Rahme v Rahme
[2011] FCA 320
•6 April 2011
FEDERAL COURT OF AUSTRALIA
Rahme v Rahme [2011] FCA 320
Citation: Rahme v Rahme [2011] FCA 320 Parties: MAROUN GEORGE RAHME v NAHDA SARAH RAHME File number: NSD 1326 of 2010 Judge: COWDROY J Date of judgment: 6 April 2011 Catchwords: BANKRUPTCY – Debtor’s petition filed subsequent to the filing but preceding the hearing of a creditor’s petition – creditor’s petition rendered nugatory
COSTS – Application by petitioning creditor for indemnity costs – whether respondent’s conduct warranted an order for indemnity costs – conduct of respondent insufficient to justify such an order – application for indemnity costs refused – order for costs incidental to the creditor’s petition made in favour of the petitioning creditor including the costs of the application for costs
Legislation: Bankruptcy Act 1966 (Cth) ss 32, 55(1), 55(2)
Federal Court Act 1976 (Cth) s 43
Federal Court Rules (Cth) O 80 r 4Cases cited: AWA Ltd v George Richard Daniels T/A Deloitte Haskins and Sells (unreported, No 50271 of 1991, NSWSC Comm D, 8 October 1992, BC9201567)
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602
Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175
R & R and Ors [2006] FamCA 808
Rand & Rand [2009] FamCAFC 88
Rand & Ors v Rand [2009] FamCAFC 70
Rand & Rand (No. 2) [2009] FamCAFC 155
Rand v Rand & Ors [2006] FamCA 1530
Re Hankey; ex parte Kratzmann (1986) 11 FCR 512
Roadshow Films Pty Ltd & Ors v iiNet Ltd (No 4) (2010) 269 ALR 606Date of hearing: 29 March 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: Mr S Milanovic Solicitor for the Applicant: Cadmus Lawyers Counsel for the Respondent: Mr D Jarrett
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1326 of 2010
BETWEEN: MAROUN GEORGE RAHME
ApplicantAND: NAHDA SARAH RAHME
Respondent
JUDGE:
COWDROY J
DATE OF ORDER:
6 APRIL 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The Applicant is entitled to his costs incidental to the creditor’s petition filed on 8 October 2010 including the costs of the application for costs.
2.Such costs be taxed and paid in accordance with the provisions of the Bankruptcy Act 1966 (Cth).
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1326 of 2010
BETWEEN: MAROUN GEORGE RAHME
ApplicantAND: NAHDA SARAH RAHME
Respondent
JUDGE:
COWDROY J
DATE:
6 APRIL 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
By creditor’s petition filed on 8 October 2010 the applicant (Mr Rahme) sought a sequestration order against the respondent (Mrs Rahme). The creditor’s petition was based upon an act of bankruptcy committed by Mrs Rahme, the former wife of the applicant, when she failed to comply with bankruptcy notice NN 3694 (‘the notice’) issued on 3 September 2011 and served upon her on 7 September 2010. Pursuant to the notice, Mrs Rahme was to discharge the debt owing to Mr Rahme by 28 September 2010 or satisfy the Court that she had a counter-claim, set-off or cross-demand equal to or exceeding the sum claimed in the notice.
The notice claimed that Mrs Rahme owed the applicant the amount of $24,320, being the amount as certified by order of the Federal Court of Australia (‘the Court’) in respect of a Certificate of Taxation of costs issued on 7 July 2010.
In addition to the sequestration order, the applicant sought an order that Andrew Aravanis be declared the trustee of the bankrupt estate of Mrs Rahme. The consent of Mr Aravanis to act as trustee dated 11 November 2010 has been filed in the Court record.
Mrs Rahme opposed the applicant’s petition and filed with the Court a ‘notice stating grounds of opposition to application’ which alleges:
1.The Applicant Creditor owes the Respondent Debtor an amount greater than the amount owed by the Respondent Debtor to the Applicant Creditor.
2.The Applicant Creditor is engaging in an abuse of the legal process.
3.The Respondent Debtor is not in a fit and proper state to deal with the Applicant Creditor’s application to bankrupt the Respondent Debtor.
4.The Applicant Creditor is engaging in harsh and unconscionable conduct.
Mrs Rahme had been represented by a solicitor in earlier proceedings involving the parties in the Family Court of Australia (‘the Family Court’). However, her solicitor passed away at the beginning of 2010. Accordingly, on 22 March 2011 the Court ordered that a Referral Certificate be issued to Mrs Rahme pursuant to O 80 r 4 of the Federal Court Rules (Cth) (‘the Rules’) in respect of the provision of legal advice, to assist in the filing and service of any further documents or evidence and to represent Mrs Rahme in the proceedings.
