Ratul v Islam (No 2)

[2022] NSWSC 1470

Supreme Court

New South Wales

Medium Neutral Citation:

Ratul v Islam (No 2) [2022] NSWSC 1470

Hearing dates:

19 October 2022

Date of orders:

19 October 2022

Decision date:

19 October 2022

Jurisdiction:

Equity - Duty List

Before:

Henry J

Decision:

Refuse to grant the relief sought in defendant’s notice of motion and make limited interlocutory orders. See [41]

Catchwords:

CIVIL PROCEDURE – Interlocutory application by defendant – where order sought to restrain the second plaintiff from making any payment to contractor – where order sought for commencement of payment of Director’s allowance of $10,000 in amount by second plaintiff to defendant – where order sought for recommencement of payment of 50% trail income from third party to defendant – whether serious question to be tried established – orders refused in terms sought but limited orders made in relation to notice and types of payment to be made to contractor – costs of first plaintiffs successful injunctions applications ordered to be paid by defendant

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Corporations Act 2001 (Cth)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Wang v Cai (No 2) [2021] NSWSC 1268

Category:

Procedural rulings

Parties:

Abu Walid Ratul (First Plaintiff)
Australian Real Estate Relation Pty Ltd ACN 619 522 182 (Second Plaintiff)
Md Rajibul Islam (Defendant; Self-Represented)

Representation:

Counsel:
J Raftery (Plaintiffs)

Solicitors:
Mitry Lawyers (Plaintiffs)

File Number(s):

2022/00277860

Publication restriction:

Nil

JUDGMENT – EX TEMPORE (REVISED)

1. The first plaintiff, Mr Ratul and the defendant, Mr Islam, are directors of and equal shareholders in the second plaintiff, Australian Real Estate Relation Pty Ltd (Company), which operates a real estate agency business pursuant to a Raine & Horne franchise agreement.

2. In these proceedings, which were commenced by Mr Ratul on an urgent basis last month, Mr Ratul sought and was granted mandatory injunctions on two occasions requiring Mr Islam to remove a stop placed on four bank accounts of the Company and, on 12 October 2022, an interlocutory injunction restraining Mr Islam from placing further stops on four of the Company's bank accounts, until further order of the Court. The background to the grant of the injunctions is set out in my ex tempore reasons dated 12 October 2022 (Ratul v Islam, 12 October 2022, unrep) (12 October Judgment).

3. In the 12 October Judgment, I noted that an injunction requiring Mr Islam to remove a stop on the Company bank accounts had been made by Kunc J on 16 September 2022 (which was complied with) and that the injunctions on 12 October 2022 (after another stop had been placed on the accounts by Mr Islam) were granted on the basis of the usual undertaking as to damages and an undertaking given by Mr Ratul that he would operate the Company bank accounts in connection with the business of the Company in and for the purposes of the ordinary course of business, as well as an order made that day that Mr Ratul and the Company would not make any payments or transfers to Farha Diba until 4:00pm today, or further order of the Court.

4. Ms Diba is Mr Ratul's wife. It is common ground that she has been receiving payments from the Company relating to sales commission that Mr Ratul claims Ms Diba is entitled to be paid in her capacity as an independent contractor and sales agent for the Company. The order in relation to Ms Diba was proffered by Mr Ratul at the 12 October hearing and made for a limited period in the context where Mr Islam’s claim, that the Company should not be making payments to Ms Diba, is the subject of a notice of motion which I granted Mr Islam leave to file on 12 October 2022 and listed for hearing before me today sitting as the Equity Duty Judge.

5. Ms Diba, who has been served with Mr Islam’s notice of motion as an interested party, and Mr Ratul are both represented at today’s hearing by Mr Raftery. Mr Islam is self-represented, as he was at the hearing before me on 12 October 2022.

Mr Islam’s notice of motion

6. Mr Islam has informed the Court that today he only presses for the relief sought at paragraphs 1, 3 and 4 of his notice of motion, he no longer presses for the order sought in paragraph 2 of his notice of motion and he wishes to defer seeking the relief at paragraphs 5, 6, 7 and 8 of his notice of motion until a future occasion.

7. The orders sought by Mr Islam in his notice of motion are being considered on the basis that Mr Islam seeks relief of an interlocutory nature, rather than on a final basis. This is consistent with the observations made at [21] of the 12 October Judgment, where I stated that:

“Whether any further interlocutory order in relation to Ms Diba should be made will be the subject of the hearing next week if the defendant wishes to pursue such an order on the next occasion, noting that he will need to make good that there is a serious question to be tried that the commission and other payments proposed to be made to Ms Diba are improper and not in the ordinary course of the company’s business, and the balance of convenience favours the making of such an order.”

