Leigh v Ghanem - [2004] FMCA 629

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LEIGH v GHANEM & ORS

[2004] FMCA 629

BANKRUPTCY – Interim injunctive relief.

Bankruptcy Act 1966, ss.120(1), 121(1)

Applicant:

DAVID JOHN LEIGH (THE BANKRUPT ESTATE OF ANTOINE & ADRIENNE GHANEM LEIGH)

Respondent:

ANTOINE GHANEM and OTHERS

File No:

BZ499 of 2004

Delivered on:

21 September 2004

Delivered at:

Brisbane

Hearing date:

21 September 2004

Judgment of:

Rimmer FM

REPRESENTATION

Counsel for the Applicant:

Mr M Bland

Solicitors for the Applicant:

McCullough Robertson

The Respondents:

No appearance

ORDERS

Upon the applicant undertaking to pay to the respondents such amount as the court may decide should be paid by way of damages for loss sustained by reason of this order, the first, second and third respondents, by their servants or agents, and each of them, be restrained from contracting to sell, transferring, mortgaging, borrowing against the security of, increasing the liabilities secured by or otherwise dealing with the land described as lot 93 on RP 37801 County of Stanley, Parish of Yeerongpilly, being title reference 12769222 until 4.00pm on 30 September 2004 or further order;
The application be adjourned to 1.00pm on 30 September 2004;
The costs of and incidental to today’s hearing be reserved;
All parties have liberty to apply on the giving of 2 days’ notice in writing.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BZ499 of 2004

DAVID JOHN LEIGH (THE BANKRUPT ESTATE OF ANTOINE & ADRIENNE GHANEM LEIGH)

Applicant

And

ANTOINE GHANEM and OTHERS

Respondent

REASONS FOR JUDGMENT

Application

This is an application which has been brought by the trustee in bankruptcy, David John Leigh, who is the trustee of the bankrupt estate of Antoine Ghanem and Adrienne Ghanem. This is an application which is brought ex parte and today urgent interim injunctive relief is sought without notice to the respondents who are both the first and second respondent and also a third respondent, Adne Pty Limited. The substantive application, which has been filed, includes an application seeking relief pursuant to Sections 120(1) and 121(1) of the Bankruptcy Act of 1966.
In effect, what is sought in that application is a declaration that a transfer by the bankrupts, the first and second respondents, to a company, Adne Pty Limited, ACN101338569, the third respondent, of a real property which is described as Lot 93 on RP37801, County of Stanley, Parish of Yeerongpilly, in title reference 12769222, which took effect on 6 January 2003 is void against the trustee in the first and second respondent's bankruptcy.

Background

The background material facts to this matter is that these bankrupts were made bankrupt on their own petition as a result of a debt which led them to the position where they were insolvent. This indebtedness arose as a result of a guarantee given on a lease.
I do not need to refer to those precise facts in great detail today, it has been the subject of a number of actions in the Supreme Court of Queensland and details of that are set out in full in paragraph 8 of the affidavit of Maree Henry filed on behalf of the trustee on 3 September 2004.
It is clear from the material facts that what occurred was that on

