Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie

Judgment

1. This is my ninth (but the Court's eleventh) judgment in this matter since Pembroke J's 2017 hearing of these proceedings. My first judgment was given on 8 November 2017: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie [2017] NSWSC 1509. My second judgment was given on 30 January 2018: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie (No. 2) [2018] NSWSC 22. My third judgment was given on 29 March 2018: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie (No. 3) [2018] NSWSC 381. My fourth judgment was given on 24 April 2018: Pham v Mazen Zraika; Pham v Sebie (No. 4) [2018] NSWSC 566. My fifth judgment was given on 1 May 2018: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie (No. 5) [2018] NSWSC 567. My sixth judgment was given on 3 May 2018: Ramzy Sebie v Andy Duong Duc Pham (No. 6) [2018] NSWSC 592. My seventh judgment was given on 13 July 2018: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie (No. 7) [2018] NSWSC 1063. The eighth judgment in these proceedings was given by Kunc J on 4 October 2018: Pham v Enterprise ICT Pty Ltd & Ors (No. 8) [2018] NSWSC 1492. My ninth judgment was given on 1 November 2018: Pham v Enterprise ICT Pty Ltd & Ors (No. 9) [2018] NSWSC 1657. Lindsay J gave a further judgment on 23 November 2019, refusing a stay on a writ of execution over the Chiswick property: Pham v Enterprise ICT Pty Limited (No. 10) [2018] NSWSC 1805.
2. This judgment should be read together with these previous judgments which provide procedural context for the present dispute. Events, matters and persons are referred to in this judgment in the same way that they are my previous judgments.
3. This judgment deals with the last outstanding issue before me for determination and relates to the enforcement of a lump sum costs order in the sum of $263,660 the Court made on 30 January 2018 against the first defendant, Mr Robert Sebie. The issue for present determination is whether or not the amount of this January 2018 gross sum costs order should now be paid to the Phams out of Mr Robert Sebie's funds in Court, before the resolution of other proceedings in the Family Court of Australia between Mr Robert Sebie and Ms Musabwasoni ("the payment out issue"). The payment out issue was first raised in the Phams' motion filed in the proceedings on 15 May 2018.
4. Because of intervening events in these proceedings, final argument on the payment out issue took place on 12 December 2018. This argument was followed by short supplementary written submissions. On that day, Mr Zipser of counsel, appeared for the plaintiffs, the Phams. Mr Duc, of counsel, appeared for the second defendant, Ms Musabwasoni. Mr Booth, the solicitor for the Registrar General, appeared briefly on this occasion but was excused. Part of the argument on the payment out issue had taken place earlier, on 2 July 2018, as is explained below.
5. The Court is satisfied on the evidence of service that Mr Robert Sebie and Enterprise ICT Pty Ltd (which at various times had made claim to these monies in Court) had notice of the hearing in this matter, before the Court proceeded on 12 December 2018. Mr Robert Sebie was present and Enterprise ICT was represented by counsel on 2 July 2018.
6. Much has occurred in these proceedings since my judgment on 1 November 2018, my ninth judgment and the tenth judgment of the Court.

