Zenah Project Developments Pty Ltd v Kanj (No. 2)

[2020] NSWDC 380

District Court

New South Wales

Medium Neutral Citation:

Zenah Project Developments Pty Ltd v Kanj (No. 2) [2020] NSWDC 380

Hearing dates:

21 July 2020

Date of orders:

21 July 2020

Decision date:

21 July 2020

Jurisdiction:

Civil

Before:

Abadee DCJ

Decision:

See paragraphs 38 and 42

Catchwords:

PRACTICE AND PROCEDURE – whether proceeding should be summarily dismissed – action for conversion for allegedly stolen prestigious motor vehicle – whether proper claimant joined – where manager of corporate plaintiff ignorant of underlying transaction – where controller of corporate plaintiff is undischarged bankrupt – where potential alternative claimant is in external administration and has not asserted title to stolen vehicle

Legislation Cited:

Bankruptcy Act1966 (Cth), ss 5, 58, 77

Uniform Civil Procedure Rules 2005 (NSW), rr 6.29, 7.2, 13. 4, 14.23

Cases Cited:

Cachia v Hanes (1994) 179 CLR 403

Knight v FP Special Assets Ltd (1992) 174 CLR 178

Category:

Principal judgment

Parties:

Zenah Project Developments Pty Ltd (Plaintiff)
Mr H Kanj (Defendant)

Representation:

No appearance by the plaintiff
Defendant appeared in person

File Number(s):

2019/292025

Publication restriction:

Nil

Judgment

INTRODUCTION

1. Before the Court is consideration of whether the proceeding should be summarily dismissed on account of the wrong plaintiff continuing to agitate the claim against the defendant.

2. This issue comes about because on 22 June 2020 I made certain procedural directions concerning this matter. My reasons for doing so were published as Zenah Project Developments Pty Ltd v Kanj [2020] NSWDC 322 (‘My Earlier Reasons’). What follows in these reasons assumes some familiarity with My Earlier Reasons. Indeed, these reasons are to be properly construed in the light of My Earlier Reasons.

3. Relevantly, on 22 June 2020, I directed that:

1. the plaintiff be given the opportunity to show cause why the proceeding should not be dismissed against it with indemnity costs; and

2. the plaintiff and Mr Mehajer be given opportunity to argue who should be liable to pay those costs.

4. The Court forwarded those reasons to the liquidator to Mehajer Bros Pty Ltd and to Mr Ayach.

5. On 22 June 2020, unlike on the earlier occasion (15 June 2020) when Mr Salim Mehajer purported to appear for the plaintiff, a solicitor appeared for the plaintiff. So as to ensure that he was apprised of the reasons and the directions, on 24 June 2020, I arranged for my Associate to email My Earlier Reasons to Mr Mehajer through the email address he had used to directly correspond to the Court; when purporting to act for the plaintiff.

6. It is notable that when the proceeding was before me today, the legal representative who appeared on 22 June 2020 had withdrawn. When the matter was called today, Mr Kanj appeared in person, as before. There was no appearance for the plaintiff.

Adjournment Application

7. In the early hours of this morning, my Associate received an email (at 12:22am) purporting to be from Ms Melissa Tysoe (Mr Mehajer’s partner). The email attached two related documents which were to the substantial effect that Mr Mehajer had last week undergone spinal surgery that had been arranged for him in the first week of July. An application was made for an adjournment for two further weeks. It was foreshadowed that a “critical” affidavit of Mr Mehajer would follow as soon as possible.

8. I note that no explanation was supplied to the Court before today as to Mr Mehajer’s absence even though it was obviously apparent from as early as 8 July 2020 that he might be absent today and, indeed, his treating surgeon had suggested that adjournment might be required.

9. In my opinion, it is unnecessary to adjourn this proceeding. Mr Mehajer’s participation was, as contemplated by my directions on 22 June 2020, predicated only upon his being potentially affected by a costs order and, accordingly, his submissions would have been confined to that subject. For reasons that are to follow, no such costs order will be made at all, let alone a costs order made personally against him.

