Heaven Builders Pty Ltd v Moustafa (No 2)
[2024] ACTSC 201
•21 June 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Heaven Builders Pty Ltd & Ors v Moustafa & Anor (No 2) |
Citation: | [2024] ACTSC 201 |
Hearing Date: | 21 June 2024 |
Decision Date: | 21 June 2024 |
Reasons Date: | 28 June 2024 |
Before: | Taylor J |
Decision: | (1) The defendants are directed to pay forthwith into the Supreme Court the proceeds of the sale of the Property at 1 Trewenack St, Taylor ACT 2913 net of sales expenses and the registered mortgagee’s discharge amount pending resolution of Heaven Builders Pty Ltd ACN 645 316 865 v Nour Moustafa Abdelhameed and Marwa Mohamed Elsaied Hassan Keshnk ACT Magistrates Court No. CS 182 of 2022 or further order of the Court. (2) Costs are reserved. |
Catchwords: | CIVIL LAW – JURISDICTION, PRACTICE AND PROCEDURE – Ex Parte Application – Freezing order – whether evidence establishes a good, arguable case – whether there is a real risk of defendants dissipating assets – whether the balance of convenience favours making the orders – whether balance of convenience favours granting the freezing order |
Legislation Cited: | Court Procedure Rules 2006 (ACT), rr 741, 743 Land Titles Act 1925 (ACT), s 107C |
Cases Cited: | Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd [2021] NSWSC 961 Chong v Huang [2021] ACTSC 310 Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft m.b.H & Co K.G., The Niedersachen [1983] 1 WLR 1412; [1984] 1 All ER 398 Owen v Owen [2019] ACTSC 108 Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 |
Parties: | Heaven Builders Pty Ltd ( First Plaintiff) Khalil Khan Khattak ( Second Plaintiff) Muhammad Shoaib Khan Naizi ( Third Plaintiff) Mice Kljusuric ( Fourth Plaintiff) Syeda Naila Gul Gul ( Fifth Plaintiff) Nour Moustafa Abeldhameed Moustafa ( First Defendant) Marwa Mohamed Elsaeid Hassan Keshk ( Second Defendant) |
Representation: | Counsel W D B Buckland ( Plaintiffs) No appearance ( Defendants) |
| Solicitors Bradley Allen Love ( Plaintiffs) No appearance ( Defendants) | |
File Number: | SC 185 of 2024 |
TAYLOR J:
Introduction
1․On 21 June 2024, the plaintiff sought an urgent duty listing to seek an ex parte freezing order against the defendants, concerning the sale of a property. The property is land located at Block 11 Section 71, Taylor, in the Australian Capital Territory (ACT) more commonly known as 1 Trewenack St, Taylor, ACT 2913 (the Property).
2․The first plaintiff sought orders by way of an originating application filed on 31 May 2024. On 14 June 2024 orders were made granting leave to lodge a caveat on the Property. I heard the urgent, ex parte application in relation to the freezing order late in the afternoon of 21 June 2024. I made a freezing order in the terms sought by the plaintiff, with reasons to follow. These are those reasons.
Evidence
3․The evidence led in support of the application included two affidavits. The first was affirmed by Mr Benjamin Grady on 21 June 2024. The second affidavit was affirmed by Mr Basem Seif, also on 21 June 2024. Both Mr Grady and Mr Seif act as solicitors for the plaintiffs in this matter.
4․Also before me was an email from Dr Marwa Keshk, the second defendant, dated 21 June 2024, to which I will come.
Background to the application
5․The background to the application explains the urgency of the listing and the necessity of the application being dealt with in the absence of the defendants. In summary, the plaintiffs were engaged by the defendants in relation to the Property. In June 2022, a dispute arose as to the progress of works and in July 2022 the plaintiffs were locked out of the site and not permitted to return. The contract between the parties was terminated in August 2022. The plaintiffs instituted proceedings in the Magistrates Court in an attempt to recover the balance they claimed they were owed under the contract. The defendants filed a counterclaim. The plaintiffs seek the balance in the amount of $128,000 plus interest.
