Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie

[2017] NSWSC 1509

Supreme Court

New South Wales

Medium Neutral Citation:

Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie [2017] NSWSC 1509

Hearing dates:

8 September 2017

Date of orders:

08 November 2017

Decision date:

08 November 2017

Jurisdiction:

Equity

Before:

Slattery J

Decision:

The first and third defendants should pay the plaintiffs costs of the plaintiffs’ motion for contempt, on the indemnity basis. Such costs may be off-set against any moneys payable by the plaintiffs to the third defendant on the settlement of the 2014 Contract.

Catchwords:

COSTS - party/party – costs orders in interlocutory proceedings – motions resolved in substance by the course of events - plaintiffs and applicants on three motions unwilling to proceed – costs outcomes for two of the motions agreed - who should bear the costs of the remaining contempt motion – application of UCPR, r 42.7 - whether one or other party was certain to succeed on the contempt motion – whether one or other party conducted the contempt motion unreasonably.

Legislation Cited:

Civil Procedure Act 2005, ss 67, 98(4)(c)
Family Law Act 1975 (Cth), ss 79 106B
Jurisdiction of Courts (Cross-vesting) Act 1987, s 5(1)
Real Property Act 1900, s 74J
Uniform Civil Procedure Rules 2005, rr 7.36, 42.7, 51.44

Cases Cited:

Angela Campbell Pty Ltd (as trustee of the Halina Superannuation Fund) v Hengrove Hall Pty Ltd [2016] NSWSC 1219
Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006
Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194
Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119
Enterprise ICT Pty Ltd v Pham [2017] NSWCA 236
Hamod v New South Wales [2011] NSWCA 375
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
Lawrence v Gunner [2015] NSWCA 322
McIntyre v Perks (1988) 15 NSWLR 417
Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

Category:

Procedural and other rulings

Parties:

In proceedings 2015/325044:
First plaintiff: Andy Vuong Duc Pham
Second plaintiff: Thi Huong Giang Pham
First defendant: Enterprise ICT Pty Ltd
Second defendant: Nadine Musabwasoni
Third defendant: Robert Sebie

In proceedings 2015/56505:
First plaintiff: Andy Vuong Duc Pham
Second plaintiff: Thi Huong Giang Pham
First defendant: Robert Sebie
Second defendant: Commonwealth Bank of Australia
Third defendant: ENA Development Pty Ltd (ACN 105 235 363)
Fourth defendant: Mazen Zraika

Representation:

Counsel:

 

In proceedings 2015/325044:

 

Plaintiffs: B. Zipser
Second Defendant: Mr Duc
Third Defendant: Dr G. O’Shea; Ms B. Oliak

 

Solicitors

 

Plaintiffs: John Bui, Bui Lawyers
First Defendant: Richard Killalea, Kazi & Associates
Second Defendant: Howard Norman Simons, Remington & Co solicitors

 

Counsel:

 

In proceedings 2015/56505:

 

Plaintiffs B. Zipser
First Defendant: Dr G. O’Shea; Ms B. Oliak
Second Defendant: Mr Duc

   

Solicitors:

  Plaintiffs: John Bui, Bui Lawyers
First Defendant: in person
Second Defendant: Justin Bates, Dentons Australia Pty Ltd
Third Defendant: Hsin-Hung Wang, Mark Wang
Fourth Defendant: n/a

File Number(s):

(2015/325044); (2015/56505)

Publication restriction:

No

Judgment

1. Mr Andy Vuong Duc Pham and Mrs Thi Huong Giang Pham are the joint purchasers from Mr Robert Sebie under an October 2014 Contract for Sale (“the 2014 Contract”) of certain residential land in the Sydney suburb of Chiswick (“the Chiswick Property”). Mr and Mrs Pham have commenced two sets of proceedings to protect their equitable interests as purchasers against Mr Sebie and certain other defendants, who are alleged to have dealt with the Chiswick Property inconsistently with the Phams’ interests.

2. This judgment records the disposition of three notices of motion filed in one of these two proceedings in June this year. The following motions were dealt with: (1) the plaintiffs’ motion seeking orders that Mr Robert Sebie and Enterprise ICT Pty Limited (“Enterprise”) are in contempt of certain orders Pembroke J made against them in May 2017 (“the contempt motion”); (2) Mr Robert Sebie’s motion seeking a stay of proceedings, pending an appeal against Pembroke J’s May 2017 orders (“the Sebie stay motion”); and (3) a motion of Ms Nadine Musabwasoni, Mr Robert Sebie’s former wife, seeking a stay of the proceedings in this Court and relief under Family Law Act 1975 (Cth), s 106B to set aside the 2014 Contract, to preserve the subject matter of the matrimonial property in dispute in proceedings she has already commenced in the Federal Circuit Court of Australia against her former husband (“the Family Law Act, s 106B stay motion”).

