C & C Transport Enterprise Pty Ltd v Younes Chandab & Anor [2010] NSWSC 1271

New South Wales Supreme Court

CITATION : C & C Transport Enterprise Pty Ltd v Younes Chandab & Anor [2010] NSWSC 1271

HEARING DATE(S) : 18, 19, 31 August

JUDGMENT DATE : 9 November 2010

JURISDICTION : Equity Division

JUDGMENT OF : Bergin CJ in Eq

DECISION : Plaintiff sole director and shareholder.

CATCHWORDS : CORPORATIONS - where parties previously married agree in property settlement to reciprocal relinquishment of directorships and shareholdings in certain corporations - whether the former wife is the sole director and shareholder - whether the former wife agreed to reinstate the former husband as a director/shareholder

LEGISLATION CITED : Family Law Act 1975 (Cth)

C & C Transport Enterprise Pty Ltd (First Plaintiff / Cross-Defendant) PARTIES : Nachwa Chandab (Second Plaintiff / Cross Defendant) Younes Chandab (Defendant / CrossClaimant)

FILE NUMBER(S) : SC 2009/291541

COUNSEL : J Chambers (Plaintiffs /Cross-defendants) I Chrysostomou (Defendant / Cross-claimant)

SOLICITORS : Antwan Lawyers (Plaintiffs/Cross-defendants) Barber Lawyers (Defendant/Cross-claimant)

