FEDERAL COURT OF AUSTRALIA

Amirbeaggi as Trustee for the Bankrupt Estate of Hanna v Hanna (No 2) [2022] FCA 562

File number(s):

NSD 1285 of 2020

Judgment of:

GOODMAN J

Date of judgment:

18 May 2022

Catchwords:

PRACTICE AND PROCEDURE – application for leave to amend cross-claim – where application made after expert report concluded, contrary to the cross-claimant’s pleaded position, that he had signed a dealing for the transfer of property – where consideration of the factors relevant to the discretion weighs in favour of allowing the amendment

PRACTICE AND PROCEDURE – application for an order that this proceeding be heard with another proceeding and that evidence in one proceeding be evidence in the other – where some common issues and common witnesses whose credit will be in issue – where no objection by parties other than the cross-respondent – application granted

Legislation:

Bankruptcy Act 1966 (Cth)

Federal Court of Australia Act 1976 (Cth)

Federal Court Rules 2011 (Cth)

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW)

Cases cited:

Amirbeaggi as Trustee of the Bankrupt Estate of Hanna v Hanna [2021] FCA 988

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) 187 FCR 261

Ghose v CX Reinsurance Company Ltd [2010] NSWSC 110

Humphries v Newport Quays Stage 2A Pty Ltd [2009] FCA 699 

Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098

Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; (2016) 332 ALR 199

Trade Practices Commissioner v David Jones (Australia) Pty Ltd (1985) 7 FCR 109

Walsh, Liquidator of D&R Community Services Pty Ltd (Receivers and Managers Appointed) (In Liq) v Commissioner of Taxation [2018] FCA 1739

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

General and Personal Insolvency

Number of paragraphs:

82

Date of hearing:

Determined on the papers

Solicitor for the Applicant:

Mr J Rodgers of Kardos Scanlan

Solicitor for the First Respondent:

Ms A Klein of Lawpoint Lawyers

Counsel for the Second Respondent:

Mr D Allen

Solicitor for the Second Respondent:

Ms S Metry of SKM Lawyers

ORDERS

NSD 1285 of 2020

BETWEEN:

SHABNAM AMIRBEAGGI AS TRUSTEE OF THE BANKRUPT ESTATE OF JOHN MAMDOUH HANNA

Applicant

AND:

ANDREW JOSEPH HANNA

First Respondent

HEDRA FAYEZ NASHED ABDALLA

Second Respondent

AND BETWEEN:

HEDRA FAYEZ NASHED ABDALLA

Cross-Claimant

AND:

ANDREW JOSEPH HANNA

Cross-Respondent

order made by:

GOODMAN J

DATE OF ORDER:

18 May 2022

THE COURT ORDERS THAT:

1.    The Cross-Claimant has leave to file, within 7 days of the date of these Orders:

(a)    an Amended Notice of Second Cross-Claim in the form of the Amended Notice of Second Cross-Claim annexed to the Interlocutory Application dated 28 February 2022; and

(b)    an Amended Statement of Second Cross-Claim, in the form of the Amended Statement of Second Cross-Claim annexed to the Interlocutory Application dated 28 February 2022, with the deletion of the words “been executed or in paragraph 13 and the entirety of paragraph 17.

2.    The Cross-Claimant is to pay the costs of the Cross-Respondent thrown away by reason of the amendment.

3.    The Cross-Respondent is to file any Defence to the Amended Statement of Second Cross-Claim, within 14 days of the date of service of the Amended Statement of Second Cross-Claim.

4.    This proceeding be heard together with proceeding NSD1722/2019, with evidence in one proceeding being evidence in the other.

5.    Subject to Orders 6 and 7, the Cross-Respondent is to pay the Cross-Claimant’s costs of the Interlocutory Application dated 28 February 2022 filed by the Cross-Claimant, as agreed or assessed.

6.    If any party seeks an alternative order as to costs:

(a)    that party is to file and serve within 7 days of the date of these Orders:

(i)    a proposed form of alternative order;

(ii)    any evidence in support of that proposed form of order;

(b)    any party against whom an alternative order as to costs is sought is to file and serve within 14 days of the date of these Orders, any evidence upon which it wishes to rely;

(c)    any party seeking an alternative costs order is to file and serve within 21 days of the date of these Orders:

(i)    any evidence in reply;

(ii)    its submissions (limited to 3 pages);

(d)    any party against whom an alternative order for costs is sought is to file and serve within 28 days of the date of these Orders its submissions (limited to 3 pages); and

(e)    any party seeking an alternative order for costs is to file and serve within 35 days of the date of these Orders any submissions in reply (limited to 2 pages).

7.    Unless the Court otherwise orders, any question of costs so arising will be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GOODMAN J

INTRODUCTION

1    By Interlocutory Application dated 28 February 2022, the cross-claimant, Mr Abdalla, seeks:

(1)    leave to file and serve an Amended Cross-Claim; and

(2)    an order that this proceeding be heard with proceeding NSD1722/2019, with evidence in one proceeding being evidence in the other.

2    The cross respondent, Mr Andrew Hanna (Mr Hanna Jnr), opposes both orders sought by Mr Abdalla.

BACKGROUND

Background facts

3    Mr Abdalla and Mr John Hanna (Mr Hanna Snr), the father of Mr Hanna Jnr, developed eight townhouses at Hinchinbrook in New South Wales. Upon registration of a strata plan for those townhouses, Mr Hanna Snr and Mr Abdalla became the registered proprietors, as tenants in common in equal shares, of inter alia the property contained in folio identifier 17/SP93648 (first property) and folio identifier 22/SP93648 (second property).

4    On 11 July 2017, a sequestration order was made against Mr Hanna Snr and Ms Amirbeaggi was appointed as the trustee of Mr Hanna Snr’s bankrupt estate.

5    The trustee is the applicant in proceeding NSD1722/2019 and this proceeding.

Proceeding NSD1722/2019

Overview

6    Proceeding NSD1722/2019 concerns the first property and in particular the transfer of that property, in January 2018, from Mr Abdalla and Mr Hanna Snr to Jarvis J Pty Ltd.

7    In November 2018, the trustee commenced a proceeding in the Supreme Court of New South Wales, seeking relief against various parties including Mr Abdalla.

8    In July 2019, Mr Abdalla filed a cross-claim in that proceeding against the trustee and against Jarvis.

9    On 30 August 2019, the Supreme Court of New South Wales made an order transferring the proceeding to this Court.

10    On 16 June 2021, Yates J made orders, by consent, for the dismissal of the trustee’s claim and of Mr Abdalla’s cross-claim in so far as it sought relief against the trustee. Thus, the only extant claim in proceeding NSD1722/2019 is Mr Abdalla’s cross-claim against Jarvis. From that cross-claim and Jarvis’s defence to it, the following picture emerges.

11    It is common ground that as at 11 July 2017, when the trustee was appointed, Mr Abdalla and Mr Hanna Snr were the registered proprietors, as tenants in common in equal shares, of the first property. It is also common ground that during January 2018 the legal title to the first property was transferred to Jarvis, pursuant to a transfer dealing.

12    Mr Abdalla claims that:

(1)    immediately prior to the transfer of the first property to Jarvis in January 2018, he was the legal and beneficial owner of 50 per cent of that property;

(2)    the transfer of the first property to Jarvis did not occur pursuant to any valid or effective contract of sale, at least in so far as concerned the legal and beneficial interests of Mr Abdalla in that property, because Mr Abdalla did not sign any such contract;

(3)    the transfer dealing was not signed by Mr Abdalla;

(4)    the consideration for the transfer was $650,000;

(5)    Mr Abdalla has not received any payment or consideration for his 50 per cent interest in the first property;

(6)    in these circumstances, Jarvis has been unjustly enriched at the expense of Mr Abdalla and it would be unconscientious of Jarvis to retain the benefit it has received, with the consequence that Jarvis is liable to provide restitution in respect of the market value of 50 per cent of the first property as at January 2018; and

(7)    alternatively, if it be the case that the terms of the transfer dealing are binding upon Mr Abdalla, then Jarvis is liable to pay 50 per cent of $650,000 to him as a debt or as contractual damages.

13    Jarvis disputes Mr Abdalla’s claim. In particular, Jarvis:

(1)    denies that Mr Abdalla was the legal and beneficial owner of 50 per cent of the first property at the time of its transfer to Jarvis because, Jarvis contends, his interest in that property had been transferred to Ms Eman Shonoda (the wife of Mr Hanna Snr) under a Deed dated 4 April 2017 to which Mr Abdalla and Ms Shonoda are parties;

(2)    denies that the transfer of the first property to Jarvis did not occur pursuant to any valid or effective contract of sale and says that a contract for the sale of the first property, and the transfer dealing, had been executed by all registered proprietors of the first property;

(3)    denies that the transfer dealing was not signed by Mr Abdalla;

(4)    denies that the consideration for the transfer was $650,000 and says that the consideration of $650,000 recorded on the transfer was for stamp duty purposes and no consideration was paid by Jarvis; and

(5)    admits that Mr Abdalla received no payment, but says that Mr Abdalla has no entitlement to restitution, or any other remedy because he held no interest in the first property at the time of its transfer to Jarvis.

14    Jarvis also pleads that:

(1)    the Deed, pursuant to which it says Mr Abdalla transferred his interest in the first property to Ms Shonoda, and a letter from Mr Abdalla’s solicitor dated 19 February 2018, provide a complete defence to Mr Abdalla’s cross-claim; and

(2)    it, at the direction of Ms Shonoda, transferred the first property to Mr Hanna Jnr for no consideration and so Jarvis neither paid nor received consideration in any part of the transaction.

Affidavit evidence filed

15    Mr Abdalla has filed affidavit evidence from himself and his solicitor, Ms Metry.

16    Jarvis has filed affidavit evidence from Ms He (the director of Jarvis), Ms Shonoda and Mr Hanna Jnr.

The present proceeding

Overview

17    The present proceeding concerns the second property and in particular the transfer of that property, on or about 6 June 2017, to Mr Hanna Jnr. On that day a transfer dealing was completed. The consideration shown on the transfer dealing was $299,000.

18    The trustee seeks relief against Mr Hanna Jnr and Mr Abdalla. In particular, and without being exhaustive, the trustee alleges that:

(1)    the second property had a market value of approximately $700,000 at the date of its transfer;

(2)    Mr Hanna Jnr provided no consideration, or provided consideration less than the market value, to Mr Hanna Snr for the transfer of Mr Hanna Snr’s interest in the second property;

(3)    Mr Hanna Jnr knew or had reason to suspect as at the date of the transfer that Mr Hanna Snr was unable to pay his debts as they became due from his own money and that the effect of the transfer would be to give Mr Hanna Jnr a preference over other creditors of Mr Hanna Snr; and

(4)    the transfer of the second property to Mr Hanna Jnr is void as against the trustee as it was an undervalued transaction, a transfer to defeat creditors and a preference payment (ss 120-122 of the Bankruptcy Act 1966 (Cth)).

19    Mr Hanna Jnr defends the trustee’s claims and brings a cross-claim on the basis of the following allegations:

(1)    there was an arrangement between himself and Mr Hanna Snr pursuant to which Mr Hanna Jnr advanced $564,912 to Mr Hanna Snr for the purpose of undertaking the development at Hinchinbrook;

(2)    as part of that agreement, Mr Hanna Snr was able to repay the funds advanced to him by a transfer of property to Mr Hanna Jnr;

(3)    the second property had a value of approximately $550,000 as at the date of the transfer;

(4)    the transfer of the second property was made by way of repayment from Mr Hanna Snr to Mr Hanna Jnr; and

(5)    alternatively, the funds advanced by Mr Hanna Jnr to Mr Hanna Snr were impressed with a remedial constructive trust and/or a resulting trust and he had an equitable interest in the second property prior to its transfer to him.

20    Mr Abdalla also brings a cross-claim, to which Mr Hanna Jnr is the cross respondent. That cross-claim, which is set out in a Notice of Second Cross-Claim and Statement of Second Cross-Claim (SSCC), was brought pursuant to leave granted by Yates J on 19 August 2021: Amirbeaggi as Trustee of the Bankrupt Estate of Hanna v Hanna [2021] FCA 988 (the 2021 leave decision) and is the subject of the amendment application.

21    In the SSCC, Mr Abdalla propounds several cases.

22    The first is a restitution-based case, as follows:

(1)    Mr Abdalla and Mr Hanna Snr were the registered proprietors of the second property as tenants in common in equal shares immediately prior to its transfer to Mr Hanna Jnr in June 2017 ([3], [5]);

(2)    the transfer of the second property did not occur pursuant to any valid or effective contract of sale signed by Mr Abdalla ([6]);

(3)    Mr Abdalla did not sign the transfer dealing ([7]);

(4)    as at the date of the transfer of the property, its market value was in the order of $650,000, not $299,000 as shown on the transfer dealing ([7], [8]);

(5)    Mr Abdalla received no consideration for a transfer of his interest in the second property ([9]); and

(6)    as a result, Mr Hanna Jnr has been unjustly enriched at the expense of Mr Abdalla, and is liable to provide restitution to Mr Abdalla in respect of 50 per cent of the value of the second property as at the time of its transfer ([10], [11]).

23    Mr Hanna Jnr defends this case on the following bases:

(1)    he denies that Mr Abdalla had beneficial ownership of 50 per cent of the second property at the time of its transfer ([5]). He says that the beneficial owner of Mr Abdalla’s 50 per cent interest in the property was Ms Shonoda, for whom Mr Abdalla held his interest on trust as a result of the Deed ([29(a)]);

(2)    he says that the transfer occurred pursuant to a Contract of Sale which appeared to have been validly signed by Mr Abdalla ([6]);

(3)    he denies that the market value of the second property at the date of its transfer was in the order of $650,000 ([8]);

(4)    he denies that Mr Abdalla received no consideration for the transfer of the second property ([9]) and says that:

(a)    Mr Abdalla received $112,000 on 13 July 2017 and $100,000 on 30 August 2017 (a total of $212,000) as partial consideration for his interest in the second property, from or on behalf of Ms Shonoda, pursuant to the Deed;

(b)    Mr Abdalla’s remaining entitlement to consideration of $35,356.74 pursuant to the Deed is subject to a dispute between Mr Abdalla and Ms Shonoda ([29(b)]);

(5)    he denies ([7]) or does not admit ([29(c)]) that the transfer dealing was not signed by Mr Abdalla but says that even if Mr Abdalla did not sign the transfer dealing he has not suffered loss or damage arising from that fact because he received the amounts described above and was not the beneficial owner of his 50 per cent interest at the time of the transfer ([29(c)]); and

(6)    he denies that Mr Abdalla is entitled to the relief sought.

24    Mr Abdalla’s second case is an alternative case, in the event that he is bound by the transfer of the second property. In that case, he pleads that Mr Hanna Jnr:

(1)    had agreed to purchase the second property for $650,000.00;

(2)    has failed to pay that amount and/or has failed to pay 50 per cent of that amount to Mr Abdalla; and

(3)    is liable to Mr Abdalla in debt or in contract for $325,000.00 ([12]).

25    Mr Hanna Jnr denies each of these allegations.

26    Mr Abdalla’s third case is based on allegations of fraud. Mr Abdalla contends that Mr Hanna Jnr knew that he was to obtain and did obtain legal title to the second property by fraud ([13]) and in particular:

(1)    the transfer of the second property to Mr Hanna Jnr occurred pursuant to a transfer dealing in registrable form that had not been executed by Mr Abdalla ([13]);

(2)    Mr Hanna Jnr knew that the second property was being transferred to him without a contract for sale ([14]);

(3)    Mr Hanna Jnr knew that the second property was being transferred to him without him paying any consideration to Mr Abdalla, and Mr Hanna Jnr did not intend that any consideration would, in fact, be paid ([15], [16]);

(4)    Mr Hanna Jnr knew that Mr Abdalla had not executed a transfer dealing in registrable form for the second property ([17]);

(5)    Mr Hanna Jnr did not pay any consideration for the transfer of the second property to him ([18]);

(6)    the above matters occurred pursuant to an agreement between Mr Hanna Jnr and Mr Hanna Snr by which they agreed to transfer the second property in order to divest Mr Abdalla and Mr Hanna Snr of any interest in that property so that Mr Hanna Snr’s interest in the second property would be given to Mr Hanna Jnr and be unavailable to pay the creditors of Mr Hanna Snr ([19]);

(7)    in the above circumstances, Mr Hanna Jnr knew of the fraud, participated in it and procured it ([20]-[22]); and

(8)    as a result, Mr Hanna Jnr holds the second property on a constructive trust for Mr Abdalla as a tenant in common for 50 per cent ([23]) and the second property is charged for payment of 50 per cent of its value as at the time of its transfer, plus interest ([24]).

27    Mr Hanna Jnr denies that he engaged in fraud ([13]-[28]). He also says that:

(1)    the allegations of fraud in paragraphs [13] and [19] of the SSCC are inadequately particularised ([13], [19] and [27]); and

(2)    he does not know whether Mr Abdalla executed the transfer dealing but says that Mr Abdalla was represented by his present lawyers throughout the transaction and that Mr Hanna Jnr was not put on notice that the transfer dealing had not been signed by Mr Abdalla ([17]).

28    Mr Abdalla’s fourth case is that if Mr Hanna Jnr acquired the property not participating in the fraud, he is nevertheless bound to pay Mr Abdalla $325,000 plus interest as a matter of good conscience now that Mr Hanna Jr knows of the fraud ([25]). Mr Hanna Jnr denies this.

Evidence filed

29    Each of the trustee, Mr Hanna Jnr and Mr Abdalla have made affidavits which have been filed in this proceeding. Mr Abdalla has also filed expert reports, including a report of Ms Melanie Holt, a forensic document examiner, dated 15 November 2021. That report is relevant to the amendment application.

Hearing dates

30    Both proceedings are set down for hearing commencing on 25 July 2022, with an estimate of four days in total.

THE AMENDMENT APPLICATION

The nature of the amendments

31    As noted above, the first order sought in the Interlocutory Application is an order for leave to file and serve “an Amended Cross-Claim”. Annexed to the Interlocutory Application are:

(1)    a proposed Amended Notice of Second Cross-Claim; and

(2)    a proposed Amended Statement of Second Cross-Claim (ASSCC).

32    The proposed amendments to the SSCC are as indicated in the proposed ASSCC, as supplemented by an indication from Mr Abdalla’s solicitor that Mr Abdalla also seeks the deletion of the words “been executed or” in paragraph 13 and the entirety of paragraph 17.

33    Mr Abdalla seeks to amend his restitution based case by:

(1)    amending paragraph 7 as follows:

The Transfer of the Property, which was not signed by the Cross-Claimant, designated the amount of $299,000.00 as the consideration that was to be paid and had been paid in respect of the acquisition by the Cross-Defendant of the Property.

(2)    adding the following as paragraph 7A:

7A.    The Transfer was obtained by John Mamdouh Hanna without the Cross-Claimant being informed that:

(a)    he was signing a document which could and would be used to transfer registered title to the Property from the Cross-Claimant to a third party;

(b)    the document, would be used to transfer the Property to the Cross-Defendant without the Cross-Claimant being paid any consideration.

Particulars

On or about 4 April 2017, John Mamdouh Hanna, had the Cross-Claimant sign the transfer without telling the Cross-Claimant of what he was signing nor the ramification of signing.

The Cross-Claimant signed because he trusted the John Mamdouh Hanna had erroneously assumed the document required his signature for the completion of the development of the land known as 7 Altair Place, Hinchinbrook in the State of New South Wales.

In or about January 2018 the purported signature of the Cross-Claimant on a transfer in registrable form was applied to the said transfer by either John Mamdouh Hanna or his wife Eman Shonoda and used to transfer the title to Land comprised in folio identifier 17/SP93648 to Jarvis J Pty Ltd as pleaded in NSD 1722/2019 and Jarvis J Pty Ltd then transferred the Land to Hanna’s brother Anthony John Hanna for no consideration. The Cross-Claimant relies on this evidence as establishing a tendency of John Mamdouh Hanna to defraud the Cross-Claimant of his interest in Land created by the subdivision of land known as 7 Altair Place, Hinchinbrook in the State of New South Wales.; and

(3)    amending paragraph 9 as follows:

9.    As a matter of fact, the Cross-Claimant has never received from or on behalf of the Cross-Defendant any payment or consideration representative of the Cross-Claimant’s former 50% legal interest in the Property, and the Cross-Defendant never gave any consideration for the transfer of the Cross-Claimant’s interest in the Property to the Cross–Claimant or any other person or entity.

34    Mr Abdalla seeks to amend his fraud case by:

(1)    amending paragraph 13 as follows:

13.    Further, in the circumstances of paragraph [4] above, in June 2017, Hanna knew that he was to obtain and did obtain legal title to Property by reason of fraud: the transfer of the Property pursuant to a transfer in registrable form that had not been executed or knowingly executed as pleaded in paragraph 7A, by the Cross Claimant.

Particulars

On or about 4 April 2017, Hanna saw and heard John Mamdouh Hanna produce in front of the Cross-Claimant the Transfer and heard John Mandou Hanna say words to the effect that the Transfer ought to be signed, heard that no explanation of why the transfer ought to be signed, heard that no explanation of the effect of the Cross-Claimant signing the Transfer was given and saw the Cross-Claimant sign the Transfer.

Hanna, as a honest and reasonable man, in the circumstance would have asked John Mamdouh Hanna how the consent of the Cross-Claimant for the transfer and his signature on the Transfer were obtained to which John Mamdouh Hanna would have given the honest answer that John Mamdouh Hanna asked the Cross-Claimant to sign the document without telling the Cross-Claimant the effect of signing the Transfer and thereby tricked the Cross-Claimant into signing the Transfer.

Hanna would have been aware at the time he was not paying the Cross-Claimant for the Transfer and was not aware of any rational reason for the Cross-Claimant gifting him an interest in the Property.;

(2)    amending paragraph 14 as follows:

14.    As of 6 June 2017, Hanna knew that the Property was being transferred to him without a valid or binding Contract for Sale being entered into.

Particulars

No valid or binding contract for the sale or the transfer of the Property exists.

(3)    deleting the whole of paragraph 17, which was in the following form:

17.    As of 6 June 2017, Hanna knew that the Cross-Claimant had not executed a transfer in registerable form for the Property.

Particulars

Hanna did not see the Cross-Claimant execute the transfer.

Hanna knew that no solicitor nor a conveyancer was acting for the Cross-Claimant at the time.

Hanna left it to John Mamdouh Hanna to procure the transfer and as such John Mamdouh Hanna was acting as Hanna’s agent and the knowledge of John Mamdouh Hanna can be imputed to Hanna.

Paragraphs [13] to [19] of the Cross-Claim.

A reasonable and honest man in Hanna’s circumstances would have been aware that the transfer had not been executed by the Cross – Claimant.; and

(4)    adding paragraph 17A, as follows:

17A.    As of 6 June 2017, Hanna knew that the Cross-Claimant had not knowingly executed a transfer in registrable form for the Property.

Particulars

The Cross-Claimant repeats paragraph 7A, [13] to [19] including the particulars thereto.

Evidence on the amendment application

Mr Abdalla’s evidence

35    Mr Abdalla’s evidence on the amendment application is an affidavit he made on 28 February 2022. The effect of Mr Abdalla’s evidence is as follows:

(1)    Ms Holt provided an expert handwriting report dated 15 November 2021;

(2)    after that report was received he reviewed the transfer dealing and as a result he accepts (contrary to paragraph 7 of the SSCC) that he signed it;

(3)    during the development of the townhouses, Mr Abdalla did not look after any paperwork and left this to Mr Hanna Snr. During the development, Mr Abdalla signed documents at the request of Mr Hanna Snr because he trusted him as his business partner and accepted his explanation of the documents he had Mr Abdalla sign from time to time. Mr Abdalla also says that Mr Hanna Snr often said to Mr Abdalla “you are like my son”;

(4)    he does not know when or how he came to sign the transfer dealing. No-one said to him words to the effect: “this document is a transfer so that Lot 22 can be transferred to [Mr Hanna Jnr]. He also says that he was not informed when he signed the transfer that he was signing a transfer of the second property to Mr Hanna Jnr and has never had an intention of transferring his interest in that property to Mr Hanna Jnr; and

(5)    he arrived in Australia from Egypt in 2007 and can speak and read basic English.

Mr Hanna Jnr’s evidence

36    Mr Hanna Jnr’s evidence on the amendment application is an affidavit of his solicitor, Ms Klein, affirmed on 21 March 2022. Mr Hanna Jnr also relies upon Mr Abdalla’s 28 February 2022 affidavit as well as an affidavit of Mr Abdalla sworn on 12 May 2021.

37    Ms Klein’s affidavit sets out some of the history of this proceeding. That history includes the following:

(1)    on 14 December 2020, Yates J made orders including an order that Mr Abdalla file and serve his Defence and Cross-Claim by 5 February 2021. That deadline was extended on 10 February 2021 to 26 February 2021 and on 5 March 2021 to 19 March 2021;

(2)    Mr Abdalla did not file a Defence or Cross-Claim by 19 March 2021 and no explanation was provided for his failure to do so on that or earlier occasions;

(3)    on 23 April 2021, Yates J made an order that Mr Abdalla file and serve any application for leave to file a Cross-Claim by 14 May 2021;

(4)    on 13 May 2021, Mr Abdalla filed an Interlocutory Application seeking leave to file a cross-claim. The affidavit in support of that application, being Mr Abdalla’s 12 May 2021 affidavit, contained no explanation for the delay in the filing of the Cross-Claim;

(5)    on 19 August 2021, as noted above, Yates J, by the 2021 leave decision, granted leave to Mr Abdalla to file the SSCC;

(6)    on 17 November 2021, Mr Abdalla filed the evidence he proposed to rely upon at the final hearing in the proceeding;

(7)    on 28 January 2022, ahead of a case management hearing scheduled for 31 January 2022, the solicitor for Mr Abdalla sent an email to Ms Klein proposing that the Court make an order that Mr Abdalla file and serve an interlocutory application on or before 4 February 2022. The email did not indicate the nature of the proposed interlocutory application or why it was required. Ms Klein wrote to the solicitor for Mr Abdalla putting her on notice of Mr Hanna Jnr’s objection to the proposed order due to its lack of specificity, amongst other reasons;

(8)    on 9 February 2022, Mr Abdalla’s solicitors served a proposed Amended Statement of Second Cross-Claim; and

(9)    on 28 February 2022, the Interlocutory Application the subject of these reasons was served. The proposed ASSCC differed from the proposed Amended Statement of Second Cross-Claim that had been served on 9 February 2022.

Consideration

38    The Court’s discretion to allow an amendment is broad, but is to be exercised in a manner which best promotes the overarching purpose of facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: s 37M(1) of the Federal Court of Australia Act 1976 (Cth); Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) 187 FCR 261 at [43]; Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; (2016) 332 ALR 199 at [122]-[124]. The exercise of the discretion is informed by the principles enunciated by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175: Tamaya Resources at [125]. The weight to be given to the considerations identified in Aon, individually and in combination, and the outcome of the balancing process, vary depending on the facts in the individual case: Cement Australia at [51].

39    In the first instance decision Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098, Gleeson J at [127] identified the following as matters relevant to the exercise of the Court’s discretion:

(1)    The nature and importance of the amendment to the party applying for it: Aon at [102];

(2)    The extent of the delay and the costs associated with the amendment: Aon at [102];

(3)    The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102];

(4)    The explanation for any delay in applying for that leave: Aon at [108]; and

(5)    The parties’ choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 (“Luck”) at [44];

(6)    The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and

(7)    Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30].

40    It is convenient to consider the proposed amendments to the SSCC by reference to those factors.

The nature and importance of the amendment to the party applying for it

41    The nature of the amendments has been described at paragraphs 33 to 34 above.

42    Mr Hanna Jnr submits, at a global level, that the proposed amendments lack merit and are likely to be struck out. However, Mr Hanna Jnr’s submissions contain no criticism of the proposed amendments to paragraphs 7, 9 and 14 and the analysis below does not include those paragraphs.

Paragraph 7A

43    Mr Hanna Jnr submits that the final paragraph of the particulars to proposed paragraph 7A is a submission in which Mr Abdalla is asking the Court to make an inference based on evidence which may not be admissible in this proceeding. Assuming for present purposes that this is true, it does not follow that this paragraph is likely to be struck out. Admissibility issues will be determined at the trial and the inferences to be drawn, if any, will be based upon relevant evidence adduced at the trial. Further, in filing a defence to this paragraph, Mr Hanna Jnr would not be required to plead to the particulars but instead to the body of paragraph 7A: see Trade Practices Commissioner v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 115.

