Seedat v Banks Group Perth Pty Ltd (Under External Administration)
[2023] WASC 101
•28 MARCH 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SEEDAT -v- BANKS GROUP PERTH PTY LTD (UNDER EXTERNAL ADMINISTRATION) [2023] WASC 101
CORAM: ACTING MASTER MCDONALD
HEARD: 23 MARCH 2023
DELIVERED : 23 MARCH 2023
PUBLISHED : 28 MARCH 2023
FILE NO/S: COR 47 of 2023
BETWEEN: DAWOOD GOOLAM HOOSEN SEEDAT
First Plaintiff
DAWOOD GOOLAM HOOSEN SEEDAT as trustee for THE DRS SUPERANNUATION FUND
Second Plaintiff
DAWOOD GOOLAM HOOSEN SEEDAT as trustee for THE ADS SUPERANNUATION FUND
Third Plaintiff
DAWOOD GOOLAM HOOSEN SEEDAT as trustee for THE DRS TRUST
Fourth Plaintiff
AND
BANKS GROUP PERTH PTY LTD (UNDER EXTERNAL ADMINISTRATION)
Defendant
Catchwords:
Practice and procedure ‑ Application for leave to commence an action for damages against a company under external voluntary administration ‑ Limitation period about to expire ‑ Whether leave should be granted ‑ Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s500(2)
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | H Q Vu |
| Second Plaintiff | : | H Q Vu |
| Third Plaintiff | : | H Q Vu |
| Fourth Plaintiff | : | H Q Vu |
| Defendant | : | In person |
Solicitors:
| First Plaintiff | : | Forbes Kirby |
| Second Plaintiff | : | Forbes Kirby |
| Third Plaintiff | : | Forbes Kirby |
| Fourth Plaintiff | : | Forbes Kirby |
| Defendant | : | In person |
Case(s) referred to in decision(s):
Galati-Sardo v Career Boss WA Pty Ltd (In Liq) [2021] WASC 278
Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408
ACTING MASTER MCDONALD:
(This judgment was delivered extemporaneously and has been edited from the transcript.)
This is an application by the plaintiffs made pursuant to s 500(2) of the Corporations Act 2001 (Cth). The plaintiff seeks leave to commence proceedings in the Supreme Court of Western Australia against the defendant. For the following reasons it is appropriate that leave be granted.
Factual background
The application was made by an originating process filed on 21 March 2023. The application is supported by a minute of proposed orders filed on 27 March 2023 and the affidavit of Mr Huan Quoc Vu, a solicitor for the plaintiffs, filed 22 March 2023 (affidavit of Mr Vu).
A hearing of the application was listed on an urgent basis as it is said the relevant limitation period will arguably expire on 27 March 2023. The matter was listed for hearing on 23 March 2023 on an ex parte basis. The liquidators of the defendant were put on notice of the hearing but advised they did not intend to appear.
The factual background is taken from the affidavit of Mr Vu. Mr Vu deposes, among other things, to the following.
The first plaintiff is the father of Mr Ahmed Seedat (Ahmed).[1] Ahmed:
(a) commenced employment with the defendant (Banks Group) in or about 2006; [2] and
(b) between 1 July 2015 and 5 September 2018, was a director of the defendant.[3]
[1] Affidavit of Mr Vu [6.3].
[2] Affidavit of Mr Vu [6.4].
[3] Affidavit of Mr Vu 'HQV-4' (24).
In or around 2011 the first plaintiff engaged the professional services of the Banks Group through his son Ahmed.[4] Between 2011 and 2018, based on financial advice the first plaintiff received from the Banks Group (primarily through his son Ahmed and its employees), the first plaintiff transferred his personal assets, including his savings, shares and funds from his superannuation, into the various entities that were under the control of the Banks Group for investment purposes which were accumulatively worth approximately $2,471,499.[5]
[4] Affidavit of Mr Vu [6.5].
[5] Affidavit of Mr Vu [6.6].
Based on the financial advice from the Banks Group, the first plaintiff caused the DRS Superannuation Fund, the ADS Superannuation Fund and the DRS Trust to be created and controlled by the Banks Group.[6] Mr Vu advised from the bar table that on investigation the first plaintiff and his wife are the trustees for each of these entities and in that capacity are the second, third and fourth plaintiffs respectively.[7]
[6] Affidavit of Mr Vu [6.7].
[7] The letter from the plaintiff's solicitors to the defendant’s insurer dated 3 June 2022 describes both Mr and Mrs Seedat as joint trustees for DRS Super Fund, Mrs Seedat only as trustee for the ADS Super Fund, and Ahmed as trustee for the DRS Trust with Mr and Mrs Seedat as beneficiaries; affidavit of Mr Vu 'HQV-8' at pages (73 ‑ 74);.
Mr Vu deposes that on 28 May 2019, Ahmed was sentenced to life imprisonment with a minimum non‑parole period of 23 years for murder. Shortly after becoming aware of Ahmed's arrest, the first plaintiff immediately enquired with the Banks Group concerning his investments. In or about 2018, following Ahmed's arrest, the first plaintiff learned that his securities and investments, which were in the control of the Banks Group, had been sold or dissipated or were no longer in the Banks Group's control. A significant proportion of the funds from the sale of the first plaintiff's house, namely $1,621,959, had allegedly been misappropriated.[8]
[8] Affidavit of Mr Vu [6.9] – [6.12].
It is further said by Mr Vu that on 7 January 2022, Ahmed was committed to the District Court of Western Australia for 23 charges for stealing, gaining benefit by deceit and causing detriment by deceit. Ahmed was found guilty and sentenced to terms of imprisonment for the charges preferred in the District Court.[9] Annexed to the affidavit of Mr Vu is a charge list of the counts in the District Court and a statement of material facts in relation to the counts including those naming the first plaintiff as the victim in connection with the misappropriation of the funds from the proceeds of the sale of the first plaintiff's house.[10]
[9] Affidavit of Mr Vu [6.13] – [6.14].
[10] Affidavit of Mr Vu 'HQV-6', 'HQV-7'.
The affidavit of Mr Vu annexes correspondence between the plaintiffs' solicitors and the Banks Group's insurers regarding the availability of an insurance policy.[11] The insurance policy provided to the plaintiffs’ solicitors reveals that the Banks Group was insured between 1 December 2017 to 1 December 2018, the policy has retroactive cover, the limit is $5 million for any one claim and that the policy agrees to indemnify the defendant against any civil liability for compensation arising from any claim made against it:
(a) as a result of a breach of professional duty in the conduct of its profession; and
(b) under the Australian Consumer Law.[12]
[11] Affidavit of Mr Vu [8], 'HQV-8'.
[12] Affidavit of Mr Vu [9] ‑ [10], 'HQV-9'.
Mr Vu deposes to his belief that the policy held by the defendant for the relevant period is valid and would respond to the plaintiffs' proposed claim.[13]
[13] Affidavit of Mr Vu [11].
Annexed to the affidavit of Mr Vu is a copy of the current company extract for the defendant procured from the Australian Securities and Investment Commission on 14 March 2023.[14] The search reveals that a liquidator was appointed on 6 August 2021 by the creditors' voluntary winding up.[15]
[14] Affidavit of Mr Vu [4], 'HQV-1'.
[15] Affidavit of Mr Vu [4], 'HQV-1' (12).
Proposed action
The plaintiffs seek to bring an action by writ of summons against the Banks Group and the defendant's insurer. Against the Banks Group the plaintiffs propose to bring an action for breach of contract, breach of duty of care, breach of trust, and misleading and deceptive conduct pursuant to the Australian Consumer Law, the limitation period for which is six years.
The conduct complained of spans a period from 2012 to 2018. Specifically, counsel for the plaintiffs pointed to an allegedly unauthorised withdrawal that occurred on 29 March 2017 from an account entitled 'Mr Ahmed Dawood Seedat ITF The DRS',[16] which if found to give rise to damage would require an action to be brought before 29 March 2023. To be clear, leave to commence an action pursuant to s 500(2) of the Corporations Act is without prejudice to any limitation defences that might be raised in the substantive proceedings.
[16] Affidavit of Mr Vu [6.12]] 'HQV-5' (33).
Notice
Mr Vu deposes that notice of this application attaching the proposed Writ with an Indorsement of Claim has been given to the liquidators of the defendant who have confirmed that they neither consent to nor oppose the plaintiffs' application for leave to commencing an action pursuant to s 500(2) of the Corporations Act.[17]
[17] Affidavit of Mr Vu [12] – [13], 'HQV-10', 'HQV-11'.
Applicable legal principles
Section 500(2) of the Corporations Act provides that after the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company (defendant) except by leave of the Court and subject to such terms as the Court imposes.
In Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408, Beech J outlined the principles relevant to an application under s 500(2) for leave to proceed against a company in liquidation in the following terms:[18]
[18] Latimer v Cutwood Panels Pty Ltd (in liq) [6] ‑ [14].
7Like provision in respect of companies being wound up in insolvency or by the court is made in s 471B. The same principles govern the grant of leave under these sections.
8Part of the purpose of the requirement of leave is to avoid a company in liquidation being subject to a multiplicity of time consuming and expensive actions: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314, 315 ‑ 317; Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550, 555; Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 [21].
9The discretion to grant or refuse leave is broad. It is not possible or appropriate to attempt to state exhaustively the relevant considerations. Among the relevant considerations are the amount, seriousness and nature of the claim; the degree of complexity and legal factual issues, and the stage the proceedings have reached: Re Gordon Grant (317); Viscariello [21]; Lawless v Mackendrick [No 2] [2008] WASC 15 [35]; Duke v Rain Bow Pty Ltd [2011] VSC 599 [19].
