Nathan Elali v Carl Frederik Reinhold Mahrs (No. 4)

[2015] NSWSC 1363

Supreme Court

New South Wales

Medium Neutral Citation:

Nathan Elali v Carl Frederik Reinhold Mahrs (No. 4) [2015] NSWSC 1363

Hearing dates:

15 September 2015

Date of orders:

15 September 2015

Decision date:

15 September 2015

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Directions made for the further notification of the plaintiff of the orders being sought. Proceedings adjourned to 24 September to allow the plaintiff to appear and put submissions.

Catchwords:

COSTS – interpretation of costs order – where costs order entered against bankrupt after bankruptcy – where note to costs order that enforcement of order could only be made on application to the trustee in bankruptcy.

Cases Cited:

Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653
Foots v Southern Cross Mine Management Pty Ltd & Ors (2007) 234 CLR 52
Nathan Elali v Carl Frederik Reinhold Mahrs [2013] NSWSC 1883
Nathan Elali v Carl Frederik Reinhold Mahrs (No. 2) [2013] NSWSC 1976
Nathan Elali v Carl Frederik Reinhold Mahrs (No. 3) [2014] NSWSC 58
Radmanovich v Nedeljkovic [2002] NSWSC 212

Texts Cited:

Note, “Construing Court Orders”, Justice P.W. Young (1998) 72 ALJ 117

Category:

Consequential orders (other than Costs)

Parties:

Plaintiff: Nathan Elali (a bankrupt)
First Defendant: Carl Frederik Reinhold Mahrs
Second Defendant: Melinda Mahrs

Representation:

Counsel:

 

Defendants: J. Ireland QC

  Solicitors:
Plaintiff- T. Russell, ERA Legal

File Number(s):

2013/302179

Publication restriction:

No

EX TEMPORE Judgment

1. These proceedings have returned to the Court today to seek clarification of Order number 3 that the Court made on 19 December 2013. The Court's previous judgments in these proceedings fully set out the details of the various contests between the parties in this litigation: Nathan Elali v Carl Frederik Reinhold Mahrs [2013] NSWSC 1883; Nathan Elali v Carl Frederik Reinhold Mahrs (No. 2) [2013] NSWSC 1976; and Nathan Elali v Carl Frederik Reinhold Mahrs (No. 3) [2014] NSWSC 58. Events, matters and things in this judgment will be referred to in this judgment the same way as in these previous judgments.

2. Mr Elali's trustee in bankruptcy, Mr Michael Gregory Jones, appears today through his solicitor Mr Russell. Mr Jones seeks clarification of the meaning of Order number 3, which provides as follows:

“(3)   Enter judgment for costs in the defendant’s favour in the sum of $16,277.25 but note that proceedings for enforcement of that judgment will not be taken other than by way of application to the plaintiff’s trustee in bankruptcy”

3. The issue is what is meant by the words in Order 3 after the reference to the sum of $16,277.25 (“the words in question”).

4. The orders were made on 19 December after a hearing that proceeded for a full day on a factual contest of whether or not representations had been made to Mr Elali that he could have the benefit of a two year lease over the Mahrs’ house. That issue was ultimately resolved against Mr Elali. The parties then argued about costs. The only record in the 19 December 2013 transcript of what was said about the words in question in Order 3 is at page 59. The discussion proceeded after the Court had decided Mr Elali would pay 75 per cent of the Mahrs’ costs and the relevant transcript provides as follows:

“HIS HONOUR:   But Mr Smith I can enter judgment for that amount I think even though the plaintiff is bankrupt but on the basis that it’s not enforced other than through the trustee, is that what I do?

SMITH:      I think that’s right.

HIS HONOUR:   Do you agree with that Miss Oliak?

OLIAK:       Yes, your Honour.