3. After a preliminary directions hearing on 23 August 2017, the Court dealt with these three notices of motion on 8 and 15 September 2017. The Court closely case managed the proceedings from 23 August. As a result all three of the motions fell away. None of them needed to be heard to finality. But residual questions remain as to who will bear the costs of one of the motions.

The Chiswick Property, its Vendor and his Relations – 2014 to 2017

Overview of the Proceedings

4. The Phams, the plaintiffs in both proceedings, a husband and wife, purchased the Chiswick Property under the 2014 Contract. Mr Robert Sebie, then the sole registered proprietor of the Chiswick Property, was the vendor to the plaintiffs under the 2014 Contract. But Mr Robert Sebie failed to complete the 2014 Contract on the date fixed for completion, 3 December 2014.

5. Mr and Mrs Pham sought specific performance of the 2014 Contract against Mr Robert Sebie as first defendant in proceedings (No. 2015/56505), commenced on 23 February 2015 (“the specific performance proceedings”). The second to fourth defendants in the specific performance proceedings were various encumbrancers of the Chiswck Property. One of these, ENA Development Pty Limited (“ENA”) was associated with Mr Robert Sebie and played a role in this litigation that is explained below in the overview of Pembroke J’s April 2017 judgment in the proceedings.

6. At about the same time as the Phams commenced the specific performance proceedings they also sought to protect their equitable interests in the Chiswick Property as purchasers under the 2014 Contract by lodging a caveat over the Chiswick Property (“the February 2015 caveat”).

7. Between June and August 2015, Mr Robert Sebie took steps to remove the February 2015 caveat without prior notice to Mr and Mrs Pham. Then, and still without notice to Mr and Mrs Pham, Mr Robert Sebie and his brother Mr Richard Sebie arranged the transfer of the Chiswick Property for no consideration from Mr Robert Sebie to Enterprise ICT Pty Ltd (“Enterprise”), through a mechanism further explained in Pembroke J’s April 2017 judgment. Mr Richard Sebie is and was and at all material times the sole director of Enterprise.

8. Mr and Mrs Pham found out in October 2015 about the transfer of the Chiswick Property to Enterprise only after it had occurred. Upon discovering that the February 2015 caveat had been removed, Mr and Mrs Pham lodged a new caveat over the Property (“the October 2015 caveat”).

9. The October 2015 caveat again asserted and sought to protect the Pham’s equitable interest in the Chiswick Property as purchasers, as had the February 2015 caveat.

10. Enterprise soon sought to remove the October 2015 caveat. Enterprise served a lapsing notice under Real Property Act 1900, s 74J to trigger its lapsing. In response, Mr and Mrs Pham commenced a second set of proceedings on 5 November 2015 (2015/325044) this time against Enterprise, as first defendant, seeking to extend the October 2015 caveat and restrain Enterprise from dealing with the Property (“the Enterprise proceedings”). Mr Robert Sebie was joined as third defendant to the Enterprise proceedings. Darke J extended the October 2015 caveat on 11 November 2015, until further order.

11. But Mr Robert Sebie was not the only person interested in the Chiswick Property before its sale to the Phams. Mr Robert Sebie was going through divorce proceedings from his wife, Ms Nadine Musabwasoni. In June 201, Ms Musabwasoni had commenced proceedings in the Federal Circuit Court of Australia, seeking relief under the Family Law Act, s 79 which included a claim on her part to an interest in the Chiswick Property (“the family law proceedings”). Ms Musabwasoni was seeking a division of marital assets of the parties to the marriage in the family law proceedings to effect a distribution of assets as to 70 per cent to her and 30 per cent to her husband.

12. Mr and Mrs Pham took the prudent course of joining Ms Musabwasoni as a second defendant in the Enterprise proceedings, so that her interests in the Property would be bound by any relief granted in the Enterprise proceedings: see John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [131]. Mr and Mrs Pham did not seek specific relief against Ms Musabwasoni.

13. It was logical for Mr and Mrs Pham’s specific performance proceedings against Mr Robert Sebie to be merged with their claims against Enterprise and the other parties to the Enterprise proceedings. This merger was brought about on 15 March 2016 when, with the Court’s leave, the Phams filed a comprehensive Statement of Claim in the Enterprise proceedings to consolidate their claims in both proceedings.

