El-Saafin v Franek (No 5) - [2020] VSC 773

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST

S CI 2018 01685

HASSAN EL-SAAFIN	First Plaintiff
MOHAMAD EL-SAAFIN	Second Plaintiff
v
MARK FRANEK and others according to the Schedule	Defendants

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JUDGE:	LYONS J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	21 December 2020
CASE MAY BE CITED AS:	El-Saafin & Anor v Franek & Ors (No 5)
MEDIUM NEUTRAL CITATION:	[2020] VSC 773

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COSTS – Injunction application – Injunction granted - Whether costs in the cause or order in favour of plaintiffs for their costs – Discrete application involving question of law – Lack of candour of respondents – Order that plaintiffs’ costs be costs in the cause – No order for respondents’ costs.

COSTS - Company in administration – Plaintiff directors sought leave to bring proceedings in name of company - Administrators sought directions that justified in assigning all claims in proceeding to company controlled by defendants to proceedings – Neither application granted – Whether separate order for costs on each application – Factual overlap between two applications – Plaintiffs opposed administrators’ application and administrators opposed plaintiffs’ application – No orders for costs made.

COSTS – Appeal by plaintiff directors from decision of chair of second creditors meeting of company in administration to allow proofs of debt for voting purposes – Appeal successful in part with result that it was likely company would not have been placed into liquidation – Liquidation not set aside as Court ordered report on solvency – Whether plaintiffs entitled to costs of appeal – Whether plaintiffs entitled to costs against chair personally – Plaintiffs entitled to part of their costs reflecting degree of success – Finding that chair did not act independently and impartially in determining proofs constituted misconduct or unreasonable behaviour justifying personal costs order – Costs taxed forthwith.

COSTS – Company in liquidation - Plaintiff directors sought leave to bring proceedings in name of company – Application not opposed by liquidator but opposed by defendants - Leave granted - Whether costs in the cause or plaintiff entitled to costs of the application – discrete application - Much evidence not relevant to the trial of the proceeding – Costs ordered in favour of plaintiffs – Reduction as conduct on part of plaintiffs added unnecessarily to costs.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I Upjohn QC with Mr B Mason	Hicks Oakley Chessell Williams
For the First and Fourth Defendants	Mr M Clarke QC with Ms K Wangmann	Mr M Halse
For the Fifth and Sixth Defendants	Mr A Trichardt	Mr C Fice

HIS HONOUR:

INTRODUCTION AND SUMMARY

I have delivered four separate reasons for judgment in respect of various applications in this proceeding.[1] These reasons deal with the costs of those applications.
[1]El-Saafin v Franek [2018] VSC 450 (‘Reasons No 1’); El-Saafin v Franek (No 2) [2018] VSC 683 (‘Reasons No 2’); El-Saafin v Franek (No 3) [2019] VSC 155

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] VSC 773
Decision Date: 21 December 2020

CaseChat Overview and Summary

El-Saafin v Franek (No 5) involved a complex web of litigation between directors of a company and other parties, with various applications for costs and leave to sue. The parties were directors of a company in administration, along with other stakeholders, and the dispute centred around several applications for costs and leave to sue, as well as an appeal from a decision of the chair of a creditors' meeting. The case was heard in the Federal Court of Australia.

The court had to determine the appropriate allocation of costs in several discrete applications. This included deciding whether costs in the cause or an order in favour of the plaintiffs for their costs were appropriate, given the lack of candour by the respondents. The court also had to consider whether separate orders for costs should be made on each application, particularly as there was a factual overlap between the applications. Additionally, the court needed to decide whether the plaintiff directors were entitled to costs of the appeal against the chair of the second creditors' meeting, and if so, whether these costs should be awarded against the chair personally.

The court ruled that the plaintiffs were entitled to an order for costs in the cause due to the respondents' lack of candour. It found that there was no need for separate orders for costs on each application, given the factual overlap. The court also determined that the plaintiffs were entitled to part of their costs reflecting their degree of success on the appeal, but found that the chair did not act independently and impartially in determining the proofs, which constituted misconduct or unreasonable behaviour justifying a personal costs order against the chair. The costs were taxed forthwith. The court ordered that the plaintiffs were to be awarded costs in the cause, but reduced the amount due to conduct on the part of the plaintiffs that unnecessarily added to the costs.

The final orders included an order that the plaintiffs' costs be costs in the cause, a refusal to make separate orders for costs on each application, and an order that the plaintiffs were to be awarded part of their costs reflecting their degree of success on the appeal. The court also ordered that the chair was to be personally liable for part of the costs due to their misconduct or unreasonable behaviour.

Orders