10It has often been said that there must be no prejudice to the creditors, or to the orderly winding up of the company, before the action is allowed to proceed: Re Gordon Grant and Grant Pty Ltd (in liq) (1982) 6 ACLR 727, 730; Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, 649 ‑ 650; Re AJ Benjamin Ltd (in liq) [1969] 2 NSWR 374, 376; Duke v Rain Bow Pty Ltd [20].
11In Haviland v Joslow (No 4) Pty Ltd [1979] 2 NSWLR 318, 319 Needham J stated that the court should not grant leave to proceed or to commence proceedings against a company in liquidation if it appears there is no possibility that the company will be able to meet any part of damages awarded against it. That was said to be based on the principle that the court should not give its imprimatur to fruitless proceedings which would involve a waste of time and money. That statement of principle has been cited in a number of cases since. See, for example, Maher v Taylor [1984] 1 NSWLR 231, 233; ASIC v Managed Investments Ltd (No 2) [2012] QSC 72 (pages 2 ‑ 3).
12In Re AJ Benjamin (376), Street J stated that there would be a good reason to refuse leave when there is no prospect of surplus assets in the company and no question of insurance. That statement was cited with approval in Maher v Taylor (234).
13The position is different if there is an insurer standing behind the company in liquidation that will pay the amount of any judgment awarded. That has been said to be a factor strongly favouring the grant of leave, as in those circumstances, the grant of leave will generally not prejudice creditors: Lawless v Mackendrick [No 2] [37]; Re AJ Benjamin; Re Sydney Formworks; Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329.
14A claimant seeking leave need only to demonstrate a serious question to be tried: Vagrand Pty Ltd v Fielding (556).
I adopt and apply these principles in the determination of this application.
Disposition
Having regard to the affidavit material before me, I am satisfied that the plaintiffs have demonstrated that there is a serious question to be tried. Although not direct evidence, I am satisfied the plaintiffs have grounds to bring a claim in damages and/or compensation in respect of professional services provided by the Banks Group to each of the four plaintiffs. There is evidence that the Banks Group were managing the plaintiffs' investment portfolios, namely the DRS Superannuation fund and ADS Superannuation Fund and as at 21 April 2017, Account 1 was valued at $1,642,289.04 and Account 2 was valued at $446,705.[19] Ahmed was a director of the Banks Group between 1 July 2015 and 5 September 2019.[20]
[19] Affidavit of Vu [6.7] 'HQV-3'.
[20] Affidavit of Vu [6.8] 'HQV-4'.
There is evidence the proceeds of the sale of the first plaintiff's house were deposited into an account in the name of 'Mr Ahmed Dawood Seedat And The DRS' being the DRS Trust created by the Banks Group from which there were numerous withdrawals.[21] According to Mr Vu's affidavit those withdrawals were the subject of criminal charges resulting in convictions in the District Court.[22] Counts 97 and 98 in respect of which Ahmed was convicted related to the first plaintiff’s funds.[23]
[21] Affidavit of Vu 'HQV-5'.
[22] Affidavit of Vu [6.12] ‑ [6.14], [7].
[23] Affidavit of Vu [6.12] 'HQV-7'.
Against the nature and seriousness of the plaintiffs' claim, I have weighed up the status of the defendant company, a company under external administration. There is no evidence before me of any prospect of surplus assets in the defendant company, a factor which would be a good reason to refuse leave.[24] However, in this case there is evidence of a relevant insurance policy. There is evidence that the defendant's insurer has been put on notice of the plaintiffs' proposed claim by way of letter dated 3 June 2022,[25] although there is no evidence of any notice being given of this application. In response to the notice of the proposed claim the insurer provided the solicitors for the plaintiffs with a copy of the insurance policy for the period during which the withdrawals referred to above took place.[26]
[24] Galati-Sardo v Career Boss WA Pty Ltd (In Liq) [2021] WASC 278, [16].
[25] Affidavit of Vu [8]. 'HQV-8'.
[26] Affidavit of Vu [9], 'HQV-9'.
The willingness of the insurer to respond and whether or not the insurer will ultimately respond cannot be discerned from the affidavit material.
Counsel nevertheless seeks orders that contemplates that any judgment entered against the defendant would not be able to be enforced without leave of the Court. This form of order provides a safety net for the defendant and creditors. It is envisaged that upon enforcement of any judgment the court may revisit the matter of insurance and whether the insurer will meet any judgment sum.
Conclusion
In all of the circumstances, I am satisfied that there is a serious question to be tried. In the absence of any evidence about the assets held by the liquidator and potential claims by creditors, the evidence in relation to the insurance tips the balance in favour of leave being granted. In all of the circumstances and for these reasons, I make orders in the terms sought by the plaintiffs in their originating motion.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CM
Associate
28 MARCH 2023
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