Commonwealth Bank of Australia v Saleh & 8 Ors [2005] NSWSC 681

New South Wales Supreme Court

CITATION : Commonwealth Bank of Australia v Saleh & 8 Ors [2005] NSWSC 681

HEARING DATE(S) : 30/06/05, 01/07/05

JUDGMENT DATE : 1 July 2005

JUDGMENT OF : White J

DECISION : See para 55 of judgment.

CATCHWORDS : PRACTICE AND PROCEDURE - Interlocutory injunction to restrain dealings with a bank account - Account contained proceeds from an alleged fraud practised on plaintiff - Strength of prima facie case that defendant implicated in the fraud - Strength of prima facie case that plaintiff relied on alleged misrepresentations - Balance of convenience - Plaintiff's negligence - Injunction not continued.

CASES CITED : Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 399

Commonwealth Bank of Australia PARTIES : v Mohamed Saleh & 8 Ors

FILE NUMBER(S) : SC 3643/05

Plaintiff: A Henskens COUNSEL : 3rd Defendant: In Person

Plaintiff: J K O'Sullivan SOLICITORS : Defendant: N/A

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

WHITE J

Friday, 1 July 2005

3643/05 Commonwealth Bank of Australia v Mohamed Saleh & 8 Ors JUDGMENT 1 HIS HONOUR: This is an application to extend an injunction granted ex parte on 24 June 2005, to restrain dealings with bank accounts to which the plaintiff claimed the proceeds of a fraud practised on it, could be traced. The injunction against the third defendant has been extended from time to time until today, and he opposes its continuance. 2 The plaintiff's claim, in short, is that it was induced to lend $7 million to a person representing himself to be a Mr Edge. The loan was made to enable this person to purchase the shares of the first defendant, a Mr Saleh, in a company called TDM Australia Pty Ltd. 3 The sum of $7 million was paid by the plaintiff to the first defendant on 3 June 2005. Since then Mr Edge has apparently disappeared, if he ever appeared. So, it seems, has the first defendant. 4 The plaintiff claims that the company does not have the assets which it was represented to have or that the assets may be worthless. In particular, it was represented to the plaintiff that the company had debtors totally $8,427,540.76. Subsequent inquiries have revealed that this representation was probably false. Enquiries of the debtors in question disclose that they either deny owing any money at all to the company TDM Australia Pty Ltd, or, if they do, they say that they owe a few hundred dollars and not a few hundred thousand dollars, as represented on a list of the company's debtors. 5 The third defendant is sued because he was the accountant for the company. 6 The plaintiff, I apprehend, will say that it relied upon certain correspondence written by the third defendant, as director of the company called Qureshi & Associates Pty Ltd which carries on business as an accountant under the business name of Mascot Taxation & Accounting Services. Mr Qureshi owns the shares in that company. 7 There are two relevant items of correspondence from Mr Qureshi. One is a letter written by him dated 20 May 2005, and the other is a letter dated 3 June 2005 to which I will refer later in these reasons. The plaintiff says that the third defendant represented that the company's debtors listing was correct. 8 On 24 June, the plaintiff obtained an order freezing the third defendant's account with the ANZ Bank, which is the fourth defendant. The order was obtained on the basis of evidence given by an officer of the plaintiff on information and belief that $315,015 of the $7 million had been disbursed by the first defendant by being paid to the third defendant. 9 Subsequent inquiries, or production of documents on subpoena, revealed that on 7 June 2005 the first defendant transferred $125,000 to the third defendant's account with the ANZ Bank. Of that sum $55,168, was drawn on 10 June. Further withdrawals totalling $24,500 were made between 14 June and 20 June. When the order was made, the account had a credit balance of $45,337. It is that sum which the plaintiff seeks to restrain the third defendant from dealing with. 10 In essence, the plaintiff makes two claims against the third defendant: one is that there is a serious question to be tried that the third defendant was a participant in the fraud and it claims to trace the moneys against him as a constructive trustee. Alternatively, it will say that there is a serious question that it has a claim against him on the basis of misrepresentations contained in the correspondence of which he was the author, upon which it relied, and that there is reason to apprehend that if the injunction is not continued the moneys are likely to be dissipated with the intention of frustrating any judgment. 11 The plaintiff relies upon the correspondence written by the third defendant which it says assisted the fraud. Secondly, it relies upon the circumstances of the payment made to Mr Qureshi on 7 June. The third defendant says that that payment was for outstanding accounts for accountancy or consultancy services which he provided to the company. The plaintiff says that that explanation is false, or there is at least a serious question to be tried that it is false, and it relies upon the alleged apparent falsity of the explanation as corroborative of its charge that the third defendant participated in the fraud. It also relies on the failure of the third defendant to produce any of the company's records when a representative of the receiver, which the plaintiff has appointed to the company, sought their production. 12 The plaintiff submits that there would be no real prejudice to the third defendant if the injunction is continued. This is because, on the third defendant's own evidence, a substantial part of the debt of $125,137 had been outstanding for a considerable time and the money which was used to discharge it, assuming the debt existed, belongs beneficially to the plaintiff. Hence, the plaintiff says the third defendant would be really no worse off if he is not entitled to make use of the rest of the plaintiff's money than he would have been if the debt had not been discharged in the first place. 13 The plaintiff also says the third defendant ought never to have received the whole of the $125,000 that was paid to him, assuming that it was paid for accountancy services as he claims. That is so because if the accounts which he says were sent to the company were genuine, the company ought to have withheld 47½% of the remittance, owing to the fact that the accounts did not include on them a statement that they were tax invoices and did not contain an Australian Business Number for the company Qureshi & Associates Pty Ltd, which supplied the relevant services. Hence it is said, the third defendant cannot complain if he is restrained from dealing with a sum which is less than that which, in any event, should not have been paid to him. 14 The plaintiff also says that the third defendant claims to have no assets except his interest in the company which conducts the accountancy practice and that if he is allowed to deal with the sum of $45,337, it is likely that no moneys will be available to satisfy any judgment. 15 It is convenient to turn first to the correspondence written by the third defendant to which the plaintiff has referred. The letter of 20 May 2005 is addressed to the director, TDM Australia Pty Ltd and it is headed "Re: 2004 Accounts and 2004 and 2005 Receivables". It refers to a query regarding the 2004/5 debtors for TDM and continues as follows: " From the information available to us we confirm: · That the 2004 accounts are correct, · That the debtors as at the 30th June 2004 and for the 10 months to 30th April 2005, as per the attached debtors listing is correct."