6 January the first and second respondent, who owned in their own name, a house property, which I have already referred to, transferred that to the third respondent, the third respondent being a company of whom the directors and shareholders are Adonis and Naim Ghanem, who are the sons of the first and second respondent.
This transfer was effected in a manner which the trustee submits that the Court can draw a reasonable and strong inference involved no proper consideration and gives rise to the concerns of the trustee that, in fact, it was a transaction intended to defeat creditors, particularly the major creditor, who the first and second respondent were actively involved with in proceedings in the Supreme Court at the relevant time.
What occurred was that the respondents effected two round robins of payment in association with the transfer, one of $200,000.00 and one for $350,000.00. The transactions were effected in the following manner. On 7 August 2002 the National Australia Bank drew a bank cheque for $200,000.00 in favour of a Violette Ghanem, the first respondent's mother, that amount of debited to the first and second respondent's account. On 23 August 2002 Violette Ghanem endorsed the cheque making it payable to Adonis Ghanem and Naim Ghanem and it was then credited to the third respondent company's account on 6 September 2002.
Some months later on 24 December 2002 the National Australia Bank drew a bank cheque for $200,000.00 in favour of the first and second respondents and that amount was debited to the third respondent company account. The cheque was then credited to the first and second respondent's account. Effectively, the process took place over a period of about four months meant that the $200,000.00 which was originally taken out of the first and second respondent's account was paid through a variety of means to others and eventually to the third respondent was then returned to the first and second respondent by the third respondent.
With respect to the $350,000.00 the payment was effected on 24 December 2002 in the following manner. The National Australia Bank drew a bank cheque for $350,000.00 in favour of the first and second respondent and that amount was then debited to the third respondent's account. That cheque was credited to an account in the second respondent's name and the National Australia Bank then drew two further bank cheques, one, again, to Violette Ghanem for $75,000.00 and one to the second respondent's mother, Margaret Shirley Michael, for $275,000.00 and the total of those amounts were then debited to the second respondent's account.
Those cheques were credited to the third respondent's account. Those matters are supported by various file notes, emails and other documents which the trustee has obtained from the respondent's accountants, Peter McDuff and Company and solicitors, Hopgood and Ganim, and there are various documents which include declarations from Violet Ghanem and Mrs Michael dated 18 December 2002 and obtained from the National Australia Bank.
The applicants submit that those facts give rise to, as I said, a strong inference that they have a very strong case to argue on its merits that, in fact, the transaction should be, and will be, set aside in the fullness of time by the Court pursuant to the provisions of Section 120 and 121 of the Bankruptcy Act. That is important, they say, and I concur, because in an application such as this there are a number of things which the Court must have regard to, the first being whether or not there is a reasonable prima facie case on its merits or a serious issue to be tried.
I am satisfied from the material put before the Court thus far, by way purely of finding that a reasonable inference is raised that there is a serious issue to be tried by the trustee and reasonable prospect that the trustee may be successful in the fullness of time in respect of their application.
Secondly, the Court must then have regard to whether or not there is a risk or a serious concern that if the respondents are given notice of these proceedings, that they will, in some way, minimise the effect of any final orders that might be made by the Court with respect to the substantive relief sought by conduct that they may undertake which would put at risk the ultimate result which may be achieved by the trustee in the substantive application.
The trustee submits today that evidence before the Court indicates that there are in place with the National Australia Bank various loan facilities which demonstrate on the evidence, (in particular, the second affidavit of Maree Henry, which was filed on 20 September 2004) sufficient facts from which the Court can draw the conclusion that there is a very serious risk that if notice were given to the respondents that, effectively, they could act to either minimise substantially or completely negate the effect of any final outcome in respect of these proceedings. The evidence they rely upon is that the subject property is now subject to a mortgage security to the National Australia Bank.
This is a mortgage facility secured on the subject property which, on the advice from the National Australia Bank, covers a number of loan facilities which have been granted by the National Australia Bank to the first and second respondent and the third respondent either directly or in their capacity as directors of corporate entities. The evidence discloses that if those facilities all were drawn down to their limit, and, given the nature of the facilities which are outlined in Ms Henry's affidavit, I can establish that they are facilities which, by their very nature, could be drawn on very quickly, it is likely that there would be insufficient equity left in the subject property for the trustee to bring any action which is likely to bring about a result or benefit to the creditors. In bringing the action under Section 121 and in exercising their duties as a trustee in bankruptcy, the trustee must always have regard to the likely success of the application and the ultimate likely benefit to the creditors in pursuing expensive litigation pursuant to Section 120, 121 of the Act.
The facts establish that there is available, and secured against that property as collateral security with other property, facilities which would enable the first and second respondent to draw up to the sum of $5,000.00, a second facility which would enable one of the bankrupts sons, who is a director of the third respondent, to draw to a limit of $26,000.00. There is a facility also in respect of a company, Adfold Pty Limited, for in excess of a million dollars and the facility covers a further business interest, it appears, of the sons of the first and second respondent who are also the directors of the third respondent, another facility which is in excess of a million dollars.
In those circumstances it is submitted that there is a high probability given the conduct already engaged in by the first and second respondent to take this property outside the clutches of the bankruptcy legislation, and, therefore, the creditors of their bankrupt estate for the Court to have a concern that if notice were given to the first and second and third respondents that, effectively, it would defeat the primary application which the trustee seeks to bring.
The Court must have regard also to the likely impact upon the respondents of any order that the Court makes. The trustee properly submits today that it is a serious step to take for a Court, without notice to respondents, be they individuals or corporate entities, to injunct their rights with respect to their financial dealings and financial affairs. Whilst this is less in the case of the first and second respondent as their financial dealings should be now under the control of the trustee and transparent at all times to the trustee, but, more particularly, in respect of the third respondents who are strangers to the bankruptcy of the first and second respondent except, of course insofar as this application.
It is properly raised in submissions that it is possible given the nature of those facilities that this injunction could interfere with the ordinary course of conduct of operation of business carried out by the third respondents. However, it is counter-submitted that the Court should act to grant this relief but do so in granting the relief without notice to the respondents for the shortest period of time before allowing the respondents to come back to the Court within a very short period of time. This it is submitted would be unlikely to cause substantial detriment to the ordinary conduct or operation of business of the third respondent. I accept that it is the usual course taken by Courts if injunctive relief is granted, and would be the course adopted by the Court.

Conclusion

Having regard to all of those matters I am satisfied that the applicant today has demonstrated on the facts that they have a triable issue to put before the Court in respect of their substantive application for a declaration under Section 120, 121 of the Bankruptcy Act. I am further satisfied that there is, from the evidence before the Court, a strong inference to be drawn that there is a likelihood which is a high likelihood that if notice were given to any of the respondents in these proceedings of the application pursuant to Section 120 and 121 of the Act by the trustee that, very quickly, they could take action to completely negate any benefit that such an application would bring for the creditors and for the reasons I've set out.
I am further satisfied that whilst in these applications it is always the case that orders made without notice to respondents bring with them the danger and possibility that it will create some prejudice to the respondents without notice, that in this instance the Court can bring the matter back before the Court in a short period of time such as to minimise any risk or possibility of that occurring, and, secondly, the Court has before it the proposed undertaking by the applicants with respect to damages which is usual for the Court to require of an applicant in such an application.
For those reasons I propose to make orders in terms of the draft orders which have been provided to the Court today by the applicant trustee and I will be adjourning the application to 1 pm on 30 September 2004.

I certify that the preceding twenty two (22) paragraphs are a true copy of the reasons for judgment of Rimmer FM

Associate: Lynnette Chin

Date: 21 September 2004