Nazloomian v Jones

Case [2018] FCA 44

FEDERAL COURT OF AUSTRALIA

Nazloomian v Jones [2018] FCA 44

File number: NSD 1793 of 2016
Judge: FARRELL J
Date of judgment: 6 February 2018
Catchwords: PRACTICE AND PROCEDURE – second application for security for costs by respondents to appeal – where first application dismissed – whether there was a material change of circumstances or new material since the first application – where appellant commenced litigation against respondents in other courts – application dismissed
Legislation:

Bankruptcy Act 1966 (Cth) s 121

Corporations Act 2001 (Cth) s 477(2A)

Federal Court of Australia Act 1976 (Cth) s 56

Federal Court Rules 2011 (Cth) r 36.09

Conveyancing Act 1919 (NSW) s 37A
Cases cited:

Addenbrooke Pty Ltd v Duncan (No 3) [2014] FCA 322

Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44

Carey v Freehills [2014] FCA 325

Mbuzi v Hall [2010] QSC 359

Renshaw v Queensland Mining Corporation [2016] FCA 994

Royal v El Ali [2011] NSWSC 602

Royal v El Ali (2016) 14 ABC(NS) 108; FCA 782

Royal v El Ali (No 2) [2016] FCA 1156

Royal v El Ali (No 3) [2016] FCA 1573

Royal v El Ali (No 4) [2017] FCA 299
Date of hearing: 11 December 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 57
Counsel for the Applicants: Dr C Birch SC with Ms P Thew
Solicitor for the Applicants: Watson Mangioni Lawyers Pty Limited
Counsel for the Respondents: Mr A Fernon

ORDERS

NSD 1793 of 2016
BETWEEN:

JOHN RENE NAZLOOMIAN

Appellant
AND: 

MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI

First Respondent

SARACEN HOLDINGS PTY LIMITED (IN LIQUIDATION)

Second Respondent

DAVID MANSFIELD AS LIQUIDATOR OF SARACEN HOLDINGS PTY LIMITED (IN LIQUIDATION) (and others named in the Schedule)

Third Respondent

IN THE INTERLOCUTORY APPLICATION: 
BETWEEN:

PETER PAUL ROYAL

First Applicant

JUDITH LOUISE ROYAL

Second Applicant

MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI

Third Applicant
AND:

JOHN RENE NAZLOOMIAN

Respondent

JUDGE:

FARRELL J

DATE OF ORDER:

6 FEBRUARY 2018

THE COURT ORDERS THAT:

1.The application for security for costs filed on 4 October 2017 by Peter Paul Royal, Judith Louise Royal and Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali (together the applicants) is dismissed.

2.The applicants must pay John Rene Nazloomian’s costs as agreed or taxed.

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


REASONS FOR JUDGMENT

FARRELL J:

  1. By an interlocutory application accepted for filing on 4 October 2017, the applicants, Peter Paul Royal and Judith Louise Royal (together the Royals) and Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali (Mr El Ali) sought orders that John Rene Nazloomian provide security for their costs in proceedings NSD 1793 of 2016…

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AGLC
Nazloomian v Jones [2018] FCA 44
Case
[2018] FCA 44
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Nazloomian v Jones [2017] FCAFC 162, the respondents, Peter Paul Royal, Judith Louise Royal, and Michael Gregory Jones, as trustee of the bankrupt estate of Nathan El Ali, sought a second application for security for costs in relation to an appeal against a decision of Davies J. The applicants sought an order that the appellant, John Rene Nazloomian, provide security for the costs of the appeal. The applicants contended that there had been a material change of circumstances since the dismissal of their first application for security for costs on 21 July 2017, and that new material had come to light. The applicants argued that the appellant had commenced litigation against them in other courts and that they were impecunious. The appellant contended that there had been no material change of circumstances and that the applicants had not demonstrated that he was or might be impecunious. The court considered the applicable legal principles and the submissions made by both parties. The court found that the applicants had not demonstrated that there had been a material change of circumstances or the discovery of new material which could not reasonably have been put before the Court on the hearing of the first application. The court held that the applicants had not established that the appellant was or might be impecunious and that there was no evidence that he was disposing of assets. The court found that the appellant had paid into Court over $220,000 in respect of orders made by Davies J in the Orders Decision and the Costs Decision. The court held that the applicants' reliance on the decision of Jacobson J in Addenbrooke Pty Ltd v Duncan (No 3) was misplaced as the appellant was fully exposed to an adverse costs order. The court dismissed the application for security for costs and ordered that the applicants pay the appellant's costs as agreed or taxed.

Orders

Orders of the court

1. The application for security for costs filed on 4 October 2017 by Peter Paul Royal, Judith Louise Royal and Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali (together the applicants) is dismissed.