6․The dispute remains before the ACT Magistrates Court, Heaven Builders Pty Ltd ACN 645 316 856 v Nour Moustafa Abdelhameed Moustafa and Marwa Mohamed Elsaied Hassan Keshk, No. CS 182 of 2022 (the Magistrates Court proceedings). The evidence in the Magistrates Court proceedings was heard over three days and the parties are in the process of filing final written submissions.
7․On 31 May 2024, the first plaintiff applied for leave before McCallum CJ to lodge a caveat pursuant to s 107C of the Land Titles Act 1925 (ACT). There had previously been a caveat on the Property lodged by the plaintiffs that had lapsed. On 31 May 2024, the defendants informed the Court that the settlement of the sale of the Property was not to occur until around mid-July 2024. In those circumstances, the plaintiffs’ counsel sought a two-week adjournment so that a copy of the contract for the sale of the Property could be provided to the Court. A copy of that contract was produced by the defendants (and is annexed to Mr Grady’s affidavit), though was so heavily redacted that any substantive detail was unable to be discovered, including the purchase price. The date for completion of the contract was left blank.
8․On 14 June 2024, McCallum CJ made orders granting leave for the first plaintiff to lodge a caveat over the Property, and for the caveat to remain registered on the title until further order of the Court or until withdrawn by the first plaintiff.
9․It is significant to note that the Court record of 14 June 2024 demonstrates that the matter was stood down to enable the defendants to facilitate an irrevocable authority in relation to the payment out of monies obtained from settlement of the sale of the property, which was ultimately not forthcoming. It is in those circumstances that the plaintiff pressed the application for orders granting leave for the caveat to be filed. Those orders were made, and the application was listed to return to this Court on 26 July 2024.
10․On 18 June 2024, pursuant to the orders entered on 14 June 2024, the first plaintiff lodged a caveat over the Property. On 19 June 2024, the caveat was registered on the tile of the Property (dealing number 3320459).
11․On 20 June 2024, Mr Seif caused a title search to be performed in relation to the Property. The search revealed three lodgements were recorded on the title of the Property but were not registered. The three unregistered dealings were lodged in relation to the Property on 19 June 2024, and are identified as a discharge of mortgage (dealing number 3319555), a transfer (dealing number 3319556) and a mortgage (dealing number 3319557).
12․On 21 June 2024, several attempts were made to obtain copies of the unregistered dealings from the ACT Land Titles Office, without success. By the time of the urgent ex parte application those documents had still not been received by solicitors for the plaintiff.
13․In his affidavit, Mr Grady, a legal practitioner with significant experience in commercial and residential property law, including residential conveyancing, attests to the following:
[T]he lodgement of any document associated with the conveyance of residential property which facilitates the discharge of an encumbrance (e.g., a mortgage), the transfer of title, and/or the registration of an encumbrance (e.g. a mortgage) simultaneously, as appears to be the case in respect of the Property, as evidence by the title search [conducted by Mr Seif], will only occur following settlement of the conveyance and the payment of monies by a buyer.
14․On 21 June 2024, Mr Seif caused an application to register the caveat on the title of the Property to be lodged with the ACT Land Titles Office. At 10:46AM he received confirmation that registration would take place over the following 48 hours.
15․In addition to the unregistered dealings in relation to property strongly suggesting settlement of the sale of the property has occurred, there is the email from Dr Keshk herself. The email came in response to the initial email from Mr Seif on 21 June 2024 to the Court requesting an urgent listing of the matter. Mr Seif’s email included Dr Keshk as a recipient.
16․Relevantly the email from Dr Keshk states:
We seek leave until we get back to Australia on 26 July 2024. We will then be able to respond, apply leave, lodge a new originating claim against the other party in the Supreme Court for damages.
I am Dr Marwa Keshk (the second defendant) on overseas with my husband (Dr Nour Moustafa) the second defendant. My husband did his medical surgery yesterday and his health at risk at the coming 72 hours. I told her honour at the hearing date by our overseas travel due to the medical surgery of my husband.