Paragraph 13

44    Mr Hanna Jnr submits that the particulars which Mr Abdalla wishes to add to paragraph 13 are internally contradictory in that the first paragraph alleges that Mr Hanna Jnr witnessed Mr Hanna Snr induce Mr Abdalla to sign the transfer dealing, while the second paragraph alleges that Mr Hanna Jnr would have asked how the consent of Mr Abdalla was obtained in signing the transfer dealing. I do not accept that there is a contradiction. As I understand the allegations:

(1)    the first paragraph of the particulars states in essence that Mr Hanna Jnr was on notice of circumstances which suggested that Mr Abdalla may have signed the transfer without understanding why it was to be signed or its effect; and

(2)    the second paragraph states in essence that if Mr Hanna Jnr, contrary to the allegation in the body of paragraph 13, were an honest and reasonable man he would have asked questions and been made aware of the true position (but he did not do so).

45    Mr Hanna Jnr also submits that the contention in the first paragraph of the proposed particulars to paragraph 13, that Mr Hanna Jnr and Mr Hanna Snr were together on or about 4 April 2017, is not supported by any of the evidence that has been filed. Assuming for the moment that the evidence filed to date does not support the contention, it does not follow that paragraph 13 is likely to be struck out. The evidence filed in a proceeding ahead of a hearing does not represent the universe of evidence that may be adduced at the hearing. Documents and answers obtained under cross–examination are other sources of evidence that may be adduced relevant to a particular issue.

The fraud case generally

46    Mr Hanna Jnr also makes some general submissions concerning the pleading of Mr Abdalla’s fraud case.

47    The first submission is that the basis of Mr Hanna Jnr’s alleged knowledge of the fraud fluctuates depending upon the particular paragraph and Mr Hanna Jnr is left without a proper basis from which to identify the case against him. I do not accept that this provides a basis to deny Mr Abdalla leave to amend in the manner proposed. Yates J gave leave to Mr Abdalla to propound the fraud case in its present form and there has been no application to strike it out. The proposed amendments, and in particular the inclusion of the particulars to paragraph 13 provide further detail. To the extent that it is suggested that the particulars are internally inconsistent, this has been dealt with at paragraph 44 above.

48    The second submission is that there is a well-established duty on parties to civil litigation not to pursue allegations of fraud absent a sufficient evidentiary foundation and that in this case there is no evidentiary foundation in circumstances where evidence is “closed” and none of the affidavits and reports filed support the allegations of fraud. I accept that there is a longstanding principle that allegations of fraud are not to be pursued without a sufficient evidentiary foundation. However, I do not accept the remainder of the submission for the following reasons. First, as noted above, Yates J gave leave to Mr Abdalla to propound the fraud case as presently formulated and there has been no application to strike out the fraud case as presently pleaded. Secondly, the proposed amendments provide further particulars of that fraud case. Thirdly, for the reasons set out above concerning the universe of available evidence, it is not possible on this application to conclude that there is no evidentiary foundation for the allegations that have been made.

49    The first factor identified in Tamaya Resources at first instance also includes the importance of the amendment to the party seeking it. There is no direct evidence on this topic, nevertheless I infer from the bringing of the application and from the content of the amendment sought that it is a matter of some importance to Mr Abdalla. Mr Hanna Jnr did not submit otherwise.

The extent of the delay, the explanation for the delay, and the costs associated with the amendment

50    Mr Hanna Jnr submitted that there has been considerable delay on Mr Abdalla’s part in the proceeding generally. He drew the Court’s attention in particular to Mr Abdalla’s non-compliance with the directions made by Yates J in late 2020 and early 2021, which necessitated the application for leave to file the Notice of Second Cross-Claim and the SSCC.

51    The central focus of the Court’s consideration in an application for the amendment of a pleading is upon the period commencing from the date of the filing of that pleading. In Tamaya Resources, in the context of an application to amend a Statement of Claim, the Full Court stated that the point in time from which delay is measured is no earlier than the date of the commencement of the proceeding ([at 136]). Prior to that point, there is nothing to amend. By parity of reasoning, the point of time from which delay is measured concerning an application to amend a cross-claim is no earlier than the date on which the cross-claim is filed.

52    In the present case, the SSCC was filed on 25 August 2021 and the application to amend was foreshadowed by 9 February 2022 and filed on 28 February 2022. In the interim, Ms Holt’s report was filed in mid-November 2021. Mr Abdalla has explained that the amendment is sought because of his acceptance, following the receipt of Ms Holt’s report in mid-November 2021, that he signed the transfer dealing. The delay between Mr Abdalla’s consideration of Ms Holt’s report and the service of the first iteration of the proposed ASSCC on 9 February 2022 is not a lengthy delay in circumstances which include the vacation period and which, I infer, required the provision of legal advice and the drafting of the proposed amendments. In these circumstances, there has been no unreasonable delay since the filing of the SSCC.

53    Whilst, as the Full Court explained in Tamaya Resources at [135]-[136], it is possible to have regard to events prior to the commencement of a proceeding (and by parity of reasoning, events prior to the filing of a cross-claim where a cross-claim is sought to be amended) in considering the question of delay (being the delay commencing from the filing of the cross-claim to the making of the amendment application), I do not accept that the earlier delays in filing the SSCC are of particular moment in circumstances where that delay was considered by Yates J as part of the 2021 leave decision. His Honour granted leave to file the SSCC on terms which required Mr Abdalla to pay the costs of the application, the costs order being reflective of the earlier delays: see the 2021 leave decision at [31]. Further, whilst, as Mr Hanna Jnr submits, it may have been possible for Mr Abdalla to have obtained an expert opinion at an earlier point in time and to have formulated his case in the manner in which he now wishes to formulate it at an earlier time, I consider this to be an unrealistic expectation in the circumstances of the present case, involving the imposition of a counsel of perfection and hindsight analysis. The power to allow amendments to pleadings is itself reflective of the fact that it is common place for parties to seek to reformulate the case that they wish to bring as further information comes to light during the course of a proceeding. The further information in this case came to light as part of the process of obtaining expert evidence in November 2021.

Prejudice that might be assumed to flow from the amendment and that which is shown

54    If the amendment were to be allowed, Mr Hanna Jnr would obviously need to file a Defence to the ASSCC and to consider his position with respect to the evidence in the context of the ASSCC ahead of the hearing scheduled to commence on 28 July 2022.

55    Mr Hanna Jnr submitted that he will suffer significant prejudice should the amendments be permitted in that:

(1)    he will inevitably be required to obtain further evidence in circumstances where Mr Abdalla now alleges further specific acts of Mr Hanna Snr and Mr Hanna Jr which were not contained in the SSCC. The gathering of that further evidence may jeopardise the hearing date, as well as the estimate of the hearing length;

(2)    he may be required to subpoena or obtain evidence from Mr Hanna Snr; and

(3)    he will bear the costs of obtaining such evidence at a stage in the proceedings after the hearing date has been set;

and to impose such prejudice at such a late stage in the proceedings is unreasonable.

56    As noted above, I accept that it would be necessary for Mr Hanna Jnr to assess the evidence that is available to him presently against the pleading as amended and the evidence presently filed. However, on the evidence before me it is not possible to conclude that it is inevitable that further evidence would be required, particularly in circumstances where Mr Hanna Jnr, as noted earlier, submitted that the particulars which Mr Abdalla seeks to add to paragraph 13 are unsupported by evidence from Mr Abdalla. For the same reason, I am not in a position to conclude that the hearing date may be put in jeopardy or that it may go longer than the four days that have been set aside.

57    If Mr Hanna Jnr forms the view that further evidence is required, leave may be sought to file it. The hearing date is more than two months away.

The parties’ choices to date

58    Mr Abdalla’s choices in not complying with the timetable set by the Court leading up to his application to Yates J and in not obtaining an expert report earlier, have been dealt with above.

The detriment to other litigants in the Court

59    Mr Hanna Jnr submitted that there is a risk, if the amendments were to be allowed, of a significant effect on other litigants before the Court because of the possible risk to the hearing date and change to the hearing estimate. For the reasons set out above, I am not satisfied on the evidence before me that there is a risk to the hearing date or to the estimate of the hearing time.

Potential loss of public confidence in the legal system that can arise where a Court is seen to accede to applications made without adequate explanation or justification

60    Mr Hanna Jnr submitted that to allow the amendment in a context in which Mr Abdalla has failed to justify or explain the basis of the proposed amended pleading, runs the risk of a loss of public confidence, particularly in circumstances where there was a delay in bringing the cross–claim in its present form. For the reasons set out above, I am satisfied that there is an adequate explanation and justification for the amendment.

61    Taking all of the above matters into account, the proposed amendments to the SSCC should be allowed.

62    The proposed Amended Notice of Second Cross-Claim, which was attached to the Interlocutory Application, also contains amendments to the nature of the relief sought. No specific objection to these amendments has been taken and I propose to allow them.

THE APPLICATION TO HAVE THE PROCEEDING HEARD TOGETHER WITH PROCEEDING NSD1722/2019 WITH EVIDENCE IN ONE PROCEEDING BEING EVIDENCE IN THE OTHER

63    I turn now to Mr Abdalla’s application for an order that this proceeding be heard together with proceeding NSD1722/2019, with the evidence in one proceeding being evidence in the other.

Legal framework

64    Rule 30.11 of the Federal Court Rules 2011 (Cth) provides:

If several proceedings are pending in the Court and the proceedings:

(a)    involve some common question of law or fact; or

(b)    are the subject of claims arising out of the same transaction or series of transactions;

any party to any of the proceedings may apply to the Court for an order that the proceedings be:

(c)    consolidated; or

(d)    heard together; or

(e)    heard immediately after one another; or

(f)    stayed until after the determination of any of the other proceedings.

65    The Court’s discretion to order that the proceedings be heard together is to be exercised in a manner which best promotes the overarching purpose of facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: s 37M(1) of the Act. The factors that may be relevant to the exercise of the discretion include those identified by Besanko J in Humphries v Newport Quays Stage 2A Pty Ltd [2009] FCA 699 at [11].

66    The Court is required to take a pragmatic approach in assessing the competing alternatives (here, a joint hearing or consecutive hearings): see Ghose v CX Reinsurance Company Ltd [2010] NSWSC 110 at [27] per Austin J.

67    As Greenwood J identified in Walsh, Liquidator of D&R Community Services Pty Ltd (Receivers and Managers Appointed) (In Liq) v Commissioner of Taxation [2018] FCA 1739, an important consideration is whether there is a real risk of inconsistent findings being made on contested questions of fact common to both proceedings if the proceedings are not heard together.

Consideration

68    It is appropriate to make the order sought by Mr Abdalla for the following reasons.

69    First, and contrary to Mr Hanna Jnr’s submission that the only common link between the two proceedings is that each relates to the bankruptcy of Mr Hanna Snr, there are likely to be common issues between the two proceedings and a real risk of inconsistent findings. These include:

(1)    the proper construction and effect of the Deed, which is central to both proceedings and is relied upon by Mr Hanna Jnr in this proceeding and by Jarvis in proceeding NSD1722/2019 for the proposition that, by operation of the Deed, Mr Abdalla no longer held both legal and beneficial title to each of the properties at the times of their transfer;

(2)    whether there was a tendency of Mr Hanna Snr to defraud Mr Abdalla of his interest in townhouses the subject of the development; and

(3)    the credit of Mr Hanna Jnr and Mr Abdalla. Each of them has provided affidavit evidence and seems likely to give evidence in each proceeding.

70    Secondly, it is likely to be a more efficient use of resources for each of Mr Hanna Jnr and Mr Abdalla to be cross-examined once only. It is also likely to be more convenient to each of them. If an order were not to be made, then each gentleman would be required to be cross-examined in each proceeding, with consequent duplication and an attendant increase in time and costs.

71    Thirdly, Mr Hanna Jnr is the only party opposing the making of the order sought by Mr Abdalla. Neither the trustee nor Jarvis sought to be heard on this application.

72    Mr Hanna Jnr submitted that there was a risk of prejudice to Mr Hanna Jnr arising from evidence in proceeding NSD1722/2019 in circumstances where the proposed ASSCC refers to a “tendency of [Mr Hanna Snr] and/or [Ms Shonoda] to act in a certain way should be impressed upon [Mr Hanna Jnr]. I take this to be a reference to the following paragraph in the particulars to paragraph 7A of the proposed ASSCC:

In or about January 2018 the purported signature of the Cross-Claimant on a transfer in registrable form was applied to the said transfer by either John Mamdouh Hanna or his wife Eman Shonoda and used to transfer the title to Land comprised in folio identifier 17/SP93648 to Jarvis J Pty Ltd as pleaded in NSD 1722/2019 and Jarvis J Pty Ltd then transferred the Land to Hanna’s brother Anthony John Hanna for no consideration. The Cross-Claimant relies on this evidence as establishing a tendency of John Mamdouh Hanna to defraud the Cross-Claimant of his interest in Land created by the subdivision of land known as 7 Altair Place, Hinchinbrook in the State of New South Wales.

(emphasis added)

73    The nature of the alleged prejudice and the evidence have not been identified. In these circumstances, the submission cannot be meaningfully assessed. In any event, it is difficult to discern any prejudice to Mr Hanna Jnr when he is a witness in each proceeding. As noted above, the question of whether there is such a tendency is one touching upon both proceedings.

74    Mr Hanna Jnr also submitted that he should not be required to address evidence in proceeding NSD1722/2019 which is irrelevant to the present proceeding. That submission rests on the false premise that if the two proceedings were to be heard together, he would need to address all evidence in proceeding NSD1722/2019, as part of the present proceeding. It is a matter for Mr Hanna Jnr which evidence he addresses in each proceeding, noting that he is a party to this proceeding only but is a witness in each proceeding.

75    Mr Hanna Jnr also submitted that an order that the evidence in one proceeding be evidence in the other is more likely than not to increase the length of the hearing and the costs of and incidental to the proceedings on the basis that it will likely lead to cross-examination of Mr Hanna Jnr being expanded to include irrelevant information from proceeding NSD1722/2019. There are several answers to this submission. First, for the reasons set out above, it is desirable that Mr Hanna Jnr (and Mr Abdalla) be cross-examined only once. Secondly, if the evidence is relevant to proceeding NSD1722/2019, then it will validly be the subject of cross-examination in that proceeding. If it is not relevant to either proceeding, then objection may be taken. Thirdly, the cross-examination of each of Mr Abdalla and Mr Hanna Jnr once only is likely to reduce, rather than increase, the time and costs involved in the hearing.

76    Mr Hanna Jnr also submitted that the hearing date could be prejudiced due to the need for further issues to be determined and for a listing for a longer hearing. The “further issues” have not been identified. It is difficult to see how the number of issues would increase by dint of the proceedings being heard together, rather than consecutively.

77    Finally, Mr Hanna Jnr submitted that Mr Abdalla’s solicitor, Ms Metry, has made an affidavit in proceeding NSD1722/2019 as to her intentions in drafting a document and that an application for her removal would be likely to flow should evidence in one matter be evidence in the other, because Ms Metry would be required to give evidence (and has given evidence) material to the determination of contested issues in this matter and would be unable to continue to act under reg 27 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW). Regulation 27 provides:

27 Solicitor as material witness in client’s case

27.1  In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court, the solicitor may not appear as advocate for the client in the hearing.

27.2  In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court the solicitor, an associate of the solicitor or a law practice of which the solicitor is a member must not continue to act for the client if doing so would prejudice the administration of justice.

78    Whilst it is possible that compliance with reg 27 may become an issue, the facts as presently known are insufficient to found a conclusion that this is likely to occur. For example:

(1)    as to reg 27.1, counsel for Mr Abdallah may choose not to call her as a witness (in this regard I note that Mr Hanna Jnr’s submission is that her affidavit addresses her intentions in drafting a document, and the relevance of her intentions to the issues raised on the pleadings is not immediately apparent). Further, the prohibition in reg 27.1 is upon appearing as an advocate, and it is not apparent that Ms Metry is likely to do so; and

(2)    as to reg 27.2, it is not apparent that Ms Metry will be required to give evidence material to a contested issue, or that her continuing to act would prejudice the administration of justice.

79    Further, to the extent that there is substance to this submission, the issue of compliance with reg 27.1 arises in proceeding NSD1722/2019 regardless of whether the proceedings are heard together or consecutively.

80    For the reasons set out above, the quick, inexpensive and efficient just resolution of these proceedings is more likely to be achieved by the proceedings being heard together, rather than consecutively.

CONCLUSION

81    For the reasons set out above, Mr Abdalla should have leave to amend the Notice of Second Cross-Claim and the SSCC. He should pay the costs thrown away by reason of the amendment. There should also be an order that this proceeding be heard together with proceeding NSD1722/2019, with the evidence in one being evidence in the other.

82    As Mr Abdalla has succeeded on the Interlocutory Application, there should be an order that Mr Hanna Jnr pay Mr Abdalla’s costs of the application, subject to the determination of any application that either party wishes to make for a different costs order. There will orders accordingly.

I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

Associate:    

Dated:    18 May 2022