Gazzard v Wormald Malanda Pty Ltd atf Anthony Hekeik Trust

[2025] NSWSC 689

Supreme Court

New South Wales

Medium Neutral Citation:

Gazzard v Wormald Malanda Pty Ltd atf Anthony Hekeik Trust [2025] NSWSC 689

Hearing dates:

16 June 2025

Date of orders:

30 June 2025

Decision date:

30 June 2025

Jurisdiction:

Equity

Before:

Richmond J

Decision:

(1)   The cross-claim filed 12 December 2024 is stayed until:   

(a)   the payment to the first plaintiff of $76,000 in respect of order 4 made by this Court on 23 March 2022 in proceedings 2021/40040;

(b)   the payment into court of an amount of $99,400 as security for costs in respect of the cross-claim.

(2)   The first cross-claimant is to give security in the sum of $99,400 for costs in respect of the cross-claim by payment into court of that amount.

(3) Pursuant to r 9.8 of the Uniform Civil Procedure Rules 2005 (NSW), the summons and the cross-claim are to be tried separately.

(4)   Costs of the plaintiffs’ notice of motion are reserved.

(5)   List the matter before the Equity Registrar on 7 July 2025 for allocation of a hearing date for the summons.

Catchwords:

CIVIL PROCEDURE — Cross-claims — Connection with subject-matter of claim — Whether cross-summons should be dismissed or in the alternative stayed

COSTS — Security for costs

JUDGMENTS AND ORDERS — Enforcement — Charging orders

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Bowen v Hickey (1958) 78 WN (NSW) 820

CGU Insurance Ltd v Watson [2007] NSWCA 301

Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664

Gazzard v Hekeik [2022] NSWSC 670

Government Insurance Office (NSW) v Johnson [1981] 2 NSWLR 617;

Pi v Zhou [2016] NSWCA 148

The Owners-Strata Plan 88565 v ACN 103 211 141 Pty Ltd [2024] NSWSC 396

Texts Cited:

Ritchie’s Uniform Civil Procedure

SR Derham, Set-off (2nd ed, 1996, Clarendon Press)

Category:

Principal judgment

Parties:

Richard Warwick Gazzard (First Plaintiff)
Badajoz Property Pty Ltd (Second Plaintiff)
Wormald Malanda Pty Ltd trading as ATF Anthony Hekeik Trust (First Defendant)
Wormald Malanda Pty Ltd trading as ATF Raymond Hekeik Trust (Second Defendant)
Anthony Joseph Hekeik (Third Defendant)

Representation:

Counsel:
S Aspinall (Plaintiffs)
S Reuben (Defendants)

Solicitors:
LAS Lawyers (Plaintiffs)
Hunt & Hunt Lawyers (Defendants)

File Number(s):

2024/311076

Publication restriction:

Nil

JUDGMENT

1. These proceedings were commenced by a summons filed on 22 August 2024 (summons) by Richard Gazzard (Mr Gazzard), the first plaintiff, and Badajoz Property Pty Ltd, the second plaintiff. The defendants named in the summons are Wormald Malanda Pty Ltd as trustee for Anthony Hekeik Trust (first defendant), Wormald Malanda Pty Ltd as trustee for Raymond Hekeik Trust (second defendant) and Anthony Joseph Hekeik (third defendant) (Mr Hekeik).

2. By the summons the plaintiffs seek the following relief:

1. An order that the property subject to the security interests charged in favour of the first plaintiff pursuant to orders made in Supreme Court proceedings 2021/00040040 on 21 May 2024 be transferred to the plaintiff.

2. An order that the judgment debt owing to the plaintiff in the Supreme Court proceedings 2021/00040040 is reduced by the amount of the aggregate value of the property subject of the security interests charged in favour of the first plaintiff pursuant to orders made in Supreme Court proceedings 2021/00040040 on 21 May 2024 (less the first plaintiff’s costs of these proceedings).

