National Australia Bank Ltd; Application of Avant Garde Investments Pty Ltd (rec apptd) (in liq)

[2023] NSWSC 1153

Supreme Court

New South Wales

Medium Neutral Citation:

National Australia Bank Ltd; Application of Avant Garde Investments Pty Ltd (rec apptd) (in liq) [2023] NSWSC 1153

Hearing dates:

6 September 2023

Date of orders:

22 September 2023

Decision date:

22 September 2023

Jurisdiction:

Equity

Before:

McGrath J

Decision:

(1) Order pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW) that the sum of $360,153.41, together with interest on that amount, be paid to the applicant.

(2)   Order that the third respondent pay the applicant’s costs of the proceedings.

Catchwords:

PRACTICE AND PROCEDURE – application for payment out of court of monies representing surplus funds held after mortgagee sale of property – Uniform Civil Procedure Rules 2005 (NSW), r 55.11 – whether the applicant has established prima facie entitlement to the monies – HELD – applicant has established entitlement to the monies – order for payment made out

CONTRACTS – formation – whether Deed of Settlement executed by the parties takes effect as a valid deed – whether signature validly witnessed – lack of evidence adduced by the party challenging the validity of the execution of the deed – HELD – Deed of Settlement is a valid and enforceable deed – whether, if the Deed of Settlement is not an enforceable deed, the parties entered into a binding contract or agreement upon signing the Deed of Settlement – whether the parties objectively intended to be immediately bound by the terms of the Deed of Settlement – evidence of clear intention to be immediately bound by the terms of the Deed of Settlement – absence of post-contractual conduct indicating understanding on behalf of the third respondent to not be bound by the terms of the Deed of Settlement – HELD – Deed of Settlement is a binding contract or agreement – whether, if the Deed of Settlement is not a binding contract or agreement, the third respondent ought to be estopped from resiling from the terms of the Deed of Settlement – whether reasonable person would interpret the actions of the third respondent as indicative of an intention to be bound by the agreement – HELD – third respondent ought to be estopped from denying that the Deed of Settlement was a valid deed

CONTRACTS – interpretation – whether terms of the Deed of Settlement are properly characterised as “conditions precedent” – language of the relevant clause demonstrates clear intention not to restrict enforceability of agreement in the event that obligations contained therein are not complied with

Legislation Cited:

Conveyancing Act 1919 (NSW)

Electronic Transactions Act 2000 (NSW)

Evidence Act 1995 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Centuria Property Funds Ltd v Thorn Australia Pty Ltd [2022] NSWCA 104

Council of the City of Sydney v Baboon Pty Limited [2020] NSWSC 1480

Crown Melbourne Ltd v Cosmopolitan Hotel (VIC) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26

Darjan Estate Co plc v Hurley [2012] 1 WLR 1782

Fiona & John Sinclair Pty Ltd v Burns Bay Services Pty Ltd [2023] NSWSC 789

Grange v Sullivan (1966) 116 CLR 418

Hampton Court Ltd v Crookes (1957) 97 CLR 367; [1957] HCA 28

HCK China Investments Ltd v Solar Honest Ltd (1999) 165 ALR 680; [1999] FCA 1156

In the matter of Garslev Holdings Pty Ltd [2023] NSWSC 609

Jingalong Pty Ltd v Todd [2015] NSWCA 7

KPE Superannuation Fund Pty Ltd v Two Tempe Holdings Pty Ltd [2022] NSWSC 1614

Michael Kuehn & Jennifer Kuehn v Masterton Homes (NSW) Pty Ltd t/as Masterton Homes (NSW) Pty Ltd [2020] NSWSC 1049

NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd [2020] NSWSC 1378

Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537

Prime Constructions v West Bridge Investments [2004] NSWSC 861

Re C & L Cameron Pty Limited [2012] NSWSC 676

Segboer v A J Richardson Properties Pty Ltd [2012] NSWCA 253

Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102

The Commercial Bank of Australia Ltd v G H Dean & Co Ltd [1983] 2 Qd R 204

Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] 2 WLR 196

Yue Family Investment Pty Ltd atf Yue Family Investment Trust v Yin [2023] NSWSC 641

Category:

Principal judgment

Parties:

Avant Garde Investments Pty Ltd (Receiver Appointed) (In Liquidation) (Applicant)
Nabil Hamzeh (First Respondent)
Royal Lion Capital Pty Ltd (ACN 623 525 833) (Second Respondent)
Sikander Farooq Cheema (Third Respondent)

Representation:

Counsel:
B Koch (Applicant)
G Edwards (Third Respondent)

Solicitors:
Nelson McKinnon Lawyers (Applicant)
Gupta & Co (Third Respondent)

File Number(s):

2022/00250442

Publication restriction:

Nil

JUDGMENT

INTRODUCTION

1. The application to be determined was made by notice of motion filed 7 November 2022 by the applicant, Avant Garde Investments Pty Ltd (Receivers Appointed) (In Liquidation).

2. The application has been made in these proceedings commenced by National Australia Bank Limited (NAB) by summons filed 23 August 2022, pursuant to which NAB sought orders for the payment into court of the surplus funds held by it following the exercise of its power of sale as mortgagee over the land comprised in Certificate of Title Folio Identifier 101/1218597, being the land known as 23 Milling Road, Edmondson Park, New South Wales (Property).

3. The Property had been owned by the third respondent, Sikander Farooq Cheema. Mr Cheema defaulted under a loan agreement entered into on about 4 October 2018, pursuant to which he borrowed funds from NAB, the repayment of which was secured by a registered mortgage on the Property granted by Mr Cheema in favour of NAB.

4. On 30 September 2021, NAB entered into possession of the Property pursuant to its powers under the mortgage.

5. On 11 December 2021, NAB sold the Property for $905,000.

6. On 28 January 2022, settlement of the sale of the Property occurred. After the payment of the loan amount outstanding to NAB and the fees, charges and costs associated with the sale, NAB held the amount of $360,153.41 as surplus funds (Surplus Funds).

7. NAB identified four parties with an interest in the Surplus Funds, being the applicant (Avant Garde), the first respondent (Nabil Hamzeh), the second respondent (Royal Lion Capital Pty Limited) and the third respondent (Mr Cheema). After all of the four interested parties failed to reach agreement over their respective entitlements to the Surplus Funds, NAB commenced the proceedings and the Surplus Funds were paid into court by NAB.

8. The notice of motion filed by Avant Garde seeks an order pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the Surplus Funds, together with interest on that amount, be paid to Avant Garde. No other party has made such an application. Rule 55.11(1) of the UCPR provides that funds which have been paid into court may only be paid out of court pursuant to directions of the Supreme Court. It is this discretion that I am exercising in relation to the notice of motion.

9. The notice of motion was served on each of Mr Hamzeh, Royal Lion and Mr Cheema.

10. Mr Hamzeh does not oppose the application and did not appear at the hearing of it.

11. Royal Lion has not responded to any communication from Avant Garde concerning the application and did not appear at the hearing of it.

12. At the hearing of the application, Avant Garde was represented by counsel, Mr B Koch. Mr Koch made written and oral submissions on behalf of Avant Garde in support of the orders sought in the notice of motion.

13. The application was opposed by Mr Cheema. At the hearing of the application, Mr Cheema was represented by counsel, Ms G Edwards. Ms Edwards made oral submissions on behalf of Mr Cheema in opposition to the orders sought in the notice of motion. No written submissions on behalf of Mr Cheema were made.

