Zreika v Royal (No 2) - [2019] FCAFC 237

FEDERAL COURT OF AUSTRALIA
Zreika v Royal (No 2) [2019] FCAFC 237

Appeal from:
Royal v El Ali [2016] 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 29

File number(s):
NSD 1793 of 2016
NSD 1794 of 2016
NSD 1798 of 2016
NSD 1799 of 2016
NSD 1801 of 2016

NSD 29 of 2017

Judge(s): BESANKO, FARRELL AND O’CALLAGHAN JJ

Date of judgment: 19 December 2019

Catchwords: COSTS – where six appeals involving common substratum of fact were heard together and later dismissed, save for partial success by one appellant – whether a lump sum costs order should be made in favour of certain respondents – whether and how liability for the lump sum amount should be apportioned between the appellants – consideration of the overarching purpose in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) – lump sum costs orders made and apportioned by way of percentage breakup with quantification of lump sum amount to be determined by a single judge

Legislation:
Federal Court of Australia Act 1976 (Cth) ss 37M, 37N and 43

Federal Court Rules 2011 (Cth) r 40.02

Cases cited:
Coshott v Prentice (No 2) [2018] FCAFC 1

Coshott v Prentice (No 2) [2018] FCAFC 221

Dias Aluminium Products Pty Ltd v Ulrich Aluminium Pty Ltd (No 2) [2005] FCA 1400; 225 ALR 569

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 346; 26 IPR 261

Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52

Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403

Royal v El Ali [2016] 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

Zreika v Royal [2019] FCAFC 82

Date of hearing: Determined on the papers

Date of last submissions: 5 August 2019

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category Catchwords

Number of paragraphs: 47

Counsel for the Appellants in NSD 1793 of 2016 and NSD 1794 of 2016 Mr A Fernon

Counsel for the Appellants in NSD 1798 of 2016 and NSD 1799 of 2016 The Appellants in NSD 1798 of 2016 and NSD 1799 of 2016 did not appear

Counsel for the Appellants in NSD 1801 of 2016 and NSD 29 of 2017 and for the Fourth Respondent in NSD 1793 of 2016 Mr D Barlin

Solicitor for the Appellants in NSD 1801 of 2016 and NSD 29 of 2017 and for the Fourth Respondent in NSD 1793 of 2016
Roberts & Partners Lawyers

Counsel for the First, Fifth and Sixth Respondents in NSD 1793 of 2016 and for the First‑Third Respondents in NSD 1794 of 2016, NSD 1798 of 2016,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] FCAFC 237
Decision Date: 19 December 2019

CaseChat Overview and Summary

The case of Zreika v Royal (No 2) involved multiple parties, including Mr Zreika, Mr Stojanovski, Mr Nazloomian, and Mr Mahmoud El Ali, who appealed against various judgments rendered in prior proceedings. The appeals were against decisions made in the Federal Court, including the Principal Decision, Orders Decision, Costs Decision, and Deed Decision. The appeals were primarily concerned with the outcomes of these judgments and their associated costs. The case was heard by the Full Court of the Federal Court of Australia, which ultimately dismissed the appeals with the exception of partial success by Mr Zreika.

The legal issues before the court involved the determination of costs associated with the appeals. Specifically, the court had to decide whether to make lump sum costs orders in favour of the respondents, namely the Royals and Mr Jones, and if so, how to apportion the liability for these costs among the appellants. The overarching principle guiding the court's decision was the objective in sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth) to ensure just, quick, and cheap resolution of the real issues in the proceedings.

The court reasoned that the overarching purpose of the legislation mandated a fair and efficient resolution of the litigation, including the costs associated with the appeals. The Full Court held that lump sum costs orders should be made in favour of the respondents. However, the court decided that the quantification of these costs should be determined by a single judge. Furthermore, the court apportioned the liability for the lump sum costs among the appellants by way of a percentage breakup, with each appellant responsible for a specified percentage of the total costs. The court's decision ensured that the costs followed the event and that the overarching purpose of the legislation was achieved.

The final orders of the court required the appellants to pay the respondents' costs of their appeals, with specific percentages assigned to each appellant for the lump sum costs. The quantification of these costs was to be determined jointly with the costs from related proceedings and was to be conducted by a single judge. The orders also referred the matter of the payment of moneys held in Court to Justice Farrell for further determination.

Orders

Orders of the court

1. The appellant must pay the Royals/Jones’ costs of his appeals, including any reserved costs.

2. The costs of the Royals/Jones referred to in Order 1 be awarded in a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

3. The quantification of Costs (as defined in the notation to these orders) be conducted and determined jointly with the quantification of the costs of the Royals/Jones in NSD 1793 of 2016, NSD 1794 of 2016, NSD 1798 of 2016, NSD 1799 of 2016, NSD 1801 of 2016 and NSD 29 of 2017 to the intent that the appellant pay 10% of the Costs as costs of his appeals.