3. A declaration that the Deed establishing the Badajoz Property Unit Trust dated 4 February 2015 is hereby varied with the effect that the third defendant is to be removed as an Appointer under the Deed.

4. Costs.

3. The security interests referred to in prayer 1 relate to the judgment in proceedings 2021/40040 obtained by the first plaintiff on 22 March 2022 for $2,321,675.67 together with costs against (among others) the defendants in these proceedings: Gazzard v Hekeik [2022] NSWSC 670 (Earlier Proceedings). The orders made by Bellew J in that judgment were:

(1)   Judgment for the plaintiff in the sum of $2,321,675.67.

(2)   The defendants pay the costs of the plaintiff in respect of the Statement of Claim on the ordinary basis, as agreed or assessed

(3)   The Amended Cross-claim be dismissed.

(4)   The cross-claimants pay the costs of the first and second cross-defendants in respect of the Cross-claim, up to and including 21 March 2022 on an indemnity basis, and of 22 March 2022, on the ordinary basis.

(5)   The Court notes that the plaintiff reserves his rights with respect to the enforcement of the security interest granted to him in respect of the 1 share held by Simon Charbell Hekeik in Badazjoz Property Pty Limited CAN 603 705 095 pursuant to the Deed of Loan dated 1 June 2018.

4. Before the court is an amended notice of motion filed by the plaintiffs on 27 February 2025 seeking the following orders:

1. The cross-claim filed 12 December 2024 is dismissed.

2. Alternatively the cross-claim is stayed pending (a) the payment to the first plaintiff of the sum of $88,000 and (b) the payment into court of the amount of $99,400, being security for costs in respect of the cross-claim.

3. Further in the alternative, orders for an expedited hearing of the summons and cross-claim.

5. The cross-claim was filed by Wormald Malanda Pty Ltd as trustee for AJH Family Trust, the first cross-claimant, and Mr Hekeik, the second cross-claimant. Mr Hekeik is the sole director of Wormald Malanda Pty Ltd. By the cross-claim they seek various relief in relation to the redemption of units in a unit trust called the Truman Unit Trust in 2020 held by the first cross-claimant. The first cross-defendant is Badajoz Property Pty Ltd (the second plaintiff) which was the trustee of the Truman Unit Trust at the time of the redemption, and the second cross-defendant is Mr Gazzard (the first plaintiff) who was the sole director of Badajoz Property Pty Ltd at the time of the redemption.

6. The plaintiffs contend that the cross-claim concerns the same cause of action as a cross-claim filed on 24 November 2011 in the Earlier Proceedings (Earlier Cross-claim) which was dismissed with costs by Bellew J on 22 March 2022 (see [3] above). Under the Earlier Cross-claim, Mr Hekeik was the first cross-claimant, Wormald Malanda Pty Ltd as trustee for AJH Family Trust was the second cross-claimant and Wormald Malanda Pty Limited as trustee for RJH Family Trust was the third cross-claimant. The first two cross-claimants under the Earlier Cross-claim (but not the third) are the cross-claimants under the cross claim.

7. The amounts owing for the judgment debt and costs orders made in the Earlier Proceedings remain unpaid.

8. The principal issues which arise are whether the cross-claim should be dismissed or alternatively stayed and whether the cross-claimants should be required to provide security for costs.

9. On the motion, the plaintiffs relied on an affidavit of Mr Gazzard and four affidavits of Mr Dion Manca (Mr Manca), the solicitor for the plaintiffs, and the defendants relied on three affidavits of Mr Hekeik.

Whether the cross-claim should be dismissed

10. A defendant’s entitlement to file a cross-claim is found in s 22(1) of the Civil Procedure Act 2005 (NSW) (CPA), which provides:

Subject to subsection (2), the court may grant to the defendant in any proceedings (“the first proceedings”) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant that person in separate proceedings commenced by the defendant for that purpose.