The Phams, the Sebies and the Chiswick Property - 1 November 2018 to Date

1. After the Court gave judgment on 1 November 2018, directions were made for further submissions on the payment out issue. The parties' arguments on this issue were heard on 12 December 2018.
2. The writ of possession at the Chiswick property was due to be executed on the morning of 7 December 2018. The Sebie interests brought proceedings in the Court of Appeal to attempt to stay that writ. The matter came before Beazley P and was dismissed: Sebie v Pham [2018] NSWCA 332. The eviction went ahead on 7 December 2018. Thus when the matter came back to Court on 12 December 2018, the Sebie family members were no longer in possession.
3. The Court being satisfied on 12 December 2018 that service on Mr Robert and Mr Ramzy Sebie and Enterprise ICT Pty Ltd was proven, the matter was then called outside Court. There was no appearance on behalf of any of these parties. The Court proceeded to deal with the issues raised in their absence.
4. The Court has taken into account the submissions made by Mr Robert Sebie on the payment out issue on 2 July 2018, as he was not present on 12 December 2018.
5. Once the Phams filed their motion of 15 May 2018, the Court directed, on 28 May 2018, that written submissions be filed on the payment out issue. The Phams filed a detailed written submission on 7 June 2018 and a supplementary submission on the issue on 27 June 2018. The Phams relied upon their principal submission and their supplementary submission on 2 July 2018. Although other issues were argued that day, apart from the payment out issue, Mr Robert Sebie and Mr A Rogers of counsel, appearing for Mr Ramzy Sebie and Enterprise ICT, put submissions on the payment out issue. ENA was not represented that day, but was well aware of the proceedings and was represented on 11 July 2018.
6. More urgent issues between these parties supervened. The Court deferred finalisation of the payment out issue until after execution of the writ of possession.
7. After the matter was heard on 2 July 2018, the Court reserved judgment on three issues, one of which was the payment out issue. The Court has since given judgment on all the other issues argued that day. When the Court gave judgment on 1 November 2018, it directed the parties to provide further submissions on whether the Court should give judgment on the payment out issue before the resolution of the related proceedings in the Family Court of Australia ("the Family Court proceedings").
8. The Family Court proceedings have also progressed since 1 November 2018. On 9 November 2018, the matter was listed before Loughnan J in the Family Court. His Honour indicated that the focus of the Family Court proceedings would be to resolve the matrimonial issues between Mr Robert Sebie and Ms Musabwasoni. His Honour did not indicate in the course of argument any preference for the Family Court of Australia to deal with the payment out issue or other issues involving third parties, such as the Phams.

