Sharify v Kuek
[2024] FedCFamC2G 1063
•17 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Sharify v Kuek [2024] FedCFamC2G 1063
File number: MLG 106 of 2024 Judgment of: JUDGE SYMONS Date of judgment: 17 October 2024 Catchwords: PRACTICE AND PROCEDURE – bankruptcy – costs – application for review of Registrar’s costs order – de novo hearing – where creditor’s petition proceeding dismissed by consent in circumstances where judgment debt paid by respondent – where unreasonable conduct of respondent was catalyst for filing of creditor’s petition – where despite this the respondent sought his costs of the proceeding which necessitated a hearing on costs – costs order of Registrar set aside and in its place order made that respondent pay the applicant’s costs associated with costs hearing Legislation: Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 68, 190, 191 Cases cited: Kempsey Local Aboriginal Land Council v Donnelly [2022] FedCFamC2G 149
Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
Saville v Romer [2002] FCA 351
World Best Holdings Ltd v Sarker [2006] FMCA 1876Division: Division 2 General Federal Law Number of paragraphs: 48 Date of last submissions: 13 September 2024 Date of hearing: 13 September 2024 Place: Melbourne The Applicant: Mr Sharify appeared on his own behalf Representative for the Respondent: Mr D Perkins Solicitor for the Respondent: Rigby & Bear ORDERS
MLG 106 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MOHAMMAD SHAHED SHARIFY
Applicant
AND: GABRIEL KUEK
Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
17 OCTOBER 2024
THE COURT ORDERS THAT:
1.Paragraph 2 of the orders made by Registrar Ellis on 21 March 2024 be set aside.
2.The respondent pay the applicant’s costs of the hearing on costs conducted on 21 March 2024 fixed in the amount of $2,915.
3.The application for review filed on 5 April 2024 be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
On 21 March 2024 a Registrar of this Court made two orders. The first, that the proceeding be dismissed, reflected a consent position of the parties. The second, that there be no order as to costs, was made after hearing submissions by both parties directed at this question.
The “proceeding” was the creditor’s petition filed by Mr Sharify on 15 January 2024 which named Mr Kuek as the respondent. Mr Sharify is a barrister and member of the Victorian Bar and Mr Kuek is a legal practitioner. The underlying dispute relates to the payment of Mr Sharify’s fees incurred by Mr Kuek on behalf of one of his clients.
The creditor’s petition relied on an act of bankruptcy described in the document as the failure of Mr Kuek to comply with the requirements of a bankruptcy notice served on him on 5 December 2023.
On 5 April 2024, Mr Kuek filed an application for review of the Registrar’s costs order. Mr Kuek invites the Court to make orders instead that Mr Sharify pay his costs on an indemnity basis, to be taxed in default of agreement.
Mr Sharify instead submits that on review, the Court should order that there be no order as to the costs of the proceeding, other than his costs of and in relation to the costs hearing, which I understand to be a reference to the hearing conducted before the Registrar on 21 March 2024. Mr Sharify has not attempted to quantify these costs although I note that at the costs hearing he sought costs in the amount of $2,915.
The parties agree that the Court conducts a “fresh” or de novo hearing in the exercise of its review jurisdiction.
Submissions of Mr Kuek
Mr Kuek relies on a set of written submissions filed on 3 June 2024 and a set of reply submissions filed on 24 June 2024. These were supplemented at hearing by oral argument advanced by his representative, Mr Perkins.
Mr Kuek submits that the Court should exercise its costs discretion in a manner that reflects his success in the proceeding and the established principle that “a successful litigant is generally entitled to an award of costs”. Mr Kuek submits that in the bankruptcy jurisdiction, this principle operates in the manner described in Saville v Romer [2002] FCA 351 at [11] where the Federal Court (Emmett J) said:
…There is a long standing practice of this Court, and courts previously exercising bankruptcy jurisdiction, to order a debtor to pay a petitioner’s costs where the debt upon which a petition is founded is paid in full and the petition is, as a consequence, dismissed. Ordinarily, in such circumstances, the petition will be based upon an act of bankruptcy. If of course, there was no act of bankruptcy and therefore no ground for presenting a petition in the first place, the debtor would be entitled to an order for costs upon dismissal of the petition.
Mr Kuek relies on the following matters to support this conclusion:
First, on 13 November 2023 Mr Kuek paid the monies owing to Mr Sharify pursuant to an order made by the Costs Court of the Supreme Court of Victoria in proceeding S ECI 2023 03150 for the amount of $11,000 (Costs Court order). This date was well before the date on which either the bankruptcy notice, or the creditor’s petition was issued. It followed, according to Mr Kuek, that when Mr Sharify swore to the existence of the judgment debt for the purpose of causing the bankruptcy notice to issue and in support of the creditor’s petition, he did so on either a false or erroneous basis and without having first made proper enquiries of his barrister’s clerk as to whether the judgment debt had been discharged. Mr Kuek described the conduct of Mr Sharify as “reckless, cavalier and irresponsible”.