EVIDENCE

14. In support of the notice of motion, Avant Garde relied on the following evidence:

1. the affidavit of Pip Ashleigh Nagam sworn 8 August 2022 and the exhibit to that affidavit;

2. three affidavits of Shumit Banerjee affirmed 7 November 2022, 24 March 2023 and 11 April 2023 respectively and the exhibit to the latter affidavit; and

3. five affidavits of Steven Peter Agosta sworn 9 February 2023, 14 March 2023, 24 March 2023, 11 April 2023 and 24 May 2023 respectively.

15. In opposition to the notice of motion, Mr Cheema relied on the following evidence:

1. four affidavits of Mr Cheema affirmed 29 March 2023, 2 May 2023, 31 August 2023 and 1 September 2023 respectively and the exhibits to those affidavits; and

2. the affidavit of Ajmal Farooq Cheema affirmed 30 August 2023.

16. During the hearing, only Mr Banerjee was required and available for cross-examination. I directed that the cross-examination of Mr Banerjee by Ms Edwards be limited to specific issues.

17. Ms Edwards submitted that Mr Cheema was unavailable for cross-examination as he is currently detained for an indefinite period in jail in Sharjah in the United Arab Emirates on account of an outstanding civil judgment against him initiated by some of the creditors of Avant Garde.

18. I was informed by Ms Edwards that Mr Cheema’s solicitors had served a notice on Avant Garde under ss 63 and 65 of the Evidence Act 1995 (NSW), which I take to be a reference to s 63(2), which provides that the hearsay rule does not apply to evidence of a person in a civil proceeding who is not available to give evidence about an asserted fact, and s 67, which provides for the form in which a s 63(2) notice is to be given.

BACKGROUND

19. Avant Garde was registered on 20 November 2018. At all times, Mr Cheema was the sole director and shareholder of Avant Garde.

20. On 19 June 2019, Royal Lion (as lender) entered into a Loan and Profit Share Agreement with Avant Garde (as borrower) and Mr Cheema (as guarantor).

21. On 22 October 2019, a receiver was appointed to Royal Lion (Receiver).

22. On 6 November 2019, the Receiver commenced proceedings in the Federal Court of Australia seeking various freezing orders (Federal Court Proceedings).

23. On 20 November 2019, Mr Shumit Banerjee (Liquidator) was appointed liquidator of Avant Garde on a provisional basis by an order of the Federal Court in the Federal Court Proceedings.

24. On 4 February 2020, the Liquidator was appointed liquidator of Avant Garde by an order of the Federal Court in the Federal Court Proceedings.

25. On 9 April 2020, the Liquidator was substituted as the applicant in the Federal Court Proceedings and had conduct of them.

26. On 14 April 2020, the Liquidator filed amended pleadings in the Federal Court Proceedings making claims against Mr Cheema that he had breached certain duties he owed as director of Avant Garde.

27. The Federal Court Proceedings were settled by way of a Deed of Settlement and Release dated 14 August 2020 between the Liquidator, Avant Garde, Royal Lion and Mr Cheema (Deed of Settlement). The Deed of Settlement was negotiated over several weeks from late July 2020 through until it was signed on 14 August 2020, including by way of a number of emails sent by Mr Cheema to the Liquidator requesting various amendments to it.

28. During the course of those negotiations, on 4 August 2020 at 6.12am, the Liquidator sent an email to Mr Cheema which stated:

Hi Sunny,

I wanted to meet with you to discuss the details/ terms of your settlement.

Could you please advise of suitable dates/times you are available to meet in person? I believe we will save time this way.

…

29. In response, on 5 August 2020 at 7.19am, Mr Cheema sent an email to the Liquidator in which he said that he preferred to communicate by email, stating “I’m currently self isolating”.

30. The execution of the Deed of Settlement took place over 12-14 August 2020 as outlined below.

31. On 12 August 2020 at 6.45pm, the Liquidator sent an email to Mr Cheema with an attached execution copy of the Deed of Settlement and requested that he print the entire document, initial each page, sign and witness the execution page.

32. On 12 August 2020 at 10.09pm, Mr Cheema sent an email to the Liquidator to which he attached the executed Deed of Settlement signed by him, witnessed by Nicholas Manolios of 37a Sovereign Drive, Thrumster NSW 2444 and initialled on each page by Mr Cheema with the initials “SC”.

33. On 13 August 2020, Royal Lion executed the Deed of Settlement and provided its executed counterpart to the Liquidator and the Liquidator executed the Deed of Settlement for Avant Garde and in his own capacity.

34. On 14 August 2020 at 12.33pm, the Liquidator informed Mr Cheema by email that “all parties have executed the Deed of Settlement. Please advise a time and place next week for my lawyers and I to inspect your confidential affidavit”.

35. In the Deed of Settlement, Avant Garde is defined as the “Company” and Mr Cheema is defined as the “Director”.

36. The Deed of Settlement contains the following relevant provisions:

1.   Interpretation

1.1.   In this Deed, unless otherwise indicated by the context:

…

(e)   Confidential Affidavit means the affidavit of the Director affirmed on or about 1 May 2020 in the Federal Court Proceedings;

(f)   Deed means this Deed of Settlement and Release;

…

(h)   Execution Date means the date on which the deed is entered into by the parties;

(i)   Federal Court means the Federal Court of Australia;

(j)   Federal Court Proceedings means proceedings NSD 1830/2019 in the Federal Court;

…

(u)   Settlement Sum is the amount calculated in accordance with clause 6;

(v)   Supreme Court Proceedings mean Supreme Court of New South Wales proceedings 2020/83642 commenced by Royal Lion against inter alia the Director.

1.2.   In this Deed, unless otherwise indicated by the context:

…

(b)   headings are for convenience only and do not affect interpretation of this Deed;

…

2.   Conditions Precedent

2.1.   Prior to execution of this Deed the Director must:

(a)   amend the terms of any trust deed of which he is trustee to make the Company the sole beneficiary of all of his family trusts;

(b)   immediately provide to the Liquidator a copy of the instrument effecting the amendment at (a) above;

(c)   immediately provide to the Liquidator a written undertaking that he will not thereafter amend (or otherwise cause to be effected any amendment) the terms of any trust until the Settlement Sum is paid in full; and

(d)   immediately provide an irrevocable Power of Attorney in favour of the Company, which authorises the sale of Milling Road for not less than reasonable market value.

…

3.   Confidential Affidavit

3.1.   Within seven (7) days of the execution of this Deed, the Director shall permit the Liquidator, Mr Agosta and Miss Dimovska to inspect the Confidential Affidavit, which inspection shall take place at a time and place agreed by the Director, the Liquidator, Mr Agosta and Miss Dimovska.

…

5.    Entry into Deed

The parties acknowledge and agree that, notwithstanding anything in this Deed, the provisions herein are not operative, binding and/or enforceable until such time as the Liquidator obtains necessary approval under s 477(2) of the Corporations Act and/or judicial directions as may be required at the Liquidator’s sole discretion.

6.   Payment of Settlement Sum

6.1.   The Director and the Liquidator agree that the Base Settlement Sum is the amount of $25,000,000.00 (Base Settlement Sum).

6.2.   The Liquidator shall call for and adjudicate on all proofs of debt within 12 months of the Execution Date.

6.3.   Notwithstanding clause 6.1, upon adjudication of creditor claims in accordance with clause 6.2 of this Deed (Admitted Claims), should:

(a)   the Admitted Claims exceed the Base Settlement Sum (Higher Settlement Sum), the Higher Settlement Sum will be payable in lieu of the Base Settlement Sum; or

(b)   the Admitted Claims be less than the Base Settlement Sum (Lower Settlement Sum), the Lower Settlement Sum will be payable in lieu of the Base Settlement Sum.

6.4.   The Settlement Sum is to be paid by way of instalments as follows:

(a)   each instalment is to be no less than $440,000.00; and

(b)    each instalment is to be paid every 4 to 6 weeks from the First       Due Date.

6.5.   Each instalment is to be paid by way of electronic funds transfer to the following account:

[REDACTED]

6.6.   The Director shall provide to the Liquidator a copy of the payment receipt or remittance advice immediately after making each instalment payment.

7.    Charge

7.1. As further security for the performance of the Director’s obligations under this Deed, the Director hereby mortgages and charges in favour of the Company all of his interest in any freehold land in Australia both present and future, and agrees that the Company shall have in respect of such land those powers given to a mortgagee by the Real Property Act 1900 (NSW) and the Conveyancing Act 1919 (NSW) – or corresponding State legislation – where the mortgage is by deed.

7.2.   The Director acknowledges and agrees that clause 7.1 creates a caveatable interest in the Director’s freehold land in Australia, including Millington Road, which interest entitles the Company to lodge a caveat on title of any such freehold land owned by the Director.

8.   Default

8.1.   Should the Director fail to comply strictly with any of the terms of this Deed, the Liquidator in his absolute discretion can either:

(a)   agree to allow the Director additional time to comply with any of the terms of this Deed; or

(b)   terminate this Deed and rely on this Deed in an application for summary judgment in an amount determined in accordance with the following:

(i)   if the default occurs within 12 months of the Execution Date – the Base Settlement Sum or the balance thereof that remains outstanding as at the date of default; or

(ii)   if the default occurs after 12 months of the Execution Date – the Settlement Sum as varied by virtue of clause 6.3 of the balance thereof that remains outstanding as at the date of default

and the Director consents to the Liquidator relying on this Deed and banking records to obtain summary judgement (sic) in a court of competent jurisdiction for the Settlement Sum (or any outstanding part thereof).

…

10.    Mutual releases

10.1.   Upon payment of the Settlement Sum in full and in consideration of the agreement by the Liquidator to accept payment of the Settlement Sum and full compliance with the terms of this Deed, and except for enforcement of this Deed, the Liquidator on the one part and the Director on the other part, release and discharge each other from all debts, costs, expenses, damages, causes of action, actions, suits, arbitrations and all claims, demands and legal proceedings whatsoever arising out of or in any way connected with all matters in the Federal Court Proceedings.

10.2.   Upon payment of the Settlement Sum in full, Royal Lion on the one part and the Director on the other part, release and discharge each other from all debts, costs, expenses, damages, causes of action, actions, suits, arbitrations and all claims, demands and legal proceedings whatsoever arising out of or in any way connected with all matters in the Supreme Court Proceedings.

37. On 17 August 2020 at 4.55pm, the Liquidator sent an email to Mr Cheema asking him to advise where and when the Confidential Affidavit would be made available for inspection.

38. On 20 August 2020 at 10.16am, Mr Cheema sent an email to the Liquidator asking him about his availability to inspect the Confidential Affidavit.

39. On 20 August 2020 at 10.30am, the Liquidator sent an email to Mr Cheema stating that he was seeing his lawyers at 2pm that day, asking him if he could provide the Confidential Affidavit by then, and requesting that he clarify whether he would be emailing it to him or providing it in person.

40. On 20 August 2020 at 10.31am, Mr Cheema sent an email to the Liquidator saying that he could arrange for the Confidential Affidavit to be sighted. The Liquidator replied by email that day at 10.32am asking if it could be sighted at his lawyer’s office at 2pm. The Liquidator followed up by sending a further email that day at 11.58am to Mr Cheema asking him to advise as soon as possible regarding access to the Confidential Affidavit.

37. On 20 August 2020 at 6.59pm, Mr Cheema sent an email to the Liquidator expressing his apologies that his email did not send and promising to forward him the contact details to liaise to arrange a time to inspect the Confidential Affidavit. The Liquidator replied by email that day at 7.44pm asking Mr Cheema to send access/contact details as soon as possible.

38. On 21 August 2020, Avant Garde lodged a caveat on the title to the Property, with the estate or interest claimed described as “Charge pursuant to a Deed of Settlement and Release”. There were no other encumbrances on the title to the Property at that time.

39. On 21 August 2020 at 7.54pm, Mr Cheema sent an email to the Liquidator (copying in Mr Cheema’s solicitor, Andrew Larkis) asking them to coordinate a time and place to inspect the Confidential Affidavit.

40. On 21 August 2020 at 8.26pm, the Liquidator sent an email to Mr Cheema (copying in Andrew Larkis) asking him to advise his availability on Monday, 24 August 2020 to inspect the Confidential Affidavit at the Liquidator’s office.

41. On 24 August 2020 at 1.50pm, the Liquidator sent an email to Mr Cheema stating he had been contacted by Andrew Larkis who advised that he would be attending at the Liquidator’s office in 15 minutes with the Confidential Affidavit. The Liquidator also set out in the email his undertakings to keep confidential the contents of the Confidential Affidavit and not to use or attempt to use the contents of it for any other purpose than contained in the Deed of Settlement.

42. On 24 August 2020, in accordance with clause 3.1 of the Deed of Settlement, the solicitors for Avant Garde and the Liquidator (Steven Agosta of Nelson McKinnon Lawyers) inspected the Confidential Affidavit.

43. On 25 August 2020 at 5.18pm, the Liquidator sent an email to Mr Cheema which attached a power of attorney to be signed by Mr Cheema in relation to the Property so that the Liquidator could proceed with the sale of it.

44. On 1 September 2020 at 1.43pm, the Liquidator sent an email to Mr Cheema which he stated was in anticipation of seeking court approval for the terms of the Deed of Settlement. In the email, the Liquidator asked Mr Cheema to advise on each of the matters set out in clause 2.1 of the Deed of Settlement which required: the amendment of Mr Cheema’s family trust and any other trust of which Mr Cheema was trustee to make Avant Garde the sole beneficiary; the provision of the instrument effecting the amendment; and the signing and returning of the power of attorney with respect to the Property.

45. On 8 September 2020 at 5.41pm, Mr Cheema sent an email to the Liquidator which attached a signed power of attorney witnessed by Nicholas Manolios of 37a Sovereign Drive, Thrumster NSW 2444. In the email, Mr Cheema also promised that he would have the trust deeds amended and email the Liquidator once that was done.

46. On 9 September 2020 at 11.51am, the Liquidator sent an email to Mr Cheema in which he stated that he required the original power of attorney document as it needed to be lodged at the New South Wales Land Titles Office and asked him to arrange for it to be delivered to the Liquidator’s office as soon as possible.

47. On around 9 September 2020, the Liquidator was told (by either a representative of Royal Lion or Flowrite Commissioning Pty Ltd) that Mr Cheema was overseas at the time of execution of the power of attorney.

48. On 9 September 2020 at 1.27pm, the Liquidator emailed Barbara Dimovska of Nelson McKinnon Lawyers (the solicitors for the Liquidator), as follows:

Hi Barbara,

Ok ill request original.

Im told the Director is overseas and the address of the witness is his address in Australia (not where the actual document was signed). Let me know witnessing this way is a problem.

…

53. On 9 September 2020 at 2.13pm, Barbara Dimovska sent an email to the Liquidator, as follows:   

Hi Shumit,

If you believe the director is overseas, the POA will have to be redone.

Because of COVID-19, documents such as a POA can be witnessed electronically, however there are certain requirements that have to be met, namely:

1.    The witness has to observe the signature in real time (i.e. audio-      visual link such as Zoom, FaceTime etc);

2.   Attest/confirm the signature was witnessed by signing a copy of the document – which appears to have been done; and

3.   Endorse the document with a statement to the effect that it was witnessed via audio-visual link in in accordance with the Electronic Transactions Regulation 2017.

To avoid any issues with the POA, and if in fact the director is overseas, we would suggest that the attached revised POA be signed/witnessed. Note the date on this attachment is September. You may want to ask the director to confirm whether he is in Australia or not.

If he is in Australia and the POA attached to your email this morning was witnessed in person, then you can sign the original once received.

Please give me a call if you would like to discuss further.

…

54. On 9 September 2020 at 2.23pm, the Liquidator forwarded to Mr Cheema the email received from Barbara Dimovska, stating:

Sunny,

Please see email below and revised POA attached

Please confirm you are overseas and execute and witness the revised POA in accordance with the instructions below.

…

55. On 24 September 2020 at 3.15pm, Barbara Dimovska sent an email to Mr Cheema which attached a letter from Nelson McKinnon Lawyers to Mr Cheema stating that Mr Cheema had not complied with his obligations under clause 2.1 of the Deed of Settlement and had failed to pay the first instalment of $440,000, which was due for payment on 10 September 2020. In the letter, Mr Cheema was advised that the Liquidator had allowed him additional time until 5pm on 1 October 2020 to comply with clause 2.1(a)-(c) of the Deed of Settlement and pay the first instalment of $440,000.

56. On 23 December 2020, Avant Garde filed an application in the Federal Court Proceedings for approval to be given nunc pro tunc to the Liquidator in his capacity as liquidator of Avant Garde to enter into the Deed of Settlement pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Approval Application).

57. The Approval Application also sought an order for default judgment for $1.1 million against Silverstone Capital Pty Ltd (Silverstone), a company of which Mr Cheema was the sole director and secretary. Service of the Approval Application was effected on Silverstone on 13 January 2021. The Approval Application was then listed for hearing on 17 February 2021.

58. Mr Cheema did not take any steps to oppose the Approval Application and did not assert that the Deed of Settlement was not valid and/or was unenforceable.

59. On 17 February 2021, Jagot J made orders in the Federal Court Proceedings giving approval for the Liquidator to enter into the Deed of Settlement as well as ordering default judgment of $1.1 million against Silverstone.

60. Mr Cheema did not take any steps to set aside or appeal the order made by Jagot J on 17 February 2021.

61. On 19 March 2021, Royal Lion registered a caveat on the title to the Property.

62. In July 2021, NAB served Mr Cheema with a default notice under the loan agreement.

63. On 30 September 2021, NAB entered into possession of the Property.

64. On 11 December 2021, NAB sold the Property for $905,000.

65. On 24 January 2022, Mr Hamzeh registered a caveat on the title to the Property.

66. On 28 January 2022, the settlement of the sale of the Property occurred, leading to NAB holding the Surplus Funds.

PROCEDURAL MATTERS

67. The proceedings were commenced by NAB filing a summons in this court seeking that the Surplus Funds be paid into court to enable a determination to be made as to how the Surplus Funds were to be distributed. In support of its summons, NAB filed an affidavit of Pip Ashleigh Nagam sworn 8 August 2022, which identified Avant Garde, Mr Hamzeh, Royal Lion and Mr Cheema as interested parties, who were each served with a copy of the sealed summons and the affidavit in support.

68. The Surplus Funds have since been paid into court and NAB has taken no further part in the proceedings.

69. On 7 November 2022, Avant Garde filed the notice of motion which is to be determined by me, with Mr Cheema the only opposing party.

LEGAL PRINCIPLES

70. An applicant seeking payment out of court of funds under r 55.11 of the UCPR must satisfy the following four requirements, as articulated by Rees J in Council of the City of Sydney v Baboon Pty Limited [2020] NSWSC 1480 at [9]:

1. identify the person who has the primary beneficial interest in the funds and the nature of their entitlement;

2. identify any other persons beneficially interested in the funds and the nature of their respective entitlements;

3. notify all potential fund claimants of the application; and

4. have either a beneficial entitlement prior to the other interested parties or the consent of the other interested parties to the payment.

71. In circumstances where another potential claimant does not consent to the application, the applicant must prove that the alternative claimant does not have a valid claim against the fund, requiring strict proof and having regard to the court’s concern as to the risk of incorrect payments: see Re C & L Cameron Pty Limited [2012] NSWSC 676 per Ward J (as her Honour, the President, then was) at [122].

72. Her Honour continued in Cameron, noting at [128]:

In my view, what Rule 55.11 requires is a consideration of whether there are other competing claims and, if there are, then as Slattery J pointed out in Ruth Chong, it is a matter for the Court to determine their validity and the competing priorities between any valid claims. Thus, I do not accept that the present enquiry necessarily stops at the point at which an arguable claim has been established though it may, depending on the issue, be necessary or appropriate to defer a final determination of the validity of that claim to another forum. If the evidence before the Court is such that the validity of the claim can be determined on the very payment out application, then the statutory mandate for the just, quick and cheap resolution of the real issues in dispute would support the conclusion that a final determination as to that claim should then be made.

DETERMINATION – APPLICATION OF LEGAL PRINCIPLES TO THE RELEVANT FACTS

73. Avant Garde clearly has the primary beneficial interest in the Surplus Funds arising from the amount owing of $25 million under the Deed of Settlement, being the Settlement Sum under clause 6.1 which was due to be paid by Mr Cheema under clause 6.4, secured by the caveat registered on the title to the Property which was lodged before all other caveats.

74. Avant Garde advances its beneficial interest in the Surplus Funds on the ground that the Deed of Settlement was a valid and enforceable deed which, pursuant to clause 7, created a caveatable interest in the Property on behalf of Avant Garde. Accordingly, Mr Cheema’s default in payments under it gave rise to a beneficial interest in the Surplus Funds to the value of at least $360,153.41 in favour of Avant Garde.

75. No claimant other than Avant Garde has made an application for the payment out of the Surplus Funds to it. The summons filed by NAB and the notice of motion filed by Avant Garde have both been served on Mr Hamzeh, Royal Lion and Mr Cheema. Neither Mr Hamzeh nor Royal Lion makes any claim for payment of the Surplus Funds to them.

76. The only other person with a potential beneficial interest in the Surplus Funds is Mr Cheema, as the former owner of the Property. Absent the determination of Mr Cheema’s arguments in his favour (which are dealt with below), I am satisfied that Avant Garde has the prior beneficial entitlement to the other interested parties under the four limbs in Council of the City of Sydney which are set out above.