2. The applicants must pay John Rene Nazloomian’s costs as agreed or taxed.

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

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Decision

Reasons for decision

NSD 1731 of 2013 and NSD 771 of 2014 were heard together. At [2]-[3] of Royal v El Ali (2016) 14 ABC(NS) 108; FCA 782 (Principal Decision), Davies J explained that:2. The transactions in issue in chronological order are:(a) The transfer of the shares owned by Mr El Ali in Isaac & Jacob Pty Ltd (“Isaac & Jacob”) to John Nazloomian (“Mr Nazloomian”) on 19 October 2010.(b) The Deed of Appointment of New Trustee dated 15 December 2010 by which Ottoman Investments Pty Ltd (“Ottoman”) resigned as trustee of the Ottoman Investments Unit Trust and Otsi Stojanovski (“Mr Stojanovski”) was appointed the new trustee.(c) The transfer by Ottoman of the property at Unit 2, 4 Hogben Street, Kogarah (“the Kogarah Unit 2 property”) to Mr Stojanovski on 16 December 2010.(d) The Deed of Retirement and Appointment of New Trustee executed on or around 21 or 28 April 2011 by which Ottoman resigned as trustee of the Ottoman Investments Unit Trust and Mahmoud Zreika (“Mr Zreika”) was appointed the new trustee.(e) The transfer by Ottoman of the property at 2 Woodlands Road, Taren Point (“the Taren Point property”) to Mr Zreika on 21 April 2011.(f) The transfer of the shares owned by Mr El Ali in Ottoman to his nephew Mahmoud El Ali (“Mahmoud”) on 22 August 2011.(g) The transfer of the shares owned by Mr El Ali in EasyChoice Home Loans Pty Limited (now ACN 092 879 733 Pty Ltd) (“EasyChoice”) to Mahmoud on 7 September 2011.(h) The transfer of the shares owned by Mr El Ali in Saracen Holdings Pty Limited (“Saracen”) to Mahmoud on 1 November 2011.(i) The Deed of Retirement and Appointment of New Trustee dated 8 December 2011 by which Saracen resigned as trustee of the Voyager Point Unit Trust and Mr Zreika was appointed the new trustee.(j) The transfer by Saracen of the property at 1 Sirius Road, Voyager Point (“the Voyager Point property”) to Mr Zreika on 8 December 2011.(k) The transfer by Saracen of the property at 1A McDonald Lane, Potts Point (“the Potts Point property”) to Mr Nazloomian on 22 November 2012.OVERVIEW3Isaac & Jacob, Saracen, Ottoman and EasyChoice [Home Loans Pty Ltd] were each owned and controlled by Mr El Ali before the challenged share transfers. EasyChoice was the vehicle through which Mr El Ali conducted his mortgage broking business. Saracen and Ottoman were the vehicles through which Mr El Ali acquired and owned properties. Isaac & Jacob was, and still is, the sole unitholder of the Voyager Point Unit Trust, the Helensburgh Unit Trust and the Ottoman Investments Unit Trust. Saracen was the trustee of the Voyager Point Unit Trust and the Helensburgh Unit Trust. Ottoman was the trustee of the Ottoman Investments Unit Trust. Isaac & Jacob holds the units in the Voyager Point Unit Trust and Helensburgh Unit Trust as trustee for the Elali Family Trust, a discretionary trust of which Mr El Ali is a specified beneficiary, and holds the units in the Ottoman Investments Unit Trust as trustee for the Second Elali Family Trust, a discretionary trust of which Mr El Ali is within the designated class of beneficiaries. Mr El Ali, at all relevant times, was, and still is, the appointor of both family trusts. As appointor, Mr El Ali has, under the terms of both family trusts, the power to remove and appoint the trustee.

Ratio Decidendi

Legal Principle Established

Mr Fernon responded that the Supreme Court did not, in making its orders, specify how the judgment sum was calculated. Accordingly, despite the language employed in the Supreme Court’s reasons that it would be necessary to give credit for $55,000 in respect of the transfer of the Mercedes Benz car in October 2004, it was not clear that the Court had in fact done so and the submissions made in the District Court proceedings did not address that issue.CONSIDERATION As the applicants accepted that it is necessary for them to demonstrate that there has been a material change of circumstances or the discovery of new material which could not reasonably have been put before the Court on the hearing of the first application, I have set out the submissions and circumstances of the first application in some detail as well as the submissions made in relation to the second application. I have taken into account the submissions made by the parties on both applications and legal principals recorded above. The parties did not require reasons for the orders made on 21 July 2017. In the context, it is useful to record that:(1)I was satisfied that the grounds of appeal on which Mr Nazloomian seeks to rely are arguable and there are aspects of the appeal concerning the scope and application of s 37A of the Conveyancing Act, s 121 of the Bankruptcy Act and s 477(2A) of the Corporations Act to the complex factual matrix which are of public interest. As I will be one of the judges sitting on the appeals, I understand that it is accepted by the parties that it would be inappropriate to analyse the prospects of success of the appeal any further. (2)I was not satisfied that the applicants had demonstrated that Mr Nazloomian was or might be impecunious; rather, they established that he was a registered joint proprietor of unencumbered land at Nelson Bay. Davies J did not reject Mr Nazloomian’s evidence that he had lent around $1.5 million to Mr El Ali. This would indicate that he was not impecunious. There was no evidence that he was disposing of assets.(3)Mr Nazloomian had paid into Court over $220,000 in respect of orders made by Davies J in the Orders Decision and the Costs Decision. While the source of those funds was not entirely transparent, the orders had been met. (4)There was no evidence contradicting Mr Nazloomian’s evidence that he had only become aware of the gross sum costs order on 15 June 2017 and that he was willing to meet that order promptly. On 16 June 2017, I indicated to the parties that I was minded to dismiss the application as against Mr Nazloomian, but that position was finely balanced. The factors which made the decision finely balanced were Mr Nazloomian’s reticence to explain his financial position and the fact that the source of funds for payment of the costs orders was unclear in circumstances where applicants’ exhibit 1 would imply that Mr Zreika (or an entity associated with him) had been responsible for legal fees at least until August 2015. However, any concern arising from those factors was outweighed by the facts that (save for the gross sum costs order) there was no evidence of Mr Nazloomian having failed to meet costs orders in the past and a substantial costs order of $212,166 and an order for payment of $10,000 made against Mr Nazloomian in the proceedings in this Court had been met by payment into Court. In my view, the applicants’ reliance on the decision of Jacobson J in Addenbrooke Pty Ltd v Duncan (No 3) was misplaced as Mr Nazloomian was fully exposed to an adverse costs order. Although there was no evidence that a security for costs order would stymie Mr Nazloomian’s appeal, in all of the circumstances, in my view it was not appropriate to make an order against Mr Nazloomian for security for costs.