10. The party that is affected by the issue currently under the Court’s consideration – the plaintiff – has not brought the application for adjournment. Mr Mehajer is not the lawyer for the plaintiff and had the issue been agitated, it is speculative, to say the least, that I would have granted leave for him to act for it as a lay advocate. Further, since at least 15 June 2020, when the Court flagged the issue of the proper claimant, Mr Mehajer has had sufficient opportunity, and has availed himself of that opportunity, to supply affidavit evidence for the plaintiff’s use on that particular subject. This is a matter which will be developed further below in some detail.

11. The adjournment application is therefore refused.

FACTUAL BACKGROUND

12. To reiterate, the substantive issue that has recently emerged is who is the correct plaintiff to bring the suit for damages against the first defendant, arising from a prestigious (Rolls Royce) vehicle which was allegedly stolen by the first defendant.

13. As recounted, when the proceeding commenced on 17 September 2019, it was Mr Mehajer’s sister, Ms Zenah Osman, identified as the plaintiff. Contrary to r 14.23(2) of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’), the statement of claim was not verified.

14. A week later, Ms Osman disclaimed any interest and the present plaintiff, Zenah Project Developments Pty Ltd, was substituted. An ASIC notice published on 12 May 2020 indicates that Zenah Project Developments Pty Ltd is presently the subject of an ASIC proposal for deregistration, although the currency of that application is not known to the Court.

15. Mr Mehajer owns 9 out of 10 of the shares issued by that company (with the other shareholder being Amal Mehajer, who is apparently Mr Mehajer’s mother). The director of Zenah Project Developments Pty Ltd is Mr Kenny Ayach. Mr Ayach was appointed as director on 25 July 2016.

16. On 12 June 2020, the last business day before the proceeding was mentioned before me on 15 June 2020, Mr Mehajer sent an email to my Associate (at 12:42pm), sending certain attachments. He also requested that he, and Mr Ayach, appear by telephone link. The attachments that were sent were unsigned and unsworn affidavits from Mr Mehajer and Mr Ayach. However, in the covering email, Mr Mehajer, clearly purporting to act for the plaintiff, said that the “plaintiff would rely” on the emails and said that they would be sworn that day and lodged in the District Court (at Parramatta). In another email message to my Associate on 19 June 2020, Mr Mehajer relevantly re-sent the same affidavits he had sent on 12 June, but in this message, he represented that he at least had attempted to file the affidavits with he and Mr Ayach witnessing each other’s affidavit.

17. In Mr Ayach’s (unsworn) affidavit supplied to the Court, Mr Ayach said that:

• he ‘understood’ that the proceeding originated in the District Court. Mr Ayach did not say when he acquired such understanding;

• he consented to Mr Mehajer acting on the company’s behalf “as he greatly understands the nature of the case”;

• “…the events relating to the stolen vehicle is better understood and known by Salim Mehajer”; and

• he consented to Mr Mehajer giving oral submissions “following his knowledge of the matter.”

18. In Mr Mehajer’s (unsworn) affidavit supplied to the Court, Mr Mehajer relevantly:

• stated that the subject vehicle was purchased by the company Mehajer Bros Auto Pty Ltd, of which he was the majority shareholder;

• annexed a document from the financier, being a quotation addressed to “Mehajer Bros Pty Ltd ATF Mehajer Bros Trust”; and

• stated that “…the cause of action sold to Zenah Project Developments Pty Ltd”. As I noted in My Earlier Reasons, there was no document to substantiate such transaction or indication of when it occurred or, what, if any, consideration was given by Zenah Project Developments Pty Ltd.

