Supreme Court New South Wales Medium Neutral Citation: Sandhurst Trustees Limited v Dabboussi [2022] NSWSC 754 Hearing dates: 6 June 2022 Date of orders: 6 June 2022 Decision date: 06 June 2022 Jurisdiction: Common Law Before: Beech-Jones CJ at CL Decision: (1) The notice of motion filed 24 February 2022 is dismissed. (2) The first defendant is to pay the plaintiffs' and second defendant's costs of the motion. Legislation Cited: Uniform Civil Procedure Rules, 36.16(2)(a) National Consumer Credit Protection Act Cases Cited: Dai v Zhu [2013] NSWCA 412 Category: Principal judgment Parties: Sandhurst Trustees Limited (First Plaintiff) MCCA Asset Management Ltd (Second Plaintiff) Ahmad Dabboussi (First Defendant/Applicant) Fadile Moubayed Bernard (Second Defendant) Representation: Counsel: Mr F Tao (Plaintiffs) Mr A Dabboussi, in person (First Defendant) Mr T Krayem (Second Defendant) Solicitors: *** Unrepresented (First Defendant) *** File Number(s): 2021/297983 EX TEMPORE Judgment (Revised from transcript) 1. By notice of motion filed 24 February 2022, the first defendant Ahmad Dabboussi seeks orders setting aside a default judgment and judgment for possession entered in respect of residential property at Horningsea Park (the Property). 2. The first plaintiff, Sandhurst Trustees Limited, is the custodian for the second plaintiff, MCCA Asset Management Ltd (MCCA), a lender providing Islamic finance. The second defendant, Fadile Moubayed Bernard, is Mr Dabboussi's estranged wife. Ms Bernard and Mr Dabboussi are the registered proprietors of the property. Both Ms Bernard and the plaintiffs oppose the relief sought by Mr Dabboussi. 3. Uniform Civil Procedure Rule r 36.16(2)(a) enables the Court to set aside a default judgment. The power is to be exercised having regard to the interests of justice, including the interests of the parties (see Dai v Zhu [2013] NSWCA 412). 4. Leaving aside a judgment procured by an irregularity, which is not this case, the relevant factors for the exercise of the power include whether there is a real or genuine triable issue in relation to a plaintiffs' claim (or cross‑claim), the moving party's reasons for not applying to set aside the default judgment earlier and the prejudice that is occasioned to the parties arising from that delay. 5. As I will explain in this case, the interests of Ms Bernard are very significant to the outcome of this application. Before addressing these particular issues, it is necessary to set out the somewhat convoluted background to the application. Background 1. According to one of Mr Dabboussi's affidavits, in November 2018 he bought the property with a loan from MCCA. The purchase price was $3 million and the loan from MCCA was $1.8 million. He says that subsequently, as a form of asset protection measure, he transferred half of the interest in the property to Ms Bernard, although he now contends that that transfer had an element of unconscionability about it. 2. In July 2020, Mr Dabboussi and Ms Bernard entered into agreements with the plaintiffs for the refinancing of that loan, with the indebtedness increased to $2 million. As I will outline, there were difficulties in repayment. In any event on 23 July 2021, Mr Dabboussi sent an email to MCCA writing to confirm that he will "definitely not be making any more repayments towards the house". From what I understand, by this time Mr Dabboussi's and Ms Bernard's estrangement was relatively final. In any event, by 6 August 2021, the loan was in default and the arrears were $39,000. 3. Some time at around this point, Ms Bernard commenced proceedings in the Federal Circuit and Family Court of Australia, Division 2. On 16 September 2021, orders were made restraining her and Mr Dabboussi from, inter alia, further encumbering the property or charging it. 4. On 20 October 2021, the plaintiffs filed a statement of claim in these proceedings. They sought orders for possession as well as the entry of judgments for the amount owing. 5. On 22 October 2021, the Federal Circuit and Family Court of Australia, Division 2 made a further order granting Ms Bernard sole occupation of the property. 6. On or about 3 November 2021, Mr Dabboussi, who it seems was no longer living at the property, sent an email to the plaintiffs' solicitors acknowledging service of the statement of claim. On 16 November 2021, the Federal Circuit and Family Court of Australia Division 2 made further orders, in particular orders requiring the sale of the property. 7. On 7 December 2021, freezing orders were made in proceedings in the Equity Division of this Court against Mr Dabboussi. As I understand it, the plaintiff in those proceedings claims that Mr Dabboussi had not made payments on a sum of money that had been invested with him. The freezing orders included an order precluding him from disposing of or dealing with the value of his assets up to an unencumbered value of AUD $2.5 million. 8. The next day on 8 December 2021, the plaintiffs obtained default judgment for possession and the amounts owing against both Mr Dabboussi and Ms Bernard. On the same day, Mr Dabboussi sent an email to the plaintiffs' solicitor enquiring whether default judgment had been granted and providing a copy of the freezing orders that had just been made. He advised that he would not be complying with the Federal Circuit and Family Court of Australia, Division 2 orders to appoint an agent for sale, as he believed it would contravene the Supreme Court's freezing orders. He stated that he planned to apply to the Family Court for review of those orders including a stay. He stated that he wanted to include the default judgment they were seeking as part of the reasons for his objection and stay application. The significance of that email is that Mr Dabboussi clearly was aware of the default judgment application. He gave no indication of any difficulty with the plaintiffs' entitlement to relief. 9. On 14 December 2021, the plaintiffs' solicitors emailed, inter alia, Mr Dabboussi and Ms Bernard's solicitors advising that their client had filed a motion seeking a writ of possession. They invited them as registered proprietors to deliver up vacant possession without delay to avoid the need for an eviction facilitated by the Sheriff. 10. Two days later on 16 December 2021, Mr Dabboussi responded by an email stating that he had not been at the premises since September and "you can consider that I have vacated the property". He added that he would like to know when Ms Bernard had vacated as he would need one or two days to remove his belongings but that he would need to do that after she had left due to "my ADVO and bail conditions". As I understand it, the latter is a reference to an apprehended domestic violence order and bail conditions that prevented him from having contact with Ms Bernard. 11. On or about 23 December 2021, the Federal Circuit and Family Court of Australia, Division 2 made orders by consent staying the orders of 16 November 2021, that is, the orders requiring Mr Dabboussi and Ms Bernard to effect the sale of the property. The next day Mr Dabboussi advised the plaintiffs' solicitors that those orders had been stayed. 12. On 27 January 2022, the plaintiffs' solicitors advised Mr Dabboussi that the Sheriff intended to evict the occupants of the property on 10 March 2022 at 9 am. 13. On 14 February 2022, Mr Dabboussi wrote an email to the plaintiffs' solicitors noting his understanding that Ms Bernard had now vacated the premises and handed over the keys. He advised that: "I need to attend the house; I need time to remove my items especially the business equipment which fills our double garage." 1. Although it is not entirely clear when it was sent, at least by letter dated 16 February 2022 from the plaintiffs' solicitors to Mr Dabboussi, they advised that to make arrangements for the sale of the property, their client needed to ensure the removal of all goods that had been left there. The letter advised Mr Dabboussi that if he failed to remove his goods by 2 March 2022, their clients, that is the plaintiffs, would be forced to remove them. 2. On 22 February 2022, Mr Dabboussi emailed the plaintiffs' solicitor advising that he had had "my hearing today and the restrictions have been lifted regarding my home". I understand that to be a reference to the ADVO and bail conditions. He further advised them that he would be returning to Sydney the following day and would be attending the property. The email then included the following: "As I have stressed before, I have vacated the property and will require about two weeks to do so." He added that he would write back to them once he had examined the condition of the home. 3. It is not clear what has been omitted before the word "vacated". The text of the sentence appears to suggest that he has stressed before that he has not vacated the property and will require about two weeks to do so. Read in the context of the earlier emails, it appears to be a statement to the effect that he had left the property but he required access to remove the items that had been left there. In any event, in an email he sent the following day to the plaintiffs' solicitor, his position hardened. In that email he stated: "I have not vacated the property. The police will not get involved in a property dispute and will refer you to the Courts. I will not be vacating until I receive an eviction notice." 1. The following day Mr Dabboussi filed the motion the subject of this judgment. Although it is not entirely clear, it seems that the Sheriff had cancelled the proposed eviction for 10 March 2022, having been apprised that Ms Bernard had given up vacant possession. 2. On the same day, that is 10 March, Mr Dabboussi wrote further emails to the plaintiffs' solicitors stating that he had moved back into the property "with my partner and baby last night after you locked me out against my will". I understand that to be a reference to his new partner and that to be a referral to a lockout that occurred in the previous days. The balance of his email complains about the state of the property and the actions of the plaintiffs. 