Arida v Arida & Ors; Arida v Arida & Ors

(2) Costs of the Interest Motion Determined on 4 April 2014 22Tony Arida was successful on the Interest Motion determined on 4 April 2014. Sid, Joseph and George Arida had brought this motion in the 2011 proceedings. In the principal judgment the Court noted (at [64]) that under UCPR, r 42.1 costs would normally follow the event but that one or other party may seek a special costs order. 23Sid, Joseph and George Arida, the unsuccessful applicants on the Interest Motion, submitted that costs should not follow the event and that "some other order should be made" under UCPR, r 42.1. They submitted that the proper order was that each party bear his own costs of the Interest Motion. Mr Tony Arida opposes the Court making such an order: submitting that costs should follow the event. In the result Mr Tony Arida's submissions are the more persuasive, for the following reasons. 24Sid, Joseph and George Arida argued that the principles to be applied in the exercise of the costs discretion on the Interest Motion were analogous to cases involving the division of a disputed fund such as might be in issue under the Succession Act 2006, Part 3.2 or under the Property (Relationships) Act 1984. In those situations the Court will be more ready to depart from the usual rule that costs follow the event and look at "the overall justice of the case": Sherborne Estate (No. 2); Re Vanvalen v Neaves (2005) 65 NSWLR 268 at [61] - [66]. Where adjusting orders are made as to the parties' respective entitlements to a fund, what is the appropriate order for costs in the exercise of the UCPR, r 42.1 discretion will depend upon the facts and circumstances of each case: Baker v Tawle (2008) 39 Fam LR 323 at [22] - [25]. 25Sid, Joseph and George Arida develop this analogy further in argument. They submit they were never parties to the Church Street contract which was entered into by the trustees for sale as vendors and Tony Arida as purchaser. They submit that the trustees for sale had responsibility for the conduct of the dispute about the interest issue between themselves and Mr Tony Arida. When Mr Tony Arida objected to the payment of interest under the Church Street contract the trustees agreed to retain in trust at the 24 January 2014 settlement sufficient monies to recover Sid, Joseph and George Arida's share of interest payable under the contract, namely $479,862.81, pending the resolution of the interest issue. Sid, Joseph and George Arida submit that this was a compromise reached between Mr Tony Arida and the trustees, despite the view held by the trustees' solicitors that interest was properly payable to Sid, Joseph and George Arida. 26Sid, Joseph and George Arida claim they were not directly involved: in the settlement of the Church Street contract; in determining the proper settlement amount; or in reaching the compromise to set aside the amount of $479,862.81 in claimed interest. Indeed, they point out that the trustees themselves appear to have supported the relief being pursued by Sid, Joseph and George Arida. And the proper course was for the trustees themselves to make an application under Trustee Act, s 63 to determine who was ultimately entitled to the trust moneys and that Sid, Joseph and George Arida only brought their application because the trustees and Tony Arida refused to do so. The submission is that had the trustees brought an application under the Trustee Act, s 63 the trustees' costs would have been borne by the fund, and not by the parties. In the circumstances Sid, Jospeh and George Arida submit that the appropriate order is that each party should bear his own costs of the Interest Motion. 27Mr Jones SC and Ms McWilliam on behalf of Mr Tony Arida persuasively answered this submission. The Court's reasons below accept the correctness of their analysis. 28The contest between these parties was not about the splitting of a pre-existing fund such as a deceased estate or the contested joint property of parties separating after a failed relationship. The payment into trust on account of interest was only the result of the present contest between the trustees and Mr Tony Arida as to whether or not any sum of interest was payable at settlement under the Church Street contract. The fund would not have existed but for the trustees taking the point that interest dated from 24 July 2012 up to the date of settlement, the very point which was resolved in the Interest Motion on 4 April. 29Authority makes clear that this case would not have been resolved under Trustee Act, s 63. Whilst the trustees may perhaps have brought the matter to Court under Trustee Act, s 63, the present contest was unlikely to be ended by such a proceeding. An application for judicial advice is generally not an appropriate vehicle to settle disputes between parties to a trust: Hartigan Nominees Ltd v Rydge (1992) 29 NSWLR 405 at 440 and Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Church Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42. In a judicial advice application the Court is essentially engaged in solely determining what is done in the best interests of the trust estate and not in determining the rights of adversarial parties: Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201 and Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Church Diocese of Australia and New Zealand (2008) 237 CLR 66 at [125]. The proper remedy for a beneficiary who wishes to resolve contested issues concerning an estate is to take proceedings for the administration of the trust and as to the rights of the trustees and the beneficiaries: Harrison v Mills [1976] 1 NSWLR 42 at 46E. 30Here it is difficult to make good the analogy for which Sid, Joseph and George Arida contend. Mr Tony Arida is right: this is not a dispute about a fund. The fund only exists because of the dispute. If Trustee Act, s 63 proceedings were