Subsequent to the above order being made, the Court was made aware that counsel who represented Mrs Rahme at the mediation in these proceedings would also represent Mrs Rahme at the hearing of the applicant’s petition.
As will become apparent, Mrs Rahme became a bankrupt upon her own debtor’s petition dated 24 March 2011.
HISTORY OF LITIGATION
Mrs Rahme filed two affidavits opposing the orders sought by the applicant. Mrs Rahme’s second affidavit, sworn on 28 January 2011, recites the substantial history of litigation (‘the Family Court matters’) involving the applicant, Mrs Rahme and related parties in the Family Court. The first judgment of the Family Court involving the parties to these proceedings was delivered by Justice Rowlands on 10 January 2006.
The Family Court matters have involved a complex web of companies and trusts in which both the applicant and the respondent were either directly or indirectly involved. In his Honour’s decision (entitled by the pseudonym Rand v Rand & Ors [2006] FamCA 1530) Rowlands J delivered an extensive judgment (236 paragraphs) relating to the affairs of Mr and Mrs Rahme.
On 23 August 2006 the judgment of the Full Court of the Family Court was delivered in R & R and Ors [2006] FamCA 808 (Finn, May and Boland JJ). The Full Court of the Family Court ordered that the applicant pay by way of security the sum of $45,000 to Mrs Rahme’s solicitors, failing which the applicant’s appeal would be permanently stayed.
On 4 May 2009 the Full Court of the Family Court delivered its decision in Rand & Ors v Rand [2009] FamCAFC 70 (Finn, May and Boland JJ). Such judgment extensively dealt with issues relating to the costs of the applicant and of Mrs Rahme.
On 25 May 2009 in the matter of Rand & Rand [2009] FamCAFC 88 the Full Court of the Family Court (Finn, May and Boland JJ) delivered judgment. The permanent stay ordered on 23 August 2006 was lifted, contingent upon the applicant providing $45,000 to Mrs Rahme’s solicitor by way of security.
On 26 August 2009 in Rand & Rand (No. 2) [2009] FamCAFC 155 the Full Court of the Family Court (Coleman, Warnick and Crisford JJ) delivered judgment dismissing an appeal by the applicant against certain orders of Rowlands J and ordered the applicant to pay Mrs Rahme’s costs.
Mrs Rahme’s affidavit filed on 24 January 2011 refers to the Supreme Court of New South Wales proceedings No. 5487/05. It appears that such proceedings related to an application by the trustee of the bankrupt estate of the applicant in these proceedings to seek an order for partition and sale of the residence of Mrs Rahme.
From the documents available, it appears that numerous parties are, or were, associated with the matrimonial financial affairs of the applicant and Mrs Rahme, namely: the applicant’s father, George Maroun Rahme; Wayne Jones; the applicant’s mother Nouha Rahme; Rahme Enterprises Pty Ltd (in liquidation); Roderick Mackay Sutherland as either liquidator or administrator of Rahme Enterprises Pty Ltd (in liquidation); G & N Developments Pty Ltd; Cavalock Pty Ltd; Maroun Investments Pty Ltd; Nu-Rock Technology Pty Ltd; Nu-Rock Corporation SALR; Spincast Pty Ltd (‘Spincast’).
Although the evidence is unclear, it appears from the applicant’s affidavit affirmed on 9 December 2010 that the liquidator of Rahme Enterprises Pty Ltd claims $1,254,825.20 plus costs against Mrs Rahme. No other details are available of such alleged indebtedness.
The applicant’s affidavit also attaches an order of the Family Court dated 17 November 2010 dismissing an application in an appeal filed on 1 November 2010 from an order of Collier J made on 25 June 2007 and 28 March 2008. No other details relating to these proceedings are contained in the affidavit.
Mrs Rahme stated that she expects to receive funds from Spincast in connection to the Family Court matters within the next 12 months which will enable her to satisfy her debts owed to the applicant. Proceedings are still current in the Family Court relating to claims by companies in which either the applicant or Mrs Rahme or both are involved, albeit indirectly.
THE DEBTOR’S PETITION
On 24 March 2011 Mrs Rahme signed and filed a debtor’s petition under s 55(2) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’). On the same day Adam Shepard consented to act as trustee of Mrs Rahme’s bankrupt estate. On 25 March 2011 the Official Receiver signed a form entitled ‘Certificate of Appointment of Trustee’ confirming that the administration of Mrs Rahme’s estate (Administration No. NSW 1813 of 2011/0) had commenced.
By filing her petition, Mrs Rahme, invoked the procedure provided by s 55(1) of the Bankruptcy Act and rendered the creditor’s petition otiose. Therefore the sole remaining issue in these proceedings relates to the applicant’s costs.
COSTS
Submissions
The applicant seeks the costs of these proceedings on an indemnity basis or alternatively on a party/party basis. Such application is made on the ground that Mrs Rahme has caused the applicant to incur avoidable costs. It is submitted that had Mrs Rahme filed her debtor’s petition at an earlier time, or otherwise acknowledged her indebtedness when served with the creditor’s petition, the entire costs of these proceedings or a greater part of them would not have been incurred.
It is also submitted that Mrs Rahme initially denied her indebtedness, then acknowledged indebtedness but claimed a set-off as a result of the Family Court matters. The Court notes that Mrs Rahme has not brought any cogent evidence to refute the applicant’s allegations of indebtedness.
In support of the applicant’s claim for costs Mr Rahme relies on: orders made on 17 November 2010 which required any adjournment application by Mrs Rahme to be supported by an affidavit; an order made on 15 December 2010 which required Mrs Rahme to provide affidavits in support of her application to transfer the proceedings to the Family Court to be served by 17 January 2011; an order made on 3 February 2011 granting leave to Mrs Rahme to file a notice of motion to transfer the proceedings to the Family Court and for orders made on 22 March 2011 requiring the filing of further affidavits.
Apart from the affidavits filed 24 January 2011 and 28 January 2011, no further affidavits nor notice of motion have been filed by Mrs Rahme seeking to transfer the proceedings to the Family Court.
The application for indemnity costs is opposed. Mrs Rahme relies upon the fact that her legal representative in the Family Court matters passed away in early 2010, that she had been unable to obtain information concerning the status of the Family Court matters, and that when it became apparent to her upon receiving legal advice that she could not resist an order for bankruptcy, she promptly filed her debtor’s petition. Further, Mrs Rahme submits that she is entitled to nominate an independent trustee rather than have the applicant select the trustee of her estate.
Findings
The Court has a broad discretion in relation to costs pursuant to s 43 of the Federal Court Act 1976 (Cth) (‘the Court Act’). The power is unlimited, subject only to the qualification that it must be exercised judicially: see Roadshow Films Pty Ltd & Ors v iiNet Ltd (No 4) (2010) 269 ALR 606 (‘Roadshow’) at [21]-[23]. Further, s 32 of the Bankruptcy Act empowers the Court to make such orders as the Court thinks fit in respect of costs.
It has been recognised that indemnity costs may be awarded where there has been misconduct or inappropriate conduct by a party in the course of litigation. As was observed by Rogers CJ Comm D (NSWSC) in AWA Ltd v George Richard Daniels T/A Deloitte Haskins and Sells (unreported, No 50271 of 1991, NSWSC Comm D, 8 October 1992, BC9201567), the circumstances may include a party deliberately delaying the proceedings by putting ’a knowingly false defence or bringing proceedings for an ulterior motive’.
Similarly in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Sheppard J at 232-233 made reference to the circumstances which may warrant a special costs order. Such circumstances include the commencement or continuation of litigation for an ulterior purpose, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
For similar observations see Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [41]; Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175 at 177; Roadshow at [75]-[77].
The Court observes the affidavits of Mrs Rahme filed 24 January 2011 and 28 January 2011 to have been prepared by a person other than a legal practitioner, and that until recently Mrs Rahme has not had the benefit of legal advice in respect of these proceedings. The Court is also mindful that she has apparently been unable to ascertain the current state of the Family Court matters because of the death of her previous legal representative.
In these circumstances the Court is unable to draw the inference that Mrs Rahme deliberately engaged in conduct for the purpose of delaying the proceedings and frustrating the attempts of the applicant to obtain a sequestration order. The Court is prepared to accept that once having obtained the benefit of legal advice she promptly filed the debtor’s petition.
In relation to her right to nominate a trustee in her debtor’s petition, in Re Hankey; ex parte Kratzmann (1986) 11 FCR 512, Burchett J at 513 having observed that the debtor perhaps feared that ‘the creditor has nominated a trustee in his camp’ held that the debtor was entitled to regard that object as being one to justify the debtor filing his own petition, ‘to secure a wholly independent trustee’. Such observations apply with equal force to the actions of Mrs Rahme in having a trustee appointed of her choice.
For the above reasons, the Court concludes that the present circumstances do not warrant an award of indemnity costs against Mrs Rahme.
Orders
Accordingly, the Court dismisses the applicant’s claim for indemnity costs. The Court however considers that the applicant is entitled to an order for his costs incidental to the creditor’s petition, including the costs of his application for costs. Such costs are to be taxed and paid in accordance with the provisions of the Bankruptcy Act.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate:
Dated: 6 April 2011
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