New South Wales Supreme Court CITATION : Lawindi v Elkateb [2000] NSWSC 695 revised - 20/07/2000 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4479/99 HEARING DATE(S) : 03/07/00, 10/07/00 JUDGMENT DATE : 10 July 2000 PARTIES : Wasfy Lawindi (Plaintiff) Mohamet Safwat Elkateb (Defendant) JUDGMENT OF : Santow J COUNSEL : J Cheney (Solicitor) (Plaintiff) Dr M S Elkateb in person (Defendant) SOLICITORS : Turner Freeman (Plaintiff) CATCHWORDS : PROCEDURE — Injunctive orders of Mareva kind with undertaking as to damages — Was undertaking activated by hold up in settlement where defendant could have avoided that hold up by procuring the confirmation reasonably requested by plaintiff regarding agent's commission — Causality. DECISION : No money payable under the damages undertaking. REVISED — 20 July, 2000 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 4479/99 WASFY LAWINDI Plaintiff MOHAMET SAFWAT ELKATEB Defendant JUDGMENT — ex tempore 10 July 2000 1 The Defendant in these proceedings appears in person and moves upon a Notice of Motion in the following terms: "1. An order that the Plaintiff pay the defendant $2898.53, being damages pursuant to an undertaking given to the Court 2. An order that the Mareva injunction does not prevent the Defendant from expending monies on his current legal proceedings." 2 Taking first paragraph 1, the basis for the Defendant's application is set out in very broad terms in an affidavit of 6 July 2000 from Dr Elkateb. Essentially, his case is this. 3 He as Defendant claims $2,893.53 under the undertaking as to damages required of the Plaintiff. This was in order for the Plaintiff to obtain the orders that he did obtain from Bergin J on 29 October 1999 and which were subsequently extended and varied, culminating in Bergin J's orders of 29 November 1999. Those orders in broad terms were in effect Mareva orders restraining the Defendant from disposal of his assets including relevantly his property at 101/100 Cleveland Street, Chippendale. The orders of 29 November 1999 relevantly provide: "That the sale of the property 101/92-100 Cleveland Street Chippindale Title reference 101 SP 52634 proceed tomorrow 30 November 1999 on the basis that the settlement moneys to the amount of $16,910.44 be held in LJ Hooker's Trust account until 5 pm on 3.12.99 subject to the matter of the commission payment to J & Co Real Estate Agents being the subject of further submissions in this court at 10.00 am on Friday 3 December 1999 and subject also to any application to be made in respect of any joinder of J & Co Real Estate to these proceedings. …… Formally extend the orders made on 29.10.99 orders 1, 2, 3, 5, 6, 7 and 9 subject to the hearing in this matter before me on Friday and subject to any application being made by either party by application pursuant to the order made granting liberty to the parties to approach the Court." 4 The Defendant's case is that he was prevented from selling the property by reason of the Plaintiff's failure upon his request, made prior to 29 November 1999, to provide a "Request to the Land Titles Office". It is common ground that such Request, if forthcoming, would have permitted completion of the sale of the Chippendale property. Thus when the Land Titles Office did not withdraw the orders currently registered on the title to the Chippendale property, the settlement could not proceed, and was held up until 14 December 1999. The $2,893.53 represents essentially interest associated with that delay. This the Defendant says the Plaintiff is liable to meet as a result of the Plaintiff's actions and omissions. This is because these actions and omissions ultimately led to a break of the Plaintiff's undertaking. 5 Mr Cheney appeared for the Plaintiff and also gave affidavit evidence for the Plaintiff. He strenuously resists the Defendant's claim. The Plaintiff's position, as emerges from Mr Cheney's affidavit of 10 July 2000, is that in the circumstances the Plaintiff was justified as a matter of proper prudence in declining to provide the Request to the Land Titles Office. He relies particularly on a letter of 29 November 1999 from the Plaintiff's solicitor Turner Freeman (written by Mr Cheney), which is in the following terms, addressed to LJ Hooker, Surry Hills. "We act for Wasfy Lawindi, a creditor of the abovenamed Mohamed Safwat Elkateb. We advise that, earlier today, Her Honour, Justice Bergin of the Supreme Court of New South Wales, made certain orders, including an order that the sum of $16,910.44 be held in your trust account until 5:00 pm, 3 December 1999, subject to the matter of the payment of commission to Jay 7 Co Real Estate, being subject further to submissions which might be made to the Court on Friday, 3 December 1999 and subject also to any application to the court of any joinder of Jay & Co Real Estate. We will provide a Request to the Land Titles Office to withdraw orders currently registered on title to the above property, upon receipt of written confirmation from you that you will hold the abovementioned sum in your trust account in accordance with the orders. Please note that, on our understanding of the orders, you would not be authorised to release the abovementioned sum merely on the direction of Mohamed Safwat Elkateb." 