11. What s 22(1) does is permit the court to grant a ‘defendant’ any relief that might have been granted in separate proceedings commenced by the ‘defendant’. Under s 3(1) of the CPA, ‘defendant’ is defined as ‘person against whom proceedings are commenced, and includes a person against whom a cross-claim is made’, and ‘cross-claim’, is defined as ‘the claim by a defendant for the grant of relief under s 22’. It may be noted that ‘defendant’ is defined in terms of the person against whom proceedings are brought, and does not refer to the capacity in which the proceedings are brought against that person.

12. The cross-claim identifies the first cross-claimant as ‘Wormald Malanda Pty Limited T/as ATF AJH Family Trust’. It is pleaded in the cross-claim that:

1. Wormald Malanda Pty Ltd was at all material times the trustee of the AJH Family Trust established by a trust deed dated 18 May 1994, and the beneficiaries of that trust were Mr Hekeik, the second cross-claimant, and members of his immediate family.

2. Wormald Malanda Pty Ltd, acting in that capacity, originally held 50 ordinary units of $1 each in a unit trust called the Truman Unit Trust of which Badajoz Property Pty Ltd (the first cross-defendant) was at all material times trustee (Trustee).

3. The Trustee purchased land at Cromer, New South Wales, in 2017 (the Cromer property) for a purchase price of $3.9 million for the purpose of its development, construction, subdivision into strata lots and re-sale, funded in part by a loan from a third party.

4. On 9 April 2020, at a time prior to completion of the development, the Trustee required a contribution from the first cross-claimant to enable the third-party loan to be repaid.

5. On 30 April 2020, following the failure of the first cross-claimant to make that contribution, the Trustee determined that it would redeem the first cross-claimant’s 50 units for one dollar per unit which was contrary to clause 47 of the trust deed which required the redemption to be for ‘a price determined on the basis of the Unit Trust’s net asset value, according to Australian accounting principles, at the time of the redemption’.

6. On or about 6 May 2020, the Trustee issued a redemption notice and purported to redeem the units for that amount.

13. The central allegation in the cross-claim is that the Trustee acted in breach of the trust deed and in breach of its fiduciary duty owed to the first cross-claimant in relation to the redemption, including in relying on a valuation which undervalued the Cromer property.

14. The cross-defendants have not filed their defence but the court was informed by counsel that these allegations are disputed, in particular the allegation regarding the value of the Cromer property at the time of the redemption.

15. Whilst there is nothing in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to require a party to indicate that it sues or is sued in a representative capacity, that fact should appear in an initiating process: Government Insurance Office (NSW) v Johnson [1981] 2 NSWLR 617 at 622; Ritchie’s Uniform Civil Procedure at [6.18.25]. Hence, it was necessary and appropriate that the summons identified that Wormald Malanda Pty Ltd was sued in its capacity as trustee of two trusts (first and second defendants) and that the cross-claim identified that Wormald Malanda Pty Ltd brought the cross-claim in its capacity as trustee of a different trust.

16. The plaintiffs submit that the cross-claim should be dismissed. In so far as the first cross-claimant is concerned, they submit that Wormald Malanda Pty Ltd in its capacity as the trustee of the AJH Family Trust is not a defendant within the meaning of s 22 of the CPA and hence has no standing to bring the cross-claim which is therefore irregular. This is because while a corporate trustee has the legal standing of a natural person to sue and be sued, it is sued in the main claim in very specific capacities and suing it in those capacities does not make it into a ‘defendant’ in respect of any trust of which it happens to be a trustee. In so far as the second cross-claimant, Mr Hekeik, is concerned, the plaintiffs submit that while he is a defendant to the main claim, the cross-claim should be dismissed because it discloses no cause of action by him. While the cross-claim pleads that he was a director of Wormald Malanda Pty Ltd, is a beneficiary of the AJH Family Trust, and allegedly reached an agreement with Mr Gazzard, the first plaintiff, in respect of advances to be made to Wormald Malanda Pty Limited that has a connection with the redemption of the 50 units, none of these matters gives it any claim against the cross-defendants, and no relief is claimed in the cross-claim in respect of him.

17. The defendants submit that for the purposes of s 22(1) of the CPA, Wormald Malanda Pty Ltd is a person who is a defendant under the summons, albeit in two different capacities. Therefore, it is the person permitted by s 22(1) to bring a cross-claim notwithstanding that it does so in a different capacity because s 22(1) does not limit the capacity in which it brings a cross-claim to the same capacity in which it is sued as a defendant. Section 22(1) is procedural only and complements other provisions of the CPA and the UCPR intended to promote the final resolution of litigious controversy between the parties involved: Ritchie’s Uniform Civil Procedure at [s 22.5]. In so far as Mr Hekeik is concerned, he states in his affidavit of 6 December 2024 that he is named as the second cross-claimant because he is ‘an interested ultimate beneficiary of the Trust arrangements’. The defendants submit that he is a necessary party to lend his name to the proceedings in order to make the claims for relief sought in the cross-claim, which relief is intended to be applied towards a reduction or set off against the debt, including that owing by Mr Hekeik, arising from the judgment obtained in the Earlier Proceedings.

18. I do not accept the plaintiffs’ contention. No authority was cited to the court to support the proposition that ‘defendant’ in s 22(1) should be read as limited to a person in the same capacity in which that person is a defendant in the proceedings. It seems to me that absent some authority or indication in the CPA that the word ‘defendant’ should be read as limited in that way, it would be inappropriate to do so. I note that the cross-claim in the Earlier Proceedings was brought by, among others, Wormald Malanda Pty Ltd in its capacity as the trustee of the AJH Family Trust notwithstanding that it was not named as a defendant in those proceedings in that capacity and no point was taken that this was irregular.

19. Accordingly, I am not satisfied that the cross-claim should be dismissed on the basis put forward by the plaintiffs. However, it does not follow that the summons and the cross-claim should be heard together. Under r 9.8 of the UCPR the court has power, at any stage of the proceedings, to order that any cross-claim or any question in or arising on any cross-claim is to be separately tried. Rule 9.8 provides:

The court, at any stage of the proceedings:

(a)   may order that any cross-claim, or any question in or arising on any cross-claim, is to be separately tried, and

(b)   may direct generally the extent to which the usual procedures at a trial or hearing are to be modified because of the joinder of the cross-defendant.

20. In my view it is appropriate for such an order to be made in the present case. First, there is no connection between the issues raised in the cross-claim and the issues raised in the summons. Second, while the defendants submit that that they are seeking, through the cross-claim, relief which could be set off against the debt owing under the judgment obtained in the Earlier Proceedings, I am not satisfied that any entitlement to a set off would exist. This is because, as submitted by the plaintiffs, the substantive relief claimed in the cross-claim is sought by the first cross-claimant and it brings the cross-claim in a different capacity to the capacity in which it is sued as a defendant so that the required actuality of debts will not exist: SR Derham, Set-off (2nd ed, 1996, Clarendon Press) at 319. Third, there is no reason why the plaintiff should be prevented from enforcing the judgment obtained in 2022, particularly as nothing has been paid by the defendants in respect of the debt or costs.

21. While it might be said that in these circumstances, there is no utility in having the cross-claim and the Court should dismiss the cross-claim giving leave to the cross-claimants to commence fresh proceedings if they wish to do so, it is more consistent with s 56 of the CPA for the cross-claimants to be permitted to continue with the cross-claim particularly as some evidence has been filed by the cross-claimants in support of it.

Whether the cross-claim should be stayed

22. The plaintiffs’ alternative submission relies on r 12.10 of the UCPR which provides:

If:

(a)    as a consequence of the dismissal of proceedings, a party is liable to pay the costs of another party in relation to those proceedings, and

(b)    before payment of the costs, the party commences further proceedings against that other party on the same or substantially the same cause of action, or for the same or substantially the same relief, as that on or for which the former proceedings were commenced,

the court may stay the further proceedings until those costs are paid and make such consequential orders as it thinks fit.

