Zreika v Royal

Federal Court of Australia (Full Court)|2019-12-19|Before: O'Callaghan JJ

Introduction 2 Six appeals were heard together. They were brought by Nathan El Ali (a bankrupt) (NSD 1798 and 1799 of 2016), his nephew Mahmoud El Ali (NSD 29 of 2017), Mahmoud Zreika (Mr Zreika) (NSD 1801 of 2016), Otsi Stojanovski (Mr Stojanovski) (NSD 1794 of 2016) and John Rene Nazloomian (Mr Nazloomian) (NSD 1793 of 2016). Mr Nazloomian became bankrupt after the appeal was heard. Judith Royal and Peter Royal (the Royals) and Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali (Mr Jones) are respondents in all of the appeals. Ottoman Investments Pty Ltd (in liq) (Ottoman) is a respondent to the appeal brought by Mr Zreika. Saracen Holdings Pty Ltd (in liq) (Saracen) is a respondent in the appeals brought by Mr Zreika, Mr Nazloomian and Mr Stojanovski. Saracen took no active role in the appeals. 3 The appeals relate to four judgments: the Principal Decision delivered on 5 July 2016 (Royal v El Ali [2016] FCA 782), the Orders Decision delivered on 23 September 2016 (Royal v El Ali (No 2) [2016] FCA 1156), the Costs Decision delivered on 22 December 2016 (Royal v El Ali (No 3) [2016] FCA 1573) and the Deed Decision delivered on 23 March 2017 (Royal v El Ali (No 4) [2017] FCA 299). 4 Mr Zreika and Mr Nazloomian appealed all of those judgments. Mr Stojanovski appealed all but the Deed Decision. Mahmoud El Ali appealed only the Costs Decision. Nathan El Ali filed an appeal against the Principal Decision and the Costs Decision, but his appeal against the Principal Decision was dismissed by orders made on 21 July 2017 because, as a bankrupt, he was not competent to bring it. Ottoman and Saracen did not file any appeals. 5 This Court published reasons for dismissing all six appeals (save for partial success by Mr Zreika in his appeal) and made orders accordingly on 24 June 2019: see Zreika v Royal [2019] FCAFC 82. In relation to Mr Zreika's appeal, the Court varied Order 8 made by the primary judge in the Orders Decision, with the effect that Mr Zreika's liability under that order was reduced from $800,000 to $200,000 having regard to the principles discussed by the High Court in Brady v Stapleton [1952] HCA 62; 88 CLR 322 (the Brady v Stapleton ground). The Brady v Stapleton ground was raised very late in the appeal proceedings (on 28 May 2018 as additional submissions when Mr Zreika filed reply submissions ahead of a hearing set down for 12 and 13 June 2018); it was not raised at all before the primary judge. 6 A number of questions were reserved by the Full Court including the question of costs of the appeals and whether lump sum costs orders should be made, the payment out of any monies paid into Court, and any further or consequential matters that may be reserved for further consideration including the issue of the extent to which any of the above matters should be referred to a judge or registrar of the Court. The parties were ordered to file proposed orders and submissions. Of the appellants, Messrs Zreika and Mahmoud El Ali filed separate written submissions prepared by Mr Barlin of counsel. Written submissions made by Mr Fernon of counsel on behalf of Messrs Nazloomian and Stojanovski were contained in a single document. Nathen El Ali did not file written submissions and Saracen did not participate in the appeals at all. Dr Birch SC and Ms Thew made joint written submissions on behalf of the Royals and Mr Jones (who we will refer to as Royals/Jones). Ottoman also filed written submissions. 7 Each of the appellants who filed written submissions accepted that costs should follow the event. Accordingly, those appellants accepted that the Court should make orders that each appellant pay the respondents' costs of their appeal as agreed or taxed, save that Mr Zreika said that, in recognition of his success on the Brady v Stapleton ground, he should be ordered to pay only 70% of the Royals/Jones' costs as agreed or taxed. All opposed the making of a lump sum costs order as sought by the Royals/Jones. Ottoman sought orders that Messrs Stojanovski and Zreika pay Ottoman's costs of their respective appeals as agreed or taxed, but Ottoman's submissions seem to seek an order that Mr Zreika pay Ottoman's costs in the Stojanovski appeal. Submissions were also made in relation to the disposition of moneys held in Court pursuant to orders made by the primary judge or following interlocutory applications made prior to the hearing of the appeal.