brought directions would undoubtedly be made for the trustees to be able to stand back (as indeed they have done here with a submitting appearance) and for the parties truly in contest to conduct hostilities between themselves. And even in trustee litigation, the present case is closely analogous with that species of litigation often described as a "beneficiaries dispute", which is essentially adverse litigation among beneficiaries to a trust, where the unsuccessful party should bear the costs of all persons that party has brought before the Court: In Re Buckton; Buckton v Buckton [1907] 2 Ch 406 at 414-415 and McDonald v Horn [1995] 1 All ER 961 at 970H-971B per Hoffman LJ. 31The defendants insisted the trustees seek interest from Tony Arida at the settlement on 24 January 2014. The defendants' submission is that acting independently, the trustees pressed forward with their own view of the proper construction of the Church Street contract so as to demand interest under special condition 36 back to 12 July 2012 shortly before settlement. This contention is not borne out by the correspondence. The email correspondence from the solicitors from the defendants, Somerset Ryckmans, clearly shows that just before settlement the defendants insisted that "our clients will not agree to settlement unless interest was paid to our clients...[t]here is no basis for the interest share to which our clients are entitled being withheld on settlement...[i]f there is any dispute regarding interest this can form part of future proceedings to be brought by our clients against Tony Arida". 32The position which the trustees took the following day on settlement corresponded exactly with the defendants' proposal. This is hardly surprising. The trustees may have exposed themselves to potential liability to their beneficiaries, the defendants, if they did not conform with their wishes. At 4.10pm on Thursday, 23 January 2014 Somerset Ryckmans emailed the solicitors for the trustees: "we don't consent to the trustees completing this sale without accounting to our client's for the interest component as well as the principal component due and payable to our clients as per the settlement figures previously provided. We reserve all of our client's rights". The defendants are directly responsible for the trustees' decision occasioned by this correspondence, to make an invalid demand for interest at settlement. The defendants must now bear the costs consequences of their actions. 33In the result therefore I do not find persuasive the analogy with trust proceedings for which Sid, Joseph and George Arida contend. The costs of the Interest Motion will follow the event.

(3) Costs of the March 2014 Motion in the Citibank Proceedings 34The last issue between these parties related to the incidence of costs consequent in the Citibank proceedings also filed by Sid, Joseph and George Arida on 5 March 2014 ("the Citibank Motion"). The Citibank Motion sought the payment out to the applicants/defendants of an amount of $199,983.33 from the trust account of their solicitors, Messrs Somerset Ryckmans. On the morning of the hearing, 27 March 2014, Mr Tony Arida's counsel advised counsel for the defendants/applicants that this sum of $199,983.33 could be released by Messrs Somerset Ryckmans to the defendants/applicants, as their motion had sought. As a result there was no need for Messrs Sid, Joseph and George Arida to pursue their motion any further. But the question of the costs of the Citibank Motion was unresolved. It was agreed that the question of these costs would be argued together with all other questions after the Court had given judgment on the Interest Motion. The Court has received written and oral submissions on the question of the costs of the Citibank Motion. 35The monies that the Citibank Motion sought to release were being held by Messrs Somerset Ryckmans as part of another compromise made on 23 December 2013 to permit the settlement of all the transactions agreed in clause 11 of the 17 December 2013 short minutes of order and contemplated by clauses 4 and 11(a) of the Heads of Agreement to proceed. Clauses 4 and 11(a) of the Heads of Agreement are set out in the Court's principal judgment (at [12] and [17]). 36The parties' dispute related to the interpretation of clause 4 of the Heads of Agreement. This clause permitted the amount of the "first payment" to Mr Tony Arida as defined to be calculated by having deducted from the agreed value (as defined) of the properties in the parties' joint venture, "25% of the debt owed by any of the plaintiff, the first to third defendants to the following financial institutions as at 30 June 2005 that was secured by the Properties including but not limited to [certain named financial institutions]". The apparent commercial objective of this clause was to permit Sid, Joseph and George Arida to deduct Mr Tony Arida's share of the liabilities of their property joint venture. This clause means that Mr Tony Arida would only receive his 25 per cent share of the net value of these properties after the satisfaction of all liabilities associated with the property of joint venture. But for this clause to work fairly and efficiently from Mr Tony Arida's perspective (together with clause 11(b) and (c) of the Heads of Agreement - by which the defendants would obtain debt releases for and indemnify Mr Tony Arida against any joint venture debt obligations), it was important that Mr Tony Arida be able to verify that all liabilities associated with the property joint venture were being deducted from the agreed value in the calculation of the first payment. 