6 The Plaintiff gave uncontradicted evidence that Hookers Surry Hills at no stage gave that written confirmation. Thus the Plaintiff could not be assured that the condition of Justice Bergin's orders of 29 November 1999 would be fulfilled as regards retaining the $16,910.44 in Hooker's trust account till 3 December 1999. 7 It can be reasonably inferred that the Plaintiff was aware that Hookers had the amount $16,910.44. in its trust account as at 22 November 1999 (see letter of 22 November 1999 from the Defendant's solicitors to the Plaintiff's solicitors). However, the Plaintiff contends that in circumstances where Bergin J's order was directed only to the parties, the Plaintiff's solicitor, acting prudently on his client's behalf, could not be expected to provide the Request. This was in the absence of confirmation from LJ Hooker that it would continue to retain that money in accordance with what the orders of Bergin J contemplated as a condition thereof. 8 I accept that in the absence of that confirmation, the Plaintiff could not be sufficiently assured that Hookers would hold the money at least until 3 December 1999 pending the result of the further submissions to the Court contemplated that day. I do not for that conclusion need to rely upon any apprehension that the Plaintiff may have regarding the Defendant disposing of his assets; though it is not irrelevant that Bergin J was satisfied to make the restraint orders that she did, which could only be on the basis that there was a reasonable apprehension on the Plaintiff's part that otherwise the Defendant's assets might not be available to meet the judgment. 9 In the events that happened, it appears that Hookers at no point gave the written confirmation requested and the sale did not take place as contemplated by Bergin J's orders on 30 November 1999 but only upon 14 December 1999. 10 It is true that the Plaintiff subsequently communicated with Hookers on 10 December 1999 advising that Hookers was no longer bound to hold the monies in its trust account being monies in relation to a commission said to be paid to a Mr Jay Lee. It is also true that when the matter was before Bergin J on 29 November 1999 at page 8 line 10-20 Her Honour said: "HER HONOUR: The position is this, the settlement can go ahead but for the payment of that, because you know that the question has arisen in respect of the payment to Mr Lee of Jay & Co. You are either willing to place the money in the trust account and have the settlement go ahead, or alternatively the plaintiff is going to take the position it won't remove the court order as it has been requested to. You have already got an undertaking as to damages on the court so any damages you say you are wrongfully suffering at the moment is covered by an undertaking as to the damages given by the plaintiff [through] his counsel." 11 What she said is part of the forensic context in which the orders were made. To the extent the orders might be open to more than one interpretation, that context may be taken into account, but not to alter the clear effect of the orders. See generally the note by Young J writing extra-judicially in 1998 72 ALJ 117-8 and the authorities there cited. However, I do not consider that anything Her Honour said or the earlier mentioned letter, takes the Defendant to the point where he is able successfully to show that the undertaking as to damages applied in the circumstances. In particular, he has not shown that the Plaintiff is liable under the undertaking for the amount of $2,898.53 attributable to the delay in settlement. That is so, even though it is not disputed by the Plaintiff that he could not in the end provide a substantiated basis for preventing the relevant commission being paid. This is because it was always open to the Defendant to procure from Hookers the relevant written confirmation, or himself have directed Hookers so to hold the money with a copy of the direction furnished to the Plaintiff. If that had happened, the settlement would not have been delayed. 12 It might have been better had the Plaintiff communicated to the Defendant's solicitor that it had not received a confirmation from Hookers. But the responsibility must primarily rest with the Defendant to be able to demonstrate to the reasonable satisfaction of the Plaintiff that the monies would be held by Hookers as contemplated by Bergin J's order of 29 November 1999. 