Accuracy Middle East Advisory Ltd v Debelak

Supreme Court of NSW|2024-03-22|Before: Schmidt AJ

JUDGMENT

Accuracy Middle East Advisory Ltd brought these proceedings, seeking the recognition and enforcement, at common law, of a 10 January 2023 default judgment which it had obtained in the Dubai International Finance Centre against Ms Debelak. On 13 February 2024, that judgment was set aside and costs were awarded in favour of Ms Debelak.
Accuracy now seeks leave to discontinue these proceedings with an order that each party bear their own costs. Ms Debelak consents to the discontinuance, but on the condition that Accuracy pay her costs of these proceedings on the ordinary basis, under the Uniform Civil Procedure Rules 2005 (NSW).

Issues

In issue between the parties was the appropriate costs order.

Accuracy

Accuracy relied on affidavits sworn by Mr Barsalou, one of its directors and Mr Blackie, one of its solicitors. It seeks an order under r 42.19(2) that each party bear their own costs in circumstances where the default judgment had been set aside in February 2024 on Ms Debelak's application, with a costs order in her favour. That had triggered Accuracy's application for leave to discontinue these proceedings.
It contended that there was no presumption created by r 42.19 that costs will be ordered against a discontinuing party: Fordyce v Fordham & Anor (2006) 67 NSWLR 497; [2006] NSWCA 274 at [69]-[84] and Prodromos Anastasi Foukkare v Angreb Pty Limited & Ors [2006] NSWCA 335 at [65]. A proper basis for departure from the presumption was where the proceedings were rendered futile by a supervening event: Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW & Anor [2006] NSWCA 129 at [23] and [38]-[39].
Accuracy's case was that an order that each side bear their own costs was warranted in these proceedings because: 1. there has been no substantive resolution of the proceedings on their merits; 2. the discontinuance of the proceedings is sought on the basis of a supervening event, namely, the setting aside of the Judgment in the Dubai Court; 3. the setting aside of the Judgment was granted only on the basis of a ground raised for the very first time by Ms Debelak on 24 January 2024, immediately before the application to set aside the Judgment was heard; 4. Ms Debelak had sought multiple adjournments of these proceedings for the purpose of advancing grounds which she abandoned, that having resulted in unnecessary time and costs being incurred by the Court and Accuracy. They included an allegation of fraud against Accuracy, which she ultimately conceded she had insufficient basis to advance; 5. Ms Debelak did not apply to the Dubai Court to set aside the Judgment until late in the proceedings; 6. even after Ms Debelak had determined to apply to the Dubai Court to set aside the Judgment, she did not communicate the basis for the application which was ultimately accepted by the Dubai Court, but advanced grounds which she ultimately abandoned; and 7. those abandoned grounds included Accuracy's failure to comply with the Service and Execution of Process Act 1992 (Cth) in relation to service of the originating process in the Dubai Court, notwithstanding that the Act does not on its own terms apply to the originating process of a foreign court.

Ms Debelak

Ms Debelak relied on the affidavits of Mr Paterson, one of her solicitors, who explained Ms Debelak's concern about the amount of Accuracy's claims. In a period of some two and a half months, it had charged over $1 million in fees and disbursements. This had raised suspicions of fraud, leading to her subpoenaing the production of documents in these proceedings, as well as her successful challenge of the default judgment, notified to this Court at a directions hearing in November 2023.
Ms Debelak thus seeks an order that Accuracy pay her costs of these proceedings on the ordinary basis, in accordance with r 42.19(2).
She submitted that had the Dubai default judgment not been wrongly obtained by Accuracy, these proceedings could not have been commenced in July 2023, or prosecuted as they were. The situation was argued to be analogous to that considered by Gzell J in Deputy Commissioner of Taxation (DCT) v Haddock (2010) 241 FLR 318; [2010] NSWSC 996. Here, the default judgment had also been wrongly and avoidably procured by Accuracy and these proceedings then commenced to enforce that judgment.
The onus fell on Accuracy to establish a basis for departure from r 42.19, by establishing a sound positive ground or good reason for the making of such an order: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54]. It had not done so.
There is a distinction between a supervening event which resulted in there no longer being any issue between the parties and a situation where one party effectively surrenders to the other. In such a case, the Court will order the unsuccessful party to pay the other party's costs: Nadilo v Eagleton [2021] NSWCA 232 at [9] and [93]-[94]. That involves a consideration of the unreasonableness of the losing party's conduct.
A supervening event caused by a plaintiff's own, avoidable conduct does not warrant a departure from an order that the discontinuing plaintiff pay the defendant's costs: DCT v Haddock at [72]-[80].
In this case, if Accuracy had not wrongly entered the default judgment, these proceedings would not have been commenced. It followed that this case was analogous to what arose to be considered in Nadilo, the default judgment having been wrongly and avoidably procured by Accuracy. That was established by the deficiency in the service of its originating process, which led to the judgment being set aside.