8. Accordingly, the issues for determination today are whether, upon Mr Islam giving to the Court the usual undertaking as to damages, he should be granted interlocutory relief in the form of orders in the following terms:

1. The Company be restrained from making any payment to Ms Diba: paragraph 1 of the notice of motion;

2. The Company to commence payment of Director's allowance of $10,000 per month to Mr Islam as had been verbally agreed between the Company’s directors in August 2021: paragraph 3 of the notice of motion; and

3. Recommencement of payment of 50% trail income received from Expert Finance Pty Ltd (Expert Finance) to Mr Islam which was ceased from September 2022 by Mr Ratul: paragraph 4 of the notice of motion.

9. In support of his application, Mr Islam relies on his affidavits sworn on 21 September 2022 and 17 October 2022 and written submissions dated 12 October 2022.

10. Mr Ratul and Ms Diba (to the extent she has an interest in the order sought in paragraph 1 of the notice of motion) oppose the relief sought. They rely on an affidavit by Mr Ratul sworn on 14 October 2022, affidavits by Ms Diba sworn on 14 October 2022 and 18 October 2022, and written submissions dated 18 October 2022.

11. For the following reasons, I refuse to grant orders in the terms of paragraphs 1, 3 and 4 of Mr Islam’s notice of motion, although I have decided to make some limited orders relating to payments to Ms Diba until further order of the Court.

12. Dealing first with the relief sought at paragraph 4 of the notice of motion, this claim relates to a company, Expert Finance, a home mortgage broking business that Mr Islam asserts he helped Mr Ratul set up. As I understand Mr Islam’s evidence and submissions, Mr Islam claims to be entitled to this relief as both he and Mr Ratul worked for Expert Finance, they agreed to share profits and did so until around August 2022 and, since that time, Mr Islam has not received any profits from Expert Finance (Islam submissions dated 12 October 2022 at [14], Islam affidavit dated 21 September 2022 at [12] – [16]).

13. There are three issues with Mr Islam’s claim for interlocutory relief in relation to Expert Finance.

14. First, Expert Finance is not a party to these proceedings. In that context and in the absence of any evidence that Expert Finance was given notice of these proceedings and provided with an opportunity to make any submissions, I accept Mr Ratul’s submission that it is inappropriate to entertain Mr Islam’s claim for relief in relation to Export Finance’s operations and should refuse to grant it.

15. Second, and having considered the claim further since the hearing, in my view the evidence referred to at [12] above does not establish a prima facie case or serious question to be tried that Mr Islam is entitled to “payment of 50% trail income from Expert Finance”, as referred to in his notice of motion. Leaving to one side that it is not clear what is meant by “50% trail income”, Mr Islam’s evidence refers to an agreement to “share the profits” and not to trail income. Mr Islam’s own evidence indicates that he ceased doing any work from Expert Finance in April 2022 (Islam affidavit dated 21 September 2022 at [30]). The bank statements in evidence also indicate that payments to Mr Islam by Expert Finance have not been made regularly but on an ad hoc and sporadic basis and do not establish that no money has been deposited into the Expert Finance bank account since August 2022, as he claims.

16. Third, Mr Islam has also commenced District Court proceedings against Mr Ratul and Ms Diba (District Court proceedings) in which he seeks, amongst other things, to recover “half of trail income commissions” distributed to Expert Finance from October 2022 to date and future trail income in an amount of $12,500 per month. It is not appropriate for the same claims to be litigated in different Courts.

17. As to Mr Islam’s claim for an order that the Company commences payment of what is described as a “Director's allowance of the amount of $10,000 per month” to Mr Islam, I am also not satisfied that the evidence demonstrates that there is a serious question to be tried that in August 2021 Mr Islam verbally agreed with Mr Ratul, in their capacities as the Company’s directors, that Mr Islam would be provided with a payment of that amount from that date or from some other time.

18. According to Mr Islam’s affidavit dated 21 September 2022 (at [49]), in August 2021, Mr Islam asked Mr Ratul why Mr Islam had not been paid any profits from the Company which “[they] agreed to share…between [them]”, to which Mr Ratul responded by stating “There are no profits”. Mr Islam also says that during that conversation Mr Ratul told him that Ms Diba does the sales for the Company, she receives 50% of the commission of the properties she sells and that the other 50% goes to the administrative staff that support her, which is a standard arrangement in the industry (evidence that is also relevant to Mr Islam’s claim for the relief sought in paragraph 1 of his notice of motion). Mr Islam deposes to a subsequent conversation with Mr Ratul in November 2021, in which Mr Islam asked for a payment of $10,000 per month representing his share of the profits, to which Mr Ratul responded saying that “The [C]ompany can’t afford to do that. There are too many costs for the business … maybe the [C]ompany can afford to do that in a couple of months”.