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BERGIN CJ in Eq

9 NOVEMBER 2010

2009/291541 C & C TRANSPORT ENTERPRISE PTY LTD & ANOR V YOUNES CHANDAB & ANOR JUDGMENT 1 By Second Further Amended Summons filed in Court on 31 August 2010 the plaintiffs, C & C Transport Enterprise Pty Ltd (the Company) and Nachwa Chandab (the plaintiff), seek declarations that since 11 September 2006 the plaintiff has been the sole director and sole legal and beneficial owner of the entirety of the issued share capital in the Company. 2 By Amended Cross Summons filed in Court on 19 August 2010, Younes Chandab, the defendant/cross claimant and former husband of the plaintiff, seeks declarations that he is a director and member of the Company; that the plaintiff has breached her fiduciary and statutory duties to the Company; and an order that the plaintiff be removed as a director of the Company. There is an alternative claim for the appointment of a manager and/or receiver to the Company. Background 3 The plaintiff and the defendant were married in 1987. They had five children including a son, Jayden, who gave evidence in the proceedings. The plaintiff and the defendant separated in June 2006 and their divorce and property settlement was finalised in 2009. Although separated, the plaintiff and the defendant resided in the matrimonial home at Dural until October 2006 when the defendant moved out of the premises. It is clear that the separation process was volatile and unfortunately it will be necessary to detail some of these difficulties because of the nature of the competing claims in respect of the documents that were lodged with the Australian Securities and Investments Commission (ASIC) notifying changes in directorship and membership of the Company. 4 During their marriage the plaintiff and the defendant commenced a parcel delivery business under the unregistered name "Fast Delivery Service". Contracts, including with Australia Post, were awarded to the plaintiff and the defendant trading as Fast Delivery Service. In about 2000 a friend of the plaintiff and the defendant and the plaintiff's brother spoke to them about the work that each had been doing in the area of children with special needs as contractors/sub-contractors with the Department of Education and Training (the Department). In September/October 2000 when the defendant was overseas, the plaintiff, on behalf of Fast Delivery Service, applied to the Department to become a "contracted driver". In January 2001 the Department awarded the first contract to the plaintiff and the defendant trading as Fast Delivery Service for 12 months. That contract related to a number of "school runs". 5 At the end of 2001 the Department changed its tender process. Although it was not a condition of the Department's new tender process, the plaintiff and the defendant, on their accountant's advice, established the Company to operate the business. The Company was incorporated on 1 March 2002. The plaintiff and the defendant were each directors and each held 50 ordinary shares in the Company. The Company was successful in securing contracts with the Department each year from 2001. The defendant drove one of the Company vehicles and was paid a salary. After the Company was incorporated the plaintiff ceased any driving duties and attended to the administrative side of the business. 6 In about 2004 the defendant's driver's licence was either cancelled or suspended. He decided to set up a business importing and selling marble and granite and established the company, C & C Marble & Granite Pty Ltd (CCMG), to operate that business. The plaintiff and the defendant were both directors of CCMG and equal shareholders, each owning 50 ordinary shares. CCMG was funded partly by a facility for $550,000 secured by a mortgage over an investment property owned by the plaintiff and the defendant in Oatlands. 7 In about 2006 whilst the defendant's driver's licence was still suspended or cancelled, he became involved with his cousin in a phone card business known as Global Networks Pty Ltd. It is apparent that in some way this business became associated with the Company. This business was not successful and eventually failed. 8 On 11 September 2006 forms were lodged with ASIC notifying: (1) the appointment of Paul Huy Nguyen & Co Pty Ltd as the registered agent for the Company and for CCMG; (2) cessation of the defendant's appointment as a director of the Company from 11 September 2006; (3) an increase in the plaintiff's shareholding in the Company from 50 ordinary shares to 100 ordinary shares; (4) a decrease in the defendant's shareholding in the Company from 50 ordinary shares to nil; (5) cessation of the plaintiff's appointment as director and secretary of CCMG from 11 September 2006; (6) appointment of the defendant as secretary of CCMG from 11 September 2006 (he remaining as a director); (7) a decrease in the plaintiff's shareholding in CCMG from 50 ordinary shares to nil; and (8) an increase in the defendant's shareholding in CCMG from 50 ordinary shares to 100 ordinary shares. There is controversy about these Forms with which I will deal later in the Judgment. 9 In September 2006 the plaintiff's solicitor was Edward Gilchrist then with LAC Lawyers and the defendant's solicitor was Tom Zreika with Queen Street Chambers, solicitors. The plaintiff filed on 20 September 2006 an application in the Federal Magistrates Court returnable on 6 October 2006. Mr Gilchrist prepared a Deed that was signed by the plaintiff in his presence on 4 October 2006. The defendant signed the Deed in Mr Zreika's presence on 6 October 2006. Both solicitors signed a Certificate under the Family Law Act 1975 (Cth) in relation to their respective clients, certifying that they had advised them independently in relation to the effect of the agreement and the advantages and disadvantages of making the agreement. That Deed included the following (with the plaintiff referred to as "Nachwa" and the defendant referred to as "Younes"): RECITALS A. Younes and Nachwa were married on 8 February 1987. B. Their marriage had been irretrievably broken down. Younes and Nachwa separated on 18 June 2006 however the parties have continued to live separately and apart under one roof. … E. At the time of making this agreement there was no other written agreement between the parties with respect to any of the matters mentioned in Section 90C of the Family Law Act 1975. This is a financial agreement for the purposes of Section 90C of the Act. F. As at the date of separation Younes and Nachwa were the joint registered