Chance for ASIC to enforce for enforcement’s sake

Never buy downhill from a servo is one of the many lessons to be gleaned from the recent decision of Associate Judge Joanne Harrison in the matter of Seaforth Securities Pty Limited v Zoya Investments Pty Limited [2024] NSWSC 1061.

In granting plaintiff Seaforth Securities‘ (Seaforth) application for more than $9.3 million in damages against Zoya Investments (Zoya) the NSW Supreme Court associate judge detailed the tribulations Seaforth has endured after discovering in 2016 that its property at 70 Craigie Street Kanwal on the NSW central coast was contaminated by fuel leaking from the underground tanks of the service station Zoya owned next door.

Seaforth, which had an in-principle agreement to sell 70 Craigie Street to Australian Unity Funds Management Ltd (‘Australian Unity’)for $10 million, did everything it could to engage with its neighbour in a bid to halt the contamination.

Another lesson which might be gleaned from her honour’s judgment is to avoid having any dealings with Zoya’s former directors, who the judgment makes clear scarcely acknowledged Seaforth’s concerns and did next to nothing to prevent the contamination or make amends.

In identifying what looks like a litany of apparent misconduct by the pair, the judge described their actions as “conscious wrongdoing and a contumelious disregard”.

It seems Satwinder Singh 48 and Rizwan Rana 47 mostly ignored correspondence from Seaforth’s lawyers.

When they did respond it was to deny there was conclusive proof that their business was the contaminant’s source.

Nor did they hear, tremble and obey when the Land & Environment Court imposed a $320,000 fine in December 2022 following an application by the NSW Environmental Protection Agency (EPA). iNO understands the fine remains unpaid. Assume the costs of the proceedings also remain unrecouped.

As iNO readers may well have anticipated, the former directors also arranged to sell the business to related entity RAS Kanwal Group at significantly less than they paid for it before resigning and appointing the sole director who in April this year resolved to place the company into liquidation, one week after being appointed. iNO does’t know if they’ve returned to Pakistan.

The Insolvency practitioner tasked with dealing with the corporate shell Zoya had become at the time of its winding up is Vanguard Insolvency Australia’s Mohammad Najjar and his most recent report to creditors is notable for many things, among them the frequent use of the phrase “they have not yet provided a response” or derivatives of said phrase thereof.

Najjar also advises that he’s had less than fulsome cooperation from the former directors in respect of the provision of books and records and has asked ASIC for help.

If ever there was an opportunity for the regulator to enforce for enforcement’s sake it’s now.

That said iNO understands Najjar is preparing to instruct lawyers to prepare claims and both directors and Rana in particular are known to have assets so the commercial resolution option is still on the table.