14. The result of these procedural steps is that the Enterprise proceedings remain the active proceedings incorporating all the Pham’s claims. The specific performance proceedings are now largely concerned with the residual claim for the costs of these proceedings that the Phams make against Mr Robert Sebie before they became aware that he had sold the Chiswick Property to Enterprise.

15. Darke J case managed the proceedings throughout 2016 in the Real Property List. In mid-2016 Ms Musabwasoni sought by motion to transfer both proceedings to the Federal Circuit Court of Australia under the Jurisdiction of Courts (Cross-vesting) Act 1987, s 5(1). On 8 September 2016, Darke J declined to transfer the proceedings on the grounds that the proceedings were ready to receive a hearing date in the Supreme Court of NSW, the interests of a number of parties unrelated to the marriage were involved, the transfer would have involved some wastage in legal costs and there would be no prejudice to Ms Musabwasoni if no transfer order were to be made.

16. The proceedings were listed for hearing before Pembroke J, commencing 10 April 2017. After Mr Robert Sebie made a failed application for adjournment, Pembroke J heard the matter between 11 and 19 April 2017 and gave judgment on 26 April 2017.

Pembroke J’s April 2017 Judgment

17. The findings in Pembroke J’s judgment of 26 April 2017 are material to the Court’s consideration of the residual issues on the contempt motion. Pembroke J drew the following conclusions in summary in the April 2017 judgment. His Honour concluded that Mr Robert Sebie acted dishonestly and without notice to the plaintiffs in removing their February 2015 caveat and that both Mr Robert Sebie and Mr Richard Sebie dishonestly procured the transfer of the Chiswick Property for no consideration to Enterprise. Pembroke J further concluded that in so doing Mr Robert Sebie had dishonestly taken steps to defeat Ms Musabwasoni’s claims to the Chiswick Property and had ignored orders by the Federal Circuit Court on 25 June 2015 that he be restrained from selling, transferring, mortgaging or in any other way encumbering the marital home pending the outcome of the family law proceedings.

18. Justice Pembroke’s judgment gives a detailed basis for these conclusions. Those findings are recorded in this section. Mr Robert Sebie first undertook to sell the Chiswick Property without Ms Musabwasoni finding out about the sale, and without Mr and Mrs Pham finding out about Ms Musabwasoni’s claimed interest in the Chiswick Property.

19. Pembroke J findings continued. After the sale of the Chiswick Property did not proceed in December 2014, another settlement date was fixed for 6 February 2015. But that date also passed without settlement being achieved. About the same time, Mr Robert Sebie forged documents to create a purported loan and security agreement between ENA and himself. These documents were in part used to explain Mr Robert Sebie’s delay in settling the sale to the Phams. The Phams’ suspicions about the potential forgery of these documents led to them lodging the February 2015 caveat. Pembroke J found that ENA’s alleged loan and security documents were a sham (the April 2017 judgment at [36] – [38]).

20. But at the same time Mr Robert Sebie was preparing and issuing a lapsing notice for the Phams’ February 2015 caveat, ENA was filing a Statement of Claim against Mr Robert Sebie for possession of the Chiswick Property on the basis of Mr Robert Sebie’s alleged default on the supposed loan and security agreement. Mr Richard Sebie verified ENA’s Statement of Claim asserting ENA’s entitlement to judgment for possession of the Chiswick Property and for judgment in the money sum $1,898,411 (the April 2017 judgment at [30]). Pembroke J found that Mr Richard Sebie’s evidence about the circumstances in which he came to cause the proceedings for possession of the Chiswick Property to be commenced was “worthless”. Pembroke J further found that despite having an alleged executive role with ENA, Mr Richard Sebie had “no idea, no recollection, no effective role in the affairs of [ENA], and no idea he was purporting to sign” (the April 2017 judgment at [30]). His Honour was satisfied that Mr Richard Sebie was in these transactions “acting at the request of his brother or with his connivance” (the April 2017 judgment at [30]).

21. On 16 June 2015 Mr Richard Sebie signed, purportedly on behalf of ENA, draft consent orders with Mr Robert Sebie for ENA to have possession of the Chiswick Property and that the amount owing by Mr Robert Sebie to ENA of $1,898,411 would be fully extinguished upon ENA taking possession of the land (the April 2017 judgment at [31]). The same day Mr Richard Sebie sought default judgment for possession of the land.