19. Mr Islam accepts that he has not been paid $10,000 from the Company since August 2021 and his own evidence (Islam affidavit dated 21 September 2022) confirms that he has not been paid a share of profits, notwithstanding his various requests. However, Mr Islam submits that the Court should grant his relief as it is unfair that he has not received any profits from the Company in circumstances where Ms Diba has been paid and Mr Islam has given Mr Ratul money from his mortgage business over the years.

20. Even if I were to accept Mr Islam’s submissions that what has occurred was “unfair” to him and his submissions from the bar table (which are unsupported by his affidavit evidence) that he has difficulty meeting his financial commitments in the absence of the payments he claims, the issue he has is that his evidence does not, in my view, establish that an agreement existed of the nature he alleges, which is a prerequisite to making the order he seeks at paragraph 3 of the notice of motion. I accept Mr Raftery’s submission that the material before the Court on this application does not rise to the level required to establish an arguable or prima facie that there was an agreement reached in August 2021 between Mr Ratul and Mr Islam whereby $10,000 would be paid to Mr Islam each month, by way of a Director’s allowance, such as to warrant the grant of the relief sought.

21. I should also record that Mr Islam’s claim to be entitled to a payment of a Director’s allowance of $10,000 per month is the subject of his District Court proceedings.

22. Dealing next with Mr Islam’s claim for an order that the Company be restrained from making any payment to Ms Diba, there is some force in Mr Raftery’s written submissions that Mr Islam has not clearly identified the causes of action that he wishes to bring that would justify the order he seeks. That said, Mr Raftery accepts (appropriately, in my view) that based on the evidence, there is a serious question to be tried as to the terms of the agreement reached between Mr Islam and Ms Diba pursuant to which Ms Diba would receive payment of commission for sales and whether she or the Company would pay for her advertising and administrative support costs.

23. According to Mr Islam’s evidence (Islam affidavit dated 21 September 2022 at [32]), Mr Ratul introduced Ms Diba to the Company in 2021 after she was made redundant by her employer, an IT company. He deposes that in early 2021, they had a conversation to the effect that it was agreed that Ms Diba could join the real estate business as a contractor, she was to receive 50% of the sales commission if she made a sale and the lead was brought in by her, if somebody else brought in the lead and she made a sale, she would receive 25% of sales commission, and Ms Diba would pay her own costs, including for her own advertising and administrative support employees. Mr Islam deposes that he assumed that the commission payments to Ms Diba would not include the amount held for payment to Raine & Horne, he has concerns that Ms Diba has been paid amounts equal to about 50% of the gross receipts of the business and that profits have been paid to her over and above any commission payments to which she is entitled in accordance with the agreement reached. He also gives evidence that, if he was provided with information before payments to Ms Diba were made and was satisfied that she was being paid in accordance with the agreement, he would authorise payment to her (Islam affidavit dated 21 September 2022 at [34], [63], [64] and [69]).

24. In his 17 October 2022 affidavit at [5]-[7], Mr Islam gives evidence consistent with the terms of the agreement alleged and described at [23] above, asserts that the Company has promoted Ms Diba as the lead real estate agent and that she has used Company funds to provide new clients with hampers and gifts.

25. Mr Ratul deposes to a discussion with Mr Islam in which it was agreed that Ms Diba would get “just 50% of sales commission” (Ratul affidavit dated 14 October 2022 at [2]). Ms Diba’s evidence is that she had a conversation with Mr Ratul to the effect that she would receive “the same as everyone else which is 50% of the sales commission” and the “agency [would] take care of the rest, including all marketing and other costs” (Diba affidavit dated 18 October affidavit at [3]).

26. Based on the above evidence, I am satisfied there is a serious question to be tried as to the precise terms of the arrangement under which it was agreed that Mr Diba would be paid sales commission. In particular, whether the “50% of the sales commission” was to be a net or gross amount and whether the costs that Ms Diba incurs in relation to advertising, marketing and administrative support would be paid by her or by the Company.

