JV”. However, as noted above Mr Sadek did not act consistently with such an “assertion”. Further, Mr Sadek did not “deal” with any of Elite’s rights in the March 2019 Deed. Elite was not a party to the Deed and Elite’s rights were expressly preserved. Therefore, it is difficult to see how Mr Sadek’s “personal interests” conflicted with Elite’s interests where he did not deal with Elite’s rights at all.

325. By virtue of Mr Sadek’s role as a company director of Elite, it is uncontroversial that he owed fiduciary duties to Elite: Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96 (Mason J). However, I am not satisfied that a reasonable person looking at the relevant facts would think there was a real and sensible possibility of conflict between Mr Sadek’s duty to Elite and his personal interests, or his duty to his own company Render and Paint: Boardman v Phipps [1967] 2 AC 46 at 124 (Lord Upjohn, dissenting). I am not satisfied there is a real or substantial possibility of a conflict: Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 199 (McHugh, Gummow, Hayne and Callinan JJ).

326. Equally, I am not persuaded that Mr Sadek has breached his general law duty to act bona fide for the benefit of Elite as a whole. It is not entirely clear from the parties’ submissions how Mr Sadek’s conduct was not in good faith and not in the interests of the company: Hutton v West Cork Railway Co (1883) 23 Ch D 654 at 671 (Bowen LJ); Re Smith and Fawcett Ltd [1942] Ch 304 at 306 (Lord Greene MR). Mr Sadek’s conduct demonstrated that he addressed his mind to Elite’s needs where the March 2019 Deed indicated that Elite was not a party to the deed. Whether that appreciation was imprecise or possibly erroneous is another question — it suffices for bona fides: Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483 at 499-500 (Barwick CJ, McTiernan and Kitto JJ). I am not satisfied that Elite has discharged its onus of establishing that Mr Sadek’s conduct was a breach of the general law duty to act bona fide for the benefit of Elite as a whole.

327. It is also necessary to briefly note the applicable statutory duties. I say briefly because breaches of the statutory duties were not developed by counsel at the hearing or in written submissions. As the statutory provisions have a different scope to the general law rules, it follows that the absence of any breach at general law does not necessarily allow a finding that there was no breach of statutory duty. The statutory duties co-exist alongside the general law duties: Corporations Act 2001 (Cth) s 185; Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd [2011] FCA 1154 at [147] (Tracey J) (appeal allowed in part but on other grounds). I am not satisfied that Mr Sadek has exercised his powers and discharged his duties contrary to good faith in the best interests of the corporation or for a purpose other than a proper purpose under Corporations Act 2001 (Cth) s 181(1)(a)-(b). Further, I cannot accept the submission that Mr Sadek improperly used his position to gain an advantage for himself or anyone else, or to cause detriment to Elite under s 182(1). Although the advantage or detriment might be sought but not actually achieved, I am not satisfied that Mr Sadek acted improperly here: Chew v R (1992) 173 CLR 626 at 633 (Mason CJ, Brennan, Gaudron and McHugh JJ).

328. It was also suggested that Mr Sadek breached his statutory duty to exercise care, skill and diligence. I do not make such a finding. There was no suggestion Mr Sadek’s conduct fell short of the degree of care and diligence a reasonable person would have exercised as a director of Elite in Elite’s circumstances: Corporations Act 2001 (Cth) s 180(1)(a).

329. In any event, as I have concluded there was no termination by Elite, I do not need to consider whether Mr Sadek’s conduct falling short of effecting a termination nonetheless breached directors’ and fiduciary duties when the matter was not developed in submissions. Further, the only relief sought by Elite was orders for equitable compensation or compensation pursuant to s 1317H Corporations Act for loss shown to have been suffered as a result of a breach of directors’ duties. In circumstances, where it has not been demonstrated that Mr Sadek caused Elite to lose any of its rights in entering the March 2019 Deed and Elite’s rights were expressly preserved, I do not consider Elite is entitled to a remedy.

Was Matraville development a joint venture asset?

334. In about February 2018, Mr Sadek told Mr Afyouni that he wanted to purchase a property at Matraville to develop. Mr Afyouni alleged that the parties agreed that the Matraville development would be carried out using joint venture monies and as part of the joint venture. Mr Sadek denied that it was ever discussed as a joint venture project, and instead Mr Sadek wanted it as his own project. Mr Sadek set up a company Big Homes Sydney Pty Ltd, of which he was the sole director and shareholder, and the company purchased the land at Matraville for $2,025,000. Mr Sadek denied Mr Afyouni’s allegation that he promised to add Mr Afyouni as a director/shareholder or that he wanted to do another joint venture with Mr Afyouni.