proprietors of the real property situated at [Dural]. G. The home has a present agreed value of approximately $1,300,000.00. There is a mortgage secured on the home to National Australia Bank Limited in the sum of $900,000.00. H. Younes and Nachwa are also registered proprietors of an investment property at [Oatlands] which is … valued at $700,000 and is subject to a mortgage to Commonwealth Bank of Australia in the sum of $170,000.00 and is security for a line of credit with the same Bank in the sum of $390,000.00. I. Nachwa is a full-time carer of the children of the marriage and supports herself entirely from the earnings as a director of C & C Transport Enterprise Pty Limited. J. Younes supports himself from his earnings as a director of C & C Marble & Granite Pty Limited. K. The parties have agreed that their respective companies are of minimal value, depending as they do on the personal efforts of each of them. … K (sic) Nachwa has use of the Toyota motor vehicle owned by her company and Younes has use of a Holden Rodeo owned by his company and also has a 2001 Mercedes Benz registered in his name. L In order to reduce the possibility of resorting to litigation and to avoid or reduce any disputes between them in the future about ownership, use and descent of property, Younes and Nachwa have agreed to put their agreement in writing. … IT IS AGREED 1. This Deed will be binding upon the heirs, executors, administrators and assigns of each party. 2. Forthwith on signing this agreement Younes will vacate the home and remove all of his personal belongings from the home. 3. Within 14 days of the date of this agreement, Younes shall do all acts and things necessary to assign to Nachwa all of his right title and interest in the Dural property, including but not limited to executing a Transfer under the Real Property Act. 4. Upon delivery of the duly executed Transfer referred to in clause 2 (sic) above, Nachwa will thereafter indemnify Younes against all payments and liability with respect to the mortgage to the National Australia Bank Limited secured on Dural, as well as Council rates, Sydney Water charges and gas and telephone accounts relating to the said property. 5. Nachwa will also be responsible for all payments to AIF in relation to the security system for Dural and the National Australia Bank Visa credit card. 6. Nachwa will pay Younes the sum of $100,000.00 within one calendar year of the date of this agreement. 7. Nachwa shall retain all the furniture, electrical items and other chattels contained in the home as at the date of this agreement. 8. Within 14 days of this agreement Nachwa will do acts and things necessary to assign her right title and interest in the Oatlands property to Younes, including but not limited to executing a Transfer under the Real Property Act. 9. Upon delivery of the duly executed Transfer referred to in clause 2 (sic) above, Younes will thereafter indemnify Nachwa against all payments and liability with respect to the mortgage to Commonwealth Bank of Australia secured on the Oatlands property, as well as Council rates, Sydney Water charges and gas and telephone accounts relating to the said property. 10. In addition to the mortgage referred to in clause 7 (sic) , Younes will indemnify Nachwa against all payments and liability with respect to the Commonwealth Bank line of credit secured on Oatlands. 11. Within 14 days of the date of this agreement Younes will sign all such documents that are necessary to transfer his shares in C & C Transport Enterprise Pty Limited to Nachwa or her nominee. … 15. This agreement is intended to operate in substitution for all the rights of either party under Part VIII of the Family Law Act 1975 (Cth) to obtain maintenance or division of property orders. … 17. No amendment to this Deed will be binding on the parties, unless it is in writing and signed by all the parties to this Deed. 10 The defendant moved out of the Dural property on 8 October 2006. Unfortunately this was a hostile episode on this occasion to which the police were called. The police took statements from the plaintiff and from Jayden. These found their way into evidence because of an issue as to whether the defendant gave either the original or a copy of the Deed to the plaintiff on this occasion. 11 On 16 October 2006 Mr Gilchrist wrote to Mr Zreika confirming that there was a degree of urgency attached to dealing with the financial matters between the parties, in particular that there were substantial arrears in payments on the loan for the investment property at Oatlands. Mr Gilchrist suggested that an immediate sale of both properties was necessary to ease the financial strain. He sought Mr Zreika's confirmation as to whether he was acting for the defendant and suggested that if the defendant was not prepared to cooperate in having the properties listed for sale it would be necessary to obtain orders from the Court. 12 On 18 October 2006 Mr Zreika responded and confirmed that he acted for the defendant. After stating that the properties held significant sentimental value to the defendant and referring to his unwillingness to sell the properties, particularly the Dural property, Mr Zreika went on to claim that the plaintiff had failed to make payments on loans because she had mismanaged the Company business; had sapped the Company and home loan accounts and funnelled the funds into the children's accounts; had taken out a line of credit of $390,000 without the "requisite authority" from the defendant whilst he was overseas (with the claim that it would have been impossible for him to sign the mortgage documents); failed in her duties as a director of the Company in trading insolvently; and failed to make the necessary wage payments to the defendant "who is also an employee of the business". There was no suggestion in this letter that the defendant was a director of the Company. 13 On 19 October 2006 Mr Gilchrist responded to Mr Zreika's letter of 18 October 2006. Although noting that it was not a time to engage in a "war of words" Mr Gilchrist stated that the defendant's "spurious allegations" could not be allowed to pass entirely without comment. In this regard Mr Gilchrist said: Firstly, it is unlikely your client's knowledge regarding our client's business affairs is other than superficial, because he took no particular interest in these matters. Secondly, your client until recently was also a director of C & C Transport. 