37On 23 December 2013 Mr Tony Arida disputed that one of the debts (an Citibank Loan Facility xxxxxx901) that the defendants sought to deduct from the Agreed Value under Heads of Agreement, clause 4, was (i) a debt owed at 30 June 2005, (ii) that was secured by one or more of the properties set out in the schedule to the Heads of Agreement. It was not in issue that the amount of the disputed facility as at June 2005 was $799,933.37, so that Mr Tony Arida's 25 per cent share of this facility as at that date was $199,983.33. Because Mr Tony Arida alleged this was not a deductible debt, this sum was left by agreement in Somerset Ryckmans trust account when the first payment was made on 24 December 2013, pending resolution of the dispute. 38That there was a dispute about this facility is not surprising: the bank's solicitors declared that it could not find the original facility agreement, which "has been misplaced and is not in the security packet in our possession". The defendants claimed that the facility for an $800,000 loan had been signed in or about April 2005 and that Citibank did advance that sum to the defendants secured over joint venture properties that same month. The defendants not unreasonably assumed that, as they were paying out this facility they were "not in the habit of paying banks on non existent loans", contending that the plaintiff should not be disputing this amount was deductible from the Agreed Value. 39The defendants argued that the plaintiff's concession at trial showed that the plaintiff's case was always unarguable and that the plaintiff was bound to lose and should have conceded earlier. The defendants relied on McHugh J's well known statement of relevant principle in relation to the awarding of costs where there has not been a hearing on the merits in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 ("Lai Qin") at 624 that: the court will usually make no order as to costs unless it can be seen that either one party has simply capitulated, because the other was certain to succeed, or because one party has behaved so unreasonably that the other should have the costs of the action. 40Here the defendants can demonstrate neither of the conditions in Lai Qin which would displace the usual result that each party should bear its own costs. Whilst there was ultimately no issue that the Citibank facility was owed as at 30 June 2005, that was established by a bank statement that really only gained special prominence in the served evidentiary materials when attached to an affidavit served on the eve of the hearing - even though it may be accepted that the bank statement was available earlier. In my view it was not unreasonable of Mr Tony Arida to demand strict proof of these facilities, before accepting the quantum of the first payment. His lawyers casting a suspicious eye over what was less than perfect loan documentation, to ensure that the best obtainable evidence was made available was not unreasonable in the circumstances. 41Moreover, it cannot be said that Mr Tony Arida was bound to lose the Citibank Motion. He was arguing a point of construction that the words in the Heads of Agreement clause 4 "the debt owed by any of the plaintiff, the first to third defendants"...meant that the relevant debt obligation sought to be deducted must be owed by all three defendants; the words after the comma must be read conjunctively. The relevant bank statement only refers to two of the three defendants. In my judgment this point was arguable and Mr Tony Arida was not bound to lose it. 42In the circumstances the appropriate order is that each party bear its own costs of the Citibank Motion.

Conclusions and Orders 43The Court has determined the three remaining issues in these proceedings. No interest is payable to the vendor on completion of the Church Street contract between, 24 December 2013, the settlement date of that contract as set by the Heads of Agreement, and the actual settlement date of that contract on 24 January 2014. The Court sees no reason to vary the usual order that costs follow the event in relation to the Interest Motion issues determined on 4 April 2014. And each party must bear his own costs of the Citibank proceedings. 44Orders must also be made to deal with the funds set aside on the settlement of the Church Street contract on 24 January 2014. Therefore the orders of the Court will be as follows: (1) Order that the sum of $479,862.82 held by the trustees for sale be paid to the plaintiff, Mr Tony Arida without any deduction on account of interest accrued up to the settlement of and under clause 5(c) of the Church Street contract as defined in Arida v Arida [2014] NSWSC 395 for the period 24 December 2013 to 24 January 2014; (2) Order that the first, second and third defendants pay the plaintiff's costs of the defendants' 5 March 2014 motion in proceedings 2011/109699; (3) Make no order as to costs of the defendants' motion in proceedings 2010/266736 to the intent that each party will bear his own costs of those proceedings. (4) Adjourn both proceedings (2011/109699)(2010/266736) for mention before the Registrar in Equity at 9am on Tuesday, 30 September 2014. (5) Stay order 1 until 5pm on Tuesday 20 May 2014. (6) Reserve for further consideration, if required, the question of whether any interest is claimable by Mr Tony Arida on the sum of $479,862.82 referred to in order (1), and direct that Mr Tony Arida serve by 5pm on Thursday, 15 May 2014 any written submission (of no more than 2 pages) he wishes to advance as to the basis of any claim for interest on the said sum of $479,862.82. (7) If no submission is served pursuant to order (6) then the Court will note in chambers that no such claim is made. (8) If a submission is served in accordance with direction (6), the defendants may serve any written submission (of no more than 2 pages) in reply by 5pm on Tuesday, 20 May 2014. (9) The parties will notify the Court in their submissions whether they will require an oral hearing of any interest issue or whether the parties are content for the Court to determine any such issue in chambers.

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: 13 May 2014