Sergio Andres Chocron v Mina Onkoud

.The application to vary the costs order

1. Ms Onkoud seeks a variation to the costs order I made on 23 December 2019 against Sergio Chocron to make her estranged husband Fabian Chocron jointly and severally liable for costs.
2. In support of the application, Ms Onkoud relies upon the affidavit of her solicitor Mouna Youssef dated 11 February 2020. Written submissions and this affidavit were emailed to my Associate on 11 February 2020. Mr Fabian Chocron's Australian based family law solicitor was copied into the email.
3. By email dated 13 February 2020, Mr Chocron's solicitor advised that a copy of the documents filed on 11 February 2020 had been forwarded to Mr Fabian Chocron by email and he would respond in relation to the matter.
4. On 12 February 2020, the Sergio Chocron's solicitor advised that she had no instructions to be heard on this application.
5. On 27 February 2020, Fabian Chocron wrote to my Associate from Argentina (and copied in Ms Onkoud's solicitor) indicating that he did not have legal representation in relation to these proceedings. In a later email on 29 February 2020, he complained that he is wrongly described as "Fabian Onkoud" in the defendant's submissions and advised that he intended to engage lawyers to represent him. (This is a reference to the fact that the defendant's written submissions are headed "Defendant's submissions in support of application against Fabian Onkoud for third party costs order"). He also sought access to all relevant documents in the matter.
6. Given the circumstances that Fabian Chocron was unrepresented and residing in Argentina and was not a party to the proceedings, I determined that the matter should be listed for mention and that Mr Chocron could appear by way of telephone from Argentina. My Associate corresponded with the parties to arrange for a suitable date and time.
7. On 5 March 2020, Fabian Chocron sent a long email to my Associate, which I have placed with the court papers (along with his other correspondence), explaining what he does in Argentina on any given day and why he only had limited availability for the listing of the matter, even by telephone. He went into considerable detail outlining how much of his time he spends caring for his children. Details of those commitments include when the children are taken and picked up from school, when he prepares and takes school lunch to the child with special needs, the child's visits to the educational psychologist, children's sporting activities and their dinner and bedtimes. He also sought proper service of the documents on him and that he be properly named as Fabian "Chocron" rather than "Onkoud".
8. My Associate subsequently emailed Fabian Chocron to advise that the matter would be listed before the Court on 10 March 2020, at midday. There was no response to this email.

The hearing on 10 March 2020

1. Prior to the directions hearing today, I had the opportunity to consider Ms Onkoud's evidence and submissions. Significant reliance was placed on the findings I made in the principal judgment which I will consider further below. The affidavit evidence went to the question of Sergio Chocron's assets in Australia and disclosed that he has no real property in Australia.
2. At the listing of this matter before the court today, I advised Ms Onkoud's counsel that I had read all of the submissions and was not satisfied that any variation of the costs order was appropriate. Although it had been anticipated that I would ultimately consider the application in chambers based on written submissions, I listed the matter due to the increasing amount of correspondence sent to my Associate by Fabian Chocron.
3. Counsel for Ms Onkoud was invited to make further submissions but submitted that she did not propose to do so.
4. It is currently 10:20pm in Buenos Aires, Argentina, and 12:20pm in Sydney. He provided a telephone number and was advised that he would be telephoned by the Court on that number. Based on his emails, he would currently be at home with his children.
5. The telephone has rung out several times before I came on to the bench; another call was made only a few moments ago.
6. Had Fabian Chocron answered his telephone I would have advised him that there was no need for him to hire a lawyer as I was not going to vary the costs order made against his brother.
7. Although Mr Chocron indicated that he would be free from 12:30pm Sydney time, it is not clear to me why he would not be free at 12:20pm if he is in fact at home, as he alleged he would be. Despite this, the fact remains there was no email from him confirming that he would take a call at the time nominated.
8. In the circumstances, I invited counsel for Ms Onkoud to consider whether there was any reason why I ought not proceed to finalise the matter today. Given the indication I had already made to her, she submitted that she was content with that course.

Consideration

1. Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) provides that the court has "full power to determine by whom, to whom and to what extent costs are to be paid". This discretion is subject to the qualification that it "must be exercised judicially in accordance with established principle and factors directly connected with the litigation": Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65], per McHugh J.
2. Among the fetters on the discretion to award costs are the rules of the Court contained in Part 42 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). The usual rule is that costs follow the event, unless it appears to the Court that some other order should be made: UCPR r 42.1. There being no apparent reason to depart from the usual rule in this case, on 23 December 2019, I ordered that Sergio Chocron, as the unsuccessful party, pay Ms Onkoud's costs of the proceedings. As soon as I made that order, counsel for Ms Onkoud flagged a potential variation of that order by stating that there may be an application for a third party costs order against the husband as the plaintiff is a person who resides in another jurisdiction and has no assets to speak of, as far as the defendant is aware, in this jurisdiction.
3. It is to be accepted that the terms of s 98 are sufficiently broad so as to confer on the Court a general power to make orders against non-parties. The High Court confirmed that this was the case in Knight v FP Special Assets Limited (1992) 174 CLR 178. Mason CJ and Deane J observed the following at 192 (footnotes omitted): "Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long established categories of case in which equity recognised that it may be appropriate for such an order to be made. For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made." (at pp 192-193)
4. In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 ("FPM"), Basten JA (with whom Beazley JA (as her Honour then was) and Giles JA agreed), identified five criteria for the exercise of the discretion to award costs against a third party at [210] as follows: "(a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest; and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw."
5. In Yu v CAO (2015) 91 NSWLR 190 McColl J (with whom Sackville JA and Adamson J agreed) observed the following in relation to the relevant principles at [138]-[139] (footnotes omitted): "Non-party costs orders have been said to be exceptional. They should not be made where 'an exercise of the jurisdiction against a non-party would be extravagant and unjust.' Elsewhere it has been said that such applications should be treated 'with considerable caution' and that the power should be 'exercised sparingly'. '[E]xceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense … [t]he ultimate question [being] whether in all the circumstances it is just to make the order.' The power to order non-party costs 'is inevitably to some extent a fact-specific jurisdiction and … there will often be a number of different considerations in play, some militating in favour of an order, some against'."
6. In Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 Gleeson JA, with whom Macfarlan and Leeming JJ agreed) at [82]-[81] said this about the relevant test: "In May v Christodoulou at [111], Sackville AJA pointed out that the criteria identified by Basten JA in FPM Constructions (at [210]) (set out at [26] above), are not intended to be and cannot be exhaustive and that other factors may bear on the exercise of the discretionary power in a particular case. What needs to be emphasised is that the exceptional jurisdiction to make a non-party costs order is only to be exercised where, in the circumstances of the case, the interests of justice require that such an order be made: see Yu v Cao [2015] NSWCA 276 at [137] and [139]: 'Exceptional' in the context of the exercise of the non-party costs jurisdiction means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.' There is a further consideration. Care must be taken not to apply the criteria identified by Basten JA in FPM Constructions mechanically. This is because as Basten JA observed (at [214]), it will often be the case that a non-party, be it a company officer or solicitor, will be active in the conduct of litigation and obtain some direct or indirect financial benefit from its success. His Honour continued (at [214]): 'Careful attention is required as to the conduct of the party said to be involved in the litigation and the nature of the "interest" in its outcome or subject matter'."
7. More recently Simpson AJA surveyed the relevant case law in Brand2Content t/as Franchise Works v Dalby [2019] NSWCA 16 at [6]-[26] observing at [12] that "[t]he over-riding consideration is whether it is in the interests of justice to make the order".
8. With these principles in mind, I turn to consider Ms Onkoud's application.
9. Significant reliance was placed by Ms Onkoud on a number of findings I made in the principal judgment which can be summarised as follows. I was comfortably satisfied that the emails were fabricated either by Fabian Chocron alone or the two brothers together. I had regard to this when assessing the other evidence given by Fabian and Sergio Chocron. I was satisfied that there were somewhat complicated financial dealings between the Chocron brothers, and I did not accept Fabian Chocron's evidence that he was not acting in a manner to prejudice Ms Onkoud's entitlement to her share of the matrimonial home in the Family Court proceedings. I observed that both men separately gave evidence in a way that suggested collusion between them.