22. Pembroke J rejected Mr Robert Sebie’s evidence that he had served the Phams on or about 19 June 2015 with a lapsing notice in relation to the February 2015 caveat (the April 2017 judgment at [32]). His Honour found that Mr Robert Sebie had falsely sworn a statutory declaration that he had personally served the Phams with the lapsing notice (the April 2017 judgment at [32]). His Honour further found that Mr Richard Sebie and Mr Robert Sebie’s signature on the consent orders for possession of the Chiswick Property was in disregard of the Federal Circuit Court’s injunction on 25 June 2015. Those orders were then entered in this Court (the April 2017 judgment at [33]).

23. Pembroke J found that Mr Robert Sebie and Mr Richard Sebie completed their dishonest conduct by creating a document that apparently permitted ENA to transfer the Chiswick Property to Enterprise for $2.04 million but without those funds actually being exchanged (the April 2017 judgment at [34]). On 20 July 2015, Mr Robert Sebie signed the transfer of land to Enterprise, the CBA was paid out, ENA’s caveat was withdrawn and stamp duty of $87,690 was paid (the April 2017 judgment at [35]).

24. But the Phams filed another caveat, the October 2015 caveat. But this time the Sebie interests did serve a lapsing notice on the Phams with respect to the October 2015 caveat. And on Ms Musabwasoni’s application on 29 October 2015, the Federal Circuit Court of Australia made further orders restraining Enterprise from dealing with the Chiswick Property (the April 2017 judgment at [35]).

25. As a result of these findings Pembroke J drew the following legal conclusions and formulated the following relief. His Honour found that the Phams had an equitable interest in the Chiswick Property under the 2014 Contract. Their interest was not defeasible by the registration of transfer by Enterprise which transfer was fraudulent within the meaning of Real Property Act, ss 42 and 43 (the April 2017 judgment at [57]). His Honour found that the object of the transfer was to cheat the plaintiffs of their existing rights and that ENA’s Statement of Claim seeking possession of Chiswick property from Mr Robert Sebie was a “dishonest artifice” (the April 2017 judgment at [57]).

26. His Honour concluded the plaintiffs were entitled to specific performance, equitable damages and compensation. But his Honour was critical of the utility of Ms Musabwasoni’s involvement in the proceedings (the April 2017 judgment at [59] – [60]).

27. The defendants were mostly legally represented in the lead up to and during the proceedings before Pembroke J. During the trial preparation period Enterprise had a solicitor on the record and counsel for a period. Mr Robert Sebie appeared for himself. Ms Musabwasoni had a solicitor on the record and was represented by counsel from time to time.

Pembroke J’s May 2017 Judgment

28. On 10 May 2017 Pembroke J held a supplementary hearing as to the form of final orders. On 15 May 2017 his Honour gave a supplementary judgment and issued final orders. The effect of his Honour’s May 2017 orders was the following.

29. His Honour declared that the transfer from Mr Robert Sebie to Enterprise was fraudulent and ordered that the Chiswick Property revest in Mr Robert Sebie. His Honour gave effect to this by cancelling the existing folio and creating a new folio recording Mr Robert Sebie as the registered proprietor (the May 2017 judgment at [3] – [4]).

30. His Honour decreed specific performance of the 2014 Contract and authorised the Registrar in Equity to execute all documents and take all steps required to ensure performance of the 2014 Contract (the May 2017 judgment at [5])

31. Then his Honour made the following important machinery order (“the access order”) relevant to the contest before me (the May 2017 judgment at [5(8)]) as follows:

“Order that, within 14 days of the date of these orders, and in order to facilitate the obtaining of finance by the plaintiffs to complete the Contract, the first and third defendants provide access to the Property to the plaintiffs and their duly authorised agents, once only, for a period of up to four hours at a mutually agreed time.”

32. As will be seen Mr Robert Sebie failed to co-operate in the performance of the access order which led to the Phams filing the contempt motion and the Court case managing the proceedings to attempt to achieve compliance with this order without the need for the Phams to pursue the contempt motion.

33. In the May 2017 judgment, Pembroke J found that the Phams had not made out their claim for equitable damages and compensation (the May 2017 judgment at [6], [7] and [8]). Finally, his Honour ordered that Enterprise and Mr Robert Sebie pay the Phams’ costs on an indemnity basis from the date of the transfer to Enterprise, on the basis that the litigation was wholly caused by the continuing dishonesty of these defendants (the May 2017 judgment at [9]).