Determination of the Payment Out Issue

1. The starting point for analysis is the legal ownership of the fund in Court. Mr Robert Sebie was the registered proprietor of the Chiswick Property when orders were made for its sale, when settlement occurred, and when the proceeds of sale were paid into Court. He is entitled at law to the funds in Court, unless some other claimant comes forward to establish a claim in priority to his. The only potential claimant who may fall into that category is Ms Musabwasoni, in respect of her claim in the proceedings in the Family Court of Australia and she has already put submissions on the issue.
2. The other potential claims over the funds in Court have fallen away. The caveats of Enterprise ICT and ENA were removed from the title to the Chiswick Property before it was sold. The Cross Claim that ENA filed has now been stayed for want of provision of security for costs to pursue that Cross Claim.
3. The Phams' entitlement to the gross sum costs orders is an existing liability of Mr Robert Sebie to them. When the Family Court of Australia comes to determine the joint matrimonial assets of Mr Robert Sebie and Ms Musabwasoni, that $263,660 is an existing liability which will reduce the quantum of those matrimonial assets. There has been no appeal against the January 2018 gross sum costs order and the liability in question has now crystallised into a judgment of this Court.
4. Ms Musabwasoni does not have any present right to the funds in Court. She certainly has a claim over the whole of the matrimonial assets of herself and Mr Robert Sebie in the Family Court proceedings under Family Law Act 1975, s 79. But rights arising under s 79 come into existence only when an order is made under that section. Neither that section nor any other provisions in the Family Law Act establish rights in a party to a marriage over the property of the other spouse, arising from the existence of the marriage where those rights did not otherwise exist: Chemaisse & Commissioner of Taxation (No. 3), Re (1990) 97 FLR 176; (1990) 13 Fam LR 724 ("Chemaisse") (at [733]). Ms Musabwasoni makes no claim over the Chiswick property other than in accordance with her rights to bring a claim under the Family Law Act. She has exercised her right to bring a claim where her entitlements have not yet been determined.
5. The Family Court of Australia does not make orders which might indirectly defeat the legitimate claims of third parties over marital property: Bailey & Bailey (decd), In the Marriage of Bailey (1989) 98 FLR 1; (1989) 13 Fam LR 652; (1990) FLC 92-117 ("Bailey"). In Bailey (at p 657), the Full Court of the Family Court of Australia stated that where the Family Court is asked to make an order under the Family Law Act, s 79, against a party to the marriage and that party has an existing bona fide debt to a third party, the Family Court of Australia must "have due regard to the legitimate claims by third parties" and must not make an order which would "defeat the legitimate claims of the third parties in respect of whom the liabilities have been incurred". The Full Court continued in Bailey (at p 658), as follows: "…it is not proper for the court to proceed in a property application without due regard to liabilities of parties which are either established or in the process of being determined where the liabilities are of such magnitude as to be defeated by an order being sought in the Family Court".
6. Mr Robert Sebie's liability to the Phams is already established by a judgment of this Court. The Phams are in a strong position to proceed to execute upon their existing judgment against Mr Sebie's assets, without waiting until the resolution of the proceedings in the Family Court of Australia.
7. The principles stated in Chemaisse and Bailey have been applied in a number of cases in this Court. One of these, Chan v Acres (2013) 51 Fam LR 90; [2013] NSWSC 1597 ("Chan"), applied Bailey and considered certain amendments to the Family Law Act that reinforced the principles of Bailey. This Court said in Chan (at [106] - [107]) as follows: "[106] The Full Court in Bailey also observed: "For the Family Court when exercising jurisdiction under s79 to fail to take into account liabilities which term encompasses claims of all sorts as referred to above, would be to ignore and in many cases to defeat legitimate claims of the third parties in respect of whom the liabilities had been incurred and this, in our view, it is not entitled to do …" The combination of the statement by the High Court in Ascot Investments and Harper and s79A clearly indicates to us that it is not proper for the Court to proceed in the property application without due regard to liabilities of a party which are either established or in the process of being determined where the liabilities are of such magnitude as to be defeated by the order being sought in the Family Court. [107] The decision of Bailey is authority for the proposition that, in the circumstances before him, the trial judge was correct in staying Mrs Bailey's application pending determination of the interveners' Supreme Court claims. The factual circumstances of this case are different. However, the passages to which I have just referred primarily counsel that the Family Court in exercising jurisdiction under s 79 must take into account liabilities to third parties and must not proceed without due regard to those liabilities. That counsel is now reflected in the FLA. In considering what order (if any) should be made in property settlement proceedings, s 79(4)(e) requires the Court to take into account "the matters referred to in sub-s 75(2) so far as they are relevant". Section 75(2)(ha) identifies "the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt so far as that effect is relevant".
8. And again in Cypjayne Pty Ltd v Sverre Rodskog [2009] NSWSC 301, the Court said (at [50]) as follows: "[50] It was also argued that hardship would be occasioned to Mr Rodskog's wife - from whom he is now divorced - by depleting the pool of matrimonial property available for division between them. However, there is no hardship to one spouse in requiring the other to perform his ordinary legal obligations. It is well-established that a spouse's claim to discretionary matrimonial property adjustment, under (CTH) Family Law Act, s 79, does not prevail over the other spouse's obligations to third parties, and that the pool of divisible property is ordinarily calculated by deducting from the gross assets the liabilities of the spouses and each of them to third parties [Prince & Prince (1984) 54 ALR 467 ; (1984) 69 FLR 150 ; (1984) 9 Fam LR 481 ; (1984) FLC 91-501; Bailey & Bailey (1989) 98 FLR 1 ; (1989) 13 Fam LR 652 ; (1990) FLC 92-117; Rowell & Rowell (1989) 96 FLR 449 ; (1989) FLC 92-026; Semmens v Commonwealth (1989) 13 Fam LR 715 ; (1990) FLC 92-116; Biltoft & Biltoft (1995) 19 Fam LR 82; Official Trustee in Bankruptcy v Donovan (1996) 20 Fam LR 802]. The present obligation could not be said to be one incurred for the purposes of defeating a claim by Mr Rodskog's wife and thus liable to be set aside under Family Law Act, s 106B; the obligation was incurred long before (in 2004) at the time of execution of the Partnership Deed."
