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[2014] NSWSC 686
Supreme Court of NSW
2014-05-28
Slattery J
Original judgment source is linked above.
EX TEMPORE Judgment 1After giving judgment in these proceedings today, the Court indicated it was prepared to deal with the motion that Mr Mohammad Ashrafinia filed on 26 May 2014. 2This motion was filed after the Court reserved judgment on 20 May and was made returnable before the duty judge on 6 June, after I will have gone on leave. Mr McGrath SC and Mr Mohammad Ashrafinia are both in a position now to deal with the questions on this motion. As I am going on leave on Friday 30 May, it is desirable that all issues are dealt with now rather than for a duty judge to have to come to grips with the complexities of this case. 3This judgment should be read with the Court's previous judgment in the proceedings. Events, matters and persons are referred to in all judgments the same way. 4The 26 May 2014 motion seeks four groups of orders: (1) Whether Karami should reimburse the trust in respect of Mr Hayes's costs and fees in defending the issue concerning the quantum of Mr Hayes's fees ("the Hayes fees issue") whilst he acted as the trustee for sale of the Marsfield property (prayers 1 and 2 on the motion); (2) Whether Karami should bear her own costs of the Hayes' fees issue (prayers 3 and 3); (3) Whether Mr Southwell-Keely and Mr McGrath should cease acting in the proceedings (prayers 5 and 6); and (4) Whether legal fees and costs should be produced to Mohammad (prayers 7 and 8). 5The Court will determine issues 3 and 4 first, and then issues 1 and 2.
(3) Whether Mr Southwell-Keely and Mr McGrath should cease acting in the proceedings. 6Mohammad makes generalised allegations of misconduct against Mr McGrath SC and Mr Southwell-Keely. I have not called upon either of them to answer, because I see absolutely no basis for any of these allegations. They are not supported by evidence. I see no proper legal ground for the Court to intervene in the solicitor/client relationship between Karami and Mr McGrath and Mr Southwell-Keely, as Mohammad seeks. 7Mohammad seems to allege Mr McGrath SC and Mr Southwell-Keely are representatives in a conspiracy against him, which alleged conspiracy he says the Court has failed to recognise. I would simply record in these reasons that not only does Mohammad advance no evidence in support of these serious allegations but nothing in what I see objectively of the conduct of Mr McGrath SC or Mr Southwell-Keely before me gives any concern whatsoever about the propriety of their conduct in these proceedings. There is no basis for the Court to inhibit their continuing to appear for Karami, whose interests they have pursued successfully and always professionally. I dismiss paragraphs 5 and 6 of Mohammad's motion.
(4) Whether legal fees and costs should be produced to Mohammad. 8Mohammad seeks orders for the production of invoices for legal fees and of the costs agreements made between Mr Southwell-Keely and Mr McGrath SC and Karami. He seeks these for several purposes. He indicated they will assist him in proving a conspiracy that he says is being advanced against him and his interests. He also seeks those documents so that he can ensure that if Mr Southwell-Keely seeks to deduct any of Karami's costs from the Trust fund, he Mohammad will know about it in advance and can seek to prevent it. 9Seeking to unearth a conspiracy is not a legitimate basis for making such orders in proceedings that are about to conclude. 10Notwithstanding that I have now appointed Karami as trustee of the Trust, at least two steps would have to take place before any of Karami's legal fees could come out of the Trust. The first step has been foreshadowed: Mr Southwell-Keely will seek to recover Karami's costs orders directly against Mohammad, who has indicated that he is unlikely to be able to pay those costs. Step two is that Mr Southwell-Keely may, if he is so instructed, wish to make an application to the Court that the costs Mohammad does not pay Karami should come out of the trust. That is a future application which may or may not succeed. 11I see no present purpose in making orders to provide memoranda of legal fees and costs agreements in anticipation of an as yet unspecified future application of the nature described, or to further the maintenance of general allegations of conspiracy in proceedings which are now concluded. 12I therefore dismiss paragraphs 7 and 8 of the motion.
