Westpac Banking Corporation v Sentox Pty Ltd

Before the Court are two notices of motion. The first filed on 6 December 2021 by the plaintiff, Westpac Banking Corporation (Westpac), seeks asset disclosure and asset preservation orders against the eighth defendant, Ms Sahar El-Ahmad (also known as Ms Sahar Abbas) (Ms Abbas). The second filed on 1 February 2022 by Ms Abbas seeks summary dismissal of the proceedings under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 13.4 or an order under UCPR r 14.28 that the Amended Commercial List Statement (ACLS) be struck out so far as it concerns Ms Abbas.

The proceedings arise from an invoice discounting facility originally granted by Westpac to the first defendant, Sentox Pty Ltd (Receivers and Managers Appointed) (Sentox), in March 2011. Sentox is a fruit and vegetable wholesaler operating out of the Flemington Markets in Sydney. Under the terms of the facility, Westpac advanced funds in exchange for an equitable assignment of certain trade debts owing to Sentox at a discount on certain terms and conditions. The facility was initially for $4,000,000 but it was increased over time. The last increase, which was in August 2019, was from $12,500,000 to $15,000,000.

In the proceedings, Westpac claims that throughout the term of the facility Sentox provided financial information and documents in support of drawdowns under the facility which were false. It seeks to recover amounts owing under the facility from Sentox and from the second defendant, Mrs Kathie Musumeci, pursuant to a guarantee given by her. Mrs Musumeci was the sole director and shareholder of Sentox since 14 February 2014.

In addition, Westpac brings claims in deceit against the third defendant, Mr Andrew Musumeci, who was an employee of Sentox and responsible for managing the business carried on by it. Westpac also seeks to trace money advanced by it to a number of entities associated with Sentox.

By a Further Amended Summons and the ACLS, Westpac also brings a claim in deceit against Ms Abbas. Ms Abbas had been an employee of Sentox for over 10 years. She was responsible for debtor collections, supplier and customer relations and was described in a Westpac internal document as “QA Manager and PA to Andrew Musumeci”. She was also listed as an authorised representative of Sentox for the purpose of dealing with Westpac in relation to its facilities.

It is convenient to deal first with Ms Abbas’s motion.

The case against Ms Abbas is set out in paras C78 to C83 of the ACLS, which are in the following terms:

Westpac has provided particulars of C78, C80, C81 and C82 to which it will be necessary to return.

The essential elements of the tort of deceit were described by Gummow, Kirby and Crennan JJ in Magill v Magill (2006) 226 CLR 551 at [114] as follows (footnotes omitted):

Taking these requirements as a starting point, Ms Abbas submits that the claim against her must fail for three reasons. First, the claim against her does not identify any representations. Second, even if it does identify representations, it does not do so with sufficient specificity. Third, the claim does not identify any representation made by Ms Abbas. According to her, it is plain that any representation was made by Sentox and that she was merely a conduit for those representations.

In my opinion, each of these submissions must be rejected.

Although the ACLS does not use the word ‘represented’ or one of its grammatical variants, it seems plain that what is alleged is that the “Financial Information and Documents” contained representations concerning the financial position of Sentox which were false to the knowledge of Ms Abbas. Paragraph C83 asserts that those facts alone are sufficient to establish Ms Abbas’s liability. In my opinion, that allegation is sufficiently clear from the ACLS.

Ms Abbas contends that the current pleading puts her in a difficult position because if she were to admit para C78 she would, in effect, be admitting the representations pleaded against her. There are, however, two answers to that point. First, in this case there is little difference between the information and documents relied on and the representations they are said to contain. The representations are made on the face of what was provided. Consequently, nothing turns on a separate pleading of the representations. Second, it is always open to Ms Abbas to qualify any admission in her response.

Relying on the decision of Adams J in Reid v Hartcher [2017] NSWSC 1274 at [42], Ms Abbas contends that Westpac should “clearly plead chronologically each false representation made by the defendant and how it is that each is said to be false, that each representation was made by the defendant with the knowledge that it was false (or the defendant was recklessly indifferent as to the falsity), and that the defendant made each false representation with the intention that the plaintiff would act on it”, which it has failed to do.

There are a number of points to be made about that contention. First, the present case concerns allegations in a Commercial List Statement, not in a pleading. Although many of the principles relating to pleadings are applicable to a List Statement by analogy, they are not necessarily the same: see Brambles Australia Ltd t/as CHEP Australia v Tatale Pty Ltd [2006] NSWSC 204 at [9] per Bergin J; Hastie Group Ltd (in liq) v Bourne [2017] NSWSC 709 at [58]–[59] per Ward CJ in Eq to insert authority. The question that must be asked in the present context is whether the ACLS in context fairly and adequately puts Ms Abbas on notice of the case that she must meet.

Second, what is alleged is that Ms Abbas over a period of eight or more years, participated in a systematic fraud which involved the creation of false records relating to amounts owing to Sentox. No doubt, as part of the proof of its case, Westpac will need to provide details of its claim. However, there is little utility in requiring that detail to be incorporated into the List Statement and a requirement to do so would undermine one of the purposes of the List Statement, which is to provide a succinct and clear statement of Sentox’s claim.

Third, Westpac has already filed evidence in chief and it has given particulars of its claim against Ms Abbas by reference to that evidence. So, for example, it gave the following particulars of para C78:

As Mr Bow explains in his affidavit, the Cashflow Connect System was a web-based portal that permitted customers to lodge requests for Westpac to purchase debts under their facility. As part of the process of drawing down on the facility through Cashflow Connect, the customer is required to provide details of relevant invoices and give the following declaration:

In addition, each month Sentox was required to input into Cashflow Connect information concerning the various debts that it had requested the Bank to purchase and fund under the facility in order to enable Westpac to conduct a month-end reconciliation. As part of that process, Sentox provided a declaration in the following form:

It is apparent from the particulars supplied by Westpac that Westpac has identified each of the payment requests and month-end reconciliation statements it relies on. Similarly, para 1(b) of the particulars identifies each email it relies on. Paragraph 3 of the particulars sets out why it is alleged that that information was false.

Ms Abbas appears to accept that the information supplied by Sentox through the Cashflow Connect system was supplied by her. Her case, however, is that she supplied the information as a conduit for Sentox and therefore made no representations herself. In part, this point appears to be a point about the pleading. The point appears to be that the ACLS does not clearly distinguish between what representations were allegedly made by Sentox and what representations were made by her. In particular, there is no specific pleading that by certain acts Ms Abbas personally made certain representations. More significantly, however, the point appears to be one of substance. What is alleged is that the claim against Ms Abbas is bound to fail because what she did she did as a mere conduit.

So far as the point is one about the pleading, in my opinion, it is sufficiently clear that what is alleged is that, by engaging in the conduct it is alleged she engaged in (that is, personally completing the drawdown requests particularised and providing the other information she did through Cashflow Connect and emails), Ms Abbas became responsible for the representations contained in the documents and the information she supplied and she is liable in the tort of deceit because she knew that that information was false. It is true that it is not specifically pleaded that Ms Abbas intended Westpac to rely on the information. But no complaint is made about the ACLS in that respect. Moreover, the allegation seems to be obvious in circumstances where the information was supplied as part of the process of drawing down on the facility and went to the heart of the operation of the facility.

As to the substantive issue, in my opinion, that is clearly a matter of fact to be resolved at the final hearing. It does not form a proper basis for a summary dismissal or a strike out application.

The contention that Ms Abbas made the representations as a mere conduit is a shorthand way of expressing a more complex relationship which requires a detailed examination of the facts. The question is whether in all the circumstances Ms Abbas was to be understood as conveying nothing herself about the accuracy or otherwise of the information she provided. That depends on, among other things, her role within Sentox, the nature of her dealings with Westpac, the nature of the information supplied and Ms Abbas’s knowledge concerning that information. In relation to this last point, it is relevant to observe that it would be one thing to regard Ms Abbas as a mere conduit when there was no reason to think that she had any reason to believe that the information she was conveying was inaccurate. It would be quite another if she knew that it was false.

Moreover, the question for present purposes is not whether Ms Abbas was a mere conduit for Sentox. Rather, the question is whether the Court can be satisfied on the basis of the available evidence that Westpac has an arguable case that she was not. In my opinion, it can. The evidence is that Ms Abbas worked for Sentox over an extended period of time and that she was a key employee in a business that had a limited number of employees. She was the person responsible for supplying much of the information required in connection with the facility. In that capacity, she had substantial dealings with Westpac. It appears that many of the requests to drawdown on the facility were completed by Ms Abbas. As part of that process, Ms Abbas completed the warranties set out above. The evidence is that the fraud was perpetrated over a lengthy period of time and was large compared to the size of Sentox’s business.

There is also evidence that amounts drawn down on the facility were paid into a personal account belonging to Ms Abbas and then returned through intermediate accounts to Sentox, giving the impression that Sentox was receiving payment from debtors in the ordinary course of business. Those payments were made in 2011 whereas Westpac’s case is limited to the period from 2014. But nothing turns on that. What occurred in 2011 is still strong evidence that Ms Abbas was aware of the fraud that continued to be perpetrated from 2014 and beyond.

Accordingly, it is at least strongly arguable that Ms Abbas was aware of the fraud and aware that information that she provided to the Bank was false. If that is correct, it is strongly arguable that she was not a mere conduit and that she herself was guilty of the tort of deceit.

Accordingly, the notice of motion filed on 1 February 2022 must be dismissed.

It is common ground that in order to be entitled to a freezing order and asset disclosure orders Westpac must establish:

For the reasons I have explained in the context of Ms Abbas’s motion, I am satisfied that Westpac has a good arguable case.

Ms Abbas submits that Westpac has failed to establish that there is a danger that the prospective judgment will go unsatisfied if the orders are not made. She submits that Westpac has not adduced any evidence of a risk that her assets will be dissipated. Moreover, she points to the fact that Westpac did not apply for an ex parte order, which might have been expected if the risk were real.

I do not accept those submissions. In my opinion, there is a strong case that Ms Abbas knew of the fraud perpetuated by Sentox on Westpac and willingly participated in it. It can be inferred from that that there is a real risk that unless the orders are made, Ms Abbas will seek to alienate her assets or hide those that cannot be readily identified so as to defeat any judgment obtained against her: see Patterson v BTR Engineering (Aust) Ltd (1989) NSWLR 319, 325–6 per Gleeson CJ; Hurst v Prasad [2021] FCA 1562 at [27] per Cheeseman J. That inference is not undermined by the fact that Westpac did not seek ex parte orders.

Accordingly, orders should be made in terms of those sought in paras 1, 2 and 3 of Westpac’s notice of motion.

In my opinion, it is appropriate that Ms Abbas pay Westpac’s costs of both motions. The two motions were linked in that they both depended largely on whether Westpac had an arguable case. Westpac has been entirely successful in relation to both motions.

The orders of the Court, therefore, are: