Oxford (NSW) Pty Ltd v KR Properties Global Pty Ltd t/as AK Properties Group ABN 62 971 068 965

Supreme Court of NSW|2024-06-19|Before: Meek J

Solicitors: Horowitz & Bilinsky (First and Second Applicants / First and Second Cross-Claimants) Fortis Law (Proposed garnishee - named as being affected by the orders) File Number(s): 2020/7703

Introduction

HIS HONOUR: The application before the Court (by notice of motion filed on 14 June 2024) is brought by the first and second cross-claimants (judgment creditors) in relation to a judgment debt in the amount of $701,988.74 (debt) owed by Pierre Kazzi as second cross-defendant (judgment debtor). The application seeks a garnishee order against Fortis Law Pty Ltd (Fortis Law), the judgment debtor's solicitors and proposed garnishee.
The debt is consequent upon orders made between the judgment debtor (as appellant) and the judgment creditors following proceedings in the Equity Division which were the subject of an appeal heard by the Court of Appeal on 24 April 2024 (appeal) and determined less than two weeks ago on 7 June 2024, being Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143 (7 June Judgment).
The application is supported by an affidavit of the judgment creditors' solicitor, Liam Carney, which sets out how the debt sum is calculated. The calculation was by reference to a judgment (as varied by the Court of Appeal) in the sum of $918,545.46, less amounts paid of $15,921.82 and an amount of $278,023.86 held in Horowitz & Bilinsky's trust account to be released to the judgment creditors, plus post-judgment interest of $77,388.96.

Hearing

On the application, Mr Horowitz of counsel has appeared for the judgment creditors. Ms Scott of counsel has appeared for Fortis Law as the proposed garnishee.
Initially, I had some concern regarding whether a garnishee order was apt in the context of moneys that had been paid into a trust account, and whether those moneys could properly be said to relate to a "debt" that existed as between the proposed garnishee and the judgment debtor, Mr Kazzi. In light of that concern, I queried whether the moneys could be paid into Court.
Mr Horowitz indicated that, for his part, he did not object to that course being taken.
I then proceeded to formulate an order. At the conclusion of my formulation of an order, Ms Scott then indicated that she objected to the proposed order. She submitted that the order ought not be made as Fortis Law, she said, had a lien over the funds paid into the trust account.
Ms Scott drew my attention to the decision of Slattery J in Atidote Pty Ltd t/as Harcourts, The Property People Sydney v Mohammad Najjar as receiver & manager of Trinity Investments (NSW) Pty Ltd (receiver & manager appointed) [2024] NSWSC 206. In particular, she drew my attention to [42] of the reasons for judgment: 42. The claim of a judgment creditor as a garnishor is subject to any rights and equitable interests which existed over the debt owed to the judgment debtor before attachment through the garnishee procedure: Norton v Yates [1906] 1 KB 112. If a third party has a valid lien or charge over the debt prior to the making of the garnishee order, the priority of that claim must be given effect: MG Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22. No garnishee order for payment will be made if the judgment debtor's entitlement against the garnishee relates to property in which third parties have a beneficial interest: Roberts v Death (1881) 8 QBD 319; Plunkett v Barclays Bank Ltd [1936] 2 KB 107; Bank of New South Wales v Coleman (1898) 14 WN (NSW) 155; and Pogorzelska v Bechara [2015] NSWSC 92 at [30]-[33] per McDougall J. Money held in a bank account on trust for another and not beneficially for the judgment debtor is not attachable: Wentworth v Rogers [2003] NSWSC 472.
I made the observation that, at that stage, I did not have any details or evidence of any moneys over which Fortis Law had at least claimed to have a lien.
Ms Scott then sought to re‑open the application to tender some documents. Mr Horowitz did not object to her taking that course.
Ms Scott handed up four documents, being two statements of account from Fortis Law to Mr Kazzi and two invoices from counsel who acted for Mr Kazzi in relation to the appeal.
The amounts referred to in those documents total $193,702.35, at least according to Ms Scott's calculations. I have not separately attempted to add the figures but do not doubt her calculation. In addition to those statements of account and invoices, Ms Scott indicated from the Bar table that she was due fees in the sum of $26,100. Hence, the total of the fees which Ms Scott says are claimed is just under $220,000.

Orders of the Court of Appeal

On 5 June 2024, Mitchelmore JA delivered reasons for judgment in KR Properties Global Pty Ltd (ACN 602 693 729) t/as AK Properties Group (ABN 62 971 068 965) v Kazzi [2024] NSWCA 141 (5 June Judgment) which concerned an application to the Court for freezing orders. Her Honour made the orders recorded at [88] as follows: 88. Accordingly, I make the following orders: (1) Upon the first and second cross-appellants giving the usual undertaking as to damages and the other undertakings recorded in Schedule A of the Form of Orders annexed to the orders and marked "A", orders are made on the terms of Annexure "A". (2) The cross-respondent is to pay the cross-appellants' costs of the notice of motion filed on 24 May 2024. (3) The undertaking given by the solicitors on the record for Mr Kazzi on 3 June 2024 is discharged. (4) Liberty is granted to apply on 12 hours' notice. (5) These orders are to be entered forthwith.
It is evident that the first order is made by reference to the form of orders marked Annexure "A". The orders in Annexure "A" include orders 5 to 8 as follows: FREEZING OF ASSETS 5. For the purposes of these orders: "Property" means the property known as [XX] Noble Street Gerringong, being Lot [X] in Strata Plan [XXXXX]. "Contract for Sale" means the contract for sale of the Property entered into by you on or about 23 April 2024. "Proceeds of Sale" means the amount paid by the purchaser of the Property pursuant to the Contract for Sale LESS: (i) any amounts required to be paid to Perpetual Corporate Trust Limited to discharge the mortgage over the Property; and (ii) any conveyancing costs and disbursements payable in respect of the sale of the Property; and (iii) any agent's commission payable in respect of the sale of the Property. 6. You are to cause the Proceeds of Sale, which, on the undertaking of your solicitors on the record, Fortis Law, on 3 June 2024, were to be paid into the Trust Account of Fortis Law following completion of the Contract of Sale on 4 June 2024, to remain held in the Trust Account until further order. 7. You must not dispose of, deal with, charge, mortgage or encumber the Proceeds of Sale in anyway. 8. Paragraph 7 does not prevent you from paying the Proceeds of Sale into the trust account specified in paragraph 6 if that has not already occurred by the date of this Order.
There is contention between the parties as to the basis on which the hearing before Mitchelmore JA proceeded.
Mr Horowitz submits, at least by reference to [86] of the 5 June Judgment, that the hearing before Mitchelmore JA proceeded on the basis that Mr Kazzi had no liabilities (at least at the time of the hearing) and, in particular, no liabilities for legal costs. He refers to an affidavit of Petar Jakimov sworn on 21 May 2024 as solicitor for Mr Kazzi, and submits that the affidavit made no mention of any amounts that were owing in respect of legal fees. Further, he says there was no suggestion on the hearing before Mitchelmore JA that any lien was claimed by Fortis Law in respect of funds owing.
Ms Scott disputes that contention and submits that the hearing necessarily proceeded on the basis that the orders were subject to any application Mr Kazzi may make for payment of living expenses or legal expenses.

Consideration

It is not immediately evident to me that claims for legal expenses in the order of either $193,000 or $220,000 were brought to the attention of Mitchelmore JA. I do not say that as any definite conclusion. Rather, it is simply my impression, having briefly considered the reasons for judgment in the context of this urgent application.
At the conclusion of [86] of the 5 June Judgment, Mitchelmore JA considered that in the event that Mr Kazzi requires access to part of the net proceeds for the payment of living expenses or legal expenses, he should make that application with evidence.
However, I have some doubt as to whether the orders were made in a context where a claim of lien in the order of either $193,000 or $220,000 was contemplated. It is evident from the documents tendered by Ms Scott that (i) the invoices containing counsels' fees are dated 26 April 2024, and (ii) the invoices referred to in the statements of account of today's date are respectively dated 16 February 2024, 30 April 2024 and 10 June 2024. Thus, all of the invoices bar one (namely, the invoice for 10 June 2024) were for claimed fees or amounts which pre‑dated the hearing of the matter before Mitchelmore JA on 3 June 2024.
What have not been tendered or adduced are the terms of any costs agreement between Fortis Law and Mr Kazzi.
On this urgent application, I am in no position to know what the terms of any such agreement between Mr Kazzi and Fortis Law are, or whether there is any rightful claim by Fortis Law for payment of such amounts.
In all of the circumstances of the case, I consider that the appropriate step for me to take is to direct that the funds held by Fortis Law be paid into Court and held in Court pending any applications by the judgment creditors or by Fortis Law in relation to any lien that it has or may be able to establish.
The intent of the payment of funds into Court is twofold: first, to ensure that the funds are held in a way such that the respective claims can be properly ventilated; and secondly, to not prejudice any rightful claim in respect of any lien that is able to be established.

Costs

Mr Horowitz contended that costs be simply reserved. Meanwhile, Ms Scott submitted that Fortis Law should be entitled to its costs (to be paid by the judgment creditors).
Whilst Ms Scott says that the application was for a form of garnishee order, the context of the application arose urgently by reason of the orders made by Mitchelmore JA in the 5 June Judgment, in particular order 6. That order was subject to further order and, at [175] of the 7 June Judgment, Mitchelmore JA stated the following: 175. For the avoidance of doubt, the freezing orders that I made against Mr Kazzi on 5 June 2024, on the application of the Owners, continue for 14 days from the date of this decision or until further order.
It is evident that, in the context of claims being made to the funds, the Court would need to address the making of a further order. That is precisely what has occurred.

Orders

The orders of the Court are those that I had earlier formulated. The Court: 1. Directs, by way of further order in relation to order 6 of the freezing orders being Annexure A to the orders made by Mitchelmore JA on 5 June 2024, that the moneys paid into the trust account of Fortis Law under that order be now paid into Court pending any application for the moneys to be paid out including by the first and second cross-claimants (the judgment creditors) and by Fortis Law and is without prejudice to such if any right of Fortis Law in relation to the claiming of a lien. 2. Orders that the costs of and incidental to the notice of motion in respect of the hearing today are reserved, to be dealt with in respect of applications for payment out of the funds.

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: 21 June 2024

At a glance

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Judgment (8 paragraphs)

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Cases Cited (5)