34. His Honour permitted the Phams to set-off any agreed or assessed costs against the amount payable by them upon the settlement of the 2014 Contract. It should be noted that, at some stage to facilitate settlement, it may be necessary for those costs to be fixed quickly rather than have become the subject of a lengthy assessment requiring a reservation of a certain sum of the settlement amount. The Court has ample power under Civil Procedure Act 2005, s 98(4)(c) to fix this amount should it be required.

35. The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. Civil Procedure Act, s 98(4)(c) is expressed in general terms and is not limited to cases of a particular class or type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act, s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 (von Doussa J).

32. Such orders are not uncommonly made in situations, where the person against whom costs orders have been made is not of financial substance and substantial further costs would be expended in assessing the costs orders so made: Hamod v New South Wales [2011] NSWCA 375 at [816] – [818].

33. This is not such a case. But jurisdiction is potentially apt here for other reasons. There has been delay of approximately three years in the settlement of the 2014 Contract. That delay has been largely caused, as Pembroke J found, by the continuing fraudulent conduct of Mr Robert Sebie and Enterprise. In furtherance of their fraudulent conduct they have contested matters that maintained their dishonest scheme and should never have been contested. It may readily be inferred from this past conduct that any costs assessment involving Enterprise and Mr Robert Sebie is likely to be protracted and contentious. This may well be a case in which the Court’s Civil Procedure Act, s 98(4)(c) jurisdiction could be invoked. Should it be required, the Court will grant the parties liberty to apply for the making of a specified gross sum costs order prior to the settlement of the Chiswick Property.

34. Pembroke J removed an unsustainable caveat over the Chiswick Property which had been lodged by Mr Sebie’s mother, Mrs Rose Sebie after the April 2017 judgment (the May 2017 judgment at [11] and [12]).

35. Finally in relation to Ms Musabwasoni, his Honour recorded a consensus between the Phams and Ms Musabwasoni to a regime preserving Ms Musabwasoni’s entitlements in the Family Court proceedings to making a claim against the net proceeds of sale of the Chiswick Property after the completion of the 2014 Contract, subject to the set-off of the Phams’ costs (the May 2017 judgment at [13]).

The June 2017 Motions

40. The three June 2017 motions had their first directions hearing on 23 August 2017. As he was unrepresented and facing a motion for contempt, the Court made orders referring Mr Robert Sebie to the Equity Registrar for referral to a barrister or solicitor on the Court’s pro bono panel for legal assistance pursuant to UCPR, r 7.36. That referral was effective. On the contempt motion, Dr G. O’Shea and Ms B. Oliak of counsel appeared for him on a pro bono basis. The Court is much assisted by the willingness of counsel such as Dr O’Shea and Ms Oliak to take on matters such as this one on a pro bono basis, especially as here where an individual faces serious charges.

41. Mr Zipser of counsel appeared for the plaintiffs, instructed by Bui Lawyers. Mr Robert Sebie was otherwise unrepresented on the civil aspects of the motions against him. Mr Duc appeared for Ms Musabwasoni. And Mr Killalea appeared for Enterprises.

42. The Contempt Motion. The Phams’ contempt motion, filed on 15 June 2017, sought a number of forms of relief: a finding of contempt against Mr Robert Sebie for not complying with the access order of Pembroke J’s May 2017 orders, and, judgment for possession to aid enforcement of the access order. The contempt motion also sought orders that Mr Robert Sebie and Enterprise provide access to the Chiswick Property for the Phams’ duly authorised agents to facilitate the Phams financing the settlement of the property.

43. The Family Law Act, s 106B Stay Motion. In her motion filed on 6 June 2017, Ms Musabwasoni sought a stay under Civil Procedure Act, s 67 pending the determination of her application pursuant to Family Law Act, s 106B. This motion also sought leave for Ms Musabwasoni to file an application in the proceedings under Family Law Act, s 106B. This motion seemed to be predicated on the basis that if the settlement of the 2014 Contract were to succeed, the proceeds of sale would not represent the then current market value of the Chiswick Property.

44. It emerged in the course of argument on the Family Law Act, s 106B stay motion that Ms Musabwasoni had a common interest with the Phams in inspecting the Chiswick Property to determine its market value, and in her case, to determine in particular whether it had been sold at an undervalue in October 2014.

45. The Sebie Stay Motion. Mr Robert Sebie’s Stay Motion, filed on 13 June 2017, sought a provisional stay of proceedings upon Pembroke J’s judgment until Mr Robert Sebie’s appeal from Pembroke J’s orders was determined. But the Court indicated that Mr Robert Sebie should pursue any motion for a stay pending appeal in the Court of Appeal. Mr Sebie took this course, so the Sebie stay motion did not have to be argued with the other two motions.

