New South Wales Supreme Court CITATION : El Ketab v Lawindi [2001] NSWSC 249 CURRENT JURISDICTION: Equity Division Construction List FILE NUMBER(S) : SC 55026/00 HEARING DATE(S) : 13.3.01, 16.3.01, 23.3.01 JUDGMENT DATE : 6 April 2001 PARTIES : Mohamed Safwat El Ketab -v- Wasfy Lawindi JUDGMENT OF : Hunter J COUNSEL : Plaintiff: In Person Defendant: C Bevan & G Pesce SOLICITORS : Plaintiff: In person Defendant: Turner Freeman CATCHWORDS : Judgment - application to set aside for procurement by fraud - silence of legal representatives of plaintiff - erroneous statement from bench in reasons for judgment against defendant. LEGISLATION CITED : Commercial Arbitration Act 1984 DECISION : The summons is dismissed and the plaintiff is to pay the defendant's costs of the proceedings. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CONSTRUCTION LIST HUNTER J FRIDAY 6 APRIL 2001 55026/00 MOHAMED SAFWAT EL KATEB -V- WASFY LAWINDI REASONS FOR JUDGMENT 1 Mohamed Safwat El Kateb (El Kateb) sues Wasfy Lawindi (Lawindi) in these proceedings claiming the following relief: "1. A declaration that the judgement of Justice Einstein of 24 September 1999 in proceedings 55030/99 was obtained by the defendant by fraud. 2. An order that the judgement of Justice Einstein of 24 September 1999 in proceedings 55030/99 was irregularly obtained. 3. An order that the judgement of Justice Einstein of 24 September 1999 in proceedings 55030/99 be set aside. 4. In the alternative, an order that the defendant be restrained from enforcing the judgement of Justice Einstein of 24 September 1999 in proceedings 55030/99." 2 The basis upon which that relief is claimed is set out in the following contentions in the summons: "14. The Plaintiff was unable on medical grounds to attend the hearing before Justice Einstein on 24 September 1999. As he had been representing himself in the proceedings, his absence greatly prejudiced his case in that crucial information was withheld from the court under the following circumstances: (a) He instructed a solicitor over the telephone to attend the hearing and to only apply for an adjournment. The application was refused by his Honour. (b) The Plaintiff's solicitor had no knowledge about the proceedings except to seek an adjournment. He did not know that there were proceedings in the Court of Appeal to set aside the Award. (c) Justice Einstein inquired whether there were proceedings on foot to set aside the Award. The Plaintiff's solicitor said that he was not aware of any such proceedings. (d) Although the Defendant's solicitors were aware of the Court of Appeal proceedings to set aside the Award, Mr Nicholas A. Nicholls (counsel for the defendant) remained silent and did not inform his Honour of the existence of the proceedings. 15. Had Justice Einstein been informed of the Court of Appeal proceedings, he would not have entered judgement for the Defendant as such an action would have frustrated the Court of Appeal proceedings - as in fact turned out to be the case. The Award merged with the judgement. 16. By remaining silent in the face of judicial inquiry about the said proceedings, the Defendant and his lawyers obtained the judgement of Justice Einstein on 24 September 1999 by fraud." 3 The judgment of Einstein J of 24 September 1999 (Exhibit 6, vol 2, page 105 et seq) is, for ease of reference, schedule 1 to these reasons. The circumstances preceding the giving of judgment are set out in those reasons. 4 On the occasion of that hearing, Nicholas Andrew Nicholls (Nicholls) of counsel appeared for Lawindi, instructed by Ian John Cheney (Cheney), a solicitor in the employ of Turner Freeman, who had the daily carriage and conduct of those proceedings on behalf of Lawindi. Both Nicholls and Cheney were present in Court throughout the hearing on 24 September 1999. 5 El Ketab was represented on that occasion by his solicitor, Ian Tremback (Tremback), who was instructed by El Kateb to seek an adjournment of the proceedings: they being proceedings to enforce the final award of an arbitrator dated 11 August 1998 (the award) as a judgment of the Court. The award was in the sum of $72,885.12 and imposed an order for costs against El Ketab. The grounds for the application consisted of evidence of ill heath of El Kateb which prevented him from attending the hearing. He was not present in court at any stage of the proceedings of 24 September 1999. 