77. Broadly, Mr Cheema opposes the application by Avant Garde on the following grounds:

1. the Deed of Settlement was never validly signed, delivered and/or exchanged and is therefore not valid and/or enforceable;

2. the conditions precedent in clause 2.1 of the Deed of Settlement were never met and therefore no valid contract exists, rendering the Deed of Settlement unenforceable;

3. Avant Garde failed to comply with clause 6.2 of the Deed of Settlement; and

4. there has been a breach of clause 12 of the Deed of Settlement by Avant Garde.

78. It is necessary to deal with each of Mr Cheema’s arguments in turn.

Was the Deed of Settlement validly executed and enforceable?

79. Mr Cheema makes various claims surrounding the execution of the Deed of Settlement as the basis on which he asserts that the Deed of Settlement is not a valid and enforceable document. These include:

1. at the time when Mr Cheema signed the Deed of Settlement he was in Dubai;

2. Mr Cheema’s signature was witnessed via Skype;

3. Mr Manolios as the witness was operating remotely from Port Macquarie in New South Wales;

4. there were band-width issues with Skype at the time causing the cameras to not be able to be activated; and

5. the Liquidator was on notice that Mr Cheema’s signature was improperly witnessed because he knew that Mr Cheema was outside of Australia at the time.

80. In support of this claim, Mr Cheema relied on paragraph 6(iii) of his affidavit affirmed 2 May 2023, which states:

the witness to my signature on the Deed was present in Australia and I was in the UAE. The witnessing was done over Skype and neither I nor the witness had our cameras on…”

81. Mr Cheema also relied on paragraph 10 of his affidavit affirmed 1 September 2023, which states:

Due to band-width issues with Skype at the time, the cameras were unable to be activated. Mr Manolios was resident in Thrumster near Port Macquarie and I was in Dubai at the time.

82. Mr Cheema was not available for cross-examination at the hearing to be tested on any of these assertions.

83. Section 38(1) of the Conveyancing Act 1919 (NSW) provides:

38   Signature and attestation

(1)   Every deed, whether or not affecting property, shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed; but no particular form of words shall be requisite for the attestation.

84. Section 38A(1) of the Conveyancing Act provides:

38A   Electronic form deeds

(1)   A deed may be created in electronic form and electronically signed and attested.

85. Section 14G of the Electronic Transactions Act2000 (NSW) provides:

14G    Witnessing and attestation of documents by audio visual link

(1)    Despite any other Act or law—

(a)    if the signature of a document is required under an Act or another law to be witnessed, the signature may be witnessed by audio visual link, and

(b)    arrangements in relation to witnessing signatures and the attestation of documents may be performed by audio visual link.

(2)    A person witnessing the signing of a document by audio visual link (the witness) must—

(a)    observe the person signing the document (the signatory) sign the document in real time, and

(b)    attest or otherwise confirm the signature was witnessed by signing the document or a copy of the document, and

(c)    be reasonably satisfied the document the witness signs is the same document, or a copy of the document signed by the signatory, and

(d)    endorse the document, or the copy of the document, with a statement—

(i)    specifying the method used to witness the signature of the signatory, and

(ii)    that the document was witnessed in accordance with this section.

Note—

A document may be endorsed under paragraph (d) with a statement, for example, that the document was signed in counterpart and witnessed over audio visual link in accordance with section 14G of the Electronic Transactions Act 2000.

(3)    Without limiting the ways a witness may confirm the signature was witnessed, the witness may—

(a)    sign a counterpart of the document as soon as practicable after witnessing the signing of the document, or

(b)    if the signatory scans and sends a copy of the signed document electronically—countersign the document as soon as practicable after witnessing the signing of the document.

(4)    Without limiting subclause (1)(b)—

(a)    arrangements in relation to witnessing signatures by audio visual link include the following—

(i)    certification of matters required by an Act or another law,

(ii)    confirming or verifying the identity of the signatory to a document,

(iii)    attestation of a signature,

(iv)    swearing or affirming the contents of an affidavit,

(v)    seeing the face of the signatory, and

(b)    a requirement in an Act or another law for the presence of a witness, signatory or other person is taken to be satisfied if the witness, signatory or other person is present by audio visual link.

86. Mr Cheema’s signature on page 16 of the Deed of Settlement appears to have been witnessed by an individual named Nicholas Manolios, of 37a Sovereign Drive, Thrumster, NSW 2444 (near Port Macquarie). However, Mr Manolios did not provide an affidavit in these proceedings, nor was he called by Mr Cheema to give evidence.

87. Absent evidence from Mr Manolios, the self interested and uncorroborated evidence of Mr Cheema regarding the circumstances surrounding the execution and witnessing of his signature on the Deed of Settlement is of very little to no weight towards establishing the fact that the execution of the Deed of Settlement occurred electronically with him overseas and Mr Manolios not able to see Mr Cheema signing at the critical time of execution, and therefore cannot go towards establishing the fact that Mr Cheema’s execution of the Deed of Settlement was invalid. This is especially so when Mr Cheema is not available to be cross-examined on his evidence. Evidence is to be weighed according to the power of the party to produce it: Hampton Court Ltd v Crookes (1957) 97 CLR 367 at 371-372 (Dixon CJ); [1957] HCA 28; Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [110]; In the matter of Garslev Holdings Pty Ltd [2023] NSWSC 609 at [46].

88. There was no explanation in the evidence as to the absence of Mr Manolios as a witness at the hearing for Mr Cheema. Mr Cheema had the power to explain the absence of Mr Manolios as a witness but did not.

89. On its face, the Deed of Settlement was regularly executed by Mr Cheema and witnessed by Mr Manolios while physically present with Mr Cheema. Any requirement to comply with the Electronic Transactions Act 2000 (NSW) becomes an irrelevant question without hearing from Mr Manolios to the contrary (assuming that he might be regarded as a witness independent of Mr Cheema). It therefore follows that Mr Cheema’s argument that the Deed of Settlement is not a valid and enforceable deed by reason of a failure to comply with the requirements of the Electronic Transactions Act is without any basis.

90. In support of the claim that the Liquidator ought to have been put on notice that the execution requirements were not complied with by reason of Mr Cheema being located outside of Australia at the time his signature on the Deed of Settlement was witnessed, Mr Cheema relied on the emails of 9 September 2020 at 1.27pm, 2.13pm and 2.23pm involving the Liquidator’s solicitor (Barbara Dimovska) and sought leave to cross-examine Mr Banerjee at the hearing, which was granted on a conditional basis.

91. The relevant section of Ms Edwards’ cross-examination of Mr Banerjee is reproduced as follows:

Q. Mr Banerjee, at some point did you become aware whether Mr Cheema was overseas?

A. I did. Yes.

Q. When was that?

A. I think definitively it was well after all this had transpired when I was told by certain creditors that they were going overseas to pursue, you know, an action against or trace or track down where Mr Cheema was in the UAE. Yeah.

Q. Was that sometime in 2020, as best as you can recall?

A. I don’t think so. I - I can’t recall off the top of my head. I would need to look at file notes and emails and, you know, WhatsApp messages and whatnot but if the deed was executed in September, it would have been - I - I can’t recall off the top of my head. My apologies. Yeah.

Q. Does it assist you that in your affidavit you state that you were told Mr Agosta that you didn’t have to serve the application that you made on Justice Jagot for the 477(2)(b) approval on my client?

A. I don’t recall that off the top of my head. Apologies.

…

Q. Can you recall whether you knew on 9 September 2020, that Mr Cheema was or was not overseas?

A. So, that was very early on in the piece. There’s no way I - I don’t believe I knew at that time.

Q. At any point after you became aware, and at this point you’re not sure when that was, but at any point after you became aware that Mr Cheema was overseas, did you - I withdraw that. Do you recall whether you received a response to this email that you sent to him on 9 September? I think you said you don’t recall but I just want to confirm.

A. I don’t recall. That’s confirmed.

Q. After this email, when you found out that he was overseas at some point, did you seek to have Mr Cheema resign the power of attorney as you requested?

A. I don’t - no, I didn’t. So, once I was aware that he was potentially in the UAE, I think I had a conversation with Steve saying - with my legal adviser saying, you know, what do we do here. And, I think the brief conversation was unfortunately he’s in a different jurisdiction and there’s not much we can do at this point. So, no. The answer is no.

…

Q. You believed that the power of attorney was validly executed?

A. Yes. When I received it, I did. Yes.

Q. Did that change at any point after that email from Barbara?

A. No. So, at that point there was no confirmation or no understanding on my end that he was actually overseas, he just wasn’t responding to emails so

Q. But at some point you became aware that he was overseas?

A. Yes, I did. Yep.

Q. At that point, did you revisit the issue of the power of attorney?

A. No.

92. It is not apparent from the evidence adduced from Mr Banerjee under cross-examination, in combination with the emails of 9 September 2020 at 1.27pm, 2.13pm and 2.23pm that he was aware that Mr Cheema was overseas at the time of signing the Deed of Settlement. Those emails, and the answers obtained in cross-examination, relate to the execution of the power of attorney more than 3 weeks later than the execution of the Deed of Settlement.

93. In addition, in the email on 4 August 2020 at 6.12am (8 days before Mr Cheema provided the Liquidator with an executed copy of the Deed of Settlement), the Liquidator asked Mr Cheema to advise of suitable dates so that they could “meet in person”. This demonstrated that the Liquidator thought that Mr Cheema was proximate to Sydney. The email response on 5 August 2020 at 7.19am from Mr Cheema expressed a preference to communicate by email and stated that he was currently self isolating. Mr Cheema did not say that he was overseas (if in fact he was) and did not disabuse the Liquidator from thinking he was in Australia.

94. Accordingly, I do not find that the Liquidator ought to have been put on notice that Mr Cheema’s signature on the Deed of Settlement was improperly executed and witnessed. Rather, it appears that the relevant understanding of the Liquidator was that Mr Cheema was located in Australia.

95. Mr Cheema also argued that the Deed of Settlement cannot be regarded as valid and enforceable because there was no actual physical exchange of the executed counterparts of the Deed of Settlement and therefore no delivery of it.

96. But no physical delivery of a deed is required for it to take effect as a deed. The requirements for delivery were stated by Sackville AJA (with whom Allsop P and Campbell JA agreed) in Segboerv A J Richardson Properties Pty Ltd [2012] NSWCA 253 at [51]-[55] in the following terms:

[51]   …It is long established law that delivery is essential to a deed: R J A Morrison, H J Goolden, R F Norton, Norton on Deeds (2nd ed, 1928), at 10; Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263; 28 WAR 124, at [23]–[24], per Steytler J (with whom McKechnie and Hasluck JJ agreed).

[52]   It is common ground that delivery is required where a deed is executed, not only by an individual but by a corporation: see Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (1977) 2 NSWLR 109, at 118–119, per Helsham CJ in Eq: A J Bradbrook, “The Delivery of Deeds in Victoria” (1981) 55 ALJ 267, at 270–272.

[53]   The requirement for delivery has its origins in the symbolic significance of a manual transfer of a document: A J Bradbrook, at 267. But for at least two centuries, the requirement of “delivery” has been capable of being satisfied without physical delivery or transfer of the deed to the promisee or anyone else. Norton on Deeds states (at 13) that:

“Delivery may be effected by words alone, or without words by the acts or conduct of the party, from which it can be inferred that he intended to deliver the deed as an instrument binding on him.”

[54]   It is for this reason, that it held in Xenos v Wickham (1867) LR 2 HL 296, that a deed can be delivered even though it never leaves the possession of the party executing it: see at 323, per Lord Cranworth. Indeed, there is much older authority to that effect: see, for example, Doe d Garnons v Knight (1826) 5 B & C 671 ; 108 ER 250; Hall v Palmer (1844) 3 Hare 532; 67 ER 491; Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564; Re Way’s Trusts (1864) 2 De G J & S 365; 46 ER 416.

[55]   In Xenos v Wickham, Blackburn J (whose opinion was upheld by the House of Lords) stated (at 312) the principles as follows:

“no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to shew that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: “I deliver this as my deed;” but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well. And it is clear on the authorities, as well as the reason of the thing, that the deed is binding on the obligor before it comes into the custody of the obligee, nay, before he even knows of it …”

97. These statements in Segboer were approved in Crown Melbourne Ltd v Cosmopolitan Hotel (VIC) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 by Gordon J at [260].

98. After citing the statements from Segboer, in NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd [2020] NSWSC 1378, Ward CJ in Eq (as her Honour, the President, then was) stated at [77]:

Accordingly, it may be observed that whether there has, or has not, been delivery is a question of fact (that is, the intent of the executing party is a question of fact). Furthermore, it is permissible to take into account later events, as well as circumstances prior to or contemporaneous with the alleged delivery of the deed, in order to ascertain what was the intention of the person concerned at the time of execution.

99. In Centuria Property Funds Ltd v Thorn Australia Pty Ltd [2022] NSWCA 104, Ward P (with whom Gleeson and White JJA agreed) said at [62]:

Relevantly, it is accepted by the appellants that the question whether the respondent evinced an intention immediately to be bound by the deeds on physical delivery of the executed deeds is a question of fact to be determined objectively by reference to the words and conduct of the parties and the circumstances surrounding the execution and physical delivery of the deeds (see Xenos v Wickham (1867) LR 2 HL 296 at 309 per Piggott B; Realm Resources at [78]); and that subsequent conduct may be taken into account (see 400 George Street at [58]–[60]; NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd (2020) 19 BPR 40,711; [2020] NSWSC 1378 (NTT Australia) at [77]).

100. Applying these statements of principle to the present case, there is no doubt that there was delivery of the Deed of Settlement by Mr Cheema when he sent his email of 12 August 2020 at 10.09pm with the attached executed Deed of Settlement signed by him, witnessed by Nicholas Manolios and initialled on each page by Mr Cheema. It is also clear on the objective evidence that Mr Cheema intended to be immediately bound by the Deed of Settlement given that he was communicating with the Liquidator from 17 to 24 August 2020 to make arrangements for the inspection of the Confidential Affidavit, an obligation he owed under clause 3.1 of the Deed of Settlement.

101. In any event, regardless of whether Mr Cheema’s signature on the Deed of Settlement was invalidly witnessed or there was no delivery of it, the Deed of Settlement would constitute an executed contract or agreement between the parties.