3. In the meantime, Mr Dabboussi had been lodging claims with the Australian Financial Complaints Authority (the "AFCA". On 23 February 2022, he lodged a complaint online complaining about the plaintiffs' response in 2020 to his application for financial hardship, as well as about their actions in relation to eviction. On 3 May, he lodged a complaint asserting a breach of the National Consumer Credit Protection Act by their actions providing credit when they knew or should have known that he could not afford the loan. 4. As I understand it, the Sheriff has advised that he proposes to execute a writ of possession on 20 June 2022. In his affidavits, and from the Bar, Mr Dabboussi has advised that if the judgment is set aside along with the writ of possession, or at least the writ of possession is stayed, he will seek to refinance the plaintiffs' loan. 5. In that regard, his financial position is best described as complex. It is clear that he has had a number of business ventures over the years but that he clearly encountered difficulties during COVID. His affidavits attach a number of notices from landlords to businesses that I understand are associated with him. He is unemployed. His affidavit does, however, refer to a judgment debt in his favour awarded in 2020, although its recoverability appears to be uncertain. Delay 1. As already indicated, Mr Dabboussi read two affidavits from himself on this application, one filed 6 March 2022 and the other filed 23 May 2022. His affidavits describe various difficult personal circumstances faced by him over the last few years. These include his businesses coming under significant financial strain, especially due to the impact of the pandemic; the breakup of his marriage and the formation of a new relationship; being subject to an apprehended domestic violence order and then Federal Circuit and Family Court of Australia Division 2 orders restricting his access to the property. He also appears to be embroiled in various pieces of litigation. Further, his submissions and some exhibits were tendered suggest that he was the subject of a serious assault in the latter part of 2021. 2. All up it seems from around July 2021 until at least the end of 2021, Mr Dabboussi was excluded from the property. Nevertheless, Mr Dabboussi was served with an initiating process in the proceedings. It is clear that he is intelligent and has significant experience in his own right with litigation. He appears to have completely understood what the default judgment application involved and the orders that were being sought. He raised no objection to default judgment, and he did not dispute any aspect of the plaintiffs' claim for relief. Further, up until his return to the property, his communications gave the impression that he only sought to return to retrieve his items of property and not to remain. However, the correspondence indicates that once he was there, he then decided to remain and then embarked on a process of disputing the plaintiffs' claim and ultimately its entitlement to possession. 3. Even allowing for his various personal difficulties, this is the very form of delay that tells strongly against this application in that it appears to involve a deliberate decision not to dispute any aspect of the plaintiffs' claim around the time of the filing of default judgment. He only contested its claim once he had returned to the property. Triable Issues 1. There does not appear to be any dispute on the material that there was an act of default under the various loan agreements giving rise to entitlement to possession. However, in his affidavits Mr Dabboussi raises three matters that he said are said to give rise to a triable issue.First, in his affidavit of 20 May 2022 at [11] and then at [32] to [40], he sets out his contention that there was a breach of the responsible lending provisions of the National Consumer Credit Protection Act, which he says the AFCR are considering. In paragraph 11 of his affidavit he complains that the plaintiffs provided a further $200,000 in loan funds at the time of the refinancing, bringing monthly repayments of approximately $10,000 when "my taxable income for the previous two years was only $40,000". 2. An affidavit sworn on behalf of the plaintiffs indicates that, in support of the loan application, they were provided assessment notices issued by the Australian Tax Office indicating that his taxable income was in the area of $40,000. However, they were also provided with trust tax returns and financial statements for a business associated with him, namely Priceline Pharmacy Punchbowl, indicating that it earned taxable profits in excess of $400,000 for the financial years ended 30 June 2018 and 30 June 2019. There were also provided certified copies of the trust deed indicating that he controlled the units within that trust and thus in practical terms had access to that profit. 3. From the Bar table Mr Dabboussi accepted that that material was provided. He contended that it was out of date because those businesses had been sold by the time of the loan. He accepted that nobody told the plaintiffs of that matter. He nevertheless contended that they were under an obligation to make further enquiries about the documents that he had provided to verify that those sources of income were still ongoing as at 2020. 4. The precise scope of the obligations upon a lender in these circumstances is a matter of debate. However, on any view, this aspect of his claim appears to be weak. It is a particularly unattractive claim for the principal borrower to say that, notwithstanding that they provided documents which appear to indicate a reasonable capacity to pay the loan, that the lender should not have in effect trusted him. If anyone had a basis for complaint about this, it would appear to be Ms Bernard rather than Mr Dabboussi. A more fundamental problem is there really is no material to indicate that, even if this breach was made out, that there would really be any likelihood of some relief being granted which would materially impact upon the entitlement to possession and the judgment debt. It is not possible on an application of this kind to make a final determination of the strength of this claim. All that could be said is that it appears to be relatively weak. 5. Mr Dabboussi's material, at least his submissions, also indicate a further complaint in relation to the additional amount of $200,000 that was included as part of the refinance. He contends that a representative of the plaintiff effectively told him to disguise that part of the application. Mr Dabboussi says it was a business debt, but instead says he was told to describe it as being for residential purposes. It is difficult to assess the evidentiary strength of that claim in the absence of proper evidence. Even so, for the reasons I have indicated, it is difficult to see how even if that claim was established there would be ultimately any claim for relief in favour of Mr Dabboussi that would render him effectively better off than he is now. 6. The second matter raised in Mr Dabboussi's affidavit is that it is alleged that the plaintiffs agreed to refinance the home loan "at a time when they knew my ex-wife was overseas and could not have executed the documents". He also states further that the actions of his ex-wife are the subject of a separate claim by him against her in which he seeks to annul the transfer and that his ex-wife acted unconscionably and took advantage of his vulnerability to convince him to sign over half the property. 7. To the extent that this contention concerns the alleged conduct of Ms Bernard, then it does not appear in any way to relate to the plaintiffs' claim for relief in these proceedings. It also overlooks the practical reality that, given the parties are clearly estranged, regardless of the transfer, Ms Bernard would have a significant interest in the property, given she was his partner and looking after five children. 8. The suggestion that somehow the loan was invalid because she was overseas has no legal validity. 9. The third matter identified in Mr Dabboussi's affidavits is the contention in [13] that the plaintiffs "refused to accept an application for financial hardship due to COVID in 2020 at a time when my restaurant business was suffering severe financial pressure". 10. His affidavit recounts the various financial difficulties that were being experienced by restaurant businesses he had an interest in 2020. He states that in September 2020 he contacted a representative of the plaintiffs' and asked if he could apply for financial hardship due to COVID. He claims that he "did not receive any financial assistance from my bank at a time that I believe I was entitled to it". 11. The affidavit sworn on behalf of the plaintiffs indicates that in August 2020 Mr Dabboussi contacted them to request a two month "holiday" on repayments and received a response the following day advising of their agreement to a delayed monthly repayment for the month of August 2020 on a one-off basis. They also indicate that, by May 2021, Mr Dabboussi and Ms Bernard were in arrears in the amount of $27,135.80 and the parties entered into an arrangement agreement to address that indebtedness for it to be repaid over the following five months to be finalised by 21 September 2021. In the meantime, Mr Dabboussi sent his email on 23 July 2021 advising that he would not be making any more repayments, advising the plaintiff to "protect your position as soon as possible", which presumably they did by commencing these proceedings. 12. I am not persuaded that there is any relevant triable issue in relation to the financial hardship claim nor the contention that there was some difficulty with the loan because of the presence of Ms Bernard overseas. Interested Parties 1. If the motion seeking to set aside the default judgment including the writ of possession is refused, then it can be accepted that Mr Dabboussi will suffer hardship in terms of he being locked out from litigating the one claim that might have some substance, namely irresponsible lending on the part of the plaintiffs. 2. His affidavit material raises a number of other aspects of hardship in that as indicated by the above chronology, he and his new partner, along with their baby, have returned to the property. If they are evicted, he is concerned about where they will live. He has annexed material to his affidavits indicating that they have been unsuccessful in finding a rental property in what is apparently a very tight rental market. That form of prejudice is not a prejudice that is related to the prejudice from having the inability to set aside the judgment debt and the writ of possession. This Court does not have a general power to allow parties who are in default to continue to live in property for the sake of it. It can only grant relief to that effect in aid of legal rights and the relevant legal right that will be lost if the application is refused is his ability to further litigate the claim. 3. In terms of his personal position, as I have indicated he is unemployed and seems to be embroiled in a significant amount of litigation. He does have an old judgment debt in his favour but there is nothing to indicate any likelihood of recovery. Even if I could allow him to stay to pursue a refinancing, the evidence is very flimsy that any refinancing can be given effect to, in that he seems to have real difficulty in being able to meet any further obligations. Also, there are at the moment orders issued by the Federal Circuit and Family Court of Australia, Division 2 and potentially this Court that represent an obstacle to him giving effect to any refinancing. If the writ of possession was to be set aside or stayed, then it seems to me the inevitable likelihood is that there will be a prolonged period before there is any refinancing, much less any sale. It is very unlikely, bordering on a near certainty, that there will be no further payments made in respect of the plaintiffs' loan or judgment debt. 4. In terms of the plaintiffs' position in relation to prejudice, they have already expended considerable legal costs between the time of filing for default judgment and now. If the writ was even just to be stayed, their position would potentially be prejudiced in that the amounts would continue to accrue under the loan agreements, although it seems likely that the balance of the equity in the property before any of the debts that Mr Dabboussi claims are secured over the property, would cover that increased indebtedness. 5. Ms Bernard appears to be particularly vulnerable if the writs of possession are set aside. As I have said, the inevitable result of that would be very substantial delay in any refinancing or sale. In the meantime amounts would continue to accrue under the loan agreements which would, subject to considering Mr Dabboussi's claims that there are further debts secured over the property, substantially reduce her equity. She would be left in the position where her equity would be diminishing, yet she does not even have the benefit of living in the home. 6. Ms Bernard's interests clearly appear to be best served by having certainty about the position of the matrimonial home and not having her equity or potential equity diminished. If the judgment was not set aside, the Federal Circuit and Family Court could sort out between her, her estranged husband and the various debtors he identifies where the true position lies. Conclusion 1. The interests of justice overall require that the notice of motion be dismissed. There was a form of delay which, although not great in length, was occasioned by the kind of forensic decisions that tell strongly against setting aside a default judgment. Of the three proposed defences, only one appears to be tenable, and that is only just tenable. Considering the interests of the parties, and in particular the hardship Ms Bernard would be likely to suffer if the extremely weak defence is allowed to be litigated, judgment should not be set aside. 2. To the extent that it is said that a stay of enforcement is sought without setting the judgment aside, I have already indicated the Court's power to grant that for its own sake is limited. In any event, no case for that has been made out. 3. Accordingly, I dismiss the notice of motion filed 24 February 2022. [Parties addressed on costs] 1. The plaintiffs and the second defendant seek the costs of the motion. Mr Dabboussi rejects that claim. However, it seems to me they must follow the event. Accordingly, I order the first defendant to pay the plaintiffs' and second defendant's costs of the motion. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 June 2022