Sayed v Hemat
[2011] WASC 183
•4 AUGUST 2011
SAYED -v- HEMAT [2011] WASC 183
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 183 | |
| 04/08/2011 | |||
| Case No: | COR:239/2009 | 7 JULY 2011 | |
| Coram: | COMMISSIONER SLEIGHT | 7/07/11 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Interim freezing order granted | ||
| B | |||
| PDF Version |
| Parties: | ANWAR SHAW WAFIQ SAYED GHULAM RASUL HEMAT ASSADULLAH SHIR HEMAT SHIR & SAYED DEVELOPMENTS PTY LTD |
Catchwords: | Application for a freezing order Principle to be applied Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) Rules of the Supreme Court 1971 (WA), O 52 r 5(5) |
Case References: | Western Australian Real Estate Investment Ltd v Pontoon Holdings Pty Ltd [1999] WASC 162 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
GHULAM RASUL HEMAT
First Defendant
ASSADULLAH SHIR
Second Defendant
HEMAT SHIR & SAYED DEVELOPMENTS PTY LTD
Third Defendant
Catchwords:
Application for a freezing order - Principle to be applied - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA), O 52 r 5(5)
(Page 2)
Result:
Interim freezing order granted
Category: B
Representation:
Counsel:
Plaintiff : Ms S Edwards
First Defendant : Mr S J Blyth
Second Defendant : Mr S J Blyth
Third Defendant : Mr S J Blyth
Solicitors:
Plaintiff : Summerslegal
First Defendant : Lewis Blyth & Hooper
Second Defendant : Lewis Blyth & Hooper
Third Defendant : Lewis Blyth & Hooper
Case(s) referred to in judgment(s):
Western Australian Real Estate Investment Ltd v Pontoon Holdings Pty Ltd [1999] WASC 162
(Page 3)
1 COMMISSIONER SLEIGHT: This matter concerns an application by the plaintiff for a freezing order to prevent the first defendant and the second defendant from causing the third defendant, a company, to dissipate its assets without giving an account to the plaintiff. The plaintiff claims a one-third interest in the company's assets as a shareholder.
History of proceedings
2 On 17 December 2009, the plaintiff, Mr Sayed, commenced proceedings in this court by originating process under the Corporations Act 2001 (Cth), seeking the following orders:
(a) a declaration that Mr Sayed holds 20 ordinary shares and 20 'B' class shares in the third defendant company;
(b) an order that the third defendant company pay a dividend to Mr Sayed equivalent to that paid to the first and second defendants;
(c) alternatively, an order that the second and third defendants purchase the one-third share of Mr Sayed in the third defendant company;
(d) interest on all sums awarded to Mr Sayed pursuant to s 32 of the Supreme Court Act1935 (WA);
(e) further or other relief, and costs
3 The application by Mr Sayed was made pursuant to s 232 and s 233 of the Corporations Act 2001 (Cth) which relate to remedies for oppressive conduct.
4 The application before me was for a freezing order. The application was accompanied by an affidavit of Mr Sayed sworn on 17 December 2009. The affidavit deposed to the following:
(1) The plaintiff, Mr Sayed, is a property developer and investor.
(2) In August 2003, Mr Sayed agreed with the first defendant (Mr Hemat) and the second defendant (Mr Shir) to form a company to carry out a property development business. Mr Sayed was to provide the expertise and arrange for the development of any land purchased by the company, with Mr Hemat and Mr Shir to act as financiers. It was agreed that each of them would hold a one-third share in the company.
(Page 4)
- (3) The third defendant was incorporated on 7 August 2003. Mr Sayed and Mr Hemat were appointed as directors and Mr Sayed was also the company secretary. Mr Sayed, Mr Hemat and Mr Shir each had an equal shareholding in the company, being 20 ordinary shares each and 20 'B' class shares each.
(4) The company undertook three property developments:
(i) a property in Flynn Street, Canning Vale, Western Australia (the Canning Vale property);
(ii) a property in Welshpool Road East, Wattle Grove, Western Australia (the Wattle Grove property);
(iii) a property consisting of 70 subdivisional lots at Nottingham Drive, Calamvale, Queensland (the Queensland property).
(5) For a period of time in 2007 and 2008, Mr Sayed travelled to and resided in Afghanistan.
(6) On 4 November 2008, Mr Hemat sent an email to Mr Sayed who was at that time in Afghanistan, seeking Mr Sayed's consent to an agreement whereby Mr Sayed resigned from the company and transferred his shares to Mr Hemat and Mr Shir. The reason for this proposal was that Mr Hemat and Mr Shir believed Mr Sayed had neither taken an active role in the affairs of the company nor contributed towards the purchase of any assets of the company since he had become a shareholder. Mr Sayed disputed this and says he had spent considerable time and energy on behalf of the company in respect of all three properties.
(7) On his return to Australia, Mr Sayed discovered that at a shareholders' meeting on 13 November 2008, Mr Hemat and Mr Shir had removed Mr Sayed as a director and secretary of the company.
(8) In February 2009, Mr Hemat and Mr Shir lodged with ASIC a change of company details notice, disclosing that Mr Sayed had transferred his shareholding in the company to Mr Hemat and Mr Shir. Mr Sayed disputes that he ever agreed to such a transfer occurring.
(Page 5)
5 The proceedings have been in abeyance until an urgent application for a freezing order was listed before the court on 7 July 2011. The need for an urgent application was disclosed in an affidavit of Ms Sonia Edwards, a solicitor acting for Mr Sayed, and sworn 7 July 2011. This affidavit disclosed the following:
1. On 21 December 2009, the third defendant company provided an undertaking to this court that, save for an amount of $30,000, the proceeds of the sale of various named lots of land would be paid into a trust account held by its solicitors Lewis Blyth & Hooper and such proceeds would not be dealt with until 4 pm on 21 January 2010. The undertaking was extended (through numerous extension agreements) until 29 October 2010.