102. According to Henry J in Fiona & John Sinclair Pty Ltd v Burns Bay Services Pty Ltd [2023] NSWSC 789 at [174]-[175]:

174   A document described as a deed that does not meet the requirements of validity for a deed because it is defectively executed may constitute a contract between parties and fall within the first category of Masters v Cameron cases as a specifically enforceable executed contract: Prime Constructions Pty Ltd v Westbridge Investments Pty Ltd (2004) 22 ACLC 1390; [2004] NSWSC 861 at [12], [23] and [30], per Young CJ in Eq; and Guang Dong Zhi Gao Australia Pty Ltd v Fortuna Network Pty Ltd [2009] NSWSC 1170 at [137]–[139], per Einstein J. Alternatively, there may be evidence to support the conclusion that the parties intended to be bound by a contract in terms of the deed: Bombardier v Avwest Aircraft at [86].

175   As observed in N Seddon, Seddon on Deeds (2nd ed, 2022, The Federation Press) at [2.34] (citations omitted):

“Given the common use of deeds where the elements of contract are present, such as a deed of settlement, it is not difficult in such cases to find that the document, if defective as a deed, is effective as a contract.”

103. The legal principles which apply to assessing whether a binding agreement has been entered into were conveniently summarised by Hammerschlag J (as his Honour then was) in Michael Kuehn & Jennifer Kuehn v Masterton Homes (NSW) Pty Ltd t/as Masterton Homes (NSW) Pty Ltd [2020] NSWSC 1049 at [29], as including:

(1)   Whether an agreement has been entered into is to be objectively assessed. The objective intention of the parties is fact-based, found in all the circumstances, including by drawing inferences from their words and their conduct in their making of the agreement: Allen v Carbone (1975) 132 CLR 528 at 532; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 (ABC); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105 [25]; Sagacious at [69].

(2)   In ascertaining the intention of the parties, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract: Sagacious at [69].

(3)   The Court will not write a contract for parties who have failed to reach agreement. Failure to reach agreement includes where there is obscurity or incompleteness in the agreement: Sagacious at [73]; Feldman v GNM Australia [2017] NSWCA 107 at [60]-[61] (Feldman).

(4)   The existence of matters of importance on which the parties have not reached consensus in their informal agreement will render it less likely that they intended immediately to be bound before the execution of a formal document. That the terms have not been fully or well stated is material to whether a contract has been made. The more important the term, the less likely it is that the parties will have left it over for future decision, but there is no legal obstacle which prevents the parties agreeing to be bound now while deferring important matters: Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 97578 at 14,579; ABC at 548; Sagacious at [73]; Feldman at [60]-[61].

(5)   Regard may be had to the parties’ subsequent communications to assess whether it was in their contemplation that they were not to be bound until all the essential preliminaries had been agreed to or until the formal contract had been drawn up embodying all the matters incidental to the transaction: ABC at 547-8 and the authorities cited there; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [25]; Howard Smith and Co Ltd v Varawa (1907) 5 CLR 68 at 78; B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9155; Sagacious at [99].

(6)   An agreement may contain an implied term requiring the parties to do all cooperative acts necessary to bring about the contractual result. A duty to cooperate may require parties to execute a formal instrument but does not apply to the negotiation of varied or additional terms: Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530; Karellas at [64].

104. In Stellar Vision, the Court of Appeal stated (at [64]) the test of the requirement that parties have the requisite intention to be bound (citations omitted) in the following terms:

Whether parties intend to create binding legal relations is ascertained objectively, that is, by determining whether a reasonable person in the position of the parties would have taken them to have intended to contract. The presence (or absence) of that intention is fact-based, to be found in all the circumstances, including by drawing inferences from their words and their conduct in making their agreement. In ascertaining their intention, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract…

105. These legal principles recognise that the question as to whether the Deed of Settlement was a binding and enforceable contract depends upon the objective intention disclosed by the language of the parties read in light of the surrounding circumstances.

106. The Deed of Settlement was clearly brought into existence as a means of settling the Federal Court Proceedings and the Supreme Court Proceedings in a single document, which is a material factor suggestive of the parties’ intention to enter into a binding and immediate agreement when they signed the Deed of Settlement: Fiona & John Sinclair at [145] citing Jingalong Pty Ltd v Todd [2015] NSWCA 7 at [78], per Sackville AJA (with whom Meagher and Leeming JJA agreed).

107. It is clear from the evidence that the parties had reached agreement, with the terms of that agreement set out in the Deed of Settlement. The fact that Mr Cheema emailed his executed counterpart to the Liquidator on 12 August 2020 absent any express qualification indicating otherwise, demonstrates the requisite intention to be bound: KPE Superannuation Fund Pty Ltd v Two Tempe Holdings Pty Ltd [2022] NSWSC 1614 at [109].

108. In addition, subsequent conduct of the parties may be admissible on the question of whether the parties intended to be bound by a written contract: Yue Family Investment Pty Ltd atf Yue Family Investment Trust v Yin [2023] NSWSC 641 at [54].

109. The post-contractual actions of Mr Cheema, including making the Confidential Affidavit available to the solicitors for Avant Garde and the Liquidator for inspection, and providing the Liquidator with a signed power of attorney, in accordance with the obligations set out in clauses 3.1 and 2.1(d) of the Deed of Settlement respectively, are consistent with a finding of a binding settlement having been reached and demonstrate that Mr Cheema intended and understood that he was bound by the terms of the Deed of Settlement.

110. The facts of this case, if the Deed of Settlement was in fact improperly executed, reflect the line of cases where a document, which purports to be a deed, but which is not properly executed as such, but in which the particular document in question was signed, or attested, on behalf of the party against whom it is sought to be enforced, was held to constitute a binding contract between the parties who have agreed to be bound by it: see HCK China Investments Ltd v Solar Honest Ltd (1999) 165 ALR 680, 717-18, 721-23; [1999] FCA 1156; Darjan Estate Co plc v Hurley [2012] 1 WLR 1782, 1789; Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] 2 WLR 196, 208-9; 211-212; The Commercial Bank of Australia Ltd v G H Dean & Co Ltd [1983] 2 Qd R 204, 208; Fiona & John Sinclair at [183]-[186].

111. Accordingly, based on the evidence set out above and absent any objective indicia of a lack of intention on the part of Mr Cheema to be immediately bound, in my view Mr Cheema intended the Deed of Settlement to be binding and final and is therefore enforceable as a contract between the parties.

112. In the further alternative, in the circumstances Mr Cheema ought to be estopped from resiling from the Deed of Settlement. As explained in G J Tolhurst and E Peden, Furmston and Tolhurst on Contract Formation: Law and Practice (3^rd ed, 2023, Oxford University Press) at [1.14]:

… a party will be estopped from giving evidence as to their own state of mind in order to resile from a contract. For example, assume the situation is that A makes an offer to B which is accepted by B in circumstances where a reasonable person in the position of A would construe B’s statement as an acceptance. It is not possible for A to seek to resile from the contract by attempting to lead evidence that he or she did not subjectively believe B was accepting. A has acted in a way that a reasonable person ‘B’ would interpret as suggesting an intention to contract and is estopped from resiling from that position, unless A can prove that B did not rely or could have relied on the representation implied from A’s conduct because B knew that, in fact, A did not intend to contract.

113. According to Young CJ in Eq in Prime Constructions v West Bridge Investments [2004] NSWSC 861 at [22]-[23]:

[22]   Even if there was not a proper execution of the deed, because Mr Park had represented to Ms Williams that the deed had been executed, it may well have been that estoppel would operate so that the plaintiff would be estopped from denying that the document was a deed, and if the defendant had taken that view, then the deed would have had the same operation as if it had been executed as a deed;

[23]   Accordingly, on this basis, we have what is known in specific performance law as an executed contract.