27. Mr Islam did not address or lead evidence on the balance of convenience. Ms Diba’s evidence on that issue is that her only source of income is from the commissions achieved by securing a sale for the Company, that she has two young children aged 3 and 5, and that she has been working hard for the business, often working until late at night. She also gives evidence that she and Mr Ratul own numerous properties, including their family home and properties with Mr Islam and his wife. The title searches indicate that each of the properties are subject to a registered mortgage and there is no evidence of their unencumbered value. However, there is also no evidence to suggest that Ms Diba (or Mr Ratul) would abscond with her assets if commission payments continue to be made to Ms Diba.

28. Based on the evidence and the submissions, I decline to make an order in the terms sought by Mr Islam that the Company be restrained from making any payment to Ms Diba. This is primarily for the reasons that the order sought by Mr Islam seeks to restrain the Company from making any payment to Ms Diba, irrespective of the amount to be paid, and Mr Islam’s own evidence indicates that he agreed to Ms Diba being retained by the Company to act as a sale agent and was entitled to receive commission payments of up to 50% on her sales. I do not accept Mr Islam’s submission that the Company should be restrained from making any payments to Ms Diba because there is a “conflict of interest”. The fact that Ms Diba is Mr Ratul’s wife does not, of itself, amount to a conflict particularly as Mr Islam was aware of the arrangement which gives rise to what Mr Islam describes in his submissions as “the biggest issue”. It is also relevant to the decision to decline to grant relief that Mr Islam has known that Ms Diba has been receiving sales commission payments from the Company for some years and only made his claim in response to Mr Ratul’s applications for urgent relief. Further, Mr Islam did not identify in his evidence or submissions the amount that he claims has been overpaid to Ms Diba nor the amount that should be paid pursuant to the alleged arrangement (and yet appears to have made a claim against Ms Diba in the District Court proceedings for the refund of what are alleged to be “Company funds” in the amounts of $145,000 and $20,152.56).

29. I have, however, decided to make orders on an interlocutory basis and upon Mr Islam’s giving the usual undertaking as to damages that the Company be restrained from making payments to Ms Diba that are not in the nature of a commission for sales (such as a payment to Ms Diba for her marketing, advertising and other costs) and for the Company to notify Mr Islam of the amount of commission payments that are to be made to Ms Diba, together with documents (such as invoices) so that Mr Islam is on notice of the basis of the amount to be paid, prior to them being paid out. I consider these orders are appropriate to make in the context where there is clearly a dispute as to the nature and extent of Ms Diba’s entitlement and the interlocutory nature of the order. Mr Ratul’s and Ms Diba’s evidence is unclear as to whether the arrangement Ms Diba made with the Company extends to the reimbursement to her of marketing and other costs she incurs herself as a contractor, and the order made should have limited impact on Ms Diba as she can expect to continue to receive commission payments from the Company from which she should be able to pay disbursements she incurs until further order of the Court, to the extent there are any. There is also evidence before the Court of invoices from Ms Diba to the Company concerning the quantum of her commission payments, such that there should be no difficulty in the Company providing advance notice to Mr Islam (in his capacity as a director) of the payments that are intended to be made by the Company to Ms Diba for commission in the usual course of its business, until further order.

Future conduct of the proceedings

30. During the hearing today and at the hearing on 12 October 2022, Mr Islam has raised a number of concerns about the ongoing management of the Company and Mr Ratul's conduct, which he has described as “dishonest”, “improper” and “unfairly oppressive”. He has indicated to the Court that he believes that the Company is not insolvent and has ongoing value, and that he intends to bring an oppression claim and seek orders that Mr Ratul sell his shares in the Company to Mr Islam at a fair market value.

31. During oral submissions, Mr Raftery also indicated that it is anticipated that offers may be made by Mr Ratul to purchase the shares held by Mr Islam in the Company. This is in the context where the Raine & Horne franchise agreement in relation to the Company’s real estate business expires on 5 November 2022.

30. In those circumstances, I propose to list the proceedings before the Corporations List judge on Monday, 31 October 2022, rather than next Monday (24 October 2022) as Mr Islam sought. The time before the next Court appearance should provide the parties with an opportunity to engage in discussions about the resolution of the issues going forward by way of a sale of shares and some time for Mr Islam to prepare any further application he wishes to make in relation to the Company.

31. I will also stand over Mr Ratul’s summons, which seeks final declaratory relief that Mr Islam has breached his fiduciary duties, the partnership agreement, and directors’ duties pursuant to the Corporations Act 2001 (Cth), and the balance of Mr Islam's notice of motion, namely the relief sought at paragraphs 5, 6, 7 and 8, for further directions to be made on the next occasion.