6 By an exchange of emails, the parties agreed to vary the undertaking to provide:
(a) all moneys held in trust by Lewis Blyth & Hooper (which at that time stood at $4,086,856.68) be transferred into an interest bearing account with the National Australia Bank, Booragoon. The signatories to that account were a partner of Lewis Blyth & Hooper and a partner of Summerslegal (acting on behalf of Mr Sayed);
(b) any or all other moneys derived from the realisation of any of the third defendant's assets be paid into the interest bearing account with the National Australia Bank;
(c) the undertaking as varied be extended to 28 February 2011.
7 A subsequent variation was made extending the varied undertaking to 4 pm, Wednesday, 7 July 2001. By email, Mr Blyth, solicitor of Lewis Blyth & Hooper, advised that the varied undertaking would not be extended beyond 4 pm on Wednesday, 7 July 2011.
8 According to the affidavit of Ms Edwards, the subdivision of the Canning Vale land has been completed and sales of lots have occurred. The Wattle Grove property and the Queensland property have yet to be subdivided. The affidavit of Ms Edwards further states that she is instructed by Mr Sayed that Mr Hemat has stated to Mr Sayed that unless restrained by the court, it is intended that the third defendant pay moneys presently held in the joint account to Mr Hemat and Mr Shir (how this could occur without Mr Sayed consenting to it is not clear, as his solicitors are a joint signatory to the account).
(Page 6)
9 Ms Edwards' affidavit further states that Mr Hemat has sold his business in Sydney and has told Mr Sayed that, on realisation of the assets of the third defendant, Mr Hemat intends to relocate permanently to Germany. Mr Shir presently resides in Germany. Further, both the Wattle Grove property and the Queensland property are advertised for sale.
The plaintiff's application for a freezing order
10 The interim application by Mr Sayed is made pursuant to O 52A of the Rules of the Supreme Court1971 (WA) seeking a 'freezing order'. A freezing order is an order made for the purpose of preventing the frustration or inhibition of the court's process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.
11 For the court to make a freezing order in favour of an applicant who does not have a judgment the applicant must satisfy the court that he or she has a good, arguable case on an accrued or prospective action.
12 The grounds for seeking relief against a third party to protect the assets of a prospective debtor are set out in O 52A r 5(5).
13 Rule 5(5) provides as follows:
(5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that —
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because -
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor;
or
(b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under
- which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
14 In this case, the application concerns a freezing order being sought against third parties (Mr Hemat and Mr Shir) in order to protect the assets of a prospective judgment debtor, the third defendant.
15 The provisions of O 52A as to a freezing order are similar to the old rules that applied for obtaining a Mareva order or injunction. The rules that applied on an application for a Mareva order or injunction were summarised by Miller J in Western Australian Real Estate Investment Ltd v Pontoon Holdings Pty Ltd [1999] WASC 162. At [9] - [10], his Honour stated:
The law in relation to the Mareva injunction is in a fluid state. The most recent authority of Cardile v LED Builders Pty Ltd (1999) 73 ALJR 657 sets out the parameters of the remedy. It is not appropriate for me to seek to summarise the effect of that judgment, but I accept the submission of the plaintiff that the remedy is an evolving remedy and its precise contours have yet to be fixed. For a Mareva injunction to be granted it is necessary to show:
(1) a prima facie case for the plaintiff in the proceedings;
(2) a real risk or danger of the defendant's assets being dissipated or put beyond the reach of the Court if the order is not made;
(3) as in the case of any injunctive relief, a balance of convenience in its favour: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321.
I adopt and apply the test formulated in Patterson (supra) by Gleeson CJ (at 321-322) where his Honour said:
'The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.'
The purpose of the Mareva injunction is to preserve the status quo so that the administration of the law is not rendered ineffective
(Page 8)
17 In this case, the first and second defendants do not consent to the application for a freezing order, but do not oppose it. The terms of the freezing order sought are that until further order of the court, the first defendant, the second defendant and the third defendant 'not remove from Australia, or in any way dispose of, encumber, deal with or diminish the value of any of the third defendant's assets without the consent of the plaintiff or on order of this Honourable Court'.
18 It should be stressed that I have heard only one side of what has occurred. No responsive affidavit material has been filed by the first and second defendants. That is not unusual in such applications. Given the history of the matter as presented in the supporting affidavits lodged by the plaintiff, I am satisfied as to the following:
1. there is a prima facie case that the plaintiff is entitled to a one-third share of the assets of the third defendant;
2. having regard to all the circumstances, there is a danger that a judgment or prospective judgment against the third defendant will be wholly or partly unsatisfied because Mr Hemat and Mr Shir, as directors, may exercise their power of disposition over assets of the third defendant without accounting to Mr Sayed for any share he holds in such assets as a shareholder of the third defendant. I reach this conclusion that such a danger exists in light of the history as alleged by Mr Sayed that in his absence, he had been removed as a director and shareholder and a notice had been lodged with ASIC stating that he had been removed as a shareholder.
19 On the basis of the material before me, a freezing order should be made. The terms of this order are the subject of an amended minute of proposed orders agreed by the parties and, accordingly, I will make orders in accordance with this amended minute of proposed orders. The terms of those orders need not be set out in this decision, but it includes a freezing order in terms of that sought by Mr Sayed. This order is an interim order only.
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