Mr Robert Sebie Goes to the Court of Appeal

46. Mr Robert Sebie applied in the Court of Appeal for a stay of Pembroke J’s May 2017 orders. Mr Robert Sebie was unrepresented in the Court of Appeal but supported by Mr Killalea who represented Enterprise. Mr Sebie filed a Notice of Appeal and then an Amended Notice of Appeal. A Notice of Appeal does not automatically operate as a stay of proceedings of the decision below, the Court has the power to grant a stay if it considers it appropriate to do so (Uniform Civil Procedure Rules 2005 (“UCPR”), r 51.44). But a stay may be granted if there are arguable grounds of appeal: Lawrence v Gunner [2015] NSWCA 322 at [11] – [13]. Mr Robert Sebie’s application for a stay was unsuccessful on 15 September 2017. After examining the grounds of appeal and weighing competing considerations of balance of convenience concerning the ill health of Mrs Rose Sebie, Macfarlan JA dismissed the motion for a stay: Enterprise ICT Pty Ltd v Pham [2017] NSWCA 236 at [27].

The Course of the Proceedings on the June 2017 Motions

47. The hearing of the June 2017 motions was superseded by events. As has been seen, the Sebie stay motion did not need to be heard, as Macfarlan JA dealt with a parallel motion in the Court of Appeal, where his Honour discussed the motion and made no order as to costs. The parties agreed on 15 September 2017 that there should also be no order as to costs on the dismissal of the Sebie stay motion. That was noted in the transcript. For different reasons each of the other two motions also fell away.

48. Ms Musabwasoni’s Family Law Act, s 106B stay motion was dismissed on 15 September 2017, the adjourned date of the three motions. As will be explained shortly, on 8 September the Court ordered access to the Chiswick Property to take place on 12 September 2017. Access was given that day. That access was primarily directed to give the Phams the benefit of the original access order that Pembroke J made in May 2017. But an incidental feature of the orders made on 8 September 2017 was that a valuer retained by Ms Musabwasoni was also given access to the Chiswick Property, at the same time. With the benefit of that valuer’s expert advice, Ms Musabwasoni was able to form a judgment about whether or not the Chiswick Property had been sold at market value, or less than market value. Between 12 September and 15 September 2017 Ms Musabwasoni decided not to pursue the Family Law Act, s 107B stay application.

49. The Court pointed out in argument that it would have been difficult to determine who would have been successful on Ms Musabwasoni’s application. The parties agreed to the dismissal of the motion and the Court ordered that there would be no order as to costs between Ms Musabwasoni and the plaintiffs to the intent that each would bear each of their own costs of the motion.

50. On 8 September 2017 the Court expressed its concern that Pembroke J’s May 2017 access order had not been executed. As a result the Court decided, before embarking on the contempt motion, to make detailed orders for the Chiswick Property to be made available between 12 noon and 2pm on Tuesday 12 September 2017.

51. A valuer engaged by Westpac Banking Corporation and a number of the lawyers representing the parties were also present. Advance notice of the execution of these orders was given to the Five Dock Police Station. Notice of the orders was given to boarders in the premises. Mrs Rose Sebie’s room was excluded from the 8 September access and inspection orders.

52. On 15 September the parties reported that the access had been successful. As a result the Phams indicated to the Court that they did not wish to proceed with any of the relief sought on the contempt motion.

The Parties Argue About the Costs of the June 2017 Contempt Motion

53. But the parties could not agree upon the appropriate order for costs about the contempt motion. They each put written costs submissions to the Court after the 15 September hearing. Each of those submissions is briefly summarised below.

54. The Phams’ Submissions on the Costs of the Contempt Motion. The Phams submit: (1) that Mr Robert Sebie and Enterprise should pay the Phams’ costs of and incidental to the contempt motion on an indemnity basis; and (2) that the costs payable by Mr Robert Sebie should be set-off against the balance of the purchase price by the Phams to Mr Robert Sebie on completion of the 2014 Contract.

55. The Phams submit that Pembroke J’s May 2017 access order was an ancillary step to facilitate the Phams obtaining specific performance of the 2014 Contract. It was clear on the evidence before Pembroke J at the May 2017 hearing, from the text of the access order itself and then reiterated at the 8 September 2017 hearing, that the purpose of this access order was for the bank lending money to the Phams to complete the 2014 Contract, Westpac Banking Corporation, to obtain a current valuation of the Chiswick Property. Valuation could only be completed after the valuer had gained physical access to the Chiswick Property.