19. On 19 June 2020, the last business day before the mention on 22 June 2020, Mr Mehajer sent another email to my Associate, which I have referred to. In addition to re-sending the earlier affidavits of himself and Mr Ayach, Mr Mehajer relevantly sent a supplementary affidavit from Mr Ayach. This was not yet signed or filed. That affidavit generally cited attempts by the plaintiff to obtain legal representation and contained undertakings as to what might occur if the plaintiff obtained a monetary judgment. In effect, Mr Ayach sought a judgment with the proceeds placed into trust so that the proceeds could be made accessible to the company’s secured creditors. Curiously, (at paragraph 6), he gave some hearsay evidence to the effect that Mr Mehajer’s trustee in bankruptcy “has no issue/s if my company (the plaintiff) peruses (sic) the cause of action recorded in the Amended Statement of Claim – despite Salim Mehajer being the sole shareholder”.

20. Later, in the same affidavit, at paragraphs 13-15, Mr Ayach (not Mr Mehajer) sought to correct Mr Mehajer’s earlier affidavit of 12 June 2020. The effect of this was that, so far as Mr Ayach was concerned, Mr Mehajer meant to say that it was Mehajer Bros Pty Ltd, not Mehajer Bros Auto Pty Ltd, which was the corporate entity which purchased the prestige vehicle.

21. However, Mehajer Bros Pty Ltd went into liquidation on 19 November 2018. Its liquidator is Mr Domenic Calabretta, who is the Chief Executive Officer of the insolvency firm Mackay Goodwin. Mackay Goodwin is a national firm, whose main address appears to be in Bridge Street, Sydney.

22. Then, in an attempt to substantiate the assertion that the liquidator of Mehajer Bros Pty Ltd has been informed about this action, Mr Ayach attached an email from Mr Mehajer to Mr Andrew Quinn. Mr Quinn has been identified as the point of contact for Mr Mehajer. Mr Quinn appears to be the General Manager of the firm’s Brisbane operations.

23. In an email which Mr Mehajer sent to Mr Quinn on 16 June 2020 (at 11:21am), Mr Mehajer indicated, when notifying Mr Quinn of the action, that he, i.e. Mr Mehajer, wanted to commence the proceeding against the present first defendant. This was because Mr Mehajer was the personal guarantor on the loan.

24. Consistently with Mr Ayach’s belief that Mr Mehajer was mistaken in attributing the acquisition to Mehajer Bros Auto Pty Ltd, in this email message, Mr Mehajer noted that it was Mehajer Bros Pty Ltd (now in liquidation) who was the entity that took out the loan.

25. Mr Mehajer then said (at point 9 of his email) that “…the claim has been originated by company Zenah Project Developments who has no rights to the claim…” (emphasis supplied).

FINDINGS

26. As noted in My Earlier Reasons, it appeared to me on the basis of the evidence sent to the Court as at 22 June 2020, that Zenah Project Developments Pty Ltd is not the correct entity to have commenced this claim to recover the vehicle or its proceeds.

27. It also appeared to me that Mr Mehajer’s message to Mr Quinn that Zenah Project Developments had “no rights to the claim” was contradictory to Mr Mehajer’s assertion in his affidavit of 12 June 2020 that the ‘cause of action’ (in relation to the vehicle) was ‘sold’ to Zenah Project Developments Pty Ltd. The two statements cannot stand together.

28. Further, if there had been no assignment of any right of action, it appeared to the Court that the only entity with an interest in the vehicle was Mehajer Bros Pty Ltd, which company was in liquidation. That entity had no awareness of this proceeding when it commenced on 17 September 2019. Indeed, it has only very recently been notified, by email.

29. Also relevant, and I find, that the director of Zenah Project Developments Pty Ltd, Mr Ayach, was not aware of the proceeding at the time that the company was made the plaintiff in this proceeding. His earlier affidavit merely vaguely referred to his ‘understanding’ that the proceeding had been commenced by the company of which he was director. Mr Ayach has not proven any authority that he, as a properly authorised director, had to commence the proceeding (as proven by the content of an affidavit complying with r 7.2 of the UCPR). By his own affidavit, I find that Mr Ayach was only alerted to the proceeding having commenced in the name of Zenah Project Developments Pty Ltd when Mr Mehajer informed him that this was so. He said he consented to it being “continued”. He did not say that he consented to it being ‘commenced’ in the first place. It was no small wonder that Mr Ayach gave his consent to Mr Mehajer to act for the company in view of the latter’s greater ‘knowledge’ or ‘understanding’ of the case. So far is presently apparent, the Court is not satisfied that Mr Ayach has any knowledge or understanding about the proceeding other than what Mr Mehajer has told him about it.