4. The quantification of the Costs and the making of such further or other orders and directions in connection with the appeal or orders made in NSD 1731 of 2013 or NSD 771 of 2014, including directions in relation to the payment of moneys held in Court, be referred to Justice Farrell.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The appeals relate to four judgments: the Principal Decision delivered on 5 July 2016 (Royal v El Ali [2016] FCA 782), the Orders Decision delivered on 23 September 2016 (Royal v El Ali (No 2) [2016] FCA 1156), the Costs Decision delivered on 22 December 2016 (Royal v El Ali (No 3) [2016] FCA 1573) and the Deed Decision delivered on 23 March 2017 (Royal v El Ali (No 4) [2017] FCA 299). Mr Zreika and Mr Nazloomian appealed all of those judgments. Mr Stojanovski appealed all but the Deed Decision. Mahmoud El Ali appealed only the Costs Decision. Nathan El Ali filed an appeal against the Principal Decision and the Costs Decision, but his appeal against the Principal Decision was dismissed by orders made on 21 July 2017 because, as a bankrupt, he was not competent to bring it. Ottoman and Saracen did not file any appeals. This Court published reasons for dismissing all six appeals (save for partial success by Mr Zreika in his appeal) and made orders accordingly on 24 June 2019: see Zreika v Royal [2019] FCAFC 82. In relation to Mr Zreika’s appeal, the Court varied Order 8 made by the primary judge in the Orders Decision, with the effect that Mr Zreika’s liability under that order was reduced from $800,000 to $200,000 having regard to the principles discussed by the High Court in Brady v Stapleton [1952] HCA 62; 88 CLR 322 (the Brady v Stapleton ground). The Brady v Stapleton ground was raised very late in the appeal proceedings (on 28 May 2018 as additional submissions when Mr Zreika filed reply submissions ahead of a hearing set down for 12 and 13 June 2018); it was not raised at all before the primary judge. A number of questions were reserved by the Full Court including the question of costs of the appeals and whether lump sum costs orders should be made, the payment out of any monies paid into Court, and any further or consequential matters that may be reserved for further consideration including the issue of the extent to which any of the above matters should be referred to a judge or registrar of the Court. The parties were ordered to file proposed orders and submissions. Of the appellants, Messrs Zreika and Mahmoud El Ali filed separate written submissions prepared by Mr Barlin of counsel. Written submissions made by Mr Fernon of counsel on behalf of Messrs Nazloomian and Stojanovski were contained in a single document. Nathen El Ali did not file written submissions and Saracen did not participate in the appeals at all. Dr Birch SC and Ms Thew made joint written submissions on behalf of the Royals and Mr Jones (who we will refer to as Royals/Jones). Ottoman also filed written submissions. Each of the appellants who filed written submissions accepted that costs should follow the event. Accordingly, those appellants accepted that the Court should make orders that each appellant pay the respondents’ costs of their appeal as agreed or taxed, save that Mr Zreika said that, in recognition of his success on the Brady v Stapleton ground, he should be ordered to pay only 70% of the Royals/Jones’ costs as agreed or taxed. All opposed the making of a lump sum costs order as sought by the Royals/Jones. Ottoman sought orders that Messrs Stojanovski and Zreika pay Ottoman’s costs of their respective appeals as agreed or taxed, but Ottoman’s submissions seem to seek an order that Mr Zreika pay Ottoman’s costs in the Stojanovski appeal. Submissions were also made in relation to the disposition of moneys held in Court pursuant to orders made by the primary judge or following interlocutory applications made prior to the hearing of the appeal.SHOULD THE COURT MAKE A LUMP SUM COSTS ORDER IN FAVOUR OF THE ROYALS AND MR JONES?Legal principles

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Appeal from:	Royal v El Ali [2016] 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 29
File number(s):	NSD 1793 of 2016 NSD 1794 of 2016 NSD 1798 of 2016 NSD 1799 of 2016 NSD 1801 of 2016 NSD 29 of 2017
Judge(s):	BESANKO, FARRELL AND O’CALLAGHAN JJ
Date of judgment:	19 December 2019
Catchwords:	COSTS – where six appeals involving common substratum of fact were heard together and later dismissed, save for partial success by one appellant – whether a lump sum costs order should be made in favour of certain respondents – whether and how liability for the lump sum amount should be apportioned between the appellants – consideration of the overarching purpose in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) – lump sum costs orders made and apportioned by way of percentage breakup with quantification of lump sum amount to be determined by a single judge
Legislation:	Federal Court of Australia Act 1976 (Cth) ss 37M, 37N and 43 Federal Court Rules 2011 (Cth) r 40.02
Cases cited:	Coshott v Prentice (No 2) [2018] FCAFC 1 Coshott v Prentice (No 2) [2018] FCAFC 221 Dias Aluminium Products Pty Ltd v Ulrich Aluminium Pty Ltd (No 2) [2005] FCA 1400; 225 ALR 569 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 346; 26 IPR 261 Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403 Royal v El Ali [2016] 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 Zreika v Royal [2019] FCAFC 82
Date of hearing:	Determined on the papers
Date of last submissions:	5 August 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category	Catchwords
Number of paragraphs:	47
Counsel for the Appellants in NSD 1793 of 2016 and NSD 1794 of 2016	Mr A Fernon
Counsel for the Appellants in NSD 1798 of 2016 and NSD 1799 of 2016	The Appellants in NSD 1798 of 2016 and NSD 1799 of 2016 did not appear
Counsel for the Appellants in NSD 1801 of 2016 and NSD 29 of 2017 and for the Fourth Respondent in NSD 1793 of 2016	Mr D Barlin
Solicitor for the Appellants in NSD 1801 of 2016 and NSD 29 of 2017 and for the Fourth Respondent in NSD 1793 of 2016	Roberts & Partners Lawyers
Counsel for the First, Fifth and Sixth Respondents in NSD 1793 of 2016 and for the First‑Third Respondents in NSD 1794 of 2016, NSD 1798 of 2016,…