14 On 8 November 2006 Mr Gilchrist and Mr Zreika had a telephone conversation in relation to the proceedings. On the same day Mr Gilchrist wrote to Mr Zreika referring to that conversation and stating: An application was filed in the federal magistrate's (sic) court on 20 September 2006, returnable on 6 October 2006. On 5 October 2006 we faxed a Notice of Discontinuance to the Court and assuming that was the end of the matter we did not attend Court on the return date. We subsequently received a letter from the Court advising the matter was adjourned until 27 November 2006 for further directions. As agreed, we enclose for your information a copy of the Application, Notice of Discontinuance and letter dated 12 October 2006. It may be useful to keep the proceedings on foot, if we are unable to resolve the dispute otherwise, to retain priority in the interest of finalising all outstanding issues at an early date. 15 The defendant then instructed new solicitors, Philip Sim & Associates. Mr Sim wrote to Mr Gilchrist on 24 November 2006 confirming that his firm had been instructed to act for the defendant in respect of the family law matters. That letter included the following: We note that you will be attending the Federal Magistrates Court at Parramatta and mentioning this matter by consent and adjourn these proceedings to a future date. We further note there has been some agreement as to the binding agreement dated 6 October 2006 and we will seek to draft terms of settlement in accordance with that agreement. We will shortly contact you further and confirm arrangements for the sale of the respective properties. 16 The plaintiff and the defendant signed Terms of Settlement on 11 and 14 December 2006 respectively. Those Terms were filed with the Federal Magistrates Court as Consent Orders on 22 December 2006. The orders provided for the transfer of the Dural property to the plaintiff with the plaintiff indemnifying the defendant in relation to the mortgage over the property. There was provision for the payment of $100,000 by the plaintiff to the defendant on or before 1 January 2008 with a default regime for the sale of the Dural property. There was also a regime for the sale of the Oatlands property. Those orders included the following: 12. That within 14 days of the date of these orders the wife will sign all such documents that are necessary to transfer her shares and any directorship in C & C Marble & Granite Pty Ltd ACN 112 152 226 to the Husband. 13. That within 14 days of the date of these orders the wife will deliver to the husband any property, stock, plant and equipment in her possession being the property of C & C Marble & Granite Pty Ltd ACN 112 152 226. 17 On 6 February 2007 the defendant made a Statutory Declaration in the presence of Raed Rahal, a solicitor with the firm James Lahood & Associates, in the following terms: 1. I was previously a director of C & C Transport Enterprises Pty Ltd ("the company"). 2. During my time as director of the company I entered into a business venture ("the venture") with a company by the name of Global Networks Pty Ltd ("Global"). The venture involved the purchase and subsequent wholesale of international telephone cards. 3. The venture was arranged, negotiated and eventually operated by me solely without the knowledge or involvement of my wife Nachwa Chandab. 4. As a result of various disputed issues between the owner of Global and I, Global commenced proceedings to wind up the company based on Globals claims that they are owed money by the company. I have instructed my solicitor to defend these proceedings in the Supreme Court of Victoria. 5. Should my defence be unsuccessful and the company is wound up I request that the Department of Education transfer the current contract held by the company to Nachwa Chandab personally. 6. Considering that the current action against the company and the problems that have arisen due to same are predominantly a direct result of my actions, I confirm that I will not make any claim or interfere in any way with the potential transfer of the contract by the Department of Education to Nachwa Chandab either now or in the future. 18 On 28 August 2007 the same solicitor before whom the defendant had made the Statutory Declaration wrote to ASIC enclosing a completed ASIC complaint form and a statement of the defendant. That statement included claims that the plaintiff had forged the defendant's signature on documents to obtain a line of credit loan and the following: 9. It has also now come to my knowledge that as well as the line of credit being obtained without my knowledge or consent that I was also removed as a company director of C & C Transport without my consent or knowledge in or about September 2006. While I was within the country at this time I was not living within the family home due to another dispute with Nachwa. Also, I say that at the same time a transfer of my shares to Nashwa occurred without my consent and without any consideration. 10. I have never signed any documents of any nature which would cause me to be removed from my position within C & C Transport, nor have I been a party to any meetings of the company where this was resolved. 11. It is my understanding that my solicitors have confronted the accountant about how my removal from the company occurred. During the discussions with my solicitors, James Lahood & Associates, the accountant made admissions that he had never sighted any executed documents that would indicate that I consented to my removal from C & C Transport. The accountant further admitted that he had relied on Nachwa's word that she had all the original executed documents required by law when removing a director from their position within the company and transferring shares. 12. At my solicitor's request the accountant forwarded some ASIC forms which he had on his file relating to the changes made to C & C Transport. The accountant provided two form 362's executed by Nachwa, which had the effect of appointing and then removing the accountant as an agent of the company so that he is able to lodge the required forms online to remove me from my position within C & C Transport and an (sic) form 484 executed by Nachwa authorising my removal from C & C Transport. Annexed and marked "A" is a copy of the forms. Please note that all these forms were dated 11 September 2006. 