23. The orders made by Bellew J on 22 March 2022 summarily dismissed the Earlier Cross-claim which had been brought by, among others, Mr Hedeik and Wormald Malanda Pty Ltd as trustee for AJH Family Trust and ordered them to pay the costs of the plaintiffs/cross-defendants on an indemnity basis except for the day of the hearing which were ordered to be paid on the ordinary basis. These costs remain unpaid. The plaintiffs submit that a consideration of the cross-claim filed in these proceedings and the Earlier Cross-claim shows that subject to some refinement of the relief sought to better articulate the claim, and the refinement and reordering of the material facts, the cross-claim involves the same cause of action, seeking substantially the same relief. Counsel for the cross-claimants did not submit that this was an incorrect characterisation of the cross-claim, and having read both cross-claims, I agree with the plaintiffs’ submission.

24. The solicitor for the plaintiffs, Mr Manca, estimates that the amount of costs recoverable by the plaintiffs under the costs order for dismissal of the Earlier Cross-claim is $76,000. He deposes that the plaintiffs have not applied for those costs to be assessed because they are concerned that there would be little prospect of successfully enforcing any judgment obtained from any cost assessment and it would be preferable to avoid further costs of assessment in circumstances where the assets of the defendants do not even appear to satisfy the existing judgment debt. Accordingly, the plaintiffs seek that the cross-claim be stayed pending the payment of $76,000 towards outstanding costs.

25. The defendants submit that r 12.10 of the UCPR does not apply because the cross-claimants have not ‘commenced a further proceedings’ within the meaning of paragraph (b) of that rule; rather, the cross-claim is made in proceedings brought by the plaintiffs.

26. In my view, for the purposes of r 12.10, a cross-claim is properly characterised as a ‘further proceeding’ albeit that procedurally it is made in the proceedings in which the cross-claimant is a defendant, rather than in separate proceedings: see eg. r 9.9 which refers to ‘proceedings on a cross-claim’ and The Owners-Strata Plan 88565 v ACN 103 211 141 Pty Ltd [2024] NSWSC 396 at [8]. However, nothing turns on this question as r 12.10 reflects the Court’s inherent jurisdiction to prevent the abuse of its processes. In Bowen v Hickey (1958) 78 WN (NSW) 820 at 822 the Court (Street CJ; Owen and Manning JJ) said:

It has long been established that where a plaintiff has failed in an action and seeks to bring a second action based on the same facts against the same defendant, the general rule is that the court will stay proceedings in the second action until costs of the first action are paid. … [The] rule that a second action in the same cause and against the same defendant shall be stayed until the costs of the first action are paid is because, prima facie, unless they are paid, the second action is in the eyes of the court vexatious.

27. The sameness of the cause of action has been expressed in later cases in a variety of ways, including an ‘identity of issues’ and an ‘identity of the central issue’: CGU Insurance Ltd v Watson [2007] NSWCA 301 at [40]-[42]; Pi v Zhou [2016] NSWCA 148 at [23].

28. In my view the cross-claim raises the same cause of action against the same defendants as the Earlier Cross-claim, and the issues under each are the same, being whether the redemption of the first cross-claimant’s units in the Truman Unit Trust was in breach of the provisions of the trust deed or involved a breach of the Trustee’s fiduciary duty to the first cross-claimant. In these circumstances, it would be unjustifiably oppressive to the plaintiffs, and bring the administration of justice into disrepute, if the cross-claimants were permitted to continue with the cross-claim without paying the costs ordered by Bellew J when dismissing the Earlier Cross-claim.

Application for security for costs

29. The cross-defendants submit that in circumstances where the cross claimants have already had, and squandered, the opportunity to bring the cross-claim, and have failed to comply with the court’s orders to pay the costs in respect of that earlier cross-claim, that the discretion lies in favour of the making of an order for security for costs of the present cross-claim before it is permitted to proceed.

