In the matter of Rissalah College Limited [2013] NSWSC 158

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Rissalah College Limited [2013] NSWSC 158 Hearing dates: 1 March 2013 Decision date: 02 March 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Time for service of originating process and specified affidavits abridged to 5pm, 4 March 2013. Interlocutory relief granted with specified conditions. Catchwords: CORPORATIONS - Interlocutory relief - Whether real prospect of success - Whether balance of convenience favours the grant of an interlocutory injunction Legislation Cited: Corporations Act 2001 (Cth) s 237 Education Act 1990 (NSW) s 21A Supreme Court (Corporations) Rules 1999 (NSW) r 2.13 Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: - Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57 - Stratford Sun Ltd v OM Holdings Ltd [2011] FCA 414; (2011) 83 ACSR 84 Category: Interlocutory applications Parties: Bassam Kamaledine (Plaintiff) Rissalah College Limited (First Defendant) Ali Roude (Second Defendant) Representation: Counsel: S.S. Ahmed (Plaintiff) Solicitors: Owen Hodge Lawyers (Plaintiff) File Number(s): 2013/63780

Judgment - EX TEMPORE 1By ex parte application filed on 1 March 2013, the plaintiff, Mr Bassam Kamaledine, seeks an abridgement of service for an originating process and supporting affidavits on the defendants, Rissalah College Limited ("Company") and Mr Ali Roude. The plaintiff also seeks orders that Mr Roude be restrained from removing financial documents from the school's premises situated at Lakemba and initially sought an order that Mr Roude also be restrained from causing, authorising, directing or approving payments to any person other than ordinary wages or salary of employees of the Company. The latter order was narrowed in the course of oral submissions. 2The interlocutory relief is sought in anticipation of an application for final relief granting leave to the plaintiff to bring proceedings on behalf of the Company against Mr Roude and other relief, and an order amending the Company's constitution under s 237 of the Corporations Act 2001 (Cth). 3The application is supported by detailed affidavits of Mr Kamaledine, who was until recently the chairman and a director of the Company. There may or may not be a contest as to whether he still occupies either or both of those positions. The application is also supported by an affidavit of Mr Riedwehn Toefy, who is a director of the Company and its treasurer. The Company is a company limited by guarantee which conducts a school at Lakemba. The proposed second defendant, Mr Roude, is one of the trustees of the school and one of the directors of the Company and has also been the principal of the school since shortly after it commenced. 4The affidavits of Messrs Kamaledine and Toefy indicate, in particular, concerns as to a payment of $125,000 allegedly made by the Company in December 2005 which, it is contended, was made to three persons including Mr Roude and one of his family members. I am conscious that there may or may not be a limitations issue in respect of that payment, which would, if it arises, be a matter for a final hearing. Allegations are also made, or concerns raised, as to other payments allegedly made without board approval in 2004-2005, 2007, 2010-2011, and as to moneys allegedly diverted from overtime paid to a staff member in 2009-2011. Concern is also raised that a copy of Mr Toefy's signature was applied to documents associated with some of these payments without his consent and as to payments to Mr Roude's sister in 2005-2007. 5I should emphasise that these matters are allegations advanced in support of an application which has been heard on an ex parte basis and Mr Roude has not had an opportunity to respond to any of those allegations, and I do not express any view as to their merits on any final basis. I address them only to the extent that is necessary to deal with this application. 6Paragraph 148 of Mr Kamaledine's affidavit summarises, by reference to other paragraphs of his affidavit, payments in the period from 2005 onward which are identified as recoveries available to the Company, totalling in excess of $560,451. These matters have been raised with the board of the Company, of which Mr Kamaledine was until recently a member, Mr Toefy is a member and Mr Roude is also a member, which has not as yet, it appears, conducted any independent inquiry as to the matters. They have been raised in correspondence between solicitors, where a letter dated 23 January 2013 from Mr Kamaledine's solicitors was met by a response from solicitors for the Company requesting full particulars of the allegations but otherwise not indicating that the Company intended to take any active step to address them. 7At a meeting of directors of the company on 26 February 2013, Mr Toefy proposed a motion that the Company bring proceedings in respect of these matters, which was not seconded by any other director and therefore lapsed. By that time, it appears that several directors were taking the position that Mr Kamaledine was no longer a director of the Company and he did not attend that meeting. 8The relief that is sought before me is, first, short service of the proceedings and that they be made returnable before the Corporations Judge. It appears that the matters have been in dispute for a considerable time. However, that dispute appears to have escalated in the recent past, by the exchange of solicitors' letters, several directors taking the position that Mr Kamaledine is no longer a director and the failure to pass a resolution authorising the commencement of the proceedings. It appears that there was also a suggestion, as late as January 2013, that a further bonus payment to Mr Roude be paid. In these circumstances, I consider that there is a degree of urgency which warrants an order for short service of the proceedings. 9The plaintiff had originally sought a return date for the matter on 8 March 2013, but in my view the matter is preferably listed in the Corporations List which is ordinarily heard on a Monday, when the Court has available at least two judges and sometimes additional judges to hear any argument that is necessary, rather than on a day on which other matters will be listed for hearing. There was a suggestion, in the course of submissions, that the matter should be made returnable on Monday. I have ultimately concluded that course is not desirable, because the shortness of time permitted for service and for parties who are delivered copies of documents to consult with solicitors and provide instructions, would be such that a mention of the matter on Monday is very likely to require a further adjournment. In these circumstances, I propose to make orders abridging the time for service to 4 March as was originally sought, and to list the matter before the Corporations Judge on 11 March 2013. 