Should the Court make a lump sum costs order in favour of the Royals and Mr Jones?

Legal principles 8 In Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403 (Paciocco) at [13]-[20], the Full Court (Allsop CJ, Besanko and Middleton JJ) set out the principles to be applied in relation to the decision whether to make a lump sum costs order. Those principles are as follows: 13 The Court has a general discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (the 'Federal Court Act'). Under s 43(3), the Court may, among other things: (a) make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial; … (d) award a party costs in a specified sum;… 14 Section 43 of the Federal Court Act is supported by r 40.02(b) of the Federal Court Rules 2011 (Cth) (the 'Rules'), which provides: A party or a person who is entitled to costs may apply to the court for an order that costs: … (b) be awarded in a lump sum, instead of, or in addition to, any taxed costs;… 15 The purpose of such a rule is "to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 ('Beach Petroleum') at 120. 16 On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ('Central Practice Note') and the Costs Practice Note (GPN COSTS) ('Costs Practice Note'). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. 17 The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. 18 We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] ('Sigalla'). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee's report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. 19 Whilst the Costs Practice Note now suggests that most cases should have a lump sum costs order approach applied unless there is some characteristic that would make it unsuitable, a lump sum costs order is not mandated in all instances. In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19]. 20 There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 9 In Coshott v Prentice (No 2) [2018] FCAFC 1, the Full Court (Logan, Kerr and Farrell JJ) noted (at [19]) that the circumstances in which a lump sum order will be made are not confined to matters of limited complexity and (at [21]) that the Costs Practice Note is to be understood as a guide, rather than an inflexible set of rules as to how such applications are to be made.