9. Appellate decisions of the Family Court of Australia also make clear that, at the eventual trial of the Family Court proceedings, it is open to Ms Musbwasoni to argue that her ex-husband should bear the burden of the post-separation costs liability that he incurred to the Phams. She can argue that his liability to the Phams should be deducted from his ultimate share of the joint matrimonial property. The Family Court of Australia has developed principles to deal with situations where a party to a marriage, post separation, depletes or distributes matrimonial assets. This is not an uncommon issue in family law proceedings: see for example the Omacini v Omacini; sub nom AJO v GRO (FLR) (2005) 191 FLR 317; (2005) 33 Fam LR 134; (2005) FLC 93-218; [2005] FamCA 195 at [30]. But even when such an argument is pursued, the Court's first step in considering any application under s 79 is to determine the net assets of the parties at the time of trial, which will involve deducting existing liabilities from their assets: Bailey at p 656 and In the Marriage of Shaw (1989) 95 FLR 183 at p 822-823.
10. Consideration of these principles makes it clear that there is no good reason to delay the hearing and determination of the Phams application to have the amount of the January 2018 gross some cost order paid out of Court from Mr Robert Sebie's monies in Court. Justice can still be done in the Family Court of Australia to take into account Mr Robert Sebie's incurring of this cost liability. Ms Musabwasoni can argue the amount in question should be deducted from her ex-husband's share of matrimonial property. And as that matrimonial property would appear at least to represent the net amount of the proceeds of sale of the Chiswick Property of over $2.2 million, there will still be ample funds available to satisfy any orders giving Ms Musabwasoni even 60% of matrimonial property. Moreover, given the way that the Sebie interests have conducted these proceedings with repeated attempt to delay them, there is a real risk that if the Phams' motion is not permitted to proceed now that they may be long delayed in obtaining satisfaction of their January 2018 gross sum costs judgment.
11. The Phams advanced an alternative argument. They contended that order 12 (b) of the orders made by Pembroke J on 15 May 2017, created an issue estoppel against Mr Robert Sebie now saying that the January 2018 gross sum cost order should not be deducted from the net proceeds of sale of the Chiswick Property. Order 12(b) ordered inter alia Mr Robert Sebie to pay the certified amount of the net proceeds of the sale of the Chiswick Property into Court where it should be held pending "the determination by the Family Court of Australia of the amount, if any, of the second defendant's claim against the net proceeds of sale of the [Chiswick] Property, after the set of an amount for the plaintiff's costs". The Phams contend that this gave priority to the satisfaction of the Phams' costs of the proceedings out of the proceeds of sale, before any claim by Ms Musbwasoni in the Family Court of Australia to the funds. Their argument is that after a contest, to which Ms Musabwasoni was a party, Pembroke J decided that the Phams' costs of these proceedings would be set off against (and therefore it is said may now be deducted from) the proceeds of sale of the Chiswick Property, before the proceeds were available to meet orders in the Family Court of Australia. The Phams submit that Pembroke J's reasons for decision on the same day make this intention clear: Pham v Enterprise ICT Pty Limited [2017] NSWSC 583 at [10].
12. It is unnecessary to decide this alternative argument. Issues have been raised as to whether Ms Musabwasoni had proper notice of the potential to make order 12 before it was made. And the application of general principle leads to a result that is consistent with Pembroke J's orders of 15 May 2017.
13. Ms Musabwasoni, Mr Robert Sebie and Mr Ramzy Sebie all advanced written submissions against the conclusion that the Court has reached. The Court has not found their submissions persuasive. Ms Musabwasoni argued that Pembroke J's orders of 15 May 2017 did not bind her and did not have the effect for which the firm contended. But it has not been necessary to decide the case on that basis. In the end, Mr Duc did not put forward, on behalf of Ms Musabwasoni, any authority which would suggest that the Court should not follow the line of cases starting with Bailey. Mr Robert Sebie and Mr Ramzy Sebie's submissions are difficult to follow and do not raise any cognizable legal issue that would answer the Phams arguments that they should have orders made for the payment of their costs out of the funds in Court.
14. The Phams also make a claim for interest. Their 7 June 2018 submissions elaborate their claims for interest under Civil Procedure Act 2005 ("the CPA"), s 101 on the January 2018 gross sum costs order. Judgment has been entered on this order. Ordinarily that judgment will bear interest under CPA, s 101. There is no reason why that judgment for interest should not also be satisfied out of Mr Robert Sebie's funds in Court, in the same way the Court here orders that the judgment for the principal proceedings should be so satisfied.
15. But interest has not yet been calculated. In their supplementary submission on 27 June 2018 the Phams offered preliminary calculations of interest on the January 2018 gross sum costs order, calculated up to 30 June 2018, in accordance with Uniform Civil Procedure Rules 2005 ("UCPR"), r 36.7, being a rate which is 6 per cent above the Reserve Bank of Australia's cash rate. But those calculations are now out of date and should be revised to bring them up to a clearly identified date in the future, when payment out will occur.
16. The Court will also order the payment of interest out of the funds in Court once a satisfactory interest calculation on the $263,660 is done. For that purpose, the Court will appoint Wednesday 27 March 2019 as the date on which the Court will enter orders in chambers for the payment of interest. And therefore, interest should be calculated up to that date. The matter need not be listed on 27 March 2019, unless some further dispute arises between the parties. If a dispute does arise, the parties can take advantage of the liberty to apply also granted by the orders made today.
17. This structure will give the Phams sufficient notice to allow them to prepare precise calculations of interest and will give the other parties sufficient time to check the Phams' interest calculations.

Conclusion and Orders

1. In the result, the Court has found the Phams' submissions persuasive and has decided now to order the payment of t fund in Court on Wednesday 27 March 2019, the amount of the January 2018 gross sum costs order, namely $263,660. This amount is exclusive of interest.
2. The Phams have been successful on this issue. Mr Robert Sebie was the principal opponent of the Phams on the payment out issue. Although he did not appear on 12 December 2018, the Court was required to treat him as opposing the orders sought, as he never formally withdrew his opposition to the order. The Court will order him pay the Phams costs of determining this issue. But he may wish to argue that Ms Musabwasone should bear with him some of the costs of this issue, as she did put limited argument against the making of these orders. He will have liberty until 27 March 2019 to move by motion to vary the orders made today.
3. Interest still needs to be calculated on the sum of $263,660. The orders below include directions for that to occur. And against the possibility the Sebie interests wish to appeal against this judgment, the order that the Court makes today will not be operative for a reasonable period.
4. The Phams have foreshadowed further claims for costs and gross sum cost orders in respect of parts of the proceedings not already the subject of costs orders. They can file motions to deal with those issues as advised. They have motions seeking some of these orders already on foot.
5. But such further matters will not automatically be listed before me. It is logical for them ultimately to be decided by me, because of my familiarity with the proceedings. But no availability exists in my diary in the short to medium term for a further day of hearing in this matter. If further orders of this nature are to be sought, any motions can be listed before the Registrar. In due course, such motions can be listed during available time in my Court diary. To facilitate this process, the matter will be listed for mention before the Registrar on Wednesday, 3 April 2019.
6. For these reasons the Court makes the following orders and directions: 1. Order that on or after 27 March 2019, there may be paid out of Court to the plaintiffs the sum of $263,660 (exclusive of interest) from the funds in Court in the name of Mr Robert Sebie, the first defendant; 2. Direct that by 4pm on 1 March 2019, the plaintiffs serve on all other parties and file in Court Short Minutes of Order setting out the plaintiffs' fully worked calculation of interest on the Court's 30 January 2018 gross sum costs order, calculating the interest thereon under Civil Procedure Act 2005, s 101, up to 27 March 2019; 3. Order that the first defendant, Mr Robert Sebie, pay the plaintiffs' costs of the issue described in the Court's judgment at today's date as "the payment out issue"; 4. Grant liberty up to and including 27 March 2019 to the first defendant, Mr Robert Sebie, to apply by motion to vary order (3) to seek to have the second defendant, Ms Musabwasoni bear some portion of the costs the subject to order (3); 5. List proceedings before the Registrar in Equity on Wednesday, 3 April 2019 at 9.00am for the return of any further application by the plaintiffs for a costs orders or lump sum costs orders in respect of costs incurred by the plaintiffs in these proceedings after 30 January 2018, or for the return of other applications by any other party; and 6. Grant liberty to apply in respect of any dispute about the calculations of interest the subject of order (2).

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