A further consequence of the payment referred to in [10] was that the debt owing by Mr Kuek to Mr Sharify was satisfied in full and there was no basis for the creditor’s petition, or the bankruptcy notice before it, to be issued.
Second, Mr Sharify unnecessarily prolonged and continued proceedings by failing, “on numerous occasions” to accept a settlement offer by Mr Kuek to have the proceedings dismissed and to pay Mr Kuek costs fixed in the sum of $880. In this regard, Mr Kuek relied on his affidavit affirmed on 20 February 2024 (the Kuek affidavit) at [19]-[20] where he deposed to a single email having been sent on his behalf to Mr Sharify that referred to and attached a proposed minute of consent order that provided for the dismissal of the proceeding and for the applicant to pay the respondent’s costs, to be taxed in default of agreement.
Third, Mr Sharify commenced bankruptcy proceedings instead of “less onerous” processes such as execution against property or garnishee proceedings.
Fourth, Mr Sharify’s conduct throughout the “whole process” was “cavalier and incompatible” with the requirements of s 68 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act) which requires parties to litigation to act consistently with the overarching purpose. Mr Kuek described Mr Sharify’s conduct in the case instead as “egregious”.
Submissions of Mr Sharify
Mr Sharify relies on a set of written submissions filed on 14 June 2024 which he supplemented with brief oral submissions at hearing.
Mr Sharify invites the Court to take a closer look at the events and circumstances that preceded the issue of the bankruptcy notice and the filing of the creditor’s petition. These events may be described as follows:
In November 2022, Mr Sharify was engaged by Mr Kuek to act for one of his clients in Supreme Court proceedings. Mr Sharify was led in the matter by Gerry Nash KC.
Mr Kuek refused to pay Mr Sharify’s invoice for fees rendered, including a discounted invoice for $11,000 issued in February 2023 (final invoice).
Mr Sharify instituted proceedings in the Magistrates’ Court seeking the recovery of the fees.
Mr Kuek then filed a summons for taxation in the Costs Court of the Supreme Court of Victoria in respect of Mr Sharify’s fees which resulted in the Costs Court order that Mr Kuek pay Mr Sharify the sum or $11,000 forthwith in full and final settlement of the Summons for Taxation filed 17 July 2023 (Amended 10 November 2023):[1]
[1] Annexure SS-1, pp 61-62 of the affidavit of Mr Sharify on 18 March 2024 filed at 4:10pm (March Sharify affidavit).
Within eight minutes of receiving the Costs Court order, Mr Sharify sent an email to Mr Kuek’s lawyer that forwarded the correspondence from the Supreme Court and read:[2]
[2] March Sharify affidavit at [30] and annexure SS-1, pp 63- 64.
Ben
My account details are:
Shahed Sharify
#### #
#### ###
If payment is not received by COB tomorrow, a bankruptcy notice will be served on Wednesday.
Mr Sharify received no response to this email and neither did he receive any response to the bankruptcy notice that was issued and served on Mr Kuek in late November 2023 (by post) and early December 2023 (by email).[3] Mr Kuek did not apply to set aside, or otherwise take any action in respect of, the bankruptcy notice.
[3] Affidavit of service sworn by Mr Sharify dated 17 January 2024 at [3]-[4].
On 10 February 2024, the creditor’s petition was served on Mr Kuek.[4]
[4] March Sharify affidavit at [36].
On 11 February 2024, Mr Kuek (through his lawyer) advised Mr Sharify that he had in fact made payment of the $11,000 to Mr Sharify’s former barrister’s clerk, Svenson Barristers, on 13 November 2023. Mr Kuek sought Mr Sharify’s agreement to have the creditor’s petition dismissed with an order that Mr Sharify pay Mr Kuek’s costs in the amount of $800.
On 12 February 2024, Mr Sharify contacted Svenson Barristers with a request that they check their records for a payment from Mr Kuek in November 2023 or afterwards.[5]
[5] March Sharify at [39] and annexure SS-1, p 10.
On 13 February 2024, Mr Sharify had a conversation with Anna Svenson, Principal Clerk at Svenson Barristers, who informed Mr Sharify that the amount of $11,000 had been paid to the List by Mr Kuek on 13 November 2023 but had been applied, in error, to the account of Mr Nash KC. Svenson Barristers paid the amount of $11,000 to Mr Sharify out of its office account the same day.
On 13 February 2024, Mr Sharify sent an email to Mr Kuek’s lawyer in which he agreed to discontinue the creditor’s petition but with no order as to costs.[6] Mr Kuek did not accept this offer, and the matter proceeded to a costs hearing before the Registrar.
[6] March Sharify affidavit at [43] and annexure SS-1, pp 68-69.
Mr Sharify submits that in circumstances where there has not been a hearing on the merits of the bankruptcy case, the Court should be guided by the principles set out by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624-625 including that:
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 costs of the proceedings…
Relatedly, Mr Sharify submits that a factor relevant to the question of costs in the bankruptcy jurisdiction is the reality that petitioning creditors “are put to time, trouble and expense in instituting bankruptcy proceedings which are frequently resolved by payment or some other mutually acceptable outcome at the ‘last gasp’” (referring to Kempsey Local Aboriginal Land Council v Donnelly [2022] FedCFamC2G 149 at [70]). Further, the exercise of the Court’s costs discretion ought to be focused on “the reasonableness of the bringing, pursuit and discontinuance of the creditor’s petition”, weighed against “the reasonableness of the debtor’s failure to pay the debt before the petitioner incurred its costs in a bankruptcy proceeding” (referring to World Best Holdings Ltd v Sarker [2006] FMCA 1876 at [22]).
Mr Sharify submits that his position, which he characterises as “reasonable”, can be juxtaposed against Mr Kuek’s position, which he characterises as “unreasonable”, as follows.
First, Mr Sharify submits that it was reasonable for him to commence this proceeding in circumstances where:
(a)the Costs Court order required Mr Kuek to pay Mr Sharify, rather than to direct payment to his (former) clerk (Svenson Barristers) who, Mr Sharify notes, ceased to be his clerk from 28 March 2023;
(b)Mr Sharify promptly provided explicit instructions to Mr Kuek’s lawyer by email (refer [21] above) about the method of payment of the Costs Court order that required payment to Mr Sharify’s nominated bank account and foreshadowed the serving of a bankruptcy notice if payment was not received by close of business the following day;
(c)when Mr Sharify received no response to his email and no payment of the amount corresponding with the Costs Court order within the specified time (or notification that a payment had been made on his behalf) he had issued and then served a bankruptcy notice on Mr Kuek;
(d)when the 21 days prescribed under the bankruptcy notice elapsed without Mr Sharify having received any response, objection or application to set aside from Mr Kuek, he caused a creditor’s petition to be issued.
Second, Mr Sharify submits that in the conduct of the proceeding he acted reasonably by offering to discontinue the proceeding by consent with no order as to costs shortly after he received confirmation from his former clerk that Mr Kuek had made a payment of $11,000 on 13 November 2023. As noted earlier, Mr Sharify made this offer for the first time on 13 February 2024, this being the same day that he received notification of payment from Svenson Barristers.
On the other hand, Mr Sharify relies on the following circumstances as revealing the unreasonable conduct of Mr Kuek:
(a)Mr Kuek was on notice as to the payment method required to satisfy the Costs Court order and on notice that his failure to make the payment would trigger the issue of a bankruptcy notice. Despite this, Mr Kuek chose a different method to make payment and did so without noting the correct invoice number corresponding with Mr Sharify’s fees. I interpose to note however that he did use a narrative that connected the payment to Mr Sharify;
(b)neither Mr Kuek nor his lawyer responded to Mr Sharify’s email of 13 November 2023, including to inform him that payment of the Costs Court order had been made. The first time that Mr Kuek communicated to Mr Sharify that payment had been made was on 11 February 2024;
(c)Mr Kuek did not object to or apply to set aside the bankruptcy notice (on the basis that the debt in question had been paid in full, or on any other basis).
Mr Sharify submits that the bankruptcy proceeding could have been avoided (in whole or in part) if Mr Kuek had simply advised Mr Sharify that payment had been made, at any time prior to 30 November 2023 (when Mr Sharify served the bankruptcy notice) or 10 February 2024 (when Mr Sharify served the creditor’s petition).
Mr Sharify submits that the approach adopted by Mr Kuek is inimical to civil procedure obligations under the FCFCOA Act, including s 191(1) which requires parties and their lawyers to conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) and act in a manner that is consistent with the overarching purpose. The “overarching purpose” in this context is “to facilitate the just resolution of disputes according to law, and as quickly, inexpensively and efficiently as possible”.
Mr Sharify notes that the definition of “overarching purpose” expressly includes the efficient use of judicial and administrative resources available for the purposes of the Court, the efficient disposal of the Court’s overall caseload, the disposal of all proceedings in a timely manner, and the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute (s 190(2)).
Importantly, s 191(4) of the FCFCOA Act provides that in exercising the discretion to award costs in a civil proceeding, the Court must take account of any failure to comply with the duty imposed by that section. Mr Sharify submits that the failure of Mr Kuek to advise him that he had complied with the Costs Court order (this being the basis for the bankruptcy proceeding) should be understood as a failure to comply with his obligations under this provision.
Mr Sharify submits that by insisting on payment of his own costs, rather than accepting the offers made by Mr Sharify to discontinue the proceeding by consent, with no order as to costs, Mr Kuek made it necessary for the Court to convene a hearing on costs.
Reply submissions of Mr Kuek
In his reply submissions filed on 24 June 2024, Mr Kuek essentially sought to controvert the characterisation of his behaviour as unreasonable.
Mr Kuek submitted that he was entitled, if not obliged, to make payment of the Costs Court order to the account identified in the tax invoice for $11,000 issued by Svenson Barristers in February 2023 (and never withdrawn) and that he had no obligation to respond to the applicant’s email sent on 13 November 2023 because he had briefed Mr Sharify via his clerk and paid him by reference to this same relationship. Mr Kuek submitted that upon the point of payment, his obligations to Mr Sharify were fully discharged.
Mr Kuek submitted that the Mr Sharify’s reliance on s 191 of the FCFCOA Act was misplaced, in circumstances where the provision was only engaged when Mr Sharify’s creditor’s petition was issued; this being the point in time when there was a “civil proceeding before the [Court]”. Mr Kuek’s conduct from that point was reasonable because he took immediate steps to engage and instruct his solicitors to notify Mr Sharify that the monies the subject of the Costs Court order had been paid.
CONSIDERATION
Although much ink has been spilt by the parties on this matter, its resolution involves straightforward considerations.
Neither party has conducted himself in exemplary fashion or is entirely blameless as far as they have contributed to the prolongation of this sorry saga. However, it is clear beyond doubt that there were at least two occasions or events that should have triggered a response from Mr Kuek and his largely unexplained failure to provide such a response, was the catalyst for the commencement of this proceeding.
Although of course it was Mr Sharify who filed the creditor’s petition and took the antecedent step of making an application for the issue of a bankruptcy notice, it remained within the power of Mr Kuek to take steps that would inevitably have stopped this process in its tracks by firstly, responding to the email sent by Mr Sharify on 13 November 2023 to inform Mr Sharify that an amount corresponding to the Costs Court order had been paid into the account of Svenson Barristers (had this occurred, this would have provided a proper basis to criticise the failure of Mr Sharify to make inquiries of his former clerk) and/or by communicating an objection to the bankruptcy notice on the basis that the judgment debt had been extinguished.
Mr Kuek offered no explanation for his failure to challenge the bankruptcy notice but sought to justify his failure to respond to the email of 13 November 2023 by referring to his contractual relationship with Mr Sharify’s (former) clerk. However, events had moved on considerably by this time, with the Costs Court order superseding the final invoice (issued by the clerk). More to the point, the email sent by Mr Sharify contained explicit instructions about how payment was to be made and plainly invited a response, however cursory, to indicate that performance had occurred.
By the time that Mr Kuek communicated to Mr Sharify that the amount of $11,000 had been paid, the proceeding was in this Court. Very shortly after, Mr Sharify acknowledged that he could not continue to press the creditor’s petition and made an offer to withdraw or discontinue the proceeding with no order as to costs. At the point in time at which this offer was communicated there was a chance to salvage matters for both parties and to walk away from the proceeding with minimal cost incurred. I consider that the decision by Mr Kuek to resist this offer and to maintain an application for costs – which moved swiftly from an amount of $880 to a full indemnity costs order – was unreasonable and reflected a technical and intractable view that the question of costs should be approached solely on the basis that the jurisdictional pre-condition for the filing of the creditor’s petition no longer existed. Whether there was ever an extant relationship of debtor and creditor is a matter that it is unnecessary to resolve for the purpose of determining this review application whose focus, as I have indicated, is firmly on the conduct of the parties.
I consider that the order that should have been made on the disposition of the creditor’s petition was that there be no order as to costs. Mr Kuek in pursuing a costs order in his favour acted unreasonably and in a manner that was inconsistent with his obligations under s 191 of the FCFCOA Act. Mr Sharify was entitled to defend this proceeding and to the costs of doing so when he enjoyed success at the costs hearing. Had Mr Sharify incurred costs in defending this review application then he would have been entitled to recover those also. However, in circumstances where Mr Sharify represented himself and has not sought an order directed at the review hearing there is no occasion to make such an order.
I propose to order that Mr Kuek pay Mr Sharify’s costs fixed in the amount of $2,915 and otherwise order that the review application be dismissed.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 17 October 2024
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