Submissions 10 The Royals/Jones submitted that, as the appeals were heard together, it was appropriate that lump sum costs orders should be made and the Court should apportion those costs between the various appellants proportionately to the time and effort expended by the respondents in meeting each of the various appeals. They calculate the gross costs they incurred to be $363,524.33 (inclusive of GST). They say that lump sum orders should be made on the following basis: (1) A discount of 10% against the contingencies of taxation should be applied to the solicitors' total fees of $116,194.33 (inclusive of GST) leaving an amount of $104,574.90 on account of solicitors' fees. No discount should be applied to counsels' fees in an aggregate amount of $246,950 (inclusive of GST). Accordingly the lump sum amount claimed is $351,524.90. (2) Liability for the lump sum amount should be apportioned between the appellants as follows: (a) Mr Zreika should pay 45%, subject to a further 20% discount recognising his partial success, leaving an amount of $126,548.97 to be paid by him. (b) Mr Stojanovski and Mr Nazloomian should each pay 17.5%, being an amount of $61,516.86 each. (c) Mahmoud El Ali and Nathan El Ali should each pay 10%, amounting to $35,152.49 each. (3) They seek leave to adduce lay and expert evidence in support of their application and agree that it would be appropriate for the amount of the lump sum costs order to be determined by a single judge or registrar. 11 As noted above, each of Messrs Zreika, Nazloomian, Stojanovski and Mahmoud El Ali opposed the making of a lump sum cost order. They say that they are entitled to avail themselves of a taxation regime in circumstances where there are multiple appellants and where it is difficult to determine what amount ought to be attributed to each appellant's arguments. Mr Fernon (for Messrs Nazloomian and Stojanovski) submitted that the overriding requirement of the "overarching principles" set out in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) is that there be a "just resolution" on costs and that could not be reached by a lump sum order nor would it be practicable and appropriate, given the facts of the case. For reasons set out below, while accepting the need for a "just resolution" on costs, the Court does not accept those submissions. 12 Mr Zreika submitted that he should pay 70% of the Royals/Jones' costs of the appeal. He submitted that the benefit of any discount to which the Royals/Jones concede he is entitled due to his partial success on the Brady v Stapleton ground would be dissipated if a lump sum cost order were to be made such that the other appellants would obtain the benefit of his partial success. The Court does not accept that the regime proposed by the Royals/Jones would have that result for reasons set out below. 13 Mr Fernon submitted on behalf of Mr Stojanovski and Mr Nazloomian that the lump sum costs order application by the Royals/Jones ignores the existence of costs orders made on interlocutory applications related to the appeals and seeks to burden some appellants with costs awarded against other appellants and, in Mr Nazloomian's case, deprives him of the benefit of two costs orders awarded in his favour against Royals/Jones. 14 As is demonstrated below, Mr Fernon's arguments promote an appearance of great complexity. However, the Court does not accept that the existence of reserved costs orders or as yet unquantified costs orders in relation to interlocutory applications is a reason to refuse to facilitate the making of lump sum costs orders in favour of the Royals/Jones. 15 Mr Fernon relies on orders made on 2 March 2017 reserving costs of interlocutory applications filed on 1 February 2017 by the appellants in all of the appeals (other than Nathan El Ali's appeals). The application made on 1 February 2017 was to stay costs orders for $442,668 made in NSD 1731 of 2013 and $212,166 made in NSD 771 of 2014 made in the Costs Decision. Mr Fernon says that it would not be fair to either of Mr Nazloomian or Mr Stojanovski that they be required to pay any part of the costs relating to Nathan El Ali's application for a stay, but that submission should be rejected as (based on the Court's record) Nathan El Ali does not appear to have made such an application. 16 Mr Fernon contends that Mr Nazloomian and Mr Stojanovski were successful on their stay applications filed on 1 February 2017 but, as they were seeking an indulgence, the result should be that there be no order as to costs. The Court does not accept that submission because the stay was granted on the conditional that the applicants for the stay arranging for the amount of the costs made on 22 December 2016 to be paid into Court. Consent orders were made on 6 and 26 April 2017 extending the time for payment into Court and payments into Court were only made on 5 May 2017. As the Royals/Jones have now been successful on the appeal (save in relation to the amount subject to Order 8) it is appropriate that they be entitled to costs of that application. They say that they have included those costs in the application for a lump sum costs award. Accordingly, this is not a reason to refuse to make a lump sum costs order. 17 Mr Fernon relies on orders made on 21 July 2017 in the appeals brought by Mr Stojanovski, Nathan El Ali, Mahmoud El Ali and Mr Zreika in relation to an application for security for costs of the appeals filed by the Royals/Jones on 14 February 2017 (inaccurately said to have been filed on 27 February 2017 in the orders). The Court ordered that Mr Zreika pay security of $50,000, Mr Stojanovski pay security of $45,000 and Mahmoud El Ali and Nathan El Ali each pay security of $21,000. The order made in Nathan El Ali's appeals was that the costs of the application be the parties' costs in the appeal. In the Mahmoud El Ai, Stojanovski and Zreika appeals, the order was that the Royals/Jones costs of that application be their costs in the appeal. Again, it is appropriate that the costs of these interlocutory applications be recovered by the Royals/Jones as they were successful on the appeal and they say that they have taken these costs into account in their application for a lump sum costs order. This is not a reason to refuse to make a lump sum costs order. 18 Mr Fernon also relies on the fact that interlocutory applications filed on 14 February 2017 and 29 September 2017 by which the Royals/Jones sought security for costs from Mr Nazloomian were dismissed with costs as agreed or taxed. Mr Fernon submitted that the orders made in Mr Nazloomian's favour are for the benefit of his bankrupt estate since they were made before he became bankrupt. However, any lump sum cost order now sought by the Royals/Jones is not provable in the bankrupt estate: see Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52. While those things are true, that is not a reason not to make a lump sum costs order in relation to the appeals if the Court is otherwise satisfied that the proposed apportionment of costs is appropriate and just. The Royals/Jones have foreshadowed that they would seek a set off of the orders in favour of and against Mr Nazloomian. That is not a matter with which the Full Court needs to engage at this time: it would be a matter for consideration by a single judge but that factor also is not a reason which should impede the making of a lump sum costs order. 19 Mr Fernon also relies on an order made on 21 July 2017 that Nathan El Ali's appeals against the Principal Decision be dismissed with no order as to costs. Although it does not appear to have been apparent to Mr Fernon, this order responded to a notice of objection to competency filed by the Royals/Jones on 10 March 2017 and an application filed on 10 May 2017 in which the Royals/Jones sought the question of competency to be heard ahead of the appeals on 26 June 2017. Mr Fernon submitted that the Royals/Jones cannot now seek to recover their costs associated with that application from Mr Nazloomian and Mr Stojanovski as they bear no responsibility or cost penalty in respect of that issue. It is not apparent that the Royals/Jones are seeking their costs of that application as against Mr Nazloomian and Mr Stojanovski. As is apparent from these reasons, the orders made on 21 July 2017 followed a hearing at which a range of issues were dealt with, including security for costs applications made by the Royals/Jones and/or Ottoman against the appellants, security in relation to Order 8 (or in the alternative, a stay or dismissal of Mr Zreika's appeal) and the competency of Nathan El Ali's appeals. The apportionment of costs is designed to address the extent of the involvement of each of the appellants in respect of matters for which costs may properly be awarded to the Royals/Jones following their success on the appeal. These matters are not a reason for refusing to make a lump sum costs order. 20 Mr Fernon also relied on interlocutory applications filed in Mr Zreika's appeal. Mr Fernon suggested that it was unclear to what some of those applications related. With respect to counsel, that is not correct. Mr Fernon referred to: (1) An application by Ottoman filed on 16 February 2017 in the Zreika appeal. That application sought security for costs in that appeal in an amount of $40,000. On 21 July 2017, the Court ordered Mr Zreika to pay security for Ottoman's costs of $25,000 into Court and ordered that Ottoman's costs be its costs in the appeal. As Ottoman seeks its costs of the Zreika appeal as agreed or taxed, that raises no issue for why a lump sum costs order should not be made in favour of the Royals/Jones. (2) An application by Mr Zreika filed on 9 May 2017. By that application Mr Zreika sought, on an urgent basis, a stay of Orders 8 and 11 made by the primary judge on 23 September 2016 in NSD 1731 of 2013, replicating orders he had previously sought and been refused. That application was dismissed on 12 May 2017 with costs of the Royals/Jones and Ottoman to be assessed and paid forthwith. The Royals/Jones now seek a lump sum amount to be determined in respect of that order, in addition to the lump sum order in relation to the costs of the appeal. (3) Applications by the Royals/Jones filed on 2 June 2017 and by Ottoman on 6 June 2017 seeking to set aside notices to produce dated 17 May 2017 and subpoenas directed at both counsel for the Royals/Jones dated 25 May 2017 issued on the application of Mr Zreika. As Mr Fernon noted, the subpoenas and the notices to produce were set aside (Ottoman's only as to part). That was done by orders made by Jagot J on 8 June 2017. Mr Zreika was ordered to pay the respondents' costs of the applications, to be determined on a lump sum basis. Justice Jagot made orders on 26 June 2017 that Mr Zreika pay the Royals and Mr Jones' costs fixed in the amount of $15,000 and Ottoman's costs fixed in the amount of $6,000. The Royals and Mr Jones acknowledge that Mr Zreika paid the lump sum costs order in their favour in mid-2017. The costs order in Ottoman's favour has not been paid. In his submissions, Mr Zreika consents to the payment of $6,000 to Ottoman out of moneys held as security for Order 8. Accordingly, this matter affords no basis to refuse to make a lump sum costs order. (4) An application filed by the Royals/Jones on 10 May 2017 seeking a stay or permanently dismissal of Mr Zreika's appeal until Order 8 was complied with and an application by Ottoman made on 5 October 2017 seeking the same relief following on from Mr Zreika's failure to comply with orders made on 21 July 2017 in respect of Order 8, as extended by consent on 29 September 2017. In respect of those applications, the Court made lump sum costs orders on 22 May 2019. Mr Zreika was required to pay the Royals and Mr Jones an amount of $35,274.91 and to pay Ottoman an amount of $6,600. Mr Zreika has agreed that those amounts may be paid out of the $730,000 held in Court in respect of Order 8. 21 Accordingly, Mr Fernon has not made good his contention that the Royals/Jones failed to take into account the matters identified by him.

