Gazzard v Hekeik

1. [1]

   These proceedings relate to business dealings between a number of natural persons and the companies and trusts created by those persons. Mr Richard Gazzard, the plaintiff and second cross-defendant (“the Plaintiff”), brought proceedings against five named defendants by statement of claim filed 11 February 2021. A defence to the claim was filed on 26 March 2021 and a cross-claim was filed on 17 May 2021 by Anthony Hekeik, the first defendant and cross-claimant (“the Defendant”). A notice of motion signed by the solicitor for the Plaintiff was filed on 22 July 2021 seeking the following orders:

2. [2]

   An amended notice of motion was filed by the Plaintiff on 8 September 2021. It sought the following orders:

3. [3]

   By the time the matter was listed for resolution of the amended notice of motion, both parties had filed affidavits on the substantive proceedings and the action commenced by the Plaintiff was ready for hearing. I was told that the Defendant (and cross-claimant) would be ready to proceed on the cross-claim within one month. This was relevant to one of the submissions made by the Plaintiff (and cross-defendants), namely that the statement of claim was ready to proceed to final hearing while the cross-claim was not.

4. [4]

   The Plaintiff provided a tender bundle of both parties’ material comprising 670 pages which became exhibit A. This included the material to be tendered on the substantive hearing. I was told this was “merely for completeness” [1] and the Plaintiff’s solicitor said:

5. [5]

   I doubt it is appropriate for a matter such as this to be included in the duty list. As it turned out, both parties referred to several documents, the most significant of which for the purpose of the application for summary judgment was an affidavit of the Defendant. I propose to provide very short reasons for the orders I will make for reasons that will become clear in the course of this judgment.

The application for summary judgment (Prayers 4 and 5)

1. [6]

   The thrust of the Plaintiff’s submission is that his claim is a simple claim for money that has not been repaid on a loan. He asserts that “the defendant has no defence to the claim” or no defence except as to the quantum of the debt. The Plaintiff relied on evidence that establishes that loan agreements (“the Loan Deeds”) were entered, that money in four separate tranches was advanced, and on evidence (and admissions in the defence) that the money has not been repaid. I was taken to the affidavit of the Plaintiff’s wife dated 8 July 2021 and to various annexures to that affidavit. This included emails between relevant parties and a spreadsheet setting out the main four advances as well as a number of other advances made over the time of the business relationship.

2. [7]

   I accept the Plaintiff’s submission that there can be little doubt that the money was advanced, that the parties entered deeds relating to the loans, and that the money remains outstanding. However, that it is not the end of the matter.

3. [8]

   The Plaintiff took me to various paragraphs of the defence in which the defendants admitted the loans and the fact that repayment is yet to be made. By way of example, the statement of claim asserts in paragraphs 25-26:

4. [9]

   The defence to those paragraphs was as follows:

5. [10]

   So much is not in dispute. However, the ensuing paragraphs of the pleadings are as follows:

6. [11]

   The defence goes on in paragraph 30.1 to assert:

7. [12]

   The “ongoing business dispute” was particularised in paragraphs 30.2 to 30.19 of the defence and the Defendant’s affidavit. Paragraph 30.20 indicated that a cross-claim would be brought seeking an order that a company established by the parties be wound up, or a receiver appointed in respect of its property, and damages.

8. [13]

   To reduce the defendants’ position to its essentials, it is asserted that the parties were in the business of property development. Over time three properties were purchased and are in various stages of development. None has been sold and each is currently held in company names or trusts controlled by the Plaintiff. At some stage the Defendant ran out of money and borrowed the money subject of the Plaintiff’s claim. As a consequence of his impecuniosity, the Defendant ceased to be a director of Badajoz Property Pty Ltd. The circumstances in which this occurred are set out in the Defendant’s affidavit sworn 8 September 2021 at [14]-[16] and involved certain alleged representations as to the position taken by the Commonwealth Bank. In spite of the express terms of the Loan Deeds, which called for repayment on a date shortly after their execution, the agreement was that the money was to be repaid after the sale of the properties and once the profits of the developments were realised. Counsel for the Defendant put it in the following terms on the hearing of the notice of motion:

9. [14]

   Counsel submitted that it was, in essence, a claim in “unjust enrichment” although he acknowledged that the pleadings (the defence and cross-claim) were a little unclear that this is so. [3] Nor is there any clear pleading for relief in the nature of restitution, unless one considers the rescission of the redemption notices sought in the cross-claim to constitute such relief.

10. [15]

    The difficulties confronting the Plaintiff (and cross-defendants) on their application for summary judgment was almost conceded in the course of their submissions in reply:

11. [16]

    It may be that the evidence is “overwhelmingly in favour of the Plaintiff”. Certainly the timing and terms of the Loan Deeds suggest that it might be. However, the defendants are entitled to conduct their defence and not have Mr Hekeik’s assertions dismissed at an interlocutory stage where none of the parties have been examined and cross-examined as to the precise nature of their dealings, conversations and agreements.

12. [17]

    In Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28, French CJ and Gummow J said at [24]:

13. [18]

    In Simmons v Henwood [2013] NSWCA 184, Emmett JA emphasised the stringency of the test to be applied at [95]:

14. [19]

    Before proceedings are summarily disposed of the case must be "so obviously untenable that it cannot possibly succeed", "manifestly groundless" or "hopeless": see for example Dey v Victorian Railway Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 91, General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at 129, Collier v Lancer (No 2) [2013] NSWCA 186 at [9]-[11] (Ward and Leeming JJA) and State of New South Wales v Williams [2014] NSWCA 177 at [71] (Emmett JA with whom Macfarlan JA and Simpson J agreed).

15. [20]

    The defendants and cross-claimants have raised a triable issue and the application for summary judgment will be dismissed.

The application that the cross-claim be dismissed under s 22(2) of the Civil Procedure Act, or severed from the statement of claim proceedings and removed to the Corporations list (Prayers 1, 2 and 3 of the amended notice of motion).

1. [21]

   Section 22 of the Civil Procedure Act 2005 (NSW) provides:

2. [22]

   The Plaintiff submitted that the relief sought in the cross-claim does not relate to, and is not connected with, the subject of his statement of claim. Accordingly, he submits that s 22(2) denies the Defendant of the relief sought in the cross-claim. Reliance was placed on the fact that two of the nominated cross-defendants (Badajoz Property Pty Ltd and Adrian Gazzard) are not parties to the proceedings commenced by statement of claim. He also referred to the fact that the pleadings and particulars referred to companies and trusts of which the Defendant was not a member or beneficiary. The Plaintiff disputed the standing of the Defendant to pursue parts of the relief sought in the cross-claim, particularly those arising under the civil penalties provisions of the Corporations Act 2001 (Cth). It was submitted that the issue of the redemption notices which lies at the heart of the cross-claim, “was an act performed by the first cross-defendant [Badajoz Property Pty Ltd] rather than the second and third cross-defendants [Richard and Adrian Gazzard]”.

3. [23]

   It was submitted, in the alternative, that “given the absence of any nexus between the relief sought in the cross-claim and the statement of claim proceedings” the cross-claim should be prosecuted separately. [5] One submission was that the cross-claim would ordinarily be dealt with in the Equity Division of this Court. While that is true, it is not a basis upon which the cross-claim should be “struck out and dismissed” or severed from the claim.

4. [24]

   Another submission was:

5. [25]

   Putting aside the question of the “commonality” of the issues, which is central to the Plaintiff’s claim for interlocutory relief under Prayers 1 to 3, I was concerned about the potential delay that might arise if the proceedings were conducted together. I made inquiries of the Defendant’s counsel as to when the matter would be ready to proceed, and also inquiries of the list clerk as to available dates for a one day hearing (the estimate provided by the parties). [7] Counsel indicated that the Defendant would be ready to proceed for hearing within one month:

6. [26]

   The list clerk indicated that the Court could accommodate the hearing on 22 March 2022 and both parties indicated they could accept such a date. However, that is a practical matter to which I will return.

7. [27]

   While there is force in some of the submissions made by the Plaintiff (and cross-defendants), the fundamental issue is whether s 22(2) of the Civil Procedure Act is engaged to deny the Defendant the opportunity to pursue the remedies raised in the cross-claim in accordance with s 22(1). I have considered the pleadings in the “first proceedings”, the terms of the cross-claim, and the evidence filed in the proceedings to date. I am satisfied that the relief sought by the Defendant in the cross-claim is connected with the subject of the proceeding commenced by the statement of claim. Accordingly, s 22(1) permits the Defendant to bring a cross-claim “against any person” including those who are not plaintiffs in the statement of claim. Accordingly, the relief sought in Prayer 1 of the amended statement of claim must be refused.

8. [28]

   Contrary to the Plaintiff’s submission made in relation to s 56 of the Civil Procedure Act, severance of the cross-claim and transferring the proceedings to the Equity Division Corporations List would be contrary to the overriding purpose in s 56. It would involve the Court hearing evidence twice in relation to the business structures, financial arrangements and property development activities of what are, when the corporate structures and trust arrangements are stripped away, the same parties and participants. The orders sought in Prayers 2 and 3 must also be refused.

Case management and costs

1. [29]

   To ensure the Plaintiff receives a relatively early hearing date, I propose to list the matter for hearing on 22 March 2022 and to set a timetable that gives effect to the undertaking as to readiness provided by counsel for the Defendant. [9] As has been touched upon in passing, there may be some issues with the pleadings and relief sought by the defendants. I will incorporate into the case management orders a direction that enables the defendants to file amended process along with any additional evidence within around five weeks. The Plaintiff will have the opportunity to file any further pleadings and evidence around four weeks later. The matter will then be listed before the Registrar to make further orders as to the filing of court books, written submissions and notification of witnesses required for cross-examination early in the new year.

2. [30]

   The costs of the motion should be the costs in the cause. While the Plaintiff has failed to obtain the orders sought in the notice of motion, its position on the merit of the defendants’ defence and the Defendant’s cross-claim may ultimately be vindicated. Further, there seem to be some issues with the defendants’ pleadings which emerged in the course of argument and this may lead to amendments of both the defence and cross-claim.

3. [31]

   Accordingly, the orders I make are these:

   1. (1)

      The relief sought in the amended notice of motion is refused and the notice of motion is dismissed.

   2. (2)

      List the matter for hearing on 22 March 2022.

   3. (3)

      The defendants and cross-claimant are to file and serve any amended defence or amended cross-claim on or before 12 November 2021.

   4. (4)

      The defendants and cross-claimant are to file and serve any additional evidence (including evidence as to quantum and expert evidence) upon which they intend to rely on or before 12 November 2021.

   5. (5)

      The plaintiff and cross-defendants are to file and serve any reply, and/or defence to the cross-claim, on or before 10 December 2021.

   6. (6)

      The plaintiff and cross-defendants are to file and serve any evidence in reply (including expert evidence and evidence as to quantum) on or before 10 December 2021.

   7. (7)

      The matter is listed before the Registrar on 13 December 2021 for further directions including orders for the filing of any additional evidence, provision of court books, and filing of written submissions.

   8. (8)

      The costs of the notice of motion will be the costs in the cause.