HIS HONOUR:   Can you tell me what the figure is? What’s 75 per cent of $21,703. Both my Associate and my Tipstaff agree that the figure is $16,275. I enter judgment for costs in the defendants’ favour in the sum of $16,277.25 but note that proceedings for enforcement of that judgment will not be taken other than by way of application to the plaintiff’s trustee in bankruptcy.”

5. Today Mr Ireland QC appears on behalf of the Mahrs. The short contest between the parties is this: Mr Russell indicates that he is concerned that proceedings will be advanced in the Local Court for the judgment sum of $16,277.25 against the trustee in bankruptcy personally. He says that the trustee, Mr Jones, holds no funds in Mr Elali’s bankruptcy. He is concerned that the words in question may be interpreted as an authorisation of the Court for enforcement of the judgment directly against the trustee personally.

6. The matter is brought before the Court in accordance with the Court's well established jurisdiction to clarify the meaning of orders that it has made, a clarification that can be achieved by declaration: Blanch v British American Tobacco Australia Services Ltd [2005] NSWSC 241; 62 NSWLR 653; Radmanovich v Nedeljkovic [2002] NSWSC 212; and see Justice P.W. Young’s case note “Construing Court Orders” at (1998) 72 ALJ 117.

7. Mr Ireland of counsel has indicated that the Mahrs now do not propose to seek to enforce the judgment against the trustee personally, because the law provides that litigants in the position of the Mahrs will ordinarily have a different remedy. In this connexion Mr Ireland has referred the Court to Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56, (2007) 234 CLR 52 (“Foots”), which is authority for the proposition that the enforcement of a costs order made in proceedings brought by a bankrupt after bankruptcy (and therefore not an attempt to enforce a provable debt) should be pressed not against the trustee but against the bankrupt. This means that if the bankrupt does not pay those costs, the bankrupt may even be pursued to a further bankruptcy. The position here may well be the same as was explained in Foots (at [67]):

"67.   Had the costs order made by Chesterman J on 3 February 2006 been made and taxed before the appellant's bankruptcy ensued, it would have been a provable debt. Even if the order had not been taxed before bankruptcy, it would nonetheless have been provable as a debt incurred "by reason of an obligation incurred before the date of the bankruptcy"; namely the antecedent making of the costs order. However, the order was made only after bankruptcy had already intervened, and the appellant's liability to meet that order did not arise from an obligation incurred before bankruptcy. Thus, it was not a provable debt, and the stay contained in s 58(3) of the Bankruptcy Act was not engaged. His Honour was therefore entitled to make the costs order against Mr Foots."

8. Looking back at Order 3, it is unclear at this distance without further analysis exactly what the additional words in question meant. I have not heard final argument on the issue. But the law as to what should happen about enforcement of the costs order seems clear enough. If Foots’ case is to be applied, the contest may ultimately be one between the Mahrs and Mr Elali for enforcement of the costs order, and the trustee will not be liable personally.

9. But regrettably Mr Elali is neither here nor represented today. His interests are potentially affected by what the Court declares or does in relation to Order 3. Mr Massey, Mr Elali’s solicitor at the trial, was informed of the re-listing of these proceedings. The Court should not proceed to make any final orders today without giving Mr Elali, Mr Massey or someone else on behalf of Mr Elali an opportunity to be heard.

10. I will therefore adjourn the matter for one week Thursday 24 September at 9.30am, to allow Mr Massey or Mr Elali to be served.

11. Accordingly, the Court’s orders and directions are:

1. Direct the plaintiff’s trustee in bankruptcy to serve a copy of these reasons upon Mr Massey, solicitor for Mr Elali by 4pm on Monday 21 September 2015.

2. If the trustee in bankruptcy ascertains Mr Massey no longer acts for Mr Elali, I direct the trustee in bankruptcy to serve a copy of these reasons by the most reasonable means available on Mr Elali personally.

3. Adjourn these proceedings at 9.30am on Thursday, 24 September 2015.

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Decision last updated: 16 September 2015