Analysis 22 The Court has set out above its response to a number of the submissions made. 23 The Court does not accept that it would be inappropriate to make lump sum costs orders in favour of the Royals/Jones in relation to the appeals having regard to the following matters. 24 First, the principles enunciated in Paciocco at [13]-[20] and the matters addressed in Coshott v Prentice (No 2) [2018] FCAFC 1 at [19] and [21]. 25 Second, all appeals were heard together and there was considerable overlap between the appeals. As submitted by the Royals/Jones, they were not run as self-contained appeals. For instance, all of the appellants relied on submissions filed by Mahmoud El Ali in relation to the appeals against the Costs Decision. The appeals arose from a common substratum of fact based in a series of financial arrangements created by Nathan El Ali between one or more of the appellants and appreciation of the factual background of each appeal required knowledge of that overall background. The decisions of the primary judge were made after hearings in which all appellants participated, save for the Deed Decision in which Mr Zreika and Mr Nazloomian participated. As a consequence, the Court accepts the Royals/Jones submission that their legal representatives undertook work relevant to several or all of the appeals and attempts to dissect and apportion, on an item by item basis, all of the time spent by the solicitors and counsel would be a wasteful, time consuming and costly process and involve a substantial degree of artificiality. 26 Third, the overarching purpose in ss 37M and 37N of the Federal Court of Australia Act is relevant to the decision, taking into account likely reduction in the use of the Court's resources and costs as between the parties where lump sum costs orders are appropriately made. A lump sum costs order may be appropriate to avoid a lengthy and expensive taxation, especially where there has been prior protracted "trench warfare" between the parties: see Coshott v Prentice (No 2) [2018] FCAFC 1 at [19]. In the Court's view, "trench warfare" is a fair description of the course of proceedings between the parties to this litigation. 27 Fourth, it is appropriate for the Court to apply a broad brush approach to the determination of costs: see Phonographic Performance Company of Australia Limited v Copyright Tribunal of Australia (Costs) [2019] FCAFC 192 at [10]. 28 Fifth, having regard to the course of the interlocutory proceedings referred to above and the appeal itself, it is possible, if not likely, that monies already in Court as security for costs will not cover the costs incurred to date, let alone those which may be incurred in taxation. The solicitors for the Royals/Jones, who have acted throughout, estimate that the likely cost of the taxation will be $80,000 and take a further two years. That is neither cheap nor efficient, and it is difficult to see how it would be just to order that the costs in each appeal be individually assessed given the interrelationship of the common substratum of fact underlying the appeals and how long the Royals have been denied the fruits of the litigation in which they were successful. 29 Sixth, it may be expected that the Royals/Jones will experience difficulty in recovering taxed costs of those appellants who are bankrupt, being Nathan El Ali and Mr Nazloomian, so that the costs of taxation would be an added burden on the Royals and Mr Jones. There is also a lack of evidence from other appellants (who are all individuals) about their financial position. Mr Zreika, in particular, refused to provide such evidence in proceedings before the primary judge and in the course of interlocutory proceedings on a number of occasions. 30 Seventh, the Royals/Jones have properly drawn to our attention the Full Court's decision in a different iteration to that referred to above of the dispute between members of the Coshott family and their related entities and Maxwell Prentice, also referred to as Coshott v Prentice (No 2), but with the citation [2018] FCAFC 221 (Kerr, Farrell and Gleeson JJ). There, the Court declined to make a lump sum costs order in relation to three appeals, even though the appeals were heard together and virtually identical submissions were made on each appeal by the appellants and the respondent, albeit that the grounds pursued on each appeal were different. That Court declined to make the lump sum costs order because a consolidated costs order would cover all three appeals and thereby wrongly impose costs on each appellant that were incurred in proceedings to which they were not a party, and would require that Court to allocate costs as between each appeal. That Court accepted that the task was most appropriately undertaken by a taxing officer because the potential benefits of a lump sum costs order of avoiding expense, delay and aggravation was illusory in that case. 31 The question of whether a lump sum costs order is appropriate in any given case is a matter for the discretion of the Court making the determination having regard to the facts and circumstances of the individual case. While the circumstances in which a lump sum costs order was made or not made in other cases may assist in informing the discretion, they do not bind the manner in which a court must exercise its discretion in a different case in part because cases are never factually the same in all respects and the Costs Practice Note recognises that different methodologies may be used in exercising the discretion. 32 It is our view that, in this case, the Court is in a position to make a fair estimate of the costs that ought to be attributed to the issues raised in each appeal and across the appeals, and hence the proportion attributable to the individual appellants. The Court has had the benefit of oral and written submissions on the appeals which were heard together. As noted above, the appeals arose from a common substratum of fact. That factual substratum was the subject of findings by the primary judge after a hearing in which all of the appellants participated leading to the Principal Decision, the Orders Decision and the Costs Decision. The Deed Decision related to the attempt by Messrs Zreika and Nazloomian to compromise Orders 8 and 11 made in the Orders Decision. 33 The Court accepts the Royals/Jones submissions that Mr Zreika appealed more issues than any other party and his counsel took a leading role in carrying forward the argument in relation to a number of grounds of appeal. Mahmoud El Ali provided submissions on the Costs Decision on which all appellants relied and that involved some time as it related not only to the issue of whether it was appropriate for the primary judge to make cost orders involving joint and several liability as between the respondents to NSD 771 of 2014 and separately the respondents to NSD 1731 of 2013 as well as substantial argument concerning to the indemnity principle. Mr Stojanovski and Mr Nazloomian each raised argument in relation to the asset that had been transferred to them and Mr Nazloomian appealed the Deed Decision. 34 We accept the Royals/Jones submission that the Full Court ought to determine the apportionment of costs between the appellants by way of percentage breakup if we are to make an order that the Royals/Jones costs should be the subject of lump sum orders. We have formed the view that the apportionment of responsibility for costs as between the appellants proposed by the Royals/ Jones is generally appropriate. We have determined that the apportionment should be 45% Mr Zreika, 17.5% each of Messrs Nazloomian and Stojanovski, and 10% each for Nathan El Ali and Mahmoud El Ali. 35 We reject Mr Zreika's contention that this apportionment would result in him sharing the benefit of his partial success with other appellants. That is because the apportionment is to be done first, and it is only after that that the discount for Mr Zreika's partial success on the Brady v Stapleton ground is to be applied. In relation to Mr Zreika's partial success on the appeal, an allocation of costs in a case of mixed results can never be done with mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 346; 26 IPR 261 at 272 (Gummow, French and Hill JJ) cited by Crennan J in Dias Aluminium Products Pty Ltd v Ulrich Aluminium Pty Ltd (No 2) [2005] FCA 1400; 225 ALR 569 at [7]. 36 The Royals/Jones contend that the amount of the discount of their costs which should be allowed in relation to Mr Zreika is 20% (taking into account that they envisage that their gross costs should be discounted by 10% having regard to the exigencies of taxation) while Mr Zreika says that the amount should be 30%. The effect of the Brady v Stapleton ground was to diminish Mr Zreika's liability under Order 8 by 75%. 37 Mr Zreika only raised the Brady v Stapleton ground at the time of submissions in reply shortly before the appeal was heard, having not raised it before the primary judge or in the notice of appeal (which Mr Zreika had previously been given leave to amend). The fundamental issue which led to Order 8 being made was not successfully appealed. Mr Zreika's success on the Brady v Stapleton ground only meant that the detriment suffered by Nathan El Ali's creditors was intensified because they could recover (through any distribution by Ottoman to its shareholders) only the amount that could be traced into Mr Zreika's hands. Further, as the Royals/Jones point out, as a result of the late time at which the Brady v Stapleton point was raised, they were only able to provide written submissions in response on the first day of the hearing, and Mr Zreika provided further written submissions on the point during the hearing. 38 Recognising that the gross amount of the Royals/Jones costs may be reduced having regard to the exigencies of taxation upon assessment by a judge or registrar of this Court to a greater or lesser extent than that proposed by the Royals/Jones and the factors previously referred to, the Court finds that, after the amount of 45% of the Royals/Jones costs of the appeals has been determined, Mr Zreika's obligation should be to pay the Royals/Jones 75% of that amount. 39 It is our view that the assessment of the aggregate amount of the lump sum costs order should be determined by a single judge of this Court, and that is most appropriately Farrell J, as the judge who managed the appeals through the interlocutory proceedings referred to above. 40 We do not accept that it is appropriate to make an order that the appellants be jointly and severally liable for the Royals/Jones costs of the appeal. Such an order would be inconsistent with the apportionment for which they contend.