13 It would also have been open to the Defendant to have sought a further order from the Court directed to Hookers or otherwise to the Land Titles Office, though that in practice would not have been necessary if what I earlier contemplated had taken place; see 12 above. 14 While therefore I have some sympathy with the Defendant in these circumstances, I am not satisfied that the Plaintiff should have to meet the amount claimed . In saying that, I do not accede to the Plaintiff's initial more extreme submission that the undertaking could only succeed if the Plaintiff were to fail in maintaining his own restraint orders, though that be one instance in which damage might follow to the Defendant. A claim under such an undertaking can still be made once it is clear that the party giving it, by act or omission, has been the effective cause of the damage to the party in whose favour it is given in seeking to maintain without proper basis an essential element of the restraint. This is so, even though other elements of the restraint were maintainable on a proper basis. Here however it is simply the case that the Defendant has not been able to demonstrate that the amount claimed is a loss or cost which can be fairly attributed in a causative sense either (a) to the Plaintiff's neglect to do that which the orders contemplated, or (b) to the Plaintiff's failure to maintain the basis upon which it obtained the relevant restraints or an essential element thereof. 15 While it is true that the Plaintiff could no longer substantiate a basis for a restraint on the monies totalling $16,910.44 insofar as attributable to Jay & Co Real Estate Agents, that does not in the circumstances entitle the Defendant to recover interest for the period the sales proceeds were held up. (There is of course no claim for interest on the $16,910.44, nor could there be.) This is because the sale could have proceeded on 29 November 1999 without any loss had the Defendant acted as I have said he could have done by procuring Hookers' confirmation or going again to Court to obtain a Request. I should add that it was not unreasonable for the Plaintiff before providing such a request to have wanted to verify that this second commission, here paid to an agent having other dealings with the Defendant, was being paid under a proper arm's length agency transaction. That in the end the Defendant failed to show the commission was not proper in that sense, only means that the commission was held up for payment but in circumstances where the sale could have still gone ahead, had the Defendant acted reasonably. That hold up, though it would not have occurred but for the concern about commission, was therefore not in the end the operative cause of the delay in settlement which is the basis of the Defendant's claim. 16 I turn now to the second order sought. The proceedings in question for which the Defendant seeks to expend monies free of the Mareva restraint are referred to in the Plaintiff's affidavit at pages 87 to 97 and again at pages 129 to 137. Put shortly, the Defendant is seeking leave to appeal in the Court of Appeal and then to pursue an appeal based upon a complex of proceedings initially before Einstein J and relating to an arbitration. Fraud is alleged by the Defendant, though it has never been pleaded in the proper manner. 17 In all the circumstances, I would make an order whereby the current restraint orders would permit by way of exclusion from the restraint the release of monies to pay such legal costs as are reasonably incurred in connection with obtaining the opinion of counsel of not less than five years standing. This is as to whether the Defendant would have reasonable prospects of success in obtaining leave to appeal and in successfully prosecuting the appeal itself. I so order. 18 In so ordering, I would not wish it to be understood that any further release of monies would be permitted for legal costs unless the Court were satisfied, in a manner not prejudicing the Defendant's legal professional privilege, that an affirmative answer was given by Counsel on a factual basis sufficiently substantiated, that the contemplated appeal would actually succeed. Indeed in saying that, I wish to be understood as saying that such an application is by no means to be considered likely to succeed even were an affirmative answer obtained, unless the court were satisfied that it was a proper exercise of its discretion so to allow the further expenditure of monies. 19 Costs are reserved. ********** Last Modified: 09/26/2000 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.