10. As for the loan itself, I was not satisfied that either of the Chocron brothers had any expectation that Ms Onkoud would be personally liable for the loan from the plaintiff. Rather, I was satisfied that it was understood by all three of them that Fabian Chocron took out the loan on behalf of he and his wife and that it was anticipated that he would repay the loan granted to his wife by Sergio Chocron. A possible reason for doing so was that there was a concern that he may be sued in relation to his business and wished to transfer some of the assets to his wife's name. There was no reason at that time to believe that the marriage may soon end. It is not necessary for me to make any finding in this regard. In any event, as I observed at [158], between late 2010 and late 2014 the nature of the marital relationship changed and Fabian Chocron started looking at ways to enhance his share of any future property divide. I was satisfied that the fabrication of emails was part of that.
11. Based upon these findings, Ms Onkoud contends that this case falls in the category of case recognised in Knight v FP that a non-party has played an active part in the litigation. That "active role" included fabrication of the emails and giving evidence for his brother.
12. The difficulty with this submission is that the category of case referred to in Knight v FP is where, inter alia, the party to the litigation is "an insolvent person or man of straw". That is not the case here
13. I am satisfied that Fabian Chocron had an interest in Sergio Chocron succeeding in the litigation as the estranged couple are disputing property including the property at North Parramatta. Despite this, it is unclear to me whether Fabian Chocron "drove the litigation for his own benefit" or whether it was his brother's idea. The evidence is that the two of them are close. Nor do I accept that there was no interest on Sergio Chocron's part in the litigation apart from assisting Fabian Chocron. Sergio Chocron stood to gain $145,762.55 if successful.
14. Significantly, it was not only aspects of the Chocron brother's evidence I could not accept. I did not accept the evidence of Ms Onkoud that she knew nothing about the loan and that her signature on the loan was forged with the knowledge of their solicitor. Rather, I was satisfied that Ms Onkoud knew about the loan but it was always the expectation that, although it was in her name, her husband would repay it. Ultimately, she has benefited from the arrangement. She has a 50% share in real property funded partly from a loan taken out in her name that her husband was responsible for.
15. Ultimately, I am not satisfied that the interests of justice favour a third party costs order in this matter. In support of the interests of justice test being satisfied, Ms Onkoud submitted that Sergio Chocron is a foreign national and resident of Argentina who owns no real property in Australia. It is noted that he did not prepare income tax returns in Australia and the inference could be drawn that he holds no assets of substance in Australia against which the costs order could be satisfied. As at the date of the hearing, he had not visited Australia since 4 April 2013. On the other hand, Fabian Chocron still owns his share of the matrimonial home in North Parramatta.
16. I have had regard to the submission that if I did not make Fabian Chocron jointly and severally liable for the costs then there is a real likelihood that it would remain unsatisfied. The evidence during the hearing is that Sergio Chocron is a successful businessman. He undoubtedly has assets in Argentina. When he commenced these proceedings in Australia, Ms Onkoud obtained security for her costs in the amount of $20,000. It is to be inferred that the costs incurred exceed that amount. Despite this, I am not satisfied that Sergio Chocron is "a man of straw" as contemplated by the relevant authorities. Although the circumstances in which a third party costs order can be made is not closed, I am not satisfied that it is appropriate to exercise this power in lieu of a further application for security for costs.
17. Mindful of the caution expressed in the above judgments about applying the FPM criteria too strictly, I further note that I am not satisfied that it was Fabian Chocron rather than Sergio Chocron who was necessarily the moving party, nor is there any evidence that Fabian Chocron was the source of funds for the litigation. Despite ultimately being satisfied that the emails were false, there is a live question as to whether the proceedings themselves could be described as "unreasonable and improper conduct".
18. The fact remains that there was contemporaneous document establishing that a loan to benefit Ms Onkoud was taken out in her name and she has in fact benefited from it. Nor am I satisfied that Fabian Chocron's interest in the litigation was "equal to or greater than that of his brothers".
19. I did not accept Ms Onkoud's claim that her signature had been forged on the contemporaneous documents. It is also significant that the loan benefited Ms Onkoud as she now has a legal interest in half the property.
20. For these reasons, I am not satisfied that the variation to the costs order should be made.

ORDERS

1. Accordingly, I make the following orders: 1. The application to vary costs order, Order 3, made on 23 December 2019 is refused. 2. Each party is to pay their costs of this application. 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: 11 March 2020