Islamic Co-ordinating Council of Australia Inc v Chawk

[2001] VSC 178

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 4770 of 2000

ISLAMIC CO-ORDINATING COUNCIL OF VICTORIA INCORPORATED AND OTHERS	Plaintiffs
v
ALI CHAWK AND OTHERS	Defendants

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JUDGE:	HARPER, J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	23-25 MAY 2001
DATE OF JUDGMENT:	28 MAY 2001
CASE MAY BE CITED AS:	ISLAMIC CO-ORDINATING COUNCIL OF AUSTRALIA INC. v. CHAWK & ORS.
MEDIUM NEUTRAL CITATION:	[2001] VSC 178

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CATCHWORDS:          Interlocutory judgment – Application to set aside Mareva injunction – Whether an issue to be tried – Alleged breach of fiduciary duty – Claim by alleged fiduciary that any breach consisted of his doing that which was unlawful if done by person to whom duty owed - Application refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr. A. Rodbard-Bean with Ms. B. McMahon	Abbott Stillman & Wilson
For the First, Third and Sixth Defendants	Mr. M. Strang	Thomas Egan & Associates

HIS HONOUR:

1. This proceeding commenced on 7 March 2001 with the issue of a writ.  It was endorsed with a statement pursuant to Rule 5.04(2)(b) of the Rules of the Supreme Court.  No statement of claim has yet been either filed or served.

1. The plaintiff's claim as presently formulated is set out in the endorsement to a further amended writ.  This was last amended pursuant to an order made by Mr Justice Beach on 27 March 2001.  As against the first defendant the plaintiff's claim is that he has since 9 April 1992 been an employee of the first plaintiff.  As such he owes his employer a duty of good faith, a duty to act in his employer's best interests, and a duty not to act so as to place himself in a position in which his personal interests including his business interests would or might conflict with those of the first plaintiff.

1. These duties, the plaintiffs allege, have not been fulfilled.  On the contrary the first defendant has enticed business away from the first plaintiff and towards interests with which he is associated.  He has profited thereby.  He must therefore, the plaintiffs claim, be ordered to disgorge those profits.  The plaintiffs also claim injunctive and declaratory relief as well as damages, interests and costs.

1. It was against the background of these allegations that on 15 March 2001 Mr Justice Beach ordered, among other things, that the first defendant be restrained from dealing with his property whether or not held jointly with another or others and whether or not by sale, transfer, disposal, encumbrance or removal from Australia.

1. By summons dated 21 March 2001, the first defendant seeks to set aside that order.  He relies in part on the fact that under the heading "Other Matters" of the orders made by Mr Justice Beach on 15 March, there appears the following notation:

"These orders [are] made without prejudice to the first and third defendants to otherwise argue that the orders herein ought not to have been made."

1. The application before Mr Justice Beach on 15 March was supported by two affidavits sworn by Mr Ibrahim Mohammed on, respectively, 6 March 2001 and 13 March 2001.  Mr Mohammed is the President of the first plaintiff.  His affidavits and the exhibits to them disclose evidence which in my opinion supports the following prima facie conclusions:

(a)The first plaintiff was incorporated on 9 April 1992 pursuant to the provisions of the Associations Incorporations Act 1981.  Its constitutional documents contain no specific reference to that which, according to Mr Mohammed, was the primary reason for its existence:  overseeing the slaughter in Victoria of animals which because they are intended for consumption by Muslims are required to be slaughtered in accordance with the rites of the Islamic faith.  Nevertheless the first plaintiff did become involved in this activity.

(b)The Australian Quarantine and Inspection Service operates the Australian Government Supervised Muslim Slaughter System.  Under that system, representative groups of Muslims may be authorised to issue certificates to the effect that the meat described in the certificate has been slaughtered in accordance with the appropriate requirements.  These certificates are known as "halal" meat certificates.  The first plaintiff is among the Muslim organisations authorised to issue them.

(c)The first defendant is and at material times was an employee of the first plaintiff with executive responsibilities.  These include "the day to day organisation of halal certification and the provision of Muslim slaughtermen to various abattoirs":  see the affidavit of Mr Mohammed sworn 13 March 2001, at paragraph 17.  They also include attendance at meetings of the executive committee of the first plaintiff.  These meetings are held approximately every month.

(d)On 1 July 1997 under the letterhead of the first plaintiff the first defendant wrote to an organisation which according to Mr Mohammed is one "with whom the Islamic Coordinating Council of Victoria Incorporated deals".  That organisation is called "Marven Poultry".  The text of the letter is as follows:

"As we discussed earlier about the contract, please be informed that the payment for the slaughtering work we do for you to be paid for(sic) Immediate and Courteous Halal Service.  Starting from the beginning of this financial year.  Thank you for your cooperation, sorry if cause you any inconvenience."

(e)The first defendant has also written, again under the first plaintiff's letterhead, a pro forma letter dated 28 July 1999.  The subject of this letter is "halal slaughtering".  The text reads:

"Confidential.  With relation to our discussion on phone last week I would like to confirm that a new agency is going to look after slaughtering and supervision of halal process in your plant.  The term and condition of our last agreement still valid (same slaughtermen will keep doing the work under stricter supervision).  The new agency is Aus-Halal, Commonwealth Bank, Brunswick Branch account no. 31110243992.  We appreciate very much if you can direct your account department to deposit the appropriate amount in the above mentioned account starting from the week ending 6 August 1999.  Thank you very much for your help and cooperation."

(f)Neither Immediate and Courteous Halal Service nor Aus-Halal are associated with the first plaintiff.  The first defendant had no authority from the first plaintiff to correspond in the terms set out above.

(g)Weekly payments of over $2000 each were made by Marven Poultry between 25 December 1998 and 15 October 1999 to Immediate and Courteous Halal Service.  These payments were not authorised by the first plaintiff nor were the proceeds received by the first plaintiff.

