Federal Court of Australia Husseini v Girchow Enterprises Pty Ltd (Costs) [2024] FCAFC 165 Appeal from: Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420 Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500 File number: NSD 551 of 2023 Judgment of: SARAH C DERRINGTON, STEWART AND FEUTRILL JJ Date of judgment: 13 December 2024 Catchwords: COSTS – costs in the primary proceeding following successful appeal – indemnity principle – other issues of contest – whether to remit issues to the primary judge – issue to be dealt with on taxation Legislation: Federal Court Rules 2011 (Cth), rr 39.05(e), 39.05(h), Div 40.2 Cases cited: Frigger v Trenfield (No 12) [2022] FCA 900 Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140; 299 FCR 224 Shaw v Yarranova Pty Ltd [2011] VSCA 55 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 16 Date of last submissions: 10 December 2024 Date of hearing: Determined on the papers. Counsel for the Appellant: M Condon SC Solicitor for the Appellant: KDA Legal Pty Ltd Counsel for the First to Eighth Respondents: A Greinke with S Lamb Solicitor for the First to Eighth Respondents: Magnolia Legal Pty Ltd ORDERS NSD 551 of 2023 BETWEEN: SAMER HUSSEINI Appellant AND: GIRCHOW ENTERPRISES PTY LTD First Respondent KARIM GIRGIS Second Respondent SHERIF ELHAMY WADIE GIRGIS (and others named in the Schedule) Third Respondent order made by: SARAH C DERRINGTON, STEWART AND FEUTRILL JJ DATE OF ORDER: 13 December 2024 THE COURT ORDERS THAT: 1. The sum of $60,000 paid into court by the appellant in accordance with Order 1 of the orders made on 28 August 2023, together with any interest thereon, be paid to the appellant on the instruction of his solicitors. 2. Order 2 of the orders in this Court on 12 November 2024 be varied by inserting "first, fifth and seventh" before "respondents" so that it be: 2. The parties' costs in the proceeding below, including the costs of the cross-claim, be reserved and, otherwise, the first, fifth and seventh respondents pay the appellant's costs of the appeal to be taxed if not agreed. 3. Order 17 of the orders made by the primary judge on 12 May 2023 be varied so that it be: 17. The first and second respondents pay the applicants' costs of and incidental to these proceedings, including the costs of the cross-claim but excluding the costs of the claims against the third and fourth respondents, and in the absence of an agreement to be taxed on a party and party basis up to 11:00am on 9 March 2020 and thereafter, on an indemnity basis. 4. There be an order in the primary proceeding that: The first, fifth and eighth applicants pay the costs of the third respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: 1 These reasons for judgment concern the proper order for costs in the primary proceeding following Mr Husseini's success, as appellant, in his appeal against the judgment against him. He was the third respondent in the primary proceeding. 2 There were four respondents to the primary proceeding. Relief was sought against all of them. The first, fifth and eighth applicants were successful in their claims against the first, second and third respondents. That is to say, there were separate orders in favour of each of the first, fifth and eighth applicants against the first, second and third respondents as a group. Only Mr Husseini appealed, and only the first, fifth and eighth applicants as the first, fifth and seventh respondents to the appeal opposed the appeal. 3 The claims against the fourth respondent in the primary proceeding were abandoned in closing submissions at the end the trial. As a result of that, the primary judge dismissed the claim against the fourth respondent and ordered that the relevant applicants pay its costs. 4 By Order 17 on 12 May 2023, the primary judge ordered that the first, second and third respondents pay the applicants' costs of the proceedings including the costs of the cross-claim but excluding the costs of the claims against the fourth respondent. 5 In allowing the appeal, the Court made the following order in relation to costs: 2. The parties' costs in the proceeding below, including the costs of the cross-claim, be reserved and, otherwise, the respondents pay the appellant's costs of the appeal to be taxed if not agreed. 6 In respect of the reserved costs, the Court invited the parties to agree on what orders to make and, failing agreement, to file submissions in support of the orders that they respectively contend for. No agreement having been reached, the parties made brief submissions in writing from which the following issues arise. 7 The first issue, on which the parties are agreed, is that there should be an order that the sum of $60,000 paid into court by Mr Husseini as security for the costs of the appeal be paid to the trust account of his solicitors, KDA Legal. There should accordingly be such an order. 8 The second issue is that the active respondents (ie the first, fifth and seventh respondents) point out that Order 2 (quoted above) contains an error in ordering that "the respondents" pay the appellant's costs of the appeal when clearly the order should have been that the first, fifth and seventh respondents pay those costs. As mentioned, it was only those respondents who were active in the appeal, and indeed it was only those respondents that had an active interest in the relief that was sought. As the reference to "the respondents" was intended to be a reference to the active respondents and the omission of the restricted mention of the first, fifth and seventh respondents was accidental, Order 2 should be varied accordingly under rr 39.05(e) and/or (h) of the Federal Court Rules 2011 (Cth). 9 The third issue concerns the proper costs order in the primary proceeding. Mr Husseini's principal position is that the active respondents to the appeal – being the parties who obtained judgments against him at trial which were overturned on appeal – should pay his costs of the trial. He also advances an alternative position which includes awarding him his costs referable solely to his defence of the claims against him and dividing the costs common to all the respondents below on a one-third or 30% basis each. The details of that position need not be further considered. 10 Mr Husseini says nothing about the costs of the cross-claim below. However, as the respondents point out, he was not a party to the cross-claim so there is no reason to vary the costs orders in relation to it. 11 Apparently in response to Mr Husseini's alternative position, but perhaps in any event, the respondents say that they dispute the effect of a costs agreement between Mr Husseini and the other respondents in the primary proceeding, on the one hand, and their solicitors on the other. They also say that they dispute whether Mr Husseini in fact paid the costs to the solicitors, suggesting that they may have been paid by the first respondent below. In that regard, they apparently raise the indemnity principle (as explained in Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [8] and Frigger v Trenfield (No 12) [2022] FCA 900 at [7]-[8]). The respondents accordingly contend for the costs of the proceeding below to be remitted to the primary judge so that those matters may be addressed by way of evidence, including the issuing of subpoenas and the cross-examination of Mr Husseini. 12 We do not consider that the issues which the respondents wish to ventilate by way of a remittal to the primary judge are relevant to the question of the costs of the primary proceeding following the variation of the orders made in that proceeding in the appeal. In the absence of proof to the contrary, the Court can act on the assumption that the legal practitioner on the record for Mr Husseini in the proceeding below was entitled to look to Mr Husseini for payment of that legal practitioner's fees and disbursements: Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140; 299 FCR 224 at [18]. This Court is concerned with what an appropriate costs liability order is in the primary proceeding, and not with questions of what costs were actually paid, whether Mr Husseini is entitled to any costs in view of the indemnity principle, how he shared the costs with the other respondents, and other such matters that the respondents wish to ventilate. Those are all matters that can be raised and dealt with on taxation of the costs under Div 40.2 of the Rules. 13 As Mr Husseini was ultimately successful in defeating the claims against him in the primary proceeding, he should in the ordinary course have his costs of defending those claims. His position is not materially different from the position of the fourth respondent in the primary proceeding which, as mentioned, was awarded its costs. Mr Husseini seeks, in effect, the same order and the respondents to the appeal have raised no issue which suggests that the usual order for costs on the basis that the costs follow the event is not appropriate. 14 In the circumstances, Order 17 of 12 May 2023 should be varied by deleting the reference to the third respondent paying the applicants' costs and inserting a reference to exclude from the costs that the other respondents are liable for those costs of the applicants in pursuing their claims against the third respondent. There should also be an order that "The first, fifth and eighth applicants pay the costs of the third respondent." 15 The fourth issue is that there is a dispute between the parties whether there should be an order that the relevant respondents remove a writ on the title of Mr Husseini's property. That is not a dispute that arises in the appeal. The parties should deal with that dispute as advised, but it is not something that is properly before this Court. 16 The costs in this Court of the resolution of the issues on costs are, naturally, to be treated as costs in the appeal. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Sarah C Derrington, Stewart and Feutrill. Associate: Dated: 13 December 2024 SCHEDULE OF PARTIES NSD 551 of 2023 Respondents Fourth Respondent: PAUL CHAU Fifth Respondent: ACTIV HEALTH CLUBS PTY LTD Sixth Respondent: RICHARD KIM Seventh Respondent: ADVANCED CLUB MANAGEMENT PTY LTD Eighth Respondent: LAZIZ MIRDJONOV Ninth Respondent: ULTIMATE FRANCHISING GROUP PTY LTD ACN 607 187 860 Tenth Respondent: MAZEN HAGEMRAD