13. As well as having me removed from C & C Transport I was also able to obtain documents which had the effect of removing Nachwa from any official capacity within another company called C & C Marble & Granite Pty Ltd ACN 112 152 226 ("Marble & Granite"). These documents consisted of two 362 forms which appointed and then removed the accountant as agent of the Marble & Granite for the purpose of lodging the forms online and a 484 form authorising a change to Marble & Granite. These forms were all purportedly executed by me. However, I say that I have never authorised the accountant as an agent of Marble & Granite for the purpose of lodging these forms and that I have never executed these forms. The signature contained on the forms does not resemble my signature. Annexed and marked "B" is a copy of the ASIC forms allegedly executed by me and specimen copies of my actual signature as it appears on various cards. Please note that these forms were also dated 11 September 2006. 19 The defendant requested that ASIC investigate and prosecute the plaintiff for breaches of the Corporations Act 2001. On 27 September 2007 ASIC advised that it would not investigate the complaint because it appeared it was an "internal company dispute". The defendant persisted unsuccessfully with his request for ASIC to investigate and prosecute the plaintiff. 20 The Department awarded the contract for the year 2009 to the plaintiff and the Company. 21 As I have said earlier, the deterioration of the relationship between the plaintiff and the defendant was at times volatile. This resulted in the granting of an Interim Apprehended Violence Order (AVO) against the defendant on 25 November 2008 in which he was ordered not to assault the plaintiff and not to engage in any other conduct that intimidated the plaintiff. The defendant was also ordered not to stalk the plaintiff or go within 200 metres of the Dural property. It was noted that the defendant was present in Court when the order was made and the defendant was directed to attend the Local Court at Hornsby on 13 January 2009. The order also contained a notation that if the defendant failed to attend the Local Court on 13 January 2009 orders might be made against him or a warrant might issue for his arrest to bring him before the Court. 22 The plaintiff claims that she attended the Hornsby Local Court on 13 January 2009. The defendant claims that he met with the plaintiff in Parramatta on that day and that she signed a form reinstating him as a director of the Company. The defendant claimed that the plaintiff asked him not to lodge the form until the "settlement in the Federal Magistrates Court is finalised" and after she told him to do so. 23 By this time the plaintiff had not paid the $100,000 to the defendant. She had also found out that the defendant had made an arrangement with the Bank that left her with a liability of $23,968.25 to the Bank. Accordingly the plaintiff wished the Consent Orders to be adjusted to reduce the order for payment of $100,000 to $76,031.75 in recognition of her payment to the Bank. The adjusted Consent Orders were filed with the Federal Magistrates Court on 17 February 2009. 24 In September 2009 the defendant lodged ASIC Forms which included his appointment as a director of the Company from 13 January 2009, the issuing of a further 100 ordinary shares in the Company and an increase in his shareholding from nil to 100 ordinary shares. The plaintiff became aware of these forms and on 22 October 2009 notified ASIC and Westpac Banking Corporation with which the Company held an account. On 29 October 2009 the plaintiff lodged further forms with ASIC removing the defendant as a director and reducing his shareholding in the Company to nil. Proceedings commenced 25 The plaintiff commenced these proceedings before the Duty Judge in Equity on 27 November 2009. The proceedings were heard on 18, 19 and 31 August 2010 when Ms J Chambers, of counsel, appeared for the Company and the plaintiff and Mr I Chrysostomou, of counsel, appeared for the defendant. ASIC, as second defendant, has apparently filed or agreed to file a submitting appearance. Consideration 26 The plaintiff claims that in respect of the agreed division of property in their separation and divorce, the defendant agreed to relinquish his directorship and shareholding in the Company and she agreed to relinquish her directorship and shareholding in CCMG. The first issue for determination is whether the parties agreed to relinquish these directorships and shareholdings. 27 In her first affidavit of 27 November 2009, the plaintiff gave evidence that in about September 2006 after she and the defendant had agreed upon the relevant division of property, they jointly consulted their then accountant, Paul Nguyen. The plaintiff claimed that on 11 September 2006 she and the defendant attended upon Mr Nguyen who presented "certain documents relevant to our intended change of shareholding and resignation by Younes as a director of the Company" for signature. The plaintiff referred to the relevant ASIC forms and claimed that the defendant ceased to be a director of the Company on about 11 September 2006. 28 After the defendant had filed his first affidavit on 15 January 2010 denying that he had attended upon Mr Nguyen and asserting that the signature on the ASIC forms was not his signature, the plaintiff made a further affidavit on 20 May 2010 in which she reaffirmed her evidence in her earlier affidavit and stated that she saw the defendant sign the ASIC Forms. The plaintiff was cross-examined in relation to an affidavit that she affirmed in the proceedings in the Federal Magistrates Court on 12 November 2009. In that affidavit the plaintiff claimed that the defendant was present at a first consultation with Mr Nguyen at which time the plaintiff said to Mr Nguyen that she and the defendant were involved in a divorce and property settlement and asked him to prepare documents "whereby we transfer our shares in each other's company" and the defendant "resigns as a director" of the Company. That affidavit included the following (par 15): To the best of my knowledge and belief, on or about 11 September 2006, Younes and I attended Paul's office where Paul presented to us for signature certain documents relevant to our intended change of shareholding and resignation by Younes as a director of the Company. Annexed herewith and marked as indicated are copies of the documents which I believe were then signed by Younes and me. 29 The defendant highlighted the difference between the evidence given in the affidavit in the Federal Magistrates Court affidavit in which the plaintiff said she believed the defendant signed the documents and the evidence given in her affidavit in these proceedings in which she claimed she saw the defendant signed the documents to suggest that the evidence given in these proceedings should be disbelieved.