Supreme Court New South Wales Medium Neutral Citation: Al Haje v Elassaad [2024] NSWSC 13 Hearing dates: 13 and 17 October 2023 Date of orders: 31 January 2024 Decision date: 31 January 2024 Jurisdiction: Common Law Before: Fagan J Decision: Defendant ordered to pay plaintiff's costs of interlocutory proceedings related to defendant's breach of earlier Court orders and of his undertaking to the Court given on 3 September 2021, on the indemnity basis, forthwith. Catchwords: COSTS — costs orders in interlocutory proceedings — basis of quantification — indemnity basis — whether appropriate case for a specified gross sum Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules Cases Cited: Caird Seven Pty Ltd v Mina Attia and Shopsmart Pharmacy Franchising Pty Ltd (No 3) (2016) 92 NSWLR 457; [2016] NSWSC 1452 Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 Category: Costs Parties: Wisam Al Hage (Plaintiff) Mohammed Elassaad (Defendant) Representation: Counsel: J Sheller SC/M Algie (Plaintiff) Self-represented (Defendant) Solicitors: Greg Walsh & Co (Plaintiff) Kiki Kyriacou Lawyers (Defendant) File Number(s): 2021/219805 Publication restriction: Nil JUDGMENT 1. The plaintiff seeks an order against the defendant for his costs of interlocutory proceedings that have resulted from the defendant's breach of an undertaking given on 3 September 2023, connected with an asset preservation order first made by Bellew J on 1 September 2021. The plaintiff submits that his costs should be awarded on the indemnity basis and that pursuant to r 42.7(2) of the Uniform Civil Procedure Rules the costs should be made payable forthwith rather than at the conclusion of the proceedings. He also applies pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) for the Court to assess the quantum of costs in a specified gross sum. The plaintiff's costs application was made at the hearing before me on 13 and 17 October 2023 of a notice of motion by which the plaintiff sought the appointment of a receiver over the assets of the defendant. 2. The substantive proceedings were commenced by statement of claim filed on 2 August 2021, alleging that the defendant assaulted the plaintiff on 24 January 2021. The plaintiff claims damages for personal injury including economic loss. The original asset preservation order, obtained ex parte, restrained the defendant from disposing of, dealing with, or diminishing the value of his assets generally. His assets at that time included a residential property at 170 Roberts Road, Greenacre, a second residential property at 69 Northcote Road, Greenacre and a half interest with his father in a third property at 83A Northcote Road, Greenacre. 3. On 3 September 2021, when the ex-parte order was first returnable, Mr Khouzame was on the Court record as the defendant's solicitor. On his application the order was varied to permit sale of the Roberts Road property on condition that the sale price should be not less than $1,350,000 and that on completion the net proceeds of sale would be paid into the defendant's solicitors' trust account. The following undertaking of the defendant, as first respondent to the notice of motion by which the freezing order had been applied for, was given to the Court by his solicitor on his behalf: The first respondent undertakes to cause the net proceeds of any sale of [the Roberts Road property] to be paid on completion into a trust account operated by the first respondent's solicitors who are on record in these proceedings and will not direct that the proceeds be dissipated without an order of the Court. 1. The varied order was expressed to continue in force until 24 September 2021. By a series of subsequent orders the varied order was continued in force up to 20 February 2024. On 3 September 2021, after the asset preservation order had been varied and the undertaking given to the Court, the defendant terminated his instructions to Mr Khouzame. He was not thereafter represented in these proceedings until he appointed Mr Kyriacou as his solicitor on some date prior to 20 October 2021. Mr Kyriacou continued on the record until the defendant again changed his representation in May 2023. 2. The defendant gave oral evidence before me on 13 October 2023 that he was unaware of the undertaking to pay the net proceeds of sale of the Roberts Road property into his solicitors' trust account. He said that he was not present at the hearing on 3 September 2021 and that he was informed by Mr Khouzame later in the day that he was restrained from disposing of his other real property interests but was free to sell the Roberts Road property and to deal with the proceeds as he saw fit. 3. I find it highly improbable that the solicitor would not have fully and accurately informed the defendant of the orders made and the undertaking given on the defendant's behalf. I would be reluctant to accept the defendant's assertion in that regard without hearing evidence from the solicitor himself. No explanation was given for the defendant's failure to call Mr Khouzame. The defendant asserted that he did not even know that an order of the Court was made on 3 September 2021. When the defendant was pressed about that assertion, many of his answers were unresponsive and evasive. He gave the strong impression of trying to avoid acknowledging any understanding of the proceedings of 3 September 2021. In later evidence concerning disbursement of the proceeds of sale the defendant was, again, evasive. I found him to be a very untrustworthy witness. I do not accept that he was unaware of the undertaking given to the Court on his behalf. I am satisfied that on and from 3 September 2021 he knew of his obligation to pay the net proceeds into trust. Even if the defendant did not know of the undertaking that his solicitor had given on his behalf, that could only have been through his own fault. He was well aware that the plaintiff was seeking an order to restrain him from dealing with his assets and it was incumbent upon him, as the respondent to that application, to ascertain the outcome of the interlocutory proceeding. 4. After 3 September 2021 the defendant entered into a contract for the sale of the Roberts Road property at a price of $1,315,000. The sale was completed on 4 February 2022. The defendant did not cause the net proceeds to be paid into the trust account of Mr Khouzame's firm, or into any other solicitor's trust account. The plaintiff was not informed of this breach of the defendant's undertaking and did not learn of it until approximately 3 March 2023. A Land Registry search of that date by the defendant's solicitor showed that a transfer dated 4 February 2022 had been lodged and that Mr Khouzame had acted in connection with the transfer. 5. Upon learning of the breach the plaintiff applied to the Court for orders to remedy the situation. On 6 March 2023 Weinstein J ordered that the asset preservation order be extended to 4 September 2023, with variations that included the following: 2 A sum of money equivalent to the net proceeds of sale of [the Roberts Road property] be paid into a trust account operated by the respondent's solicitor who is on the record in these proceedings, that is Mr Kyriacou, by 13 March 2023. 3 In the event that the respondent has insufficient funds to comply with order 2, he is to notify his solicitor by 27 March 2023 and provide his solicitor with the following particulars and documents relating to the transfer of the property and his current financial status: a-d [The order specified detailed particulars of the sale of the property and provided descriptions of bank records to be produced, by which the disposition of the proceeds of sale could be traced]. 1. The defendant did not comply with order 2. Nor did he provide copies of statements of bank accounts in his name for the period following settlement of the sale on 4 February 2022, as required by order 3d. By email of 27 March 2023 Mr Kyriacou informed the plaintiff's solicitor that the net proceeds of sale had been deposited to the trust account of Percentage Property Pty Ltd, the real estate agent through which the defendant had effected the sale. No information or substantiating documents were provided to inform the plaintiff whether the funds were still held by Percentage Property Pty Ltd or, if not, how the funds had been applied. 2. In those circumstances the plaintiff filed a notice of motion on 29 May 2023 seeking an order that the defendant pay into Court the proceeds of sale of the Roberts Road property. The plaintiff appeared unrepresented when the notice of motion came before Rothman J on 1 June 2023. His Honour ordered that the defendant pay into Court "the proceeds of sale, if any" and that he provide within 28 days an account of all money disbursed from the proceeds. The defendant was ordered to pay the costs of the notice of motion. 3. On 6 July 2023 the defendant affirmed and filed an affidavit purporting to account for disbursement of the proceeds of sale. That deposition confirmed that the defendant had not merely failed to pay the proceeds into trust, in breach of his undertaking, but that he had disbursed the proceeds, or allowed them to be disbursed, so that a significant component of the original asset preservation order had been frustrated. This caused the plaintiff to file on 1 September 2023 his notice of motion seeking the appointment of a receiver over the defendant's assets. 4. That was a reasonable and meritorious application in the circumstances. There has never been any appeal from, or application to set aside, the original asset preservation order as modified on 3 September 2021. There has never been any application to be released from the undertaking of 3 September 2021. The purpose of the order and undertaking was to freeze the defendant's assets until the substantive claim against him for damages could be determined. The defendant has demonstrated his unwillingness to abide by the injunction. The remedy of prosecution for contempt is of no comfort to the plaintiff. The only form of order that the Court could resort to, which would not be dependent upon the defendant's obedience, would be the appointment of a receiver whereby control over the defendant's assets would be taken entirely out of his hands: Caird Seven Pty Ltd v Mina Attia and Shopsmart Pharmacy Franchising Pty Ltd (No 3) (2016) 92 NSWLR 457; [2016] NSWSC 1452. 5. Towards the conclusion of the parties' submissions on the motion before the Court on 13 October 2023 I made it clear that I considered the grounds for appointment of a receiver had been established. I encouraged the defendant, in his own interests, to offer mortgages over his remaining real property to secure any judgment that the plaintiff may recover, as an alternative to incurring the professional fees of a receiver. After discussion during an adjournment the plaintiff's application was resolved by consent on that basis. 6. In these circumstances the plaintiff is entitled to his costs of and incidental to the application to Weinstein J on 6 March 2023. The plaintiff already has in his favour an order for the costs of the notice of motion filed on 29 May 2023, heard by Rothman J on 1 June 2023. The plaintiff is entitled to an order for his costs of and incidental to the notice of motion filed on 1 September 2023, heard by me on 13 October 2023. He is also entitled to the costs of appearances before Campbell J on 5 and 14 September 2023, which concerned directions for the conduct of the notice of motion and, on one occasion, an adjournment of the hearing of the motion. The plaintiff is entitled to have all those costs assessed on the indemnity basis. The entirety of the legal work undertaken on the plaintiff's behalf in these respects has been necessitated by the defendant's clear and egregious breach of his undertaking and of the Court's orders of 3 September 2021, 6 March 2023 and 1 June 2023. Assessment of the costs on the indemnity basis is not ordered for punitive purposes. It is ordered because the plaintiff should not be out of pocket for extensive interlocutory proceedings during 2023 that have had no utility for bringing the substantive case to a final hearing. This wasteful satellite litigation has been generated solely by defendant's disregard of the Court's orders and of his own undertaking. 7. The considerations to be taken into account in determining whether interlocutory costs should be paid forthwith or only at the conclusion of proceedings are identified in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 at [11]-[13] and in Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 at [14]-[15]. The first significant factor in the present case is that the issues arising out of the defendant's breach of his undertaking and of the Court's orders constitute an identifiable matter separate from the substantive proceedings. Those issues have been determined adversely to the defendant, firstly by Weinstein J and subsequently by Rothman J, resulting in their Honours' orders referred to above. The adverse conclusions drawn by me on the hearing of the notice of motion on 13 October 2023 resulted in the defendant's agreement to grant mortgages, which was an outcome more favourable to him than the order that I would have made. 8. The second significant factor relevant to whether the subject costs should be paid before the conclusion of the proceedings is that the conduct of the defendant giving rise to the interlocutory contests has been unreasonable. A third factor is whether there is likely to be any significant lapse of time before the final determination of the proceedings. I do not regard that consideration as carrying significant weight in the present case because this interlocutory diversion never should have taken place and cannot be regarded as part of the ordinary course of bringing the plaintiff's claim to trial. In my view, there is no reason why the defendant's obligation to indemnify the plaintiff for these interlocutory costs should be linked to or dependent upon the conclusion of the substantive case. For those reasons I will order that the costs be payable forthwith. 9. The case is not suitable for an order that the costs of the various interlocutory proceedings be paid in a specified gross sum. The subject costs have been incurred over three separate applications to the Court, two of them not heard by me. I do not have sufficient knowledge of the preparatory work or other detail of the applications before Weinstein and Rothman JJ to be able to make a global assessment of the costs of those applications. The evidence filed on behalf of the plaintiff to establish what his costs have been includes memoranda of fees by senior and junior counsel. The itemisation in those memoranda shows that all counsel's fees have been incurred in relation to interlocutory steps necessitated by the defendant's breach of his undertaking and of the Court's orders. The fees appear to be reasonable disbursements. 10. However, with respect to the plaintiff's solicitors' costs, the Court has been provided with an itemised bill from the commencement of the proceedings, incorporating numerous items of work from dates in 2021 and 2022, well before the plaintiff was aware of the defendant's breaches. That work is not the subject of the costs orders that that the Court is now to make. The solicitors' invoice would require the trained eye of an assessor to discriminate between items that are or are not allowable. The invoice does not facilitate the kind of broad overview approach that the Court would take in arriving at a specified gross sum. 11. From the evidence and submissions before me it is not apparent that any application was made to Rothman J for his Honour to specify that the costs he ordered against the defendant on 1 June 2023 should be paid on an indemnity basis and/or that those costs should be paid forthwith. It is not apparent that his Honour made any considered determination in that respect. It therefore seems that there is no impediment to me now supplementing his Honour's costs order, in light of the further evidence that has emerged after 1 June 2023, particularly in the defendant's affidavit of 6 July 2023 and in his oral testimony of 13 October 2023. Those subsequent developments justify the indemnity basis and an order for payment forthwith, for all costs of resolving the subject interlocutory issues. 12. For the above reasons the following orders will be entered: 1. Order that the defendant pay the plaintiff's costs of and incidental to the application heard by Weinstein J on 6 March 2023. 2. Order that the defendant pay the plaintiff's costs of and incidental to the plaintiff's notice of motion filed on 1 September 2023 including the costs of appearances before Campbell J on 5 and 14 September 2023. 3. Order that the costs payable under orders (1) and (2) and the costs payable under order 3 made by Rothman J on 1 June 2023 be assessed and paid on the indemnity basis. 4. Order pursuant to r 42.7(2) of the Uniform Civil Procedure Rules that the costs payable under orders (1) and (2) and (3) and under order 3 made by Rothman J on 1 June 2023 be paid forthwith. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 January 2024