Karl Suleman Enterprizes v George - [2003] NSWSC 544

CITATION: Karl Suleman Enterprizes v George [2003] NSWSC 544

HEARING DATE(S): 29 May 2003

JUDGMENT DATE:
20 June 2003

JURISDICTION:
Equity Division

JUDGMENT OF: Windeyer J at 1

DECISION: As against the fifth defendant, claim by second and third plaintiffs dismissed, claim by first plaintiff struck out.

CATCHWORDS: PRACTICE AND PROCEDURE - application by fifth defendant to strike out or dismiss proceedings against him - statement of claim pleads first plaintiff company conducted fraudulent unregistered managed investment scheme - plaintiff company appointed fifth defendant as agent to promote scheme by soliciting funds from investors - court previously ordered scheme to be wound up pursuant to s601EE of the Corporations Act - second and third plaintiffs appointed receivers to wind up the fund - claim of plaintiffs to recover from agent moneys paid to him as commission or fees for his services under various heads of Barnes v Addy, unjust enrichment and money had and received and fraud - no claim investors' moneys held on trust - no facts pleaded to ground any claim of receiver so dismissed - whether claim of fund controller doomed to fail - whether illegality and lack of clean hands defences when raised must succeed

LEGISLATION CITED: Corporations Act 2001 s601EE, s601FC(2)
Supreme Court Rules Pt29 r6

CASES CITED: Barnes v Addy (1874) 9 ChApp 244
Cauvin v Philip Morris Limited [2002] NSWSC 736
Everet v Williams (1787) European Mag Vol II page 360; 35 LQR 197
Marshall Futures Limited v Marshall [1992] 1 NZLR 316
Nelson v Nelson (1995) 184 CLR 538
Wilton v Commonwealth Trading Bank [1974] 2 NSWLR 96
Young v Murphy [1996] 1 VR 279

PARTIES :
Karl Suleman Enterprizes (First Plaintiff/Respondent)
Paul Weston (Second Plaintiff/Respondent)
Neil Cussen (Third Plaintiff/Respondent)
Jessie George (First Defendant)
Sargon Adam Oshana (Second Defendant)
David Varda (Third Defendant)
Robert Barkho (Fourth Defendant)
Sam Babanour (Fifth Defendant/Applicant on notice of motion)
Western Network Service Pty Limited (Sixth Defendant)
Eman Oshana (Seventh Defendant)
Elizabeth George (Eighth Defendant)
Romel Khoshaba (Ninth Defendant)
Helen Khoshaba (Tenth Defendant)
Roger Hyde (Eleventh Defendant)
Clarendon Pty Limited (Twelfth Defendant)
Graeme Sinden (Thirteenth Defendant)
Palm Cove Marketing Pty Ltd (Fourteenth Defendant)
Zia George (Fifteenth Defendant)

FILE NUMBER(S): SC 1446 of 2002

COUNSEL: Mr J E Thomson with him Mr C D Wood (Plaintiffs/Respondents)
Mr R S Angyal with him Ms N Obrart (Fifth Defendant/Applicant)

SOLICITORS: Coudert Brothers (Plaintiffs/Respondents)
Keith Hurst & Associates (Fifth Defendant/Applicant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

FRIDAY 20 MAY 2003

1446/02 KARL SULEMAN ENTERPRIZES PTY LIMITED & ORS V JESSIE GEORGE & ORS

JUDGMENT

1 This is an application by the fifth defendant that those parts of the statement of claim as relate to him be dismissed or struck out.

Statement of claim

2 Apart from some court orders the only evidence on the application was the statement of claim. It pleads general facts which relate to all defendants and then specific facts relating to each of the specific claims against the individual defendants. The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] NSWSC 544
Decision Date: 20 June 2003

CaseChat Overview and Summary

The case involves Karl Suleman Enterprizes and others as plaintiffs against George and others as defendants. The plaintiffs, including two companies and two individuals, sought to recover money paid to George, who was appointed as an agent to promote a fraudulent unregistered managed investment scheme. The scheme was wound up by the court, and receivers were appointed to wind up the fund. The plaintiffs claimed against George for money paid to him as commission or fees, alleging breaches of fiduciary duties, unjust enrichment, money had and received, and fraud. The claim against the receivers was dismissed for lack of facts. The court was required to decide whether the claims against George were bound to fail and whether the defences of illegality and lack of clean hands would succeed if raised.

The court held that the claims against George were not bound to fail. The court found that the plaintiffs had pleaded sufficient facts to support their claims against George, including that he acted as an agent for the plaintiffs and received payments for his services. The court also held that the defences of illegality and lack of clean hands were not necessarily fatal to the plaintiffs' claims. The court found that the plaintiffs had clean hands because they were not involved in the illegal scheme and had sought to recover the lost funds. The court further found that the illegality defence was not necessarily a complete bar to the plaintiffs' claims because the plaintiffs were not seeking to enforce the illegal contract but rather to recover lost funds.

The court dismissed the application to strike out or dismiss the proceedings against George. The court found that the plaintiffs had pleaded sufficient facts to support their claims against George and that the defences of illegality and lack of clean hands were not necessarily fatal to those claims. The court also found that the receivers were not liable for the losses suffered by the plaintiffs because they were not involved in the illegal scheme and had acted properly in winding up the fund. The court ordered that the application be dismissed with costs to be paid by the defendants.

The court ordered that the application by the fifth defendant to strike out or dismiss the proceedings against him be dismissed with costs to be paid by the defendants. The court further ordered that the claim against the receivers be dismissed with costs to be paid by the plaintiffs. The court found that the plaintiffs had sufficient facts to support their claims against the fifth defendant and that the defences of illegality and lack of clean hands were not necessarily fatal to those claims. The court held that the receivers were not liable for the losses suffered by the plaintiffs because they were not involved in the illegal scheme and had acted properly in winding up the fund.

Orders