From our information, the land was settled, bank discharged, and the land was transferred to the new owners before the court order of applying a caveat. Which we notified the other party at the date of the court. We are in a loss of $100,000 that we still need to pay to the bank due to the damages of the other party.
The date of settlement was before the court order of the caveat, which we have all the documents that we will use for our appeal application.
Best regards,
Dr Marwa Keshk
Emphasis added.
17․Two things of significance emerge from the email. First, that the defendants were overseas as of 21 June 2024 and, secondly, that the property settled prior to the order on 14 June 2024 granting leave for the caveat to be lodged.
18․I did not have the benefit of a transcript of the proceedings of 14 June 2024. That said, it is inconceivable in light of the orders sought in the originating application, that the order of the kind made on 14 June 2024 was made in circumstances where the defendants had revealed to the plaintiffs and the Court that the sale of the property had already settled. As counsel for the plaintiffs, Mr Buckland, noted, had the fact of settlement or imminent settlement been known to the plaintiff, he would have pursued the making of the freezing order on 14 June 2024. As Mr Buckland submitted, consistent with their actions, the plaintiff is not necessarily against the sale of the property. They are only interested in ensuring, to the extent they are able, that the Court processes in which the parties are engaged are not frustrated by the defendants dissipating the asset out of which the balance they have claimed they are owed, might be paid.
19․If it is that the defendants knew with certainty either that the property had settled or that settlement was to occur much sooner than mid-July, when they appeared before the Court on 14 June 2024 and did not disclose as much, it may be that the Court and the plaintiff were deliberately misled. The consequences for the defendants if that is indeed what occurred is a matter for another day but is not an aspect entirely irrelevant to the freezing order the plaintiff now seeks.
The Court’s power
20․The Court’s power to grant the relief sought arises from rr 741 and 743 of the Court Procedure Rules 2006 (ACT), extracted below:
741Freezing orders—general
(1)The Supreme Court may make an order (a freezing order) for the purpose of preventing the frustration or inhibition of the court’s process by ensuring that an order or prospective order of the court is not made valueless or diminished in value.
…
(3)A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
(4)For the Supreme Court, a freezing order or ancillary order may be made whether or not the respondent is a party to an existing proceeding.
743Freezing orders—order against enforcement debtor or prospective enforcement debtor or third party
(1)This rule applies if—
(a)an order has been given in favour of an applicant by—
(b)for the Supreme Court—an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in—
(i) the court; or
(ii) for a cause of action to which subrule (3) applies—another court…
…
(4)The court may make a freezing order or ancillary order (or both) against an enforcement debtor or prospective enforcement debtor if satisfied, having regard to all the circumstances, that there is a danger that an order or prospective order will be completely or partly unsatisfied because any of the following might happen:
(a)the enforcement debtor, prospective enforcement debtor or someone else absconds;
(b)the assets of the enforcement debtor, prospective enforcement debtor or someone else are—
(i) removed from Australia or from somewhere in or outside Australia; or
(ii) disposed of, dealt with or diminished in value.
Principles
21․I was helpfully taken to Chong v Huang [2021] ACTSC 310 (Chong) where McWilliam AJ (as her Honour then was) considered the making of a freezing order and identified the principles applicable when the Court is considering whether to grant such relief (at [7]). Citing Owen v Owen [2019] ACTSC 108 at [15]-[19] and Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd [2021] NSWSC 961 (Blue Mirror), her Honour observed in Chong at [9]:
It can be seen from the above principles that there are essentially two main matters of which the Court must be satisfied. The first is that the plaintiffs have a good arguable case; the second is that there is a real risk that the defendant will, either by absconding or dissipating assets, render himself (in this case) or itself “judgment proof” (to use the words of Kunc J at [80] of Blue Mirror). The Court has a discretion, which involves considerations of the kind set out by Kunc J in Blue Mirror above, as to where the balance of convenience lies.
Do the plaintiffs have a good, arguable case?
