Supreme Court New South Wales Medium Neutral Citation: Chikal Pty Limited & Anor v Youssef El Bayeh & Anor [2011] NSWSC 230 Hearing dates: 15 December 2010, Decision date: 30 March 2011 Before: Slattery Decision: See paragraph 31 of judgment. Catchwords: PROCEDURE - Costs - general rule costs follow the event - no question of principle. Legislation Cited: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005, r 42.1 Cases Cited: BI Constructions Pty Ltd v Shad; Bayeh v BI Constructions Pty Ltd [2010] NSWSC 484 Chikal Pty Ltd v BI Constructions Pty Ltd [2010] NSWSC 1286 Re Minister for Immigration and Ethnic Affairs (Cth); ex parte Li Qin (1997) 186 CLR 622 Category: Consequential orders Parties: First Plaintiff- Chikal Pty Ltd Second Plaintiff- BI Constructions Pty Ltd Second Plaintiff- BI Constructions Pty Ltd First Defendant- Youssef El Bayeh Second Defendant-Samir El Bayeh Interested Party- Barlaw Pty Ltd t/as Barrak Lawyers Representation: Counsel: First Plaintiff - P. Bambagiotti Second Plaintiff - C.W.Robinson First Defendant - T. Bland Second Defendant - Mr Condon Interested Party - M.A.Robinson Solicitors: First Plaintiff - M.Macken, Beston Maccken McManis Second Plaintiff - R. Rahal, Cambridge Law First Defendant -B. Boustani, Legal & Corporate Advisory Second Defendant -T. Oliffe, Thurlow Fisher Interested Party - Barrak Lawyers File Number(s): 2010/359687 Judgment 1The remaining question in these proceedings is the issue of costs. There are four cost applications before the Court. Chikal Pty Limited ("Chikal") seeks an order for costs against Mr Youssef ("Joe") El Bayeh, the first defendant. The second defendant Mr Samir ("Sam") El Bayeh seeks costs against Mr Joe El Bayeh. BI Constructions Pty Ltd ("BI Constructions") seeks costs against Mr Joe El Bayeh, finally, Barlaw Pty Ltd seeks costs against Chikal. 2When the matter was last before the Court on 15 December 2010 there was insufficient time to hear argument on questions of costs. I directed the parties to file submissions as to costs by Monday, 31 January 2011 and to reply to those submissions by Friday, 4 February 2011. Most parties have filed written submissions. 3On 15 December 2010 I granted the relief sought in Order 1 in the Summons, dated 25 October 2010, although those orders were stayed temporarily until 4 February 2011. 15 December 2010 was the third time that these proceedings had been before the Court. They first came before me on 4 November 2010 when Mr Bambagiotti of counsel appearing on behalf of Chikal and BI Constructions sought the payment of monies out of Court on an ex parte basis. I was not satisfied that orders for payment out should be made before Mr Sam El Bayeh and Mr Joe El Bayeh had been informed of the application. I gave directions for the service of Mr Sam El Bayeh and Mr Joe El Bayeh by 10 November 2010 and adjourned the proceedings to 22 November 2010. My reasons for taking this course appear in my judgment of that date: Chikal Pty Ltd v BI Constructions Pty Ltd [2010] NSWSC 1286. Those reasons for decision should be read with this judgment. The parties and events described in those reasons are referred to in the same way in this judgment. 4When the matter returned to the Court on 22 November 2010 Mr Joe El Bayeh appeared by counsel and sought to oppose the release of the money in Court. The basis for Joe El Bayeh's opposition to payment of funds out of the Court was not clear. So the Court directed that day that Mr Joe El Bayeh serve his proposed pleading and written submissions articulating the causes of action and claims to relief that he made to support any contention (1) that he has standing to appear in the proceedings and (2) that the funds should remain in Court in preference to being paid out to Mr Macken on behalf of the joint venture of Chikal and BI Constructions. This was to be done by 10 December 2010. The proceedings were adjourned to 15 December 2010. 5Mr Joe El Bayeh did not comply with the Court's directions. On 10 December he served a form of Summons rather than a pleading. That form of Summons did not set out the causes of action he relied upon. 6The matter returned for hearing on 15 December 2010. Mr Joe El Bayeh was joined as the first defendant to the proceedings on 15 December 2010. Mr Sam El Bayeh was joined as second defendant. Mr Bland appeared for Mr Joe El Bayeh. Mr Condon appeared for Mr Sam El Bayeh. 7On 15 December 2010 Mr Joe El Bayeh and Mr Sam El Bayeh took different positions upon the question of payment of the funds out of Court. Mr Joe El Bayeh continued to oppose payment out of Court for most of the hearing on 15 December 2010. Mr Sam El Bayeh consented to payment out at the outset of the proceedings that day. As my judgment on 15 December 2010 explains, in the course of argument on that day I sought to test the basis of the opposition to payment out of the funds to the two plaintiffs. The result of that testing was that in the course of argument on 15 December 2010 Mr Joe El Bayeh gave his counsel instructions no longer to oppose payment out. But Mr Joe El Bayeh also sought a stay upon payment out of those monies. On that day orders were made in accordance with Order 1 of the Summons which was to the following effect:- "4. Pursuant to Rule 41.3 of the Uniform Civil Procedure Rules (UCPR) that the money deposited into this court in proceedings 5323 of 2009 (2009/291340) together with interest accrued thereon be paid out of court to Beston Macken McManis, solicitors." 8Mr Joe El Bayeh offered an undertaking as to damages in support of the application for a stay. The proffering of the undertaking strengthened the argument for a stay. A stay was granted. 9It is with this background that the four cost applications set out above are made. They each raise slightly different considerations. I will deal with each in turn. Chikal's Application for Costs Against Mr Joe El Bayeh 10Chikal seeks its costs as agreed or assessed against Mr Joe El Bayeh from 22 November 2010. Mr Bambagiotti has completed written submissions in support of such an order dated 31 January 2011. Mr Joe El Bayeh is not now taking an active role in these proceedings, notwithstanding his having been joined as first defendant. The parties have been served with a Notice of Intention of Ceasing to Act by Mr Joe El Bayeh's solicitor, Ms Boustani, filed 15 February 2011. The Court has not had the benefit of submissions in reply from Mr Joe El Bayeh. Nevertheless the Court can assess the merits of the arguments Chikal advances against him. 11The applicable law is not in doubt. Under Civil Procedure Act 2005 and Uniform Civil Procedure Rules 2005, r 42.1 costs are in the discretion of the Court and costs "follow the event". Where proceedings are compromised the Court can make an order for costs if one party was almost certain to have succeeded had the matter been fully tried or if a party has otherwise behaved so unreasonably that costs should be awarded against that party: Re Minister for Immigration and Ethnic Affairs (Cth); ex parte Li Qin [1997] HCA 6; (1997) 186 CLR 622 per McHugh J. Although Mr Joe El Bayeh initially opposed the payment out of Court, his change of position was not the result of a compromise but the result of a practical concession that the relief the plaintiffs sought was likely to be granted. His concession that the relief sought should not be opposed came after detailed exchanges with the Court which exposed difficulties in his case against payment out of Court. The orders made on 15 December 2010 were, in my view, really the result of Mr Joe El Bayeh deciding to no longer contest what had become a very difficult argument. His counsel Mr Bland correctly recognised, if I may say so, the difficulties of his argument and his opposition to the orders sought ceased. The correct analysis of these events is that Mr Joe El Bayeh opposed payment out on 22 November 2010 and initially on 15 December 2010 but then he changed his mind and subject to a stay did not oppose the relief sought. In these circumstances, in my view Chikal was successful against Mr Joe El Bayeh. 12In my view Chikal should have an order for the costs it requests. There was a lengthy hearing on 22 November 2010. Much of it was taken up either with submissions from Mr Bland on behalf of Mr Joe El Bayeh or submissions dealing with the problem that Mr Joe El Bayeh did not agree with payment out of Court to BI Constructions and Chikal on the terms proposed. In my view if Mr Joe El Bayeh had not opposed the payment out on 22 November 2010 the proceedings were likely to have been much shorter and simpler on that day. There would still have been an appearance on that day to resolve some of the mechanical issues associated with the payment out. In those circumstances I will order that Mr Joe El Bayeh pay 50 per cent of Chikal's costs of the hearing on 22 November 2010 and all of Chikal's costs of the proceedings thereafter excluding the costs associated with Chikal's contest with Barlaw Pty Ltd, which is an entirely separate issue. Mr Sam El Bayeh's Costs Against Mr Joe El Bayeh 13Mr Sam El Bayeh also seeks costs against Mr Joe El Bayeh. His counsel, Mr Condon points out that no party opposed Mr Sam El Bayeh's joinder as a party to the proceedings; that Mr Joe El Bayeh had sought and then abandoned claims that the monies not be paid out of Court (or in the alternative to be paid out to an independent third party); that if Mr Joe El Bayeh had not opposed the making of these orders they would have been made in effect within a short period of time; and, the stay was only an indulgence because of Mr Joe El Bayeh's failure to comply with the Court's previous directions concerning the service of the proposed pleading and submissions, fully articulating his claim and the amount of loss. 14In my view Mr Sam El Bayeh's submissions have merit. I accept the correctness of what is put on his behalf by Mr Condon. These considerations favour an order for costs in favour of Mr Sam El Bayeh of the same kind as the Court is making in favour of Chikal against Mr Joe El Bayeh. Mr Sam El Bayeh was required to brief counsel and come to Court to argue about the issue of payment out. This would have been largely avoided if Mr Joe El Bayeh had initially taken the position that he ultimately took at the end of the hearing on 15 December 2010. On the other hand, Mr Sam El Bayeh would still have had to have been represented for a period of time on 22 November and therefore should not have all of its costs of that day. In my view Mr Sam El Bayeh should have an order for costs against Mr Joe El Bayeh for 50 per cent of his costs of 22 November 2010 and all of his costs of the proceedings thereafter. BI Construction's Costs 15BI Constructions adopted Mr Sam El Bayeh's costs submissions. BI Constructions claimed it should have its costs against Mr Joe El Bayeh on the same basis that Mr Sam El Bayeh has been successful. In my view that adoption was appropriate. BI Construction's position is similar to that of Mr Sam El Bayeh. BI Construction's attendance and preparation for the 22 November 2010 would have been simplified if Mr Joe El Bayeh had consented earlier to what ultimately happened, a payment out of Court. I will make the same order in BI Construction's favour against Mr Joe El Bayeh. Chikal Pty Ltd and Barlaw Pty Ltd 16Barlaw claims that Chikal should pay costs under the following order:- "Chikal Pty Ltd to pay Barlaw Pty Ltd ('Barlaw') the costs of and relating to the Notice of Motion of Barlaw dated 15 November 2010 and filed in Court on 22 November 2010, such costs to be paid on and from 20 November 2010." 17Barrak Lawyers formerly acted for BI Constructions. As a result of the first proceedings, BI Constructions Pty Ltd v Shad; Bayeh v BI Constructions Pty Ltd [2010] NSWSC 484, the groundwork was laid for the ascertainment for costs owing by BI Constructions to Barrak Lawyers' service company, Barlaw. As a result of negotiations between the parties and events occurring in these proceedings, those costs have been ascertained at $56,000. But there are issues between BI Constructions and Barlaw. Some members of the Board of BI Constructions are unhappy about the services provided by Barrak Lawyers to the company. But Barrak Lawyers did not act for Chikal, only for BI Constructions. With this background I now turn to Barlaw's involvement in the current proceedings. 18Chikal disputes that it should pay Barlaw any costs of its Motion of 15 November 2010 or of Barlaw's appearances on 22 November 2010 and 15 December 2010. Some background is required to understand the issues that govern the exercise of the cost discretion between these two parties. 19The question of Barlaw's costs goes back to my first judgment published on 18 May 2010: BI Constructions Pty Ltd v Shad; Bayeh v BI Constructions Pty Ltd [2010] NSWSC 484 at [52] of those reasons for judgment the status quo was preserved in relation to Barlaw's fees and I said the following:- "[52] There was ultimately no real opposition to orders 1 and 2 on Mr Barrak's principal motion dated 17 March 2010 in relation to his fees. I will make those orders. I am not yet satisfied that order 3 on Mr Barrak's motion should be made. I am not prepared to determine Mr Barrak's final entitlement to fees until an assessment has taken place, which is underway. Most of the contentions in these proceedings related to whether the evidence that Mr Barrak advanced on his motion could be more widely used by Mr Samir Bayeh on his motion. The final management plan for orders in these proceedings should include directions to enable Mr Barrak's costs position to be resolved in the long term. Protection in the short term will be achieved by making orders 1 and 2 on Mr Barrak's motion. " 20There were further arguments about costs and appearances in the Trust Proceedings whilst Barlaw's cost assessment was taking place. One of the orders made in the Trust Proceedings on 6 August 2010 related to the position of Barlaw trading as "Barrak Lawyers". Orders made on 6 August 2010 provide:- "...Barlaw Pty Ltd trading as Barrak Lawyers....be provided with at least seven (7) days written notice of any application by any party to these proceedings to release any money currently paid into or to be deposited into Supreme Court". 21The current proceedings were commenced without the requisite seven days being given to Barrak Lawyers of relief that was clearly caught by order 9 of the orders made on 6 August 2010. The reason for this oversight is not difficult to find. The new solicitor acting for Chikal and BI Constructions jointly on the application in the current proceedings, Mr Hugh Macken, was not involved in the prior Trust proceedings. The Trust proceedings had their own complexity. The Court's requirements for notice of payment out of monies paid into Court appears to have escaped Mr Macken's attention, as these current proceedings were pressed forward before the Court. Mr Macken apologised to the Court for the oversight on 22 November 2010 through Mr Bambagiotti. Mr Macken clearly indicated that no discourtesy was intended to Barlaw by the oversight. If I may say so the oversight was understandable. But Mr Macken had gone further. He apologised to Mr Barrak on the afternoon of 12 November 2010 when he, Mr Macken realised that the current proceedings had been commenced by oversight without giving prior notice to Barlaw. Mr Macken immediately made clear to Mr Barrak that on 12 November 2010, according to Mr Barrak, that Chikal had no objection to Mr Barrak being paid from BI Construction's share. By implication the issue was one between BI Construction and Mr Barrak. 22Barlaw's claim to be paid under its costs agreement with BI Constructions was that Barlaw would be paid "as a matter of first priority of any monies released from the settlement proceeds". Chikal, the other joint venturer with BI Constructions argues that Barlaw should not receive any order for costs against Chikal because Barlaw never had any interest in the joint venture monies themselves. Chikal says that Barlaw undoubtedly has a claim against BI Constructions under the cost agreement between the two once BI Constructions receives its share of the joint venture funds. Chikal says that there is no foundation for any assertion that Barlaw should be paid directly out of joint venture funds or that it should be paid before Chikal, just as BI Construction itself had no entitlement to be paid before Chikal. Chikal says that if that proposition is correct in law that Barlaw had no entitlement to justify involving itself in these proceedings in the manner that it did and especially given the resolution of BI Construction's Board that BI Constructions would pay Barlaw as soon as it received funds. 23Moreover, Chikal says that merely because Barlaw had a right to be notified of any application for release of the monies in Court arising from consent orders on 6 August 2009, that does not itself give Barlaw any entitlement to appear and involve itself in these proceedings for release of the funds or to obtain any priority of payment. 24I accept Chikal's argument in relation to this. I do not see that Barlaw has any rights against Chikal under the costs agreement. Chikal just happens to be the joint venture partner of the party, BI Constructions, with whom Barlaw has a cost agreement. Barlaw's rights to distribution of monies held in Court only arise against BI Constructions in an unqualified way when Chikal's rights to control the funds are relinquished. That only arises when funds are distributed to BI Construction and are in BI Construction's sole control. Barlaw has no rights in contract against Chikal to require it to make monies in Court available to BI Constructions. There is no relationship in equity between Barlaw and Chikal. I do not see how Barlaw is entitled to a costs order against Chikal, even if, as Barlaw submits Chikal was the only party to oppose payment out of it. The real question is whether Bawlaw had any rights against Chikal to oppose the relief. In my view it did not. 25Barlaw's other answer to this argument of Chikal is to point out that BI Construction's resolutions made future payment of the fees to Barlaw uncertain. That may be so but that is a problem between Barlaw and BI Construction. It does not give Barlaw rights against Chikal. 26Barlaw puts an alternative argument. Barlaw says that Mr Macken, then acting for Chikal and BI Constructions upon the launch of the current proceedings had a conversation to the following effect with Mr Barrak. This is referred to in paragraph 11 of Mr Barrak's affidavit of 14 December 2010:- "I'm sorry for the oversight in not putting you on notice. It was an oversight on my part. I will organise for the documents to be sent out to you. Obviously Chikal has no objection to you being paid from BI's share. It doesn't affect Chikal at all." 27Mr Macken disputes this conversation in his affidavit of 13 January 2011. He says of that conversation the following:- "I crave leave to refer to the Affidavit of Benjamin Barrak sworn 14 December 2010. In respect to that Affidavit I do not agree with the contents of paragraph 11 of the said Affidavit. I do not have an exact recollection of the precise words used in the conversation. I do state that I did not say the words ascribed to me in paragraph 11 of the Affidavit of Benjamin Barrak. I did not agree that Barrak Lawyers be paid costs and disbursements they have claimed from the monies held in Court. I did note that once the share of the monies owing to BI Constructions Pty Limited was paid to BI Constructions Pty Limited then they were at liberty to pay whatever monies they owed including any monies owing to Barrak Lawyers;" 28I have not had the benefit of seeing either Mr Macken or Mr Barrak cross-examined. But I can decide this on the probabilities. And in any event, in my view, it does not matter which version of the conversation is accepted. Neither version much assists Chikal's case. 29Mr Macken's version is consistent with what Chikal claims is consistent with his instructions, that BI Constructions "were at liberty to pay whatever monies they owed including monies owing to Barrak Lawyers" once BI Constructions received its share of the settlement monies. Even on Mr Barak's version I do not construe the words "obviously Chikal has no objection to you being paid from BI's share. It doesn't affect Chikal at all", as any concession that Barrak Lawyers have rights against Chikal or against the fund in Court. On common sense reading of what Mr Macken was saying to Mr Barrak, "BI's share" could not be ascertained until Chikal relinquished its rights over part of the monies and gave BI Constructions exclusive control over them. In my view this conversation does not elevate Barlaw's rights to a right over the funds in Court. 30I considered for a period that some part of Barlaw's costs should be paid by Chikal because Mr Macken had made an error for which he apologised, which may have led to Barlaw to incur unnecessary costs. Upon reflection though I do not think that any cost order against Chikal is warranted on this basis. Even on Mr Barrak's version Mr Macken apologised to him for the oversight on 12 November 2010. This was ten days before Barlaw appeared on 22 November. In the meantime Barlaw prepared a Motion on 14 November 2010 and commenced preparation of a lengthy affidavit in support of its contentions. Mr Macken's oversight does not appear to have been the reason why the Motion was prepared. Barlaw was well apprised of the real situation before most of its work was done and decided to appear. In my view there is much to be said for Chikal's analysis that Barlaw was taking advantage of the commercial pressure then placed on BI Constructions by the position being taken by Mr Joe El Bayeh. But this does not give Barlaw a right to costs against Chikal. In the result Barlaw's application for costs against Chikal should be dismissed and it should pay Chikal's costs of the costs argument. Conclusions and Orders 31In the result therefore the Court will make orders for costs in favour of Chikal, Mr Sam El Bayeh and BI Constructions against Mr Joe El Bayeh. I will also make orders for costs in favour of Chikal against Barlaw in relation to the argument as to costs. The Court's orders therefore will be the following:- 1. Order that Mr Youssef El Bayeh, the first defendant, pay 50 per cent of the costs of the plaintiffs and the second defendant of their appearances on 22 November 2010 and 100 per cent of those parties' costs thereafter, but in the case of Chikal, excluding the costs referred to in Order 3. 2. Dismiss Barlaw's application for costs against Chikal. 3. Order Barlaw to pay Chikal's costs of the application in these proceedings referred to in Order 2. ********** 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 March 2011