335. The plaintiffs claimed that Mr Sadek used joint venture funds to purchase Matraville and it follows that Mr Sadek breached his duties owed to Mr Afyouni and Afyouni Holdings as joint venturers, citing United Dominions Corporation v Brian Pty Ltd (1984) 157 CLR 1 at 11 (Mason, Brennan and Deane JJ).

336. I do not accept that Matraville was ever discussed as a joint venture project or intended as such. There is no contemporaneous email or text message or document between the parties or from the accountant or lawyer that supports that contention, which would be expected, as the parties appeared to communicate often through those means. At the time Mr Sadek exchanged contracts on the property in February 2018, there were no documents demonstrating that Mr Afyouni was involved in any loan being obtained to purchase and/or develop that property. Further, I accept that, by February 2018, Mr Sadek had concerns about Mr Afyouni’s ability to contribute financially to the Maroubra project, and I consider it more likely that Mr Sadek was not prepared to start developing another property with Mr Afyouni before the Maroubra project had been completed. I am satisfied that the evidence only goes as far as to demonstrate that Mr Sadek spoke to Mr Afyouni about the fact that he was looking at the Matraville site. Mr Sadek was asked in cross-examination whether he wanted Mr Afyouni to have any part in Big Homes and Matraville. His reply was unambiguous:

No way; after what happens, no way.

337. Because of that conclusion it is not necessary to consider in detail the plaintiffs’ submissions based on alleged “unauthorised” use of joint venture monies. Briefly:

1. The plaintiffs’ main submission was that Mr Sadek arranged for financing for the Matraville property to the sum of $1.6 million from the National Australia Bank and because there was a shortfall of about $420,000 after the loan, Mr Sadek used funds from the joint venture to purchase the Matraville property to meet the purchase price. I do not consider this was made out factually, as Mr Sadek in fact obtained the shortfall funds from short-term lenders, and it appears that he and his companies had sufficient ability to raise the necessary money.

2. The plaintiffs also alleged that, between February 2018 and March 2019, a net amount of $2,349,115 was transferred from MRD and Elite to Big Homes where it was then applied for use by Big Homes in acquiring and developing the Matraville property and that this was “unauthorised” and therefore in breach of fiduciary duties. However, it was not explained how, even if there had been such a fiduciary relationship, Mr Sadek fell foul of the no profit and no conflict principles such that Big Homes would hold Matraville on a trust of any kind. Further, there was no evidence about the unauthorised use or transfer of funds between accounts. While I accept that Mr Sadek moved money between the various company bank accounts, I was not taken to evidence that demonstrated that there was a misuse of that money, as opposed to the money being used to pay legitimate expenses related to the Maroubra project, including reimbursing Mr Sadek for his cash contributions. After the joint venture was terminated in May/June 2018 there was no longer any ‘joint venture money’ to speak of.

Was Condell Park purchased with joint venture funds?

338. Mr Afyouni also claimed that Mr Sadek used joint venture funds to purchase property in Condell Park. On 27 August 2020, Big Homes provided $970,000 to meet the purchase price of a property at Condell Park which was transferred into Mr Sadek’s name.

339. Mr Afyouni submitted that Mr Sadek held the Condell Park property on constructive trust for the joint venture parties. Alternatively, Mr Afyouni sought an account based on the present value of the Condell Park property to do equity between the parties and be charged upon the Condell Park property. In the further alternative, it was said that the use of the Big Homes’ funds was for Mr Sadek’s benefit and Mr Sadek breached his fiduciary duties under the Maroubra JV and was knowingly assisted by Big Homes. Finally, it was alleged that Mr Sadek engaged in unconscionable conduct under s 20 of the Australian Consumer Law.

340. These matters were not developed in submissions. In any event, it was not demonstrated that the money used to purchase Condell Park was in fact joint venture money, rather than money, to which Mr Sadek and his corporate entities were entitled either by way of reimbursement or because those funds were the profit component of the Maroubra development in circumstances where the Maroubra JV had been terminated in May 2018.

Orders

341. I make the following orders:

1. In the KPI Proceedings (2018/383933):

1. The proceedings are dismissed.

2. The plaintiffs to pay the defendants’ costs as agreed or assessed.

2. In the Afyouni Proceedings (2020/114103):

1. Judgment for the second plaintiff against the first and second defendant in the sum of $60,000.

2. Judgment for the second plaintiff against the first defendant in the sum of $20,000.

3. The Statement of Claim is otherwise dismissed.

4. Defendants to pay the plaintiffs’ costs as agreed or assessed.

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Decision last updated: 30 September 2022