(2) Whether Karami should bear her own costs of the motion concerning Mr Hayes' fees issue. 13Only one of the two remaining issues arises for determination. Both remaining issues relate to the costs incurred at Karami's instigation on the Hayes' fees issue. The outcome of that contest has now been settled by agreement. First, Mohammad now seeks that Karami reimburse the Trust for the portion of Mr Hayes' professional fees and expenses expended in defending himself against the questioning of his fees, because Mohammad says, those expenses were caused by Karami's conduct. 14Secondly, Mohammad seeks that Karami bear her own costs of the Hayes fees issue. This question does not arise as yet. Karami will bear her own costs of the motion unless she claims them against Trust. Karami is not seeking costs orders against Mohammad or against the Trust in relation to those costs. So the question of whether the Trust will bear her costs of the motion will only arise if and when at a future time she seeks to obtain those costs out of the Trust, if she is so advised. As those issues do not yet arise, and may never arise, I do not propose to determine them.
(1) Whether Karami should reimburse the trust in respect of Mr Hayes's fees in defending the issue concerning Mr Hayes's fees acting as trustee for sale. 15The precise amount of Mr Hayes' fees incurred on account of the Hayes fees issue is not entirely clear. But it will be less than $12,000, and may only be about $5,000. The precise amount does not matter: the principle needs to be decided. Mohammad submits that Karami should reimburse the trust because: (1) these costs were incurred mala fides; and, (2) were incurred unreasonably. 16Mohammad's bad faith allegation against Karami and her lawyers is that Karami deliberately questioned Mr Hayes' fees, so that Mr Hayes would not make himself available to become an independent trustee of the Trust. But I see no evidence of such mala fides. Firstly, it is inconsistent with the nature of the submissions which were put about Mr Hayes' fees, which were a detailed and rational analysis of Mr Hayes' fees, which analysis was self-evidently designed to preserve the funds of the Trust to the maximum extent. Secondly, some questioning of Mr Hayes' fees was not inappropriate in the circumstances. The Court's last judgment (Amir Ashrafinia v Mohammad Reza Ashrafinia; Parvaneh Karami Fakhrabadi v Mohammad Reza Ashrafinia (No. 4) [2014] NSWSC 676) explains, the costs and fees Mr Hayes incurred were quadruple what Mr Hayes had estimated before he was appointed. And his own professional remuneration was 50 per cent more than his estimate. Questioning this somewhat surprising fee increase seems a far more natural explanation for Karami's conduct than a conspiracy to neutralise Mr Hayes as a potential independent trustee. Thirdly, if that indeed was Karami's motivation it is inconsistent with what then happened: there was a settlement of the Hayes fees issue before the Court gave judgment earlier this morning. So I dismiss any suggestion that that such motivation accounts for the questioning of Mr Hayes' fees, without deciding whether that could be a proper basis for the orders sought. 17The Court allowed only one representative of all beneficiaries who might be minded to question Mr Hayes' fees. It was more appropriate that Karami be that representative. What is the correct legal analysis of the position of the parties here? There has been a settlement. Mr Hayes has incurred costs on the settled issue. His indemnity out of Trust funds has cost the Trust part of the $76,000 the Trust has now borne for the sale of the Marsfield property. This situation seems somewhat analogous to the settlement of litigation where Karami is on one side and the Trust is on the other and where the Trust, through Mohammad, is asking for Karami to pay the Trust's costs despite the settlement. McHugh J's decision in Re Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 ("Lai Qin") indicates that in such situations unless it can be said that one or other party must certainly have won the issue in contest had it not been settled, or that one or other party has behaved unreasonably, that in the normal course each party should bear its own costs of such a settled former contest. 18And the Court is mindful that a settlement has taken place. Lai Qin reminds that the Court should be loath to retry issues in such circumstances. Mohammad is asking that Karami reimburse Mr Hayes, so Mr Hayes can reimburse the Trust in respect of the costs the Trust has paid him. The Trustee, and therefore the Trust, would not be entitled on these principles to such an order against Karami. 19For those reasons I decline to make an order requiring Karami to repay to the Trust any part of Mr Hayes' costs incurred on the Hayes fees issue.
Conclusions and Orders 20The Court makes the following orders: (1) I dismiss the whole of Mohammad's motion of 26 May 2014. (2) I vacate the hearing date of that motion of 6 June 2014. (3) I order Mohammad to pay the costs of his motion dated 26 May 2014.
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: 28 May 2014