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

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).

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).

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.

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

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

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).

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.

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.

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

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

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

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.

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.

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

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

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.

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.

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.

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

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).

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

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

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.

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

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

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.

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.

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

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”.

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

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.

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”.

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.

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”.

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

The Deed of Settlement contains the following relevant provisions:

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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

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.

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).

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.

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.

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.

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

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

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

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

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

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

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

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.

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

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.

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]:

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].

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

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.

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.

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.

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.

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

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

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:

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

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

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

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

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

Section 14G of the Electronic Transactions Act 2000 (NSW) provides:

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.

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].

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.

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.

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.

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

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.

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.

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.

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.

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 Segboer v A J Richardson Properties Pty Ltd [2012] NSWCA 253 at [51]-[55] in the following terms:

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].

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]:

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]:

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.

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.

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

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:

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:

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.

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).

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].

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].

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.

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].

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.

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 (3rd ed, 2023, Oxford University Press) at [1.14]:

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

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.

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

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.

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:

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

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.

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.

This argument is therefore rejected.

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

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.

This final argument is therefore also rejected.

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.

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.

The orders I propose to make are as follows: