El Rihani v Hotait (No 3)

Case [2023] FCA 595

FEDERAL COURT OF AUSTRALIA

El Rihani v Hotait (No 3) [2023] FCA 595

File number: NSD 807 of 2018
Judgment of: FARRELL J
Date of judgment: 6 June 2023
Catchwords: PRACTICE AND PROCEDURE – formulation of orders to give effect to the reasons for judgment in El Rihani v Hotait (No 2) [2023] FCA 375
Legislation: Corporations Act 2001 (Cth) s 556
Cases cited:

El-Rihani v Hotait [2020] FCA 912

El Rihani v Hotait (No 2) [2023] FCA 375

Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 33
Date of last submissions: 18 May 2023 (defendant)
5 June 2023 (plaintiff)
Date of hearing: Heard on the papers
Counsel for the plaintiff: Mr T Lynch SC and Mr M Harker
Solicitor for the plaintiff: HWL Ebsworth Lawyers
Counsel for the defendant: The defendant appeared in person

ORDERS

NSD 807 of 2018
BETWEEN:

HUSSEIN EL-RIHANI

Plaintiff
AND:

BILLAL HOTAIT

Defendant
AND BETWEEN:

BILLAL HOTAIT

Cross-Claimant
AND:

HUSSEIN EL-RIHANI

Cross-Respondent

ORDER MADE BY:

FARRELL J

DATE OF ORDER:

6 JUNE 2023

IN THESE ORDERS the following words bear the following meanings:

Gavel & Page means Gavel & Page Lawyers Pty Ltd ABN 89 152 559 610;

Mr Hotait’s email address means the address specified as Mr Hotait’s email address in his email sent to the Court on 18 May 2023 at 7:48 pm which is marked as exhibit “FO-2” or such other address as Mr Hotait notifies in writing to Gavel & Page and Mr El Rihani from time to time as his email address for the purposes of these orders;

Reasons means El Rihani v Hotait (No 2) [2023] FCA 375; and

Trust Account means the account identified in the letter to the Court dated 24 May 2023 from Gavel & Page which is marked exhibit “FO-1” in these proceedings.

THE COURT ORDERS THAT:

1.It is a condition of Mr Hotait’s obligations in Order 2 that Gavel & Page confirms by an email sent to Mr Hotait’s email address on or before 5 pm (Sydney time) on the Wednesday immediately preceding the Friday on which Mr Hotait is required to pay an amount specified in paragraphs (a) to (e) of Order 2 (relevant amount) to the Trust Account that the relevant amount has been received into the Trust Account from Mr El Rihani in cleared funds.  Any funds paid by Mr El Rihani as contemplated by this order will be paid subject to the escrow arrangement set out in Order 3.

2.Mr Hotait must pay or cause to be paid the following amounts in cleared funds to the Trust Account by 5 pm (Sydney time) on the following specified dates:

(a)$200,000 by Friday, 16 June 2023;

(b)$600,000 by Friday, 30 June 2023;

(c)$600,000 by Friday, 28 July 2023;

(d)$600,000 by Friday, 25 August 2023; and

(e)$73,343.93 by Friday, 22 September 2023.

3.Any funds paid by Mr El Rihani to Gavel & Page as contemplated…

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Details
AGLC
El Rihani v Hotait (No 3) [2023] FCA 595
Case
[2023] FCA 595
Decision Date

CaseChat Overview and Summary

In the matter of El Rihani v Hotait (No 3), the parties involved are Mr El Rihani and Mr Hotait. The dispute concerns the formulation of orders to give effect to the reasons for judgment in the previous case, El Rihani v Hotait (No 2) [2023] FCA 375. This case pertains to the Trust Account of Skyworks NSW, the distribution of funds, and the administration of the Trust Account in accordance with the Deed of Separation.

The primary legal issue the court was required to address was whether the Trust Account should be administered by the liquidator of Skyworks NSW, as suggested by the liquidator’s representative, Holman Webb Lawyers. The court also needed to decide on the terms of escrow for the contributions made by Mr El Rihani and Mr Hotait to the Trust Account and to determine the final orders regarding the payment schedule and the distribution of funds in accordance with the Deed of Separation.

The court carefully considered the implications of clause 10.14(b)(i) of the Deed of Separation, which was triggered by the expiry of the building defect warranty period of Skyworks NSW and the receipt of all funds payable to Skyworks NSW. This clause entitles the parties to an equal distribution of the funds held in the Trust Account. The court noted the necessity of ensuring that payments were made in a manner that prevented either party from gaining an unfair advantage, particularly in light of the potential for one party to claim half of the other’s contribution. The court also addressed the liquidator’s request that Gavel & Page Lawyers operate the Trust Account, ensuring the process adhered to the Corporations Act.

The court concluded that the Trust Account should be administered by Gavel & Page Lawyers, subject to the parties’ agreement. Regarding the escrow arrangement, the court ordered that funds contributed by Mr El Rihani would be held in escrow until Mr Hotait made his corresponding payment. If Mr Hotait failed to make the payment by the specified date, Mr El Rihani could request the return of his contribution. Additionally, the court ordered that the $100,000 held in the court’s trust account be transferred to the Trust Account and that Mr Hotait pay Mr El Rihani’s costs of the proceedings.

The court’s orders ensure that the payment schedule and distribution of funds comply with the Deed of Separation, while also safeguarding the interests of both parties. The final orders reflect the court's meticulous consideration of the legal and practical implications of the Deed of Separation and the need for equitable distribution of the Trust Account funds.

Orders

Orders of the court

1. It is a condition of Mr Hotait’s obligations in Order 2 that Gavel & Page confirms by an email sent to Mr Hotait’s email address on or before 5 pm (Sydney time) on the Wednesday immediately preceding the Friday on which Mr Hotait is required to pay an amount specified in paragraphs (a) to (e) of Order 2 (relevant amount) to the Trust Account that the relevant amount has been received into the Trust Account from Mr El Rihani in cleared funds. Any funds paid by Mr El Rihani as contemplated by this order will be paid subject to the escrow arrangement set out in Order 3.

2. Mr Hotait must pay or cause to be paid the following amounts in cleared funds to the Trust Account by 5 pm (Sydney time) on the following specified dates:

(a) $200,000 by Friday, 16 June 2023;

(b) $600,000 by Friday, 30 June 2023;

(c) $600,000 by Friday, 28 July 2023;

(d) $600,000 by Friday, 25 August 2023; and

(e) $73,343.93 by Friday, 22 September 2023.

3. Any funds paid by Mr El Rihani to Gavel & Page as contemplated by Order 1 will be held by that firm subject to the following escrow arrangement:

(a) Mr El Rihani must not call for repayment of the relevant amount paid by him any time before 5 pm on the Monday immediately following the time specified in Order 2 as the time by which Mr Hotait must pay the same relevant amount;

(b) If Mr Hotait pays the relevant amount in cleared funds into the Trust Account by the time specified in Order 2, the escrow applying to the relevant amount contributed by Mr El Rihani ends immediately and the relevant amounts contributed by Messrs Hotait and El Rihani must be held in the Trust Account subject to the Deed of Separation; and

(c) If Mr Hotait does not pay the relevant amount in cleared funds into the Trust Account by the specified date in Order 2, the relevant amount paid by Mr El Rihani remains subject to escrow and Mr El Rihani may request their return at any time after 5 pm on the relevant Monday. The relevant amount contributed by Mr El Rihani will not be held subject to the Deed of Separation unless and until Mr Hotait pays the same relevant amount to the Trust Account to be held subject to the Deed of Separation.

4. The money paid by the parties into Court, in the aggregate amount of $100,000, is to be transferred to the Trust Account.

5. Mr Hotait is to pay Mr El Rihani’s costs of the proceedings as agreed or taxed.

6. There be liberty to apply as necessary to give effect to these Orders and the Reasons.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Included with Mr Hotait’s draft order was a letter dated 16 May 2023 from Holman Webb Lawyers, acting for the liquidator of Skyworks NSW, addressed to Ashley Holland of HWL Ebsworth Lawyers and Mr Hotait. Relevantly, the letter stated:We refer to the Reasons for Judgment dated 24 April 2023 in the matter of El Rihani v Hotait (No 2) [2023] FCA 375 (the judgment).We are instructed as follows:1.Pursuant to the judgment, the Court held that there is an amount payable by Mr El-Rihani and Mr Hotait to the Trust Account of $4,146,687.87.2.At paragraph 186 of the judgment, Her Honour refers to the prospect of Gavel & Page Lawyers operating the Trust Account and indicates that the issue of whether that firm operates the Trust Account should be established before final orders are made, and indicates that Mr El-Rihani and Mr Hotait should address this issue in draft orders to be provided to the Court.3.Clause 10.1 of the Deed of Separation provides that all moneys shall be held in the Trust Account on behalf of the Company.4.Given the judgment and the operation of cl. 10.1, our client considers that all monies to be paid into the Trust Account are to be held on behalf of the Company and in these circumstances, the money to be paid into the Trust Account should be administered by our client in accordance with s.556 of the Corporations Act.5.The purpose of this letter is to seek the agreement of Mr El-Rihani and Mr Hotait that the Trust Account be administered in the way suggested in numbered paragraph 4 of this letter.6.Please indicate your respective positions on the above request by no later than 12.00 noon on 17 May 2023.What occurred next In light of the content of Mr Hotait’s submissions, which raised an issue not addressed in El Rihani v Hotait (No 2), on 19 May 2023, Mr Holland sought an opportunity for Mr El Rihani to provide submissions addressing the issue raised in Mr Hotait’s submissions and the letter sent on behalf of the liquidator and suggesting that Mr Hotait be given an opportunity to respond to those further submissions. On 19 May 2023, by email from my chambers sent to the parties:(1)I granted leave to Mr El Rihani to provide submissions in reply, noting that no provision had been made for them in the orders made on 24 April 2023, but a right of reply was not unusual. I considered it appropriate in this case. I noted that I was aware of what I had said in my reasons in El Rihani v Hotait [2020] FCA 912 (El Rihani v Hotait (No 1)) at [103]-[133]; and(2)I requested evidence that Gavel & Page was will willing to receive moneys and operate the Trust Account for the purposes of the Deed of Separation. I indicated that I was willing to accept a letter on Gavel & Page letterhead advising the Court of its trust account details as sufficient evidence. I note that my chambers received a letter from Gavel & Page dated 24 May 2023 providing the Trust Account details and I have marked that letter as exhibit FO-1. Mr Hotait sought leave to respond to any submission in reply filed by Mr El Rihani. Following receipt of Mr El Rihani’s submissions in reply, my associate advised Mr Hotait that I would not be assisted by further submissions.Mr El Rihani’s submissions in reply

Ratio Decidendi

Legal Principle Established

Mr El Rihani’s written submissions dated 10 May 2023 were to the following effect:(5)The provision made for payment of his contribution to the Trust Account to be received in escrow was necessary because, having regard to cl 10.14(b)(i) of the Deed of Separation dated 19 December 2016, if Mr El Rihani made a contribution but Mr Hotait did not, then Mr Hotait may become entitled to half of the amount contributed by Mr El Rihani. I note that cl 10.14 of the Deed of Separation provides as follows:Upon either of the following events occurring:(a)the expiry of all building defect warranty periods which Skyworks NSW must comply by contract, statue or common law (excluding tort) and receipt of all funds payable to Skyworks NSW; or(b)agreement between the parties in writing,the following shall occur:(i)the funds held in the Trust Account shall be distributed to the parties equally (if there are funds available for distribution). For this purpose, the parties agree to provide written authority to Madison Marcus Law Firm Pty Ltd to deal with the funds held in the Trust Account in accordance with this clause; and(ii)Skyworks NSW is to be deregistered in accordance with clause 5.3.(6)It is not necessary to make provision for Mr Hotait’s contribution to be received in escrow as Mr Hotait would only be required to pay if Mr El Rihani had already paid; and(7)The proposed costs order reflects El Rihani v Hotait (No 2) at [188].Mr Hotait’s submissions in response and proposed draft orders In his written submissions dated 18 May 2023, Mr Hotait asked that the Court “makes orders consistent with Mr El Rihani’s orders accept that the monies are not held in escrow for the reasons outlined in my submission …” (as written). He submitted that provision for escrow of Mr El Rihani’s contributions was not in accordance with the Deed of Separation or El Rihani v Hotait (No 2) at [184]. Mr Hotait then submitted that (as written):1.1By reasons of Mr El Rihani’s own admission in “Mr El Rihani’s submissions on final orders” he states in paragraph 1.5, due to the effect of 10.14(b)(i) being enlivened, I am entitled to half of the El Rihani contribution. I agree with Mr El Rihani on this point, Clause 10.14(b)(i) has come to effect due to the event specified under clause 10.14(a) has occurred, which is that the defects warranty period of Skyworks NSW has expired, and receipt of funds payable to Skyworks has happened.1.2By reasons admitted in Mr El Rihani’s submission on final orders, we cannot make payments to creditors because monies in Trust will be due and payable equally to the parties (being Mr El Rihani and myself) due to clause 10.14(b)(i) of the Deed of Separation being enlivened.1.3Mr El Rihani’s assertion in paragraph 1.6 of his submission of final orders is false. The deed states that I am required to pay into Trust account when Mr El Rihani pays into the Trust Account. This is in line with Mr El Rihani Amended Statement of Claim, and order of court paragraph 184. If I was to make a payment into Trust account, and Mr El Rihani pay into escrow, then for the same reason stated by Mr El Rihani, he can also be entitled to half of my contribution due clause 10.14(b)(i) being triggered.1.4I have asserted my position that the liquidator be the nominated Trust account is the proper Trust account for the reason I have stated in the file (Final Orders – Billal Hotait) see attached. This is in the event that 10.14(b)(i) of the deed of separation has not occurred. But the fact remains that this clause is now triggered.1.5I also propose that the $100,000 held in the court Trust account be returned to myself and Mr El Rihani equally, simply for the reasons mentioned above in this this submission.