30. This means that I find that Mr Mehajer, who formally controls Zenah Project Developments Pty Ltd, was the person responsible for substituting that entity as the plaintiff. I also infer, although it is unnecessary for this application to finally decide, that it was likely that he originally instigated the claim in the name of his sister; and that it was only when she realised this that she tried to remove herself from the picture, as it were.

31. As his email to Mr Quinn on 16 June 2020 indicates, Mr Mehajer inserted Zenah Project Developments Pty Ltd as the plaintiff in the knowledge or belief that it had no rights to make a claim to the vehicle. Mr Mehajer indicated that it was really he who was the real claimant to the proceeding. He had no bona fide belief that the current plaintiff had such claim. The inference is irresistible that when he had earlier asserted (at paragraph 12) in his affidavit of 12 June 2020 that the cause of action was ‘sold’ to the plaintiff, that assertion was false.

CONSEQUENCES FOR PROCEEDING

32. The proceeding instituted by Zenah Project Developments Pty Ltd must fail as its controller, Mr Mehajer, himself says that it has no interest in the car which the company (or Mr Mehajer in substance) asserts was stolen and its manager, Mr Ayach, has no direct knowledge of the transaction by which the company purported to acquire title to the car. This company is not the proper claimant. If there was some other potential claimant who could step into its shoes, the appropriate remedy would be to remove this entity as a party to the proceeding, pursuant to r 6.29 of the UCPR and to join the correct claimant.

Alternative claimant?

33. The next question is whether there is someone else, or some other entity, who might bring the claim.

34. Mr Mehajer has not personally asserted title to the car. As an undischarged bankrupt, he had disclosure obligations to the trustee and his property may vest in the Official Trustee (Bankruptcy Act1966 (Cth), ss 5, 58 & 77). There is no evidence to suggest that such disclosure obligations have been discharged in a way that might support any personal claim on behalf of Mr Mehajer to the vehicle.

35. There is no admissible evidence before the Court as to the attitude of the liquidator of Mehajer Bros Pty Ltd.

36. I am conscious that it is not desirable for there to be a multiplicity of proceedings should this one be dismissed, only to have another entity commence a new one. However, the Court is left in the invidious position of any judgment given being, in substance, a judgment in rem, affecting the rights of third parties who the Court has no confidence in believing has, or have, been properly informed that its interests might be affected. This is so notwithstanding the Court’s multiple efforts, and indeed, directions, for the current plaintiff to provide notification to third parties.

37. Any further adjournment would only be productive of delay. The order that I propose is not intended, and cannot be binding upon third parties so as to preclude any such party advancing this claim under the doctrines or res judicata, issue estoppel or Anshun estoppel.

38. I order, pursuant to r 13.4 of the Uniform Civil Procedure Rules2005 (NSW), that the proceeding be dismissed.

Costs

39. This leaves a potential question of costs. I have already foreshadowed that there should be no order as to costs.

40. The first defendant Mr Kanj is, and always has been, unrepresented.

41. Unrepresented litigants are not entitled to obtain any order for any costs incurred for any legal assistance they have received which are consequential upon the removal of Zenah Project Developments Pty Ltd or the dismissal of the proceeding generally (Cachia v Hanes (1994) 179 CLR 403). There is no indication, in any event, that Mr Kanj has obtained any such assistance.

42. It follows that no order for costs is to be made. This means that, ultimately, it is unnecessary for the Court to further explore the hypothetical questions of whether any order for costs should be paid on an indemnity basis or paid by either Zenah Project Developments Pty Ltd or Mr Mehajer, personally, as a non-party, but controller of that entity’s action for his own benefit; in accordance with the principles set out in Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185.

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Decision last updated: 21 July 2020