Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel

Federal Court of Australia|2020-09-01|Before: Jarvis J, Yates J

The cross-claimant pay the first cross-respondent's costs of the cross-claim brought against the first cross-respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 1 June 2020, I made an order by consent that the cross-claim filed in this proceeding be dismissed. In the circumstances, this meant that the cross-claimant's cross-claim against the first cross-respondent be dismissed. The cross-claimant is Mr Abdalla. The first cross-respondent is Ms Amirbeaggi, who is the trustee of the bankrupt estate of John Mamdouh Hanna. 2 On 21 November 2019, Mr Abdalla obtained default judgment against the other cross-respondent, Jarvis J Pty Ltd (Jarvis J): Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel [2019] FCA 1965. On 4 February 2020 a lump sum costs order was made in favour of Mr Abdalla against Jarvis J: Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel (No 2) [2020] FCA 50. 3 At the time the order was made dismissing the cross-claim, the only claim remaining on foot was Mr Abdalla's claim against Ms Amirbeaggi. However, Mr Abdalla's default judgment against Jarvis J was subsequently set aside on 20 August 2020: Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel (No 3) [2020] FCA 1202. 4 At the time of dismissing the cross-claim against Ms Amirbeaggi, Mr Abdalla and Ms Amirbeaggi were unable to agree on the order that should be made for costs. I made orders for filing submissions on that question, which was then to be determined on the papers. These reasons concern the order for costs I propose to make, which is that Mr Abdalla pay Ms Amirbeaggi's costs of the cross-claim brought against her.

Background 5 The cross-claim was filed in proceedings brought by Ms Amirbeaggi in her capacity as Mr Hanna's trustee in bankruptcy, against Mina Rousaflah Youssef Kamel, Mr Abdalla, and the Registrar-General, New South Wales. 6 The proceeding commenced by Ms Amirbeaggi (the principal proceeding) concerns a townhouse in a development at 7 Altair Place, Hinchinbrook, New South Wales. The townhouse is the property contained in folio identifier 23/SP93648 (the Lot 23 property). As at 11 July 2017, when a sequestration order was made against Mr Hanna and Ms Amirbeaggi was appointed as trustee in bankruptcy, Mr Hanna and Mr Abdalla were co-owners of the Lot 23 property and of two other townhouses in the development, being the properties in folio identifier 17/SP93648 (the Lot 17 property) and folio identifier 18/SP93648. The Lot 17 property is the subject of Mr Abdalla's cross-claim. 7 On about 17 January 2018, after Mr Hanna's bankruptcy commenced, the Lot 23 property was transferred to Mr Kamel. According to Ms Amirbeaggi, she (Ms Amirbeaggi) did not consent to that transfer. Her claim in the principal proceeding is that the transfer of the Lot 23 property was not entered into in good faith in the ordinary course of business but as part of a scheme either to prevent the Lot 23 property from becoming divisible among Mr Hanna's creditors or to hinder or delay the process of making the Lot 23 property available for division among Mr Hanna's creditors. Ms Amirbeaggi claims, therefore, that the transfer to Mr Kamel is void pursuant to s 121(1) of the Bankruptcy Act 1966 (Cth). Alternatively, Ms Amirbeaggi claims that the transfer is voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW) (Conveyancing Act) as an alienation of property with the intent to defraud creditors. Other claims are pleaded by Ms Amirbeaggi, but the final relief she claims is that orders be made setting aside the transfer of the Lot 23 property to Mr Kamel and entering her as the registered proprietor of the property with Mr Abdalla as tenants in common in equal shares. Ms Amirbeaggi also seeks an order pursuant to s 66G of the Conveyancing Act appointing trustees for sale of the Lot 23 property. 8 It can be seen that Mr Abdalla has been joined as a party in the principal proceeding because of the final relief that Ms Amirbeaggi claims in respect of the Lot 23 property. Mr Abdalla does not oppose the granting of that relief. 9 As I have said, Mr Abdalla's cross-claim concerns the Lot 17 property. His claim is that, in January 2018, the Lot 17 property was transferred to Jarvis J for a stated consideration of $650,000. Mr Abdalla claims that he has a half interest in the property and that the property was transferred to Jarvis J without his consent. His claim against Jarvis J is that he is entitled to half the stated consideration apparently paid by Jarvis J. 10 Mr Abdalla's cross-claim against Ms Amirbeaggi was expressed differently. In order to understand that claim, it is necessary to refer to an earlier proceeding in the Court (NSD 1218/2018) (the 2018 proceeding) which Ms Amirbeaggi brought against Jarvis J in her capacity as Mr Hanna's trustee in bankruptcy. Mr Abdalla was not a party to the proceeding and, he says, he had no knowledge of it at the relevant time. 11 The 2018 proceeding also concerned the transfer of the Lot 17 property to Jarvis J. On 8 March 2019, the Court made procedural orders noting that Jarvis J would pay Ms Amirbeaggi the sum of $275,000 on or before 15 March 2019 on a "no admissions basis". At that time, the Court granted leave to the parties to provide consent orders disposing of the proceeding. On 3 April 2019, the Court ordered, by consent, that the proceeding be dismissed with no order as to costs. 12 In substance, Mr Abdalla's cross-claim in the present proceeding against Ms Amirbeaggi was that he was entitled to half the sum of $275,000 paid by Jarvis J to Ms Amirbeaggi in settlement of the 2018 proceeding (the settlement sum). This entitlement was based, firstly, on the theory that Ms Amirbeaggi held half the settlement sum on trust for Mr Abdalla or, alternatively, as money had and received for his benefit. In his pleading, Mr Abdalla also alleged, amongst other things, that Ms Amirbeaggi owed him certain duties in relation to his proprietary interest in the Lot 17 property, which Ms Amirbeaggi breached. He claimed damages or equitable compensation because of those breaches, including an entitlement to exemplary damages. However, his prayers for relief were all directed to orders requiring Ms Amirbeaggi to pay him half the settlement sum.

The submissions 13 Mr Abdalla submits that the appropriate order is that there be no order for costs of the cross-claim against Ms Amirbeaggi, with the intent that he and Ms Amirbeaggi each bear their own costs. 14 Mr Abdalla submits that he was compelled to file his cross-claim against Ms Amirbeaggi because the settlement of her claim against Jarvis J with respect to the Lot 17 property, about which he had no knowledge and in respect of which she had given him no notice, impacted on his entitlement to be paid for his claimed share in the property. Mr Abdalla submits that it was not unreasonable for him to have filed his cross-claim against Ms Amirbeaggi in these circumstances. He contends, further, that the default judgment he obtained against Jarvis J stands as a supervening event which has now rendered it unnecessary for him to continue against Ms Amirbeaggi. Mr Abdalla then argues that, without a final hearing on the merits of his claim against Ms Amirbeaggi, the Court should not resolve issues as to costs by attempting to predict the outcome of a hypothetical trial of the issues between them: Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624 - 625. 15 Ms Amirbeaggi submits that Mr Abdalla's cross-claim against her was misconceived at the outset because the settlement that she achieved with Jarvis J in the 2018 proceeding had nothing to do with Mr Abdalla's interest in the Lot 17 property; nor could she have dealt with that interest because the only thing that relevantly vested in her, and which she was entitled to recover, was Mr Hanna's interest in the property. She submits that the monetary sum she received from Jarvis J in settlement of the 2018 proceeding was with respect to Jarvis J's acquisition of Mr Hanna's interest in the property. Mr Abdalla has never had any right or interest, or entitlement to share, in that sum. 16 Ms Amirbeaggi points to the fact that she filed a defence to the cross-claim which informed Mr Abdalla of these facts. Although served with that defence on 26 July 2019, Mr Abdalla maintained his cross-claim against Ms Amirbeaggi until 1 June 2020 when, in Ms Amirbeaggi's submission, he effectively abandoned it. In the meantime, Ms Amirbeaggi says that she incurred costs in the defence she had mounted. Therefore, in Ms Amirbeaggi's submission, Mr Abdalla has acted unreasonably and should bear her costs.

Conclusion 17 The claims that Mr Abdalla pleaded against Ms Amirbeaggi are fundamentally different to claims he pleads against Jarvis J, even though the two sets of claims concern Mr Abdalla's contention that he was a co-owner of the Lot 17 property. 18 Mr Abdalla pursued his claim against Jarvis J to default judgment, recognising that that judgment might, on Jarvis J's application, be set aside. He also pursued his claims against Ms Amirbeaggi but, having obtained default judgment against Jarvis J, he elected, some six months later, not to pursue those claims. At the time he made that election and the cross-claim was dismissed, neither Ms Amirbeaggi nor Mr Abdalla contended that, by reason of the default judgment against Jarvis J, Mr Abdalla was precluded from continuing to bring his claims against Ms Amirbeaggi. 19 Although Ms Amirbeaggi argues that Mr Abdalla's claims against her were misconceived, I do not propose to delve into the merits of those claims. The simple fact is that Mr Abdalla elected not to pursue them, for his own reasons. I do not regard the fact that he was able to obtain default judgment against Jarvis J as a supervening event that absolves him from the costs consequences of his election. Therefore, Mr Abdalla should pay Ms Amirbeaggi's costs of the cross-claim against her. An order will be made accordingly. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

SCHEDULE OF PARTIES NSD 1722 of 2019 Cross-Respondents Second Cross-Respondent JARVIS J PTY LTD

Bankruptcy Act 1966(Cth)s 121(1)

Conveyancing Act 1919(NSW)ss 37A, 66G

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