(h)An organisation called the "Islamic Coordinating Committee of Victoria" was incorporated in August or September 1995.  On 15 October 1997 the first defendant and others in deception of office bearers of the first plaintiff changed the name of the committee to the "Islamic Coordinating Council of Australia" ("The ICCA").  The address of the registered office of the ICCA is 39 Avondale Avenue St Albans.  This is also the address of the registered office of Immediate and Courteous Halal Service as well as being, until some months ago, the residential address of the first defendant.

(i)Correspondence on the letterhead of the first plaintiff and dated respectively 25 November 1998 and 9 December 1998 was directed by the first defendant or by persons connected with him to a supplier called "Norvic Food" or "Novic Food Products".  This was done in an attempt to deceive Norvic Food into dealing with Aus- Halal on the basis that the latter was under the umbrella of the first plaintiff.  The correspondence with Norvic Food and other correspondence with Marven Poultry included a request or direction that money which the payer might reasonably have intended be received for the benefit of the first plaintiff be paid into accounts controlled by the first defendant.

1. There is enough evidence here, it seems to me, to support the prima facie conclusion that the first defendant has a fiduciary duty to the first plaintiff, that he has breached that duty and that he has profited directly or indirectly as a result.  Accordingly while this evidence remains unchallenged or unless some legal principle points the other way, the order under question here should remain in force.

1. The first defendant has sworn two affidavits in the proceeding.  These are dated, respectively, 13 March 2001 and 18 April 2001.  Neither they nor any of the affidavit material filed on behalf of any of the defendants answer any of the evidence upon which a prima facie case for the plaintiffs is based.

1. The first defendant submits that there is no evidence that the first plaintiff ever actually dealt in halal certification.  But at least one halal certificate issued by the first plaintiff is in evidence.  In any event, there is evidence that the first plaintiff's purpose was exactly that - halal certification - and that the first defendant captured dealers in meat products who thought they were trading with the first plaintiff.  These dealers, it seems from the evidence, then forwarded moneys to interests associated with the first defendant in the belief that those moneys were being received by his employer.

1. The first defendant submits that the first plaintiff's purposes as set out in its constitutional documents do not encompass halal certification.  In my opinion they do, albeit incidentally rather than explicitly. 

1. The first plaintiff was ordered by Mr Justice Beach, in orders made on 27 March 2001, to file its statement of claim by 27 April 2001.  It has failed to do so.  No explanation has been given save that the parties were at one stage negotiating with a view to settlement of this proceeding.  That is not an excuse.  The absence of a statement of claim, even given disobedience to an order of this court, is not however a ground for depriving the plaintiffs of the relief to which they are otherwise entitled on the summons before me.

1. The first defendant relies on s.51 of the Associations Incorporations Act 1981.  That section provides that an incorporated association shall neither trade nor secure pecuniary benefits for its members whether as trustee or otherwise.  The first defendant submits that by involving itself for reward in the certification of halal meat, the first plaintiff is in breach of this provision.  If so, the submission continues, there can be no breach by the first defendant of any fiduciary duty he owes to the first plaintiff.  Such alleged breach arises from the first defendant having allegedly done that which the first plaintiff cannot itself lawfully do.

1. The plaintiffs seek to negative these submissions by pointing to s.51(4).  It provides that the prohibition against trading does not apply given a number of circumstances.  The first is that the predominant purpose of the incorporated association is charitable.  The second is that the rules of the incorporated association contain provisions which:

(a)Preclude any distribution of its assets in the event of a winding up or dissolution, otherwise than for a charitable purpose; and

(b)authorise trading by the incorporated association in accordance with s.51.

1. The first plaintiff does not meet these conditions. Sub-s.(4) of s.51 does not therefore assist.  But the plaintiffs have a further argument.  It is that the first plaintiff does not in the relevant sense, "trade".  This expression is dealt with in sub-s.(2) of s.3 of the Act.  So far as is relevant, that provision states that for the purposes of the Act an incorporated association shall not be deemed to trade or secure pecuniary benefit for its members by reason only:

(a)that it makes pecuniary profits unless those profits or any of them are received by the members of the association or some of them;  and

(b)the trading activities are not only ancillary but also proportionally insubstantial, and consist of admission fees to displays and the like.

1. As I understand the evidence, the activities of the first plaintiff which might be thought to constitute trade are not limited in the ways set out in s.3(2) of the Act.

1. This being so the first plaintiff's position is, it seems to me, seriously compromised.  On the other hand it was submitted on its behalf that the extent to which its activities can properly be described as "trade" have not to date been fully explored.  Such exploration should, it is argued, await trial.  It is only then that the court would be in a position to properly evaluate this aspect of the case.

1. I am on balance disposed to agree.  The activities in which the first plaintiff engages are in themselves entirely free from any hint of illegality.  It is only s.51 which provides a barrier to the first plaintiff's engagement in them.  The first defendant has raised the point.  It is, I think, incumbent on the first defendant to sustain it if he can - remembering however that the court itself must intervene to prevent a litigant profiting, or receiving a benefit, from illegal activity.  But here, a number of considerations impinge upon the final outcome.  These include the inherent lawfulness of the activity in question;  the fact that the first defendant, through his association with the ICCA, may be a party to a like breach of s.51;  and the clear breach of fiduciary duty on his part, which, should the prima facie case against him be made out, will be established.  There is also a real danger, it seems to me, that unless the relevant order stands, the first defendant may dissipate assets wrongfully obtained by him and which he may presently hold pursuant to a constructive trust in favour of the plaintiffs or some of them.

1. For these reasons, I am of the opinion that the order made by Beach J on 15 March 2001 should not be set aside.

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