Other lump sum orders sought by the Royals/Jones 41 On 23 March 2017, the primary judge made orders that Mr Zreika pay the Royals/Jones costs of the application which he filed on 13 October 2016 to be taxed if not agreed (Order 2) and that Saracen pay the Royals/Jones costs of the application it filed on 16 January 2017 (Order 4). Those orders are recorded in the Deed Decision in relation to NSD 1731 of 2013. The primary judge also ordered Saracen to pay Mr Jones' costs of the application made by Saracen on 16 January 2017 in NSD 771 of 2014, which is also the subject of the Deed Decision. The Royals/Jones seek orders that those cost now be determined on a lump sum basis. Neither of Mr Zreika nor Saracen's liquidator made any submissions in response to the proposed order 5 in the draft orders submitted by the Royals/Jones in which this issue was raised. The Royals/Jones seek a lump sum amount of $54,277.65 (inclusive of GST) and leave to file evidence in support of that application. 42 The Royals/Jones also seek an order fixing the outstanding costs order made by Farrell J on 12 May 2017 in NSD 1801/2016 in an amount of $25,000 inclusive of GST and leave to file evidence in support of that application. 43 Given the passage of time since the primary judge made the orders in the Deed Decision and when Farrell J made orders dismissing the application made by Mr Zreika to stay Orders 8 and 11, the Court considers that it serves the overarching purpose to order that those costs now be fixed and the fixed amount be determined by a single judge of the Court. For reasons previously given, that matter should be referred to Farrell J.

Orders for which Ottoman contends 44 Ottoman has sought the following orders: (1) That Mr Zreika and Mr Stojanovski pay its costs of those appeals as agreed or taxed. Both Mr Zreika and Mr Stojanovski do not dispute that costs should follow the event. We note that Ottoman's written submissions at [5.1(e)] suggest that Mr Zreika should be ordered to pay the costs of the Stojanovski appeal but, in context, that appears to be an error. (2) That unpaid fixed costs orders in the amount of $12,650 for which Mr Zreika is liable be paid from amounts held in Court. That is not contested by Mr Zreika and the making of appropriate orders should be referred to Farrell J. (3) That $100,000 paid into Court pursuant to orders made on 14 September 2015 in respect of the Kogarah Unit 2 property be paid to the official liquidator for Ottoman. That is not contested by Mr Stojanovski and the making of appropriate orders should be referred to Farrell J. (4) That Mr Stojanovski pay the sum of $62,836.88 to Ottoman's solicitor's trust account. 45 The last proposed order was not the subject of submissions by Mr Stojanovski. In the Orders Decision the primary judge made Order 10 in NSD 1731 of 2013 in the following terms: Mr Stojanovski forthwith do all things reasonably necessary to cause the mortgagee of the Kogarah Unit 2 property to pay into Court the sum of $62,836.88, being the net proceeds of the sale of the Kogarah Unit 2 property. 46 We do not consider that the order now proposed by Ottoman is a matter for the Full Court. Mr Stojanovski's appeal having been dismissed, Order 10 stands. If it can be established that Mr Stojanovski has failed to comply with its terms, then the appropriate course is for Ottoman to make an application for contempt, but that would not be a matter with which the Full Court as constituted should deal.