56. The evidence before the Court supports the conclusion that between 19 May and 16 June 2017 the Phams asked Mr Robert Sebie and Enterprise for access to the Chiswick Property pursuant to the access order on a number of occasions. But despite these requests, Mr Robert Sebie and Enterprise had refused to provide any access to the property before the hearing on 8 September 2017. Difficulties such as Mrs Rose Sebie’s grave illness had been cited as reasons why access could not be given before then.

57. The contempt motion had been designed to secure access, so as to give effect to the access order. When the contempt motion was served on 16 June 2017, the Phams’ solicitors wrote to Mr Robert Sebie and to Enterprise, making it clear that if they provided access to the Chiswick Property the Phams would no longer press any of the substantive orders in the contempt motion.

58. The Phams submit on the costs of the contempt motion, that the effect of UCPR, r 42.7 is that the default position is that Mr Robert Sebie and Enterprise should pay them indemnity costs of and incidental to the contempt motion, in conformity with what Pembroke J had ordered in the May 2017 orders. The Phams further submit that those costs should be set-off against the amount payable to Mr Robert Sebie upon completion of the 2014 Contract as had also been provided for in the May 2017 orders.

59. UCPR, r 42.7 provides as follows:

“Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:

(a)   costs that are reserved, and

(b)   costs in respect of any such application or step in respect of which no order as to costs is made,

are to be paid and otherwise dealt with in the same way as the general costs of the proceedings”.

60. Authority suggests that “unless the Court orders otherwise” and similar phrases are phrases that “falls short of a presumption…However, [they do] create a starting point….unless that outcome is displaced by a discretionary position”: Angela Campbell Pty Ltd (as trustee of the Halina Superannuation Fund) v Hengrove Hall Pty Ltd [2016] NSWSC 1219 at [6].

61. The Phams submit that the UCPR, r 42.7 default position is appropriate here. Mr Robert Sebie and Enterprise have both failed to comply with the access order and thereby frustrated the implementation of the May 2017 orders as a whole. The Phams put the above submission on the basis that Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 (“Lai Qin”) does not apply to interlocutory proceedings.

62. But if Lai Qin does apply in interlocutory proceedings, the Phams say in the alternative, and based on Lai Qin, that they were almost certain to have succeeded if the contempt motion had been fully tried and that Mr Robert Sebie and Enterprise acted so unreasonably in relation to the orders sought on the contempt motion that the Phams should have their costs. But the Phams say that even these costs should be awarded on an indemnity basis.

63. Mr Robert Sebie’s Submissions. Mr Robert Sebie submits that circumstances prevented them from providing access to the Chiswick Property: legal title still rested with Enterprise; Mrs Rose Sebie still occupied the Chiswick Property; and Mrs Rose Sebie still had serious health problems.

64. In the alternative Mr Robert Sebie argues that any costs orders should be on the ordinary basis not the indemnity basis. It is said that it follows from the fact that even if the contempt were established by a private prosecutor such as the Phams, the usual order is for costs to be paid on the ordinary basis not the indemnity basis: McIntyre v Perks (1988) 15 NSWLR 417.

65. Mr Robert Sebie also opposes any costs orders being made against Enterprise being set-off against the amounts payable by the Phams to Mr Robert Sebie upon conclusion of the 2014 Contract for sale.

66. Finally, Mr Robert Sebie submits that even if Lai Qin principles are applied the parties did not agree upon orders which achieved the outcome that the plaintiffs sought in the contempt motion. He submits, for example, that the Phams were unsuccessful in having Mr Robert Sebie committed to prison or fined.

67. In summary, Mr Robert Sebie contends that the result should be that there should be no order for costs on the contempt motion.

68. Enterprise’s Submissions. Enterprise also submits that there should be no order for costs made against Enterprise. Enterprise in substance repeats the submissions made on behalf of Mr Robert Sebie.

69. Enterprise also advanced some submissions which only seem to be relevant to the Phams’ failed application before Pembroke J to obtain equitable damages and obtain equitable compensation for Mr Robert Sebie’s failure to complete the 2014 Contract. Pembroke J determined that issue adversely to the Phams in the May 2017 orders. Enterprise’s submissions on this issue do not bear upon the question of the costs incurred on the contempt motion, which costs were all incurred after the May 2017 orders.

Applicable Legal Principles

70. The general principles governing when the Court may make an order for costs when the parties do not wish to proceed with an action are clear. The exercise of the Court’s discretion to make an order when parties do not wish to proceed with litigation or have consented to a grant of final relief or have otherwise agreed on the outcome of the proceedings is informed by principles stated in two leading cases: Lai Qin and Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201; (1993) 116 ALR 523 (“Aust-Home”).

71. Hill J said in Aust-Home, at 530:

“(1)   Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order …

(2)   It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial … This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3)   In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them

(4)   In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation …

(5)   Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted … [Footnotes omitted]”.

72. McHugh J said in Lai Qin, at 3:

”In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.

…

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.

…

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. [Footnotes omitted]”.

73. The parties did not take issue with these being the relevant principles. The question is the application of these principles in this case.

Consideration

74. In my view, whether the costs of the contempt motion are approached through UCPR, r 42.7 or through the application of Lai Qin principles, the Phams arguments are the more persuasive. I see no reason in principle why Lai Qin principles could not apply to a motion as much as to proceedings as a whole. The contempt motion was discrete and its costs may aptly be dealt with by the application of such principles.

75. The Court will order Enterprise and Mr Robert Sebie to pay the Phams’ costs of the contempt motion on the indemnity basis, for the following reasons. No sufficient reason was advanced why Pembroke J’s May 2017 access order had not been complied with before the filing of the contempt motion and the bringing of the matter on for hearing in August and September 2017.

76. The only reasons advanced to the contrary were that legal title still rested with Enterprise and Mrs Rose Sebie, with her serious health problems, occupied the Chiswick Property. But none of these matters provides an excuse for non-compliance with the May 2017 access order. Without any great difficulty the Court fashioned orders on 8 September 2017 to allow access to take place in a way that did not interfere with Mrs Sebie’s occupation of the premises. Compliance with the access order should never have been opposed on this basis. The only reasonable course to have been taken by Enterprise and Mr Robert Sebie was to allow access but preserving some privacy for Mrs Rose Sebie. In my view it was unreasonable of the first and third defendants to oppose or delay execution of the May 2017 access order on this ground.

77. Equally, the other explanation for not providing access to the Chiswick Property - concerning uncertainty about the legal title resting with Enterprise - is of no substance. Justice Pembroke’s orders had created a clear mechanism for Mr Robert Sebie to give title to the Phams under the 2014 Contract. There should have been no doubt about who was entitled to give access to the Chiswick Property to achieve compliance with the access order. Any doubts could have been resolved by approaching the Court. Moreover, as between Enterprise and Mr Robert Sebie his Honour had found they were involved together in a dishonest scheme and therefore they were both obligated to make the Chiswick Property available to the plaintiffs.

74. It is difficult to say who would have been successful on the contempt motion. But it can be said that the first and third defendants behaved unreasonably in not consenting to the ancillary enforcement orders on that motion. For this reason the Court is not inclined to order otherwise under UCPR, r 42.7.

75. Ordinarily, for the reasons put by Mr Robert Sebie, the costs of a private prosecutor for contempt would be paid on the ordinary basis not the indemnity basis. But here Pembroke J has clearly explained why, on account of the first and third defendant’s dishonesty, costs should be paid on the indemnity basis. I see no reason to depart from that general judgment in relation to the costs of the contempt motion.

76. Mr Robert Sebie’s submission that the Phams were not successful in achieving the outcome sought on the contempt motion is of no substance. The Phams were never committed only to fining or imprisoning the respondents to the motion. They made clear that the motion would be discontinued once they gained access to the Chiswick Property. That is exactly what happened.

77. Mr Robert Sebie also opposes the costs now being ordered being deductible from what the Phams have to pay Mr Robert Sebie on settlement of the 2014 Contract. But the Court sees no reason why his costs should not be recoverable by the Phams in exactly the same way as Pembroke J provided for recovery in the May 2017 costs orders, by deduction on settlement. The Phams should not have to sue separately for these costs. Allowing a set-off will assist in bringing these disputes to an end. The costs ordered against Mr Robert Sebie on this motion are exactly the same as those ordered against Enterprise.

Conclusions and Orders

82. For these reasons the Court makes the following orders and directions:

1. Order the first and third defendants, Enterprise ICT Pty Limited and Mr Robert Sebie, to pay the plaintiffs’ costs of the plaintiffs’ contempt motion filed on 15 June 2017 on the indemnity basis.

2. Order that there may be deducted by the plaintiffs at settlement of the sale to the third defendant of the Chiswick Property the subject of these proceedings, the quantum of the costs ordered in Order (1), as agreed or assessed or as determined by the Court.

3. Grant liberty to the parties to approach the Court to seek a specific gross sum costs order in respect of costs orders in these proceedings.

**********

Decision last updated: 17 April 2018