Adam v Hasabo (No 2)

On 6 September 2019, the Court delivered the principal judgment in these proceedings (Adam v Hasabo [2019] NSWSC 1167). This judgment assumes familiarity with the Court’s principal judgment.

The Court concluded that Mr Adam was substantially successful in his claims for various relief against Mr Hasabo and Lamar. At [289] of the judgment, the Court summarised its conclusions as to these grounds for relief. It is worth reproducing the relevant parts of those conclusions here:

On the same day, the Court made orders in accordance with the above conclusions. The Court also ordered that Mr Hasabo and Lamar pay Mr Adam’s costs of the proceedings (with the basis of assessment to be subsequently determined by the Court).

This judgment addresses two further issues that arise from the principal judgment. The first issue concerns the amount of pre-judgment interest that is claimed by Mr Adam on the relevant parts of the judgment sum. The second issue concerns a question of costs.

Turning to the first issue, the Court directed Mr Adam to provide to my Associate, within 14 days, his calculation of the amount of pre-judgment interest payable on the monetary sums awarded to him. On 20 September 2019, Mr Adam’s solicitor provided four schedules of his calculation of pre-judgment interest up to 6 September 2019, the date of judgment (each schedule addressing the distinct aspects of the monetary sums awarded to Mr Adam) and written submissions. Those written submissions explained how each component of pre-judgment interest on the distinct monetary sums was calculated. The submissions outline that the calculation for the purposes of awarding pre-judgment interest under ss 100(1) and (2) of the Civil Procedure Act 2005 (NSW) was undertaken in accordance with Practice Note SC Gen 16. The submissions also briefly explain why it is appropriate to award pre-judgment interest in the circumstances of the case.

The first schedule provides the calculation of pre-judgment interest in the amount of USD $4,993.31 on the USD $25,000 sum referred to at [289(4)] in the principal judgment. The second schedule provides the calculation of pre-judgment interest in the amount of $20,187.86 on the $103,539 sum referred to at [289(3)] in the principal judgment. The third schedule provides the calculation of pre-judgment interest in the amount of $2,743.34 on the $14,070 sum referred to at [289(5)] in the principal judgment. The fourth schedule provides the calculation of pre-judgment interest in the amount of $3,079.60 on the $39,845.88 sum referred to in [289(1)] of the principal judgment. The total amount of pre-judgment interest claimed by Mr Adam is AUD $26,010.80 and USD $4,993.31.

Subject to one issue, I am satisfied that the amounts claimed in those schedules are appropriate. Mr Hasabo did not make any submissions to the contrary. The Court will therefore make orders requiring Mr Hasabo to pay pre-judgment interest largely in terms of the schedules provided by Mr Adam.

The one issue concerns the appropriateness to award pre-judgment interest on the $39,845.88 sum. The $39,845.88 figure includes the $38,000 amount, plus interest, that was withdrawn by Mr Adam from his account and paid to Mr Hasabo for the purposes of securing the issue of a bank guarantee from Westpac to provide for the bond for the Blacktown Shop lease. As noted in the principal judgment at [251], that amount was subsequently repaid to Mr Hasabo (or to Lamar on Mr Hasabo’s behalf) on 28 March 2018. The amount was then garnisheed by the Commissioner of Taxation by a notice under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth). The Commissioner agreed that it would cause that sum (plus interest) to be paid to Mr Adam in the event the Court determined Mr Adam was entitled to it. In the principal judgment at [252], the Court determined that Mr Hasabo was beneficially entitled to the amount on the principles described in Quistclose Investments Ltd v Rolls Razor Ltd (in liq) [1968] Ch 540.

Apart from a brief period of time following Westpac having repaid the $39,845.88 amount into Mr Hasabo’s account, Mr Hasabo had no control over this amount throughout the relevant period of time in which these proceedings were concerned. The amount was either held by Westpac as security for the issue of the bank guarantee or it was held by the Commissioner pending the determination of this dispute. As a consequence, Mr Hasabo had little to no ability to use or enjoy this amount. In my view, it would be inappropriate in such circumstances for the Court to order that Mr Hasabo pay pre-judgment interest on this sum.

It follows that the Court will deduct the $3,079.60 sum calculated in the fourth schedule provided by Mr Adam from the total AUD award of $26,010.80. This results in a new total AUD award of $22,931.20. This sum is in addition to the USD $4,993.41 amount.

Turning next to the issue of costs, the Court directed the parties to provide written submissions addressing the basis upon which Mr Hasabo and Lamar should pay Mr Adam’s costs of the proceedings. In his written submissions, Mr Adam sought only that his costs be paid on the ordinary basis.

Mr Hasabo, however, sent an email to my Associate on 20 September 2019, in which he disputed his liability to pay Mr Adam’s costs of the proceedings. The email stated the following:

Mr Adam’s written submissions did not address Mr Hasabo’s complaint, but the covering email sent to my Associate on 20 September 2019, which attached his written submissions, referred briefly to it. That part of the email stated:

The Court’s direction only requested written submissions addressing the basis for the assessment of Mr Adam’s costs. It did not invite Mr Hasabo to put on submissions addressing whether a different costs order might be made. No formