Business Finance Pty Ltd v Casula Projects Pty Ltd [2022] NSWSC 1156

Supreme Court New South Wales

Medium Neutral Citation: Business Finance Pty Ltd v Casula Projects Pty Ltd [2022] NSWSC 1156 Hearing dates: 22, 23, 24, 25, 29 August 2022 Date of orders: 14 September 2022 Decision date: 29 August 2022 Jurisdiction: Equity - Expedition List Before: Parker J Decision: See [45]-[48] Catchwords: MORTGAGES AND SECURITIES – mortgages – loan secured by first registered mortgage – mortgage discharged after loan purportedly repaid – purported repayment effected by third party payment to lender – whether payment attributable to loan Cases Cited: Barclays Bank Ltd and Quistclose Investments Ltd [1970] AC 567 Black v S Freedman & Co (1910) 12 CLR 105 Category: Principal judgment Parties: Business Finance Pty Limited (Receiver and Manager appointed) (First Plaintiff) Marcus William Ayres in his capacity as Receiver and Manager of Business Finance Pty Limited (Receiver and Manager appointed) (Second Plaintiff) Casula Projects Pty Limited (Defendant) Representation: Counsel: S Ipp/A Girgis (Plaintiffs) D Barlin (Defendant)

Solicitors: Corrs Chambers Westgarth (Plaintiffs) Pointon Partners Lawyers (Defendant) File Number(s): 2021/60376 Publication restriction: Nil

Judgment – EX TEMPORE

(Revised from transcript and annotated; issued 14 September 2022) 29 August 2022: 1. This is a case about money lending and security. The plaintiff company formerly held a registered mortgage over land belonging to the defendant company as security for a loan made to it. The mortgage was later discharged, purportedly because the loan had been repaid. The plaintiff company (now in receivership) disputes that this was actually so. It seeks judgment for the balance of the principal owing together with interest. It also seeks to have the mortgage restored to the property. 2. At the centre of the events which have given rise to these proceedings is the figure of Mr Frankie McDad. He is a Syrian‑Australian businessman who has operated under a number of different names. His birth name was Amjad Remi Al-Moqdad. He was also known as Franco or Franko Al‑Moqdad. He has also used the name Remi Saud Moqdad. It seems that he has now adopted Frankie McDad as his legal name. I will use that name to refer to him. 3. Mr McDad's business ventures have included a lending business. The focus of the business appears to have been the making of loans at high interest rates to borrowers unable to obtain credit from banks or other established financial institutions. 4. So far as the evidence in this case is concerned, the lending operations were carried out through four companies. One was Business Finance Pty Limited ("BF"), which is the plaintiff. [1] The other three were Private Fund Pty Limited ("PF"), Business Capital Pty Limited ("BC") and Partner Invest Pty Limited ("PI"). 5. Mr McDad is married to Yuk Mei Regina Ko. At all relevant times, she worked for him in the lending business which I have described. Two other members of Mr McDad's family came into the case. One was Hanan Mokdad, his sister. The other was her son, Mr McDad's nephew, Nick Houmam Al Jayoush. [2] 6. BF's loan operations were funded by a syndicated loan from a group of external investors. In July 2019, those investors appointed a receiver to BF. Later, a winding up order was made. These proceedings have been brought by BF on the receiver's instructions, presumably in the interests of the external investors as secured creditors of BF. 7. There is little evidence about the sources of the funds which were lent by Mr McDad's other three companies: PF, BC and PI. It seems that, as PF's name suggests, the money is may have come in whole or part from Mr McDad's own assets or resources that he controlled. PI is now in liquidation, but PF and BC are not and remain under the control of Mr McDad. 8. The proceedings concern a loan of $1.23 million from BF to the defendant, Casula Projects Pty Limited ("CPPL"). That loan was made in October 2017. It was the subject of a written loan agreement. The loan carried an interest rate of 24 per cent. 9. The purpose of the loan was to fund the acquisition by CPPL of a townhouse at Surfers Paradise in Queensland. In accordance with the loan conditions, CPPL was required to provide security in the form of a first registered mortgage over the land in favour of BF. 10. The purchase was completed, and the loan was drawn down, on 9 October 2017. A mortgage from CPPL to BF of the Surfers Paradise land was duly registered. 11. On 12 October 2017, Mr McDad arranged for the transfer of $600,000 from PF's bank account to BF's bank account. On 10 November, he organised a further transfer from PF to BF of $800,000. Following the second transfer, Mr McDad proceeded on the basis that the two payments had effected a refinance of the loan, discharging any liability to BF and substituting a liability to PF. On 14 November, he procured the discharge of the mortgage over the Surfers Paradise property. 12. CPPL had been incorporated on Mr McDad's instructions in May 2017. Mr Al Jayoush was the sole director. Later, a discretionary trust for the benefit of Mr Al Jayoush's family was established. The purchase of the Surfers Paradise land was made by CPPL purportedly as trustee for that trust. 13. In November 2017, Ms Ko replaced Mr Al Jayoush as the sole director of CPPL. In turn, Ms Ko was replaced by Ms Mokdad in July 2018 before being reappointed in December 2018. During at least part of the period that Ms Ko was a director, Mr McDad and Ms Ko lived at the property. 14. Ms Mokdad has become the sole director again, the property has been rented out. Despite the contention that PF is now the lender, Mr McDad has seemingly made no effort to require CPPL to pay the full amount of interest on borrowings (the rental being received from the property does not fully cover the interest on CPPL's liability on the amount borrowed) or to enforce the security.