30. It is apparent from Mr Manca’s affidavit of 27 February 2025, paragraphs 30-37, that the cross-claimants are impecunious and this was not in dispute at the hearing. In particular, Wormald Malanda Pty Ltd brings the cross-claim as trustee of the AJH Family Trust and there is no evidence to suggest that there is any asset of the trust which would support any indemnity if costs were awarded against it. It follows that in relation to the cross-claim, the court has power to order security for costs under r 42.21(1)(d) of the UCPR and the court needs to consider whether to exercise its discretion to do so.

31. The matters relevant to the exercise of the discretion are set out in r 42.21(1A). The cross-claimants relied on three matters in submitting that the discretion should not be exercised. First, it was said that the first cross-claimant’s impecuniosity was attributable to the cross-defendants’ conduct: r 42.21(1A)(d). However, there is no evidence of the first cross-claimants financial position before the alleged legal wrongdoing occurred, this submission is not made out: Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 at [85]-[88].

32. Second, it was said that an order for security for costs would stultify the cross-claimants’ ability to pursue the cross-claim: r 42.21(1A)(f). It is well recognised that a powerful factor in the exercise of the discretion in the plaintiff’s favour is whether the provision of security will operate to stultify the plaintiff’s non-frivolous pursuit of its claims: Morningstar at [72]-[79]. I accept that the cross-claim is not frivolous. However, the cross-claimants have not established that financial support is not available from those who would benefit from the cross-claim which include the beneficiaries of the AJH Family Trust. The cross-claim identifies those beneficiaries as Mr Hekeik and his immediate family, and while it is not in dispute that he is impecunious, there is no evidence as to the financial capacity of his immediate family. Accordingly, I do not accept that this submission has been made out: Morningstar at [76]. Further, it is relevant that the cross-claimants have already had one chance to pursue the cross-claim and did not take it.

33. Thirdly, the cross-claimants submit that they are really defendants who are seeking a set off or reduction of the judgment debt amounts to which they say the plaintiffs are not properly entitled. This submission is not correct. As noted earlier, the cross-claim seeks relief for a claim by Wormald Malanda Pty Ltd in a capacity different to that in which it is subject to the judgment debt in the Earlier Proceedings, and consequently would not be able to set off relief under the cross-claim against that judgment debt. While Mr Hekeik is a cross-claimant, as noted earlier, he seeks no relief in the cross-claim. Hence, I do not accept the cross-claimants’ submission that because Mr Hekeik is a party to the cross-claim, this ‘militates against an order for security being given’. However, for the same reason, it is not appropriate that he be ordered to provide security for costs.

34. Having considered all the matters set out in r 42.21(1A), I have concluded that the first cross-claimant should be ordered to provide security.

35. As to the amount and nature of the security to be provided, the cross-defendants seek an order for the payment into court of $99,400. Mr Manca estimates the cross-defendants costs of the cross-claim to be this amount (plus GST). The evidence was unchallenged and I accept it. I propose to make an order for security accordingly.

36. No submissions were made regarding costs of the motion. In the circumstances I will order that costs be reserved.

Conclusion

37. For the above reasons, I will make the following orders:

1. The cross-claim filed 12 December 2024 is stayed until:

1. the payment to the first plaintiff of $76,000 in respect of order 4 made by this Court on 23 March 2022 in proceedings 2021/40040;

2. the payment into court of an amount of $99,400 as security for costs in respect of the cross-claim.

2. The first cross-claimant is to give security in the sum of $99,400 for costs in respect of the cross-claim by payment into court of that amount.

3. Pursuant to r 9.8 of the Uniform Civil Procedure Rules 2005 (NSW), the summons and the cross-claim are to be tried separately.

4. Costs of the plaintiffs’ notice of motion are reserved.

5. List the matter before the Equity Registrar on 7 July 2025 for allocation of a hearing date for the summons.

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Decision last updated: 30 June 2025