Costs

34. Mr Raftery submits that a costs order should be made in favour of Mr Ratul in relation to his ex parte application before Kunc J and the subsequent notice of motion seeking injunctive relief on 12 October 2022. He submits that it is appropriate for the usual order to be made that costs follow the event in circumstances where it was Mr Islam's conduct of putting a stop on the accounts that resulted in the proceedings and Mr Ratul succeeded in obtaining the orders he sought.

35. As to the notice of motion filed by Mr Islam, Mr Raftery submits that a similar order should be made as Mr Islam only pressed three orders today and was entirely unsuccessful in respect of two of them, and Mr Ratul (and Ms Diba) succeeded in opposing the order sought by Mr Islam that restrained the Company from making payments to Ms Diba, albeit some restrictions were ordered by the Court.

36. The applicable principles on costs applications are well known. The power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is discretionary subject to the rules of the Court and statute. The Court’s discretion is very wide, noting that an order for costs is compensatory in nature, not punitive: see for example, Wang v Cai(No 2) [2021] NSWSC 1268 at [60] and the cases there cited.

37. The general rule is that costs follow the event unless it appears that some other order ought to be made as to the whole or part of the costs: Uniform Civil Procedure Rules 2005 (NSW), r 42.1 (UCPR). Costs of interlocutory applications are to be paid and otherwise dealt with in the same way as the general costs of the proceedings unless the Court otherwise orders: UCPR, r 42.7.

38. In my view, it is appropriate in this case that an order be made that Mr Islam pay the costs of Mr Ratul’s application seeking the mandatory and interlocutory injunctions that Mr Islam be ordered to remove the stop instructions and restore access to the Company bank accounts and be restrained form potting any further stop orders, as sought in an ex parte basis before Kunc J and in the notice of motion that was filed in Court and the subject of the 12 October Judgment.

39. I accept Mr Raftery's submission that Mr Ratul’s success on those applications and the circumstances that gave rise to them are sufficient to warrant a costs order against Mr Islam, particularly as his conduct required a further application to be made to remove the stop instruction after the initial application had been granted and he consented to most of the orders that were ultimately made by the Court on 12 October 2022. To my mind, the applications made involved the determination of a separately identifiable and discrete aspect of the case, and a costs order should be made to reflect that.

40. I am, however, of the view that the costs of the hearing of Mr Islam's notice of motion to date should be reserved, so that they can be considered together with the outcomes of the other orders Mr Islam seeks, when they have been determined. I should record that if Mr Islam does not pursue the balance of his motion, I would be inclined to order him to pay Mr Ratul’s (and Ms Diba’s) costs of the motion having regard to Mr Ratul’s substantial success after a hearing on the merits of the orders sought today.

Orders

41. For these reasons I make the following orders:

In relation to the defendant’s Notice of Motion filed in Court on 12 October 2022 (Defendant’s Motion):

1. Upon the defendant giving the Court the usual undertaking as to damages:

1. Order that the first and second plaintiff is not to make any payment to Farha Diba other than in relation to the payment of the commission on sales, until further order of the Court;

2. Order that the first and second plaintiffs are to give 24 hours’ notice to the defendant of any commission payments to be paid to Farha Diba, together with a copy of the documents that identify the basis for the amount of the sales commission to be paid, until further order of the Court.

2. Otherwise, refuse to make the orders sought at paragraphs 1, 3 and 4 of the Defendant’s Motion.

3. Note that the defendant does not press paragraph 2 of the Defendant’s Motion.

4. Note that the defendant intends to press paragraphs 5, 6, 7 and 8 of the Defendant’s Motion on the next occasion.

5. Reserve costs in relation to the Defendant’s Motion.

In relation to the first plaintiff’s applications for mandatory injunctions before Kunc J and Henry J:

6. Order the defendant to pay the first plaintiff’s costs of those applications, up to and including 12 October 2022 on an ordinary basis, as agreed or assessed.

In relation to the future conduct of the proceedings:

7. Vacate order 6 of Kunc J’s orders made on 26 September 2022 and list the proceedings, including the balance of the Defendant’s Motion, for directions at 9.30am on Monday, 31 October 2022 before the Corporations List Judge.

8. Note that the defendant has indicated that he intends to bring an oppression claim in relation to the first plaintiff and seek an order that the first plaintiff sell to the defendant his shares in the second plaintiff.

9. These orders be taken out forthwith.

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Decision last updated: 26 October 2022