Leave to discontinue

In all the circumstances which arise for consideration, I am satisfied that the leave to discontinue which Accuracy seeks must be granted.

What costs order should be made?

I am also satisfied that the costs order Accuracy seeks cannot justly be made.
Rule 42.19(2) provides: "(2) Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued."
There is no issue that it is for a discontinuing plaintiff to establish a proper basis for a departure from that rule.
There was no issue about the terms of the parties' agreements; the amount Accuracy had invoiced for the services it had provided; that those invoices had not been paid; that default judgment had been obtained in Dubai against Ms Debelak; or the circumstances in which she had succeeded in having that judgment set aside.
Mr Blackie explained that the claim lying at the heart of the proceedings between Accuracy and Ms Debelak were outstanding fees in respect of investigative and asset tracing work undertaken in relation to a dispute about marital assets. The Dubai proceedings were commenced in March 2022 and Australian process servers were later engaged. They made repeated, unsuccessful attempts to serve various documents at Ms Debelak's last known address, which were described.
The result was that a Mr Gajic, the process server, formed the view that Ms Debelak was deliberately avoiding service and documents were then left at this address, which had been confirmed to be her residence, by affixing them to the door. The documents were also sent there by courier and mail, as well as being sent to the mobile phone number Ms Debelak had used to contact Mr Gajic.
On Mr Blackie's understanding, a request for default judgment was pursued under the Dubai Court's rules, with the result that default judgment was entered in January 2023. That was served by mail, to which there was no response. These proceedings were then pursued and the summons and supporting affidavit personally served.
I am not satisfied by this evidence that Accuracy has established a proper basis for departure from the usual order. Its case turned on Ms Debelak not having communicated her assertion that she had not been personally served until 24 January 2023, that providing the basis for the Dubai judgment to be set aside. That fact had, however, been raised in a notice to admit facts served in December 2022.
The parties' solicitors exchanged correspondence and appeared at directions hearings in this Court. Ms Debelak's original solicitors ceased to act and she failed to comply with directions about the service of evidence. She then engaged her current solicitors and further correspondence was exchanged. In October 2023, it was advised that recognition and enforcement of the Dubai judgment was to be challenged; an application to set aside the Dubai judgment was to be pursued; and a defence was there to be raised on the basis that it had been obtained by fraud.
Ms Debelak later served evidence about her pursuit of the setting aside of the Dubai default judgment. There, she raised problems with service of the process and requirements of the Service and Execution of Process Act.
It eventually emerged that what had been required was personal service. An application to set aside the proceedings was set down for hearing in the Dubai Court in February 2024. Preparation of this matter for hearing proceeded, but the default judgment was set aside on 13 February 2024, that resulting in the parties' agreement about discontinuance of these proceedings.
Despite the views Mr Blackie expressed about Ms Debelak's conduct of the proceedings, the position is that the Dubai judgment was set aside, the case she advanced in relation to Accuracy's service of the documents in question not satisfying the requirements of the applicable rules having been accepted.
It was for Accuracy to effect service on Ms Debelak in accordance with those rules. It was the acceptance of her case that it had failed to do so which resulted in the default order being set aside, with resulting consequences for these proceedings which Accuracy properly accepted. But that does not provide a proper basis for the costs order which it seeks.
A departure from the usual order under the Rules can be ordered where a party has engaged in misconduct in the proceedings: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [69].
I am not persuaded that what Accuracy advanced establishes such misconduct, or a sound, positive ground or good reason for departing from the ordinary course which the applicable rule contemplates. Accuracy was only entitled to enforce the Dubai default judgment in this Court if it had been properly obtained. That depended on how the required service had been affected, given the applicable rules. The Dubai judgment having been set aside on Ms Debelak's application, because it had not been properly served in accordance with those rules, is not consistent with relevant misconduct on her part, in either these or the Dubai proceedings.
The supervening event in this case was the setting aside of the Dubai judgment as a result of Accuracy's failures, which rendered these proceedings futile. The costs Ms Debelak incurred in these proceedings would have been avoided if proper service had been affected.
Perhaps her application could have been earlier made. But when made Accuracy did not consent to it. Any delay by Ms Debelak did not result in the refusal of her application to have the Dubai judgment set aside. It follows that cannot provide a proper basis for departure from the costs order r 42.19 envisages be made on an application such as this.
In all the circumstances, I do not consider it just for Ms Debelak to be ordered to bear her own costs of these proceedings.

Orders

For these reasons, I order that: 1. Leave to discontinue the proceedings is granted; and 2. Accuracy is to bear Ms Debelak's costs of the proceedings, as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 March 2024

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