6 In order to understand the events that immediately preceded the judgment it is useful to have regard to the transcript of proceedings before Einstein J of 24 September. As to the subject matter of the proceedings the following appears in an exchange between Einstein J and Tremback: "HIS HONOUR: Mr Tremback, what documents do you wish to rely on? Firstly, let us deal with the merits. What is it you wish to say about the merits of the summons as opposed to the adjournment? TREMBACK: In regard to the merits, the application deals with costs. The nature of the defence of the defendant is in relation to the plaintiff's costs. That subject has a lengthy history and is subject to lengthy correspondence between Turner Freeman. HIS HONOUR: This is a claim for $72,000, is it? TREMBACK: No, it is very misleading. With all respect, the summons in front of you indicates that this is the enforcement of an award. HIS HONOUR: Are you telling me that that $72,000 is made up in some fashion of costs and costs only? TREMBACK: No, the $72,000 might be said to be moneys which belong to the plaintiff. On my instruction, the costs which the plaintiff's solicitors are seeking to enforce amount to over $250,000. This is a case where I understand the plaintiff has absolutely no money to fund this action. The case is a contingency one handled by the solicitor and counsel and their only prospect of deriving any benefit from these proceedings is by enforcing a costs order of approximately $250,000 against Doctor El Kateb who is seen to possess more funds and money than their client. The whole subject of the costs has been under a lot of attack as can be seen from the correspondence of the costs assessor and it appears there is no costs agreement in existence between Turner Freeman and Mr Lawindi and no costs agreement between Mr Lawindi and Mr Nicholls and no costs agreement between Mr Nicholls and Turner Freeman." (T120:53 - 121:30) 7 Shortly thereafter there was a short adjournment as noted in the transcript. During the period of that adjournment there was a telephone conversation between Tremback and El Ketab, the substance of which was to the effect that El Ketab was asked what defence he had to the proceedings, none having been filed. According to El Ketab, he informed Tremback that he had been too ill to draft and file a defence, and that he would "draft the defence in the coming days". When asked what should be done if the Judge did not grant an adjournment, he replied by saying "At least make sure that the costs are assessed". I take that to be a reference to the considerable sum of costs said to be the subject of the arbitrator's award and estimated to exceed $250,000. After that conversation the hearing before Einstein J resumed. 8 It is clear from the transcript that the submissions that were then advanced by the parties concerned this question of costs as ordered by the arbitrator to be paid by El Kateb. After that discussion the following exchange occurred: "HIS HONOUR: …. We come back to Mr Tremback's application to adjourn. I think in that regard I should ask him about it. We have gone a little distance down the track, so I could understand the burden of the summons. I presently remain dissatisfied, insofar as being able to see a single point where you are unable to assert that there is any defence whatever to the summons. It is an important matter in the exercise of the discretion because the whole question of adjourning because of Doctor El Ketab's medical condition is a separate matter. If you are able to satisfy me that there is any form of defence available, what has all this medical evidence to do with the application for judgment? TREMBACK: I do not think there will be any argument about interest assuming it has been properly calculated. So it all comes down to the question of costs. The matter of costs can be approached in different ways. One obvious way is for a costs assessor, who has made it very clear in his correspondence that he cannot assess the costs - I submit that an unsuccessful litigant is entitled to have some idea as to what those costs are. HIS HONOUR: When you say it all comes down to costs, what, inter (sic) terms of costs, are you referring to - which part of what Mr Nicholls is asking - which part of the costs do you say it comes down to? TREMBACK: As I understand it, there are quite a number of actions. HIS HONOUR: I am not dealing with costs in any matter otherwise than relating to these proceedings…. … TREMBACK: It is the basis of the defence that the costs should be assessed or completed. They also should be separate. There are certain costs which should be referable to that arbitration and costs in relation to other proceedings. As I understand, from my instructions, all of the costs have been lumped in together. HIS HONOUR: That is a matter which the taxation officer is exactly charged to enquire into because it is only the costs of and incidental to the arbitration that are to be taxed and it is only the fees and expenses of the award that are to be taxed. If there has been some attempt by the plaintiff to have all sorts of costs to do with other arbitrations or worked (sic) lumped in here, that is a matter which will be put before the taxing officer by affidavit and can be a matter of determination for their content. There may be rights of appeal from a taxing officer, I don't know." (T5:19 - T5:52…T124:14 - T124:30) 9 Further discussion took place concerning costs of other proceedings before the court proceeded to judgment ex tempore. Paragraphs 1 - 13 of the reasons for judgment examine the history of the matter and the nature of the proceedings before turning to the application for the adjournment, which is dealt with in paras 14 to 19 of the reasons for judgment as follows: "14.One of the discretionary considerations which is, of course, extremely important on an application to adjourn such proceedings concerns what precisely the defendant, by his legal adviser, is now able to identify by way of defences on the merits to the orders sought in the summons. Mr Tremback has not been able to satisfy the Court that there is any defence whatever. He has made plain that he is not aware of any other proceedings to set aside the award, that he is unaware of any debate about the interest amount sought and that the only submissions that he is able to proffer, relate to questions of costs covered or which may be covered by the Court's orders. In that regard he has referred in submissions to a number of other sets of proceedings and a number of debates which I understand on his instructions, are currently on foot, as to costs of an occasioned by or relating to other proceedings, but not being proceedings 55030/1999. 15. Mr Tremback has, however, made plain that the defendant is anxious to ensure that any order that the defendant pay the plaintiff's costs of and incidental to the arbitration, be an order which preserves for the defendant an entitlement to have those costs taxed. He has also, as I understood it, made plain that he is anxious to ensure that any order that the defendant pay the fees and expenses of the award which have been assessed by the arbitrator at $25,575, should preserve to the defendant the entitlement to have those fees and expenses taxed. 16. The Court is in a position to accommodate each of those concerns of the defendant by orders which the Court is able to make. 17. In all of those circumstances, where there is no evidence whatever put forward by the defendant identifying any defence of any type on the merits to the orders now proposed by the plaintiff in the summons and in circumstances where, notwithstanding the direction that a defence be filed before today, no defence has been filed and where, notwithstanding the direction that an affidavit setting out facts, matters and circumstances sought to be relied upon in support of issues raised in the defence be filed, no such affidavit has been filed and most importantly, where the legal adviser for the defendant is unable to put forward even any suggested arguable defence to the summons, it seems to me appropriate to permit the plaintiff to move for judgment subject to the Court protecting the defendant in the ways to which I have referred. 18. It is strictly unnecessary then to deal with the question of whether or not, on the current application for the adjournment, the Court ought be regarded as permitting the materials in and annexed to the affidavits of Dr El Ketab to be admitted into evidence and read. 19. Notwithstanding that this is the case, I have taken the precaution to mark those documents as exhibits. Had the defendant been in a position to put forward a substantial or substantive defence to the summons it would have seemed to me appropriate to then adjourn the proceedings for the purpose of permitting evidence to be filed and I would have been disposed to extend the time in which a defence and evidence should be filed." 10 Given the substance of the telephone conversation between El Ketab and Tremback during the short adjournment, save for one matter, the terms in which Einstein J addressed the absence of a defence in the passages referred to above are not entirely surprising. The caveat on that observation is to be found in the passage in par 14: " Mr Tremback has not been able to satisfy the Court that there is any such defence whatever. He has made plain that he is not aware of any other proceedings to set aside the award, that he is unaware of any debate about the interest amount sought and that the only submissions that he is able to proffer, relate to questions of costs covered or which may be covered by the Court's orders. " (emphasis added) 11 In substance, El Ketab seeks to establish a case that the judgment was obtained by fraud consisting of the silence of Lawindi, Nicholls and Cheney in the face of the statement by Einstein J that Tremback had "made plain that he is not aware of any other proceeding to set aside the award". It is not in dispute that both Cheney and Nicholls (and, I assume, Lawindi) were aware that there were pending proceedings in the Court of Appeal seeking leave to appeal from a judgment of Rolfe J relating to an interim award in the same arbitration in which the award was published. In those proceedings before Rolfe J, El Ketab raised a jurisdictional question. In substance, it was a 'party point' in that El Kateb contended that Lawindi was not the true contracting party to the contract containing the submission to arbitration. The proceedings before Rolfe J were by way of summons pursuant to ss 38(4), 42 and 43 of the Commercial Arbitration Act 1984 seeking leave to appeal against the interim award for error of law and seeking an order that the interim award be set aside for misconduct. 12 The questions of law sought to be raised involved the jurisdiction point and whether a certain settlement, together with a related release, extinguished any entitlement of Lawindi against El Ketab under the contract. There were other alleged questions of law raised, all of which were the subject of adverse findings by Rolfe J in rejecting leave to appeal based on those grounds. 13 The challenge to the award based on the alleged misconduct of the arbitrator involved allegations that the arbitrator had erred in his consideration of the evidence and that El Ketab was denied natural justice by the procedure adopted in the arbitration. That case was also rejected by Rolfe J who dismissed the summons and made an order for costs against El Ketab. The orders were entered on 27 July 1999. 14 On 18 August 1999 El Ketab filed a summons in the Court of Appeal for leave to appeal from the judgment of Rolfe J. That application had not been heard at the time of the proceedings before Einstein J. On 22 November 1999 the Court of Appeal granted leave to appeal "limited to the question as to whether the arbitrator had jurisdiction to proceed with the arbitration…" On 24 February 2000 that leave was revoked by order of the Court of Appeal, essentially, by reason of the final judgment on the award of the arbitrator made by Einstein J on 24 September 1999. 15 I doubt whether Einstein J would have proceeded to judgment enforcing the final award of the arbitrator at a time when the Court of Appeal was yet to hear an appeal challenging the jurisdiction of the arbitrator to make an interim award. The matter is not made any simpler by a dispute as to what transpired before Einstein J, who declined to hear these proceedings, notwithstanding both parties' acceptance of Einstein J to adjudicate on this dispute. 16 The evidence of Tremback is that, in substance, the emphasised passage from the reasons for judgment of Einstein J correctly state what he informed the Court on 24 September 1999 as to the absence of any proceedings to set aside the award. 17 The transcript of the proceedings of 24 September 1999 do not contain any reference to such a statement having been made by Tremback to Einstein J at any stage of the proceedings. 18 Cheney, who kept a file note of those proceedings, testified that he had no recollection of Tremback informing the court of the absence of any proceedings to set aside the award. There is no note of such a statement recorded in his file notes. 19 Nicholls in his affidavit of 18 October 2000 denied that Einstein J "at any stage during the course of the proceedings asked Mr Tremback or made any other inquiry as to whether or not Mr Tremback was aware of any proceedings to set aside the arbitral award". 20 It is not in dispute that Nicholls was aware of the outstanding application of El Ketab for leave to appeal the judgment of Rolfe J. It was his evidence in his affidavit of 17 November 2000 in relation to that outstanding application for leave as follows: "2. During preparation for and conducting the proceedings before Einstein J on 24 September 1999, I did not at any time consider the application which the defendant had brought seeking leave to appeal the decisions of Rolfe J to dismiss the defendant's application to appeal the Arbitrator's interim award (inter alia) to be relevant in the proceedings before Einstein J. At no material time did I discuss with my instructing solicitor or with any other person any relevance between the defendant's application for leave to appeal and the proceedings before Einstein J. 3. The only possible defences which I contemplated might be raised by the defendant in the proceedings before Einstein J, were issues related to jurisdiction. In the event, the defendant raised no such defence. 4. It was and is my opinion that the application for leave to appeal the judgment of Rolfe J was not and could not have been a defence to the summons in which Einstein J have judgment on 24 September 1999." 21 In cross examination Nicholls adhered to that evidence and it was his further evidence in cross examination that he had not noticed the remarks of Einstein J in the course of delivering of reasons for judgment and which are the subject of contention in these proceedings. Nicholls explained that the outcome of the proceedings was obvious from the outset of the delivery of His Honour's reasons, to which he paid no particular attention. 22 It is clear from Tremback's file that he was well aware of the importance on an application by a defendant for an adjournment of a hearing that the defendant is shown to have an arguable defence, particularly where none has been filed in the proceedings. In this case, El Ketab was in default in failing to file a defence together with an affidavit of facts in support of the defence by 22 September 1999. 23 That awareness of Tremback is given some point in the context of his enquiry of El Ketab of 24 September as to the defence that El Ketab relied upon in the proceedings. 24 Although the evidence of El Ketab was not entirely consistent in respect of the following matter, I think the evidence established that he was well aware of the outstanding application to the Court of Appeal at the time of his telephone conversation with Tremback. That was to be expected, given the fact that the summons for leave to appeal from Rolfe J's judgment had been filed on 18 August 1999. 25 Tremback kept reasonably full notes of the reasons for judgment of Einstein J and it was his evidence that shortly after the delivery of that judgment he read his file notes of the judgment over the phone to El Kateb. Those notes contain a note recording the observations of Einstein J that Tremback had not satisfied the Court that there was a defence to the proceedings and more particularly "Tremback not aware of other proceedings to set aside award. Only instructions relate to questions of costs". It was Tremback's evidence that, although that was read to El Kateb, the latter raised no comment about it at the time. I think that is inexplicable if El Ketab placed any importance on the outstanding application for leave to appeal from Rolfe J's judgment. 26 Another matter of some significance arises out of Tremback's involvement in February 2000 in the appeal from the judgment of Rolfe J. It was his evidence that he did not raise with El Kateb the fact that the existence of those proceedings ran counter to what he is said to have informed the court on 24 September 1999. He sought to explain that on the basis of his fringe involvement in those Court of Appeal proceedings. However, I think it must have been obvious that the appeal related to the arbitration in which the award was published. Yet nothing was said about the circumstances in which Einstein J proceeded to judgment on 24 September 1999. 27 These proceedings were not instituted until 15 August 2000, some six months after the Court of Appeal rescinded its order granting leave to appeal from Rolfe J's decision. I think it is reasonably clear that, at the time of the hearing before Einstein J, El Ketab placed no reliance upon the outstanding application for leave to appeal to the Court of Appeal from the decision of Rolfe J. His principal concern related to the question of costs awarded by the arbitrator. As observed by Nicholls, it was open to El Kateb to have instructed Tremback on 24 September 1999 that his defence went to the jurisdiction of the arbitrator to make an award. That he did not do so is a matter, I think, that counts heavily against him in failing so to instruct Tremback. 28 The reality is that no one on either side of the proceedings before Einstein J, in my view, appreciated that judgment in those proceedings would extinguish any entitlement of El Ketab to continue prosecution of the appeal from Rolfe J, if leave so to appeal was granted. That much is clear from the fact that the application for leave to appeal was argued in November 1999 and no submissions were presented to the Court of Appeal as to the effect of the judgment of Einstein J on that application. 29 I am not prepared to find that Einstein J made the specific enquiry of Tremback of the existence of any application to set aside the award, notwithstanding the passage on which reliance is placed in the reasons for judgment of Einstein J. The evidence of Nicolls is that no such exchange took place between Einstein J and Tremback. Cheney has no recollection of it nor any file note of it. The transcript does not record it. While Tremback asserts a clear recollection of the exchange, I am not satisfied as a matter of onus that such a finding should be made. If Tremback had such a clear recollection, it is curious that he did not raise the matter with El Kateb in February 2000 when involved in the appeal from Rolfe J's judgment in relation to the same arbitration in which the award was published. 30 Further, I accept the evidence of Nicholls that the statement by Einstein J, that is the subject of contention, did not register with him during the course of delivery of the reasons for judgment on 24 September 1999. 31 Cheney, in my view, did not consciously remain silent in the face of the contentious statement being made in the course of the delivery of Einstein J's reasons. I think that much is clear from the following extract from his cross examination: "Q. The paramount duties of you officers of the Court, solicitors and barristers, is to administer justice and to assist the judge before he entered that award, entered judgment. You actually could have spoken up and not kept silence on two occasions when the question, firstly, was asked, and secondly, when the judgment was delivered? OBJECTION. HIS HONOUR: Q. Can you deal with that? A. Firstly, I wasn't the advocate on the day. Secondly, it was an application for leave to appeal which you had filed. Rolfe J had already made a decision on the application to set aside the interim award so I couldn't see -- PLAINTIFF: Q. But the appeal in order 3, the appeal clearly indicates that the appeal against Rolfe J is not really Rolfe J's decision entirely but it had specifically indicated that I was appealing against the award? A. You're appealing against the decision of Rolfe J? Q. Yes, that's correct? A. Yes. Q. And especially when it comes to the point which I have just read to you in my Notice of Appeal, order 3, which said the final award of Lloyd S Austin, who was arbitrator in the proceedings dated 9 August 1999, be set aside wholly. So it's clear from all the documents have been provided to yourself and your counsel that I am attacking the award, actually one of my orders is to set aside the award which is absolutely relevant to the point that his Honour found crucial, I believe he found crucial, and that's why he had to cover it before he delivered the judgment and I put it to you that you kept silent in favour of your client while your paramount duties is to the Court and also to the administration of justice in this Court? A. I didn't -- OBJECTION. QUESTION ALLOWED. WITNESS: I did not consciously decide to keep silent. It wasn't clear to me on that day that there was any relevance between the two sets of proceedings. Although I might have, and probably did, read that paragraph and that claim in your Notice of Appeal, you have been bringing so many proceedings on so many bases in various proceedings, all of which have been dismissed in a number of cases with rather harsh comments against you by the Court -- PLAINTIFF: Can I stop him because he's not answering the question? HIS HONOUR: I will allow the witness to finish the answer. WITNESS: Harsh comments against you and your legal representatives at the time. All of those proceedings have been dismissed. I can't recall exactly what my first reaction was when I read your Notice of Appeal but I think it likely that I probably thought that that was as baseless an appeal and as baseless a ground on which you were bringing those proceedings as to have been found the other proceedings which you brought." 32 Clearly Lawindi was not in a position to speak on 24 September 1999 assuming he was present throughout the proceedings and heard the contentious statement by Einstein J in giving judgment. 33 It is plain that no case of fraud has been made out, in my view, and there is no basis upon which the Court should now set aside the judgment of Einstein J, entered on 8 October, assuming that I had jurisdiction to do so. It was open to El Ketab to instruct Tremback on 24 September 1999 of a defence based upon the absence of jurisdiction of the arbitrator. Although specifically requested by Tremback to provide instructions as to a defence, El Ketab declined or failed to do so. 34 Moreover, on being informed, from Tremback's notes, of the contentious passage in Einstein J's judgment immediately after the judgment was delivered, El Ketab failed to take any action to correct the judgment. 35 Instead, he prosecuted the application for leave to appeal in November 1999, and, when limited leave was granted by the Court of Appeal, he prosecuted that appeal until February 2000 when leave to appeal was rescinded. It was another six months before these proceedings were instituted. 36 In my view, the time has arrived for the conclusion of the disputes between the parties in the subject of arbitration. It is apparent that the costs incurred by the parties far outweigh the amount of the award. In that respect, the chronology of litigation engaged in by El Kateb, in respect of the disputes arising out of the contract containing the parties' submission to arbitration, makes compelling reading. 37 Accordingly, the summons is dismissed and the plaintiff is to pay the defendant's costs of the proceedings. 38 The parties have agreed to transcript corrections in terms of the document which I have initialled, dated 2 April 2001, and placed with the papers. ************ Last Modified: 04/12/2001 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.