114. A reasonable person in the position of Avant Garde would interpret Mr Cheema’s email on 12 August 2020 as suggesting a clear intention to be bound by the terms of the Deed of Settlement. Further, at no time did Mr Cheema’s post-contractual conduct indicate an intention not to be bound.

115. Accordingly, I also find that Mr Cheema ought to be estopped from denying that the Deed of Settlement was a deed.

Did clause 2.1 of the Deed of Settlement contain conditions precedent?

116. The second argument advanced by Mr Cheema is that the requirements in clause 2.1 of the Deed of Settlement were conditions precedent to the Deed of Settlement coming into operation and becoming valid and enforceable and those conditions were never met.

117. The principles of interpretation of a commercial contract in the form of the Deed of Settlement in these circumstances were articulated by Hammerschlag CJ in Eq in Stellar Vision at [69], as follows:

The Deed, including cl 7, is a commercial contract which is to be given a business-like interpretation. Interpreting it requires attention to the language used by the parties, the commercial circumstances which it addresses, and the objects which it is intended it secures. The meaning of the words chosen is determined objectively by reference to its text, context, and purpose, the question being what a reasonable businessperson would have understood them to mean. Preference is given to a construction supplying a congruent operation to the various components of the whole, so as to avoid commercial inconvenience. Where language is open to more than one construction, the Court will prefer a construction which avoids consequences which are capricious, unreasonable, inconvenient or unjust. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]; Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82]; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [15]; Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]-[51].

118. It takes clear language for a condition to operate as a precedent to the formation of a contract: see Grange v Sullivan (1966) 116 CLR 418 at 441; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.

119. In the consideration of whether clause 2.1 was a condition precedent, such that a failure to satisfy any of the requirements in it would render the entire Deed of Settlement as though it had not been entered into, regard must be had to construing the entire Deed of Settlement as a whole.

120. The essence of the commercial purposes and object of the Deed of Settlement was to require Mr Cheema to pay amounts to the Liquidator by instalments over time totalling the Settlement Sum, secured by a mortgage and charge over the Property in favour of the Liquidator, in exchange for mutual releases of the claims connected with the Federal Court Proceedings and the Supreme Court Proceedings. It was the means by which the Liquidator was to obtain a direct method of payment by Mr Cheema, failing which the security over the Property would be enforced and summary judgment obtained.

121. Although clause 2.1 is a curious provision (seeking to impose obligations on Mr Cheema in advance of the Deed of Settlement even being executed), the place of clause 2.1 within the entire document is quite clear. It is a provision which places obligations on Mr Cheema to take particular steps for the benefit of the Liquidator so that Mr Cheema placed trust property in more easy reach of the Liquidator and authorised the sale of the Property through the use of a power of attorney without further reference to him.

122. Reading clause 2.1 as a set of conditions precedent which Mr Cheema could choose not to perform so as to bring all of the provisions of the Deed of Settlement to nought makes no commercial sense at all. The language used in it is not suggestive of such an operation.

123. First, the heading “Conditions Precedent” above clause 2 is of no effect because the parties agreed in clause 1.2(b) of the Deed of Settlement that headings are for convenience only and do not affect interpretation of the Deed of Settlement. In any event, such an expression does not provide any real guidance as to the proper operation of clause 2, which depends on the words used in it rather than any heading above it.

124. Secondly, the words used in clause 2.1 that “Prior to execution of this Deed the Director must…” needs to be compared to the words used in clause 5 that “The parties acknowledge and agree that, notwithstanding anything in this Deed, the provisions herein are not operative, binding and/or enforceable until such time as the Liquidator…”. The clarity of language used in clause 5 that the provisions in the Deed of Settlement would not be operative, binding or enforceable until the Liquidator obtained the Federal Court approval is not present in clause 2.1.

125. Whilst both clauses impose positive obligations upon the respective parties to the Deed of Settlement, it is clear that if the parties had intended that clause 2.1 operate as a set of condition precedents such that the terms of the Deed of Settlement would not come into existence and not be enforceable until all of the obligations contained in clause 2.1 were complied with, they would have utilised similar language to that used in clause 5.

126. Thirdly, clearly clause 2.1 was not intended to restrict the enforceability of the Deed of the Settlement in the event that the obligations contained in it were not complied with. The wording of clause 2.1 contemplates that Mr Cheema had to meet various requirements immediately upon the execution of the Deed of Settlement. The consequence of him failing to do so would give rise to a breach of clause 2.1 such that the Liquidator could enforce against him the payment of the whole of the Base Settlement Sum of $25 million pursuant to clause 8.1.

127. The plain words do not suggest that none of the obligations contained in the Deed of Settlement were to come into operation until Mr Cheema met his obligations in clause 2.1. Otherwise, Mr Cheema would be in a position where he could thwart the obvious commercial purposes and object behind the Deed of Settlement (being the settlement of the Federal Court Proceedings and the Supreme Court Proceedings and the immediate enforcement against him of any amounts that he failed to pay).

Did Avant Garde fail to comply with clause 6.2 of the Deed of Settlement?

128. The third argument advanced by Mr Cheema is that the Liquidator failed to comply with clause 6.2 of the Deed of Settlement, requiring the Liquidator to call for and adjudicate on all proofs of debt within 12 months of the Execution Date.

129. It is clear on the facts that Avant Garde is able to enforce clause 8.1 of the Deed of Settlement should Mr Cheema fail to comply with any of the terms of the Deed of Settlement. In the circumstances where Mr Cheema failed to repay the first instalment of $440,000 within 12 months of the Execution Date of 14 August 2020 (or any instalment thereafter), there was no opportunity for the Liquidator to call for and adjudicate on any proofs of debt. The result is that clause 6.3 is not engaged and the Base Settlement Sum of $25 million remains owing and outstanding by Mr Cheema to Avant Garde.

130. This argument is therefore rejected.

Was clause 12 of the Deed of Settlement breached?

131. The final argument advanced by Mr Cheema is that there has been a breach of clause 12 of the Deed of Settlement.

132. Clause 12 operates as a confidentiality clause, which prohibits the parties from disclosing the existence and terms of the Deed of Settlement except in specified circumstances. Regardless of whether a breach of confidentiality occurred on behalf of Avant Garde, any such breach does not act to prohibit Avant Garde from recovering the Base Settlement Sum or enforcing the terms of the Deed of Settlement against Mr Cheema, including the security granted to it in clause 7.1 of the Deed of Settlement which now attaches to the Surplus Funds.

133. This final argument is therefore also rejected.

CONCLUSION

134. It is clear that the evidence before the court is sufficient for me to determine the validity of the competing beneficial claims between Avant Garde and Mr Cheema. The statutory mandate for the just, quick and cheap resolution of the real issues in dispute support the conclusion that the court should make a final determination as to these competing claims.

135. Accordingly, I find that Avant Garde’s claim to the Surplus Funds has been validly established and that the Surplus Funds, together with interest, should be paid to it.

136. The orders I propose to make are as follows:

1. Order pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW), that the sum of $360,153.41, together with interest on that amount, be paid to the applicant.

2. Order that the third respondent pay the applicant’s costs of the proceedings.

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Decision last updated: 22 September 2023