10The next order that was sought was an order restraining the second defendant, Mr Roude, from removing financial documents from the school's premises at Lakemba. There is evidence which, if accepted at a final hearing, would indicate that a relevant document had been destroyed on an earlier occasion. There is also evidence that Mr Kamaledine has in the recent past been refused access to documents held in the Company's archives. There is, it seems to me, an argument in favour of granting that relief, so as to preserve the status quo pending any hearing. The arguments against granting that relief seem to me to be, firstly, that the matter has been the subject of dispute for some considerable time, and it might be thought that if documents were to be removed, that would have occurred prior to today. Second, it might be suggested that an injunction adds little to the principles applicable to the destruction of documents in anticipation of or during proceedings, which may already give rise to sanctions in contempt in an appropriate case. 11I have had regard, in determining whether such an injunction should be granted, to the principles outlined by the High Court in Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57 at [65], which were helpfully summarised in Stratford Sun Ltd v OM Holdings Ltd [2011] FCA 414; (2011) 83 ACSR 84 at [7]ff. In my view, the evidence before me sufficiently demonstrates a real prospect of success, or a serious question to be tried, to warrant the preservation of the status quo pending the determination of the application at a final hearing. It seems to me that the balance of convenience favours the grant of an interlocutory injunction restraining the removal of financial documents from the school's premises. There is plainly a detriment to the plaintiff in the conduct of the proceedings if relevant documents were lost. On the other hand, there seems to be no detriment to the Company or Mr Roude in granting the relevant order, for a short period, first, because the order adds little to what would be established by existing principles while proceedings are pending and, second, because there is in evidence a letter from the Company's solicitors which points out that the Company's constitution requires the Company's books to be kept at its registered office. It appears that the Company's registered office is the same address as the address which is the subject of the injunctive relief sought, so the injunctive relief will do no more than require the continuance of the position already required under the Company's constitution. 12As I noted above, an order was also initially sought restraining Mr Roude from causing, authorising, directing or approving payments to any person other than ordinary wages or salaries of employees of the Company. In the course of submissions, it was recognised that that order was too wide, since it would potentially prevent the payment of, for example, contractors providing services to the Company, where those payments had been approved by the board in the ordinary course. The plaintiff narrowed the interlocutory relief that is sought to seek to restrain, on an interim basis, payments to Mr Ali Roude, Ms Susan Roude and Nada Roude other than their ordinary salaries. Again, I have had regard to the principles to which I have referred above. It seems to me that a sufficient likelihood of success exists on the material before me to warrant the preservation of the status quo, and I noted above that there is evidence that a payment of a bonus to Mr Roude was recently in contemplation. It seems to me that the balance of convenience favours the grant of the relief sought, in the narrower form, both because it will continue only for a short period until the matter is again before the Court and the question can be agitated further, and because any party has liberty to apply, so that any proper payment can be the subject of an application to the Court to allow a variation to the restraint. 13One further issue arose in the course of submissions. It appears, from the evidence, that the Company receives substantial Commonwealth and State funding to undertake the provision of the educational services which it provides to the community and to perform the important public functions which it performs. There is evidence that, in late August 2012, an audit firm retained by the New South Wales Department of Education and Communities conducted a routine audit or review of the school's compliance with s 21A of the Education Act 1990 (NSW), which contemplates that it should not be operating "for profit", but that audit did not identify the matters which are alleged in these proceedings. 14It seems to me that the New South Wales Department of Education and Communities, so far as it provides funding for the school, has a potential interest in these proceedings, particularly where the plaintiff seeks relief which may involve the application of the school's funds to the conduct of litigation. The Department may be a necessary or proper party to the proceedings for the purposes of the Uniform Civil Procedure Rules 2005 (NSW) and, even if it does not have that level of interest in the proceedings, it would likely be given an opportunity to be heard under Supreme Court (Corporations) Rules r 2.13 if it sought such an opportunity. I therefore propose to direct that the originating process and supporting affidavits be served upon the New South Wales Department of Education and Communities, marked, inter alia, to the attention of the officer that commissioned the audit, namely the Manager, Schools Policy External Relations Policy Directorate. In making that direction, I do not seek to limit the manner of service upon the Department or prevent service in any other manner in which documents may be served on the Department in the ordinary course, but simply to take steps to ensure that the material comes to the attention of those who may have responsibility for the relevant area. 15Accordingly, I make the following directions, in addition to those which I have previously made granting leave for filing of the Originating Process: 1. The time for service of the originating process and affidavits of Bassam Kamaledine and Riedwehn Toefy be abridged to 5pm, 4 March 2013. 2. The Originating Process be made returnable before the corporations judge in the motions list at 9.45am on 11 March 2013. 3. Until 5pm on 11 March 2013, the second defendant be restrained from removing financial documents from the school, Rissalah College's premises at xxxxx xxxxxxx xxxx, Lakemba. 4. Until 5pm on 11 March 2013, the second defendant be restrained from causing, authorising, directing or approving payments to (i) Ali Roude, (ii) Susan Roude; and (iii) Nada Roude other than ordinary salaries. 5. The plaintiff serve the originating process and the affidavits of Bassam Kamaledine and Riedwehn Toefy upon the New South Wales Department of Education and Communities, marked, inter alia, to the attention of The Manager, Schools Policy External Relations Policy Directorate, drawing the Department's attention to this direction. 6. These orders may be entered forthwith. 7. The costs of today be reserved.