Orders sought in relation to the payment of money held in Court 47 The Royals/Jones and Ottoman have made submissions concerning the payment out of money held in Court. Mr Zreika has indicated that he consents to some of those orders being made and the other appellants have made submissions in relation to some of those matters. The question of payment out of moneys held in Court should also be referred to Farrell J. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Besanko, Farrell and O'Callaghan.

SCHEDULE OF PARTIES NSD 1793 of 2016 Respondents Fourth Respondent: MAHMOUD ZREIKA Fifth Respondent PETER ROYAL Sixth Respondent JUDITH ROYAL

NSD 1794 of 2016 Respondents Fourth Respondent: OTTOMAN INVESTMENTS PTY LIMITED (IN LIQUIDATION)

NSD 1801 of 2016 Respondents Fourth Respondent: OTTOMAN INVESTMENTS PTY LIMITED (IN LIQUIDATION) Fifth Respondent SARACEN HOLDINGS PROPRIETARY LIMITED IN LIQUIDATION (ACN 126 493 552)

Cases cited: Coshott v Prentice (No 2) [2018] FCAFC 1 Coshott v Prentice (No 2) [2018] FCAFC 221 Dias Aluminium Products Pty Ltd v Ulrich Aluminium Pty Ltd (No 2) [2005] FCA 1400; 225 ALR 569 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 346; 26 IPR 261 Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403 Royal v El Ali [2016] FCA 782 Royal v El Ali (No 2) [2016] FCA 1156 Royal v El Ali (No 3) [2016] FCA 1573 Royal v El Ali (No 4) [2017] FCA 299 Zreika v Royal [2019] FCAFC 82

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