22․The parties entered a contract in April 2021 for the plaintiff to perform works in relation to the Property. Arising from a dispute in July 2022 as to the nature and progress of works performed which saw the plaintiff evicted from the site, the plaintiff initiated proceedings in the Magistrates Court seeking the balance of money owed to them under the contract.
23․As Kunc J observed in Blue Mirror at [79] citing Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG “The Niedersachen” [1983] 1 WLR 1412; [1984] 1 All ER 398 at 404 per Mustill J:
[A] “good arguable case” requires proof “of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% change of success”.
24․As part of discharging their obligation to disclose all matters that may affect an application made ex parte, the plaintiff noted the counterclaim brought by the defendants for incomplete and defective works. Mr Buckland indicated the plaintiffs’ case included refutation of the counterclaim. An experienced Magistrate has heard three days of evidence in the proceedings and has sought written submissions from the parties. The Magistrate did not dismiss the plaintiffs’ cause of action, having heard the evidence upon which it relies and has reserved his decision to consider the outcome.
25․Having regard to the observation in Blue Mirror, as well as McWilliam AJ’s consideration of the question in Chong, I am satisfied on the material before me that the plaintiffs have a good, arguable case in relation to the cause of action before the Magistrates Court and for the relief sought.
Is there a real risk that the defendants will dissipate assets?
26․I move to the next consideration of whether the defendants will render themselves “judgment proof”.
27․I am satisfied on the material before me that the settlement of the sale of the property has occurred. While information confirming with certainty as much has not been forthcoming from the ACT Land Titles Office, the email of Dr Keshk, in combination with the fact of the three unregistered dealings is evidence sufficient to demonstrate that settlement of the sale of the property has occurred. This leaves any funds arising from the settlement within the control of the defendants.
28․As part of this consideration, it cannot be ignored that on the face of the email from Dr Keshk at the very least the defendants were in possession of highly relevant information that was apparently not disclosed when the application on 14 June 2024 was adjudicated.
29․This lack of candour with the Court influences a consideration of whether, having now settled the sale of the Property, the defendants will move to dissipate the funds received from that sale, such that any order in the plaintiffs’ favour arising from the Magistrates Court proceedings will be severely frustrated. I note here that on 4 August 2023 the Magistrates Court made orders in favour of the second, third, fourth and fifth plaintiff, requiring the defendants to pay them each the costs of and incidental to their application in the proceeding, which are not recoverable until the conclusion of the proceedings. Further, that the defendants are currently overseas raises the prospect of the movement of funds out of reach of the plaintiffs, beyond the jurisdiction of the Court if no order is made.
30․The defendants’ action in withholding from the plaintiff and the Court relevant information as to the real settlement date of the Property provides a basis for a reasonable inference to be drawn that they may not act so as to preserve the asset in order that they be available to satisfy judgment in the plaintiffs’ favour: see Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 325 per Gleeson CJ, cited in Chong at [26]. There is clear reference in the email from Dr Keshk to an actual or perceived financial difficulty already in relation to the settlement funds. This adds to the consideration of whether there is a risk of dissipation of assets.
31․I am satisfied on the material before me that there is a real risk that the prospective judgment from the Magistrates Court proceedings will be valueless or diminished in value were the freezing order in the terms sought not granted.
The balance of convenience favours granting the freezing order
32․I note that the scope of the freezing order sought relates only to those funds achieved because of the sale of the Property and does not otherwise impact the finances that might be available to the defendants. On the material before me, in the circumstances, I consider that the balance of convenience favours the making of the order sought by the plaintiff.
Orders
33․For those reasons, I made the following orders:
(1)The defendants are directed to pay forthwith into the Supreme Court the proceeds of the sale of the Property at 1 Trewenack St, Taylor ACT 2913 net of sales expenses and the registered mortgagee’s discharge amount pending resolution of Heaven Builders Pty Ltd ACN 645 316 865 v Nour Moustafa Abdelhameed and Marwa Mohamed Elsaied Hassan Keshnk ACT Magistrates Court No. CS 182 of 2022 or further order of the Court.
(2)Costs are reserved.
| I certify that the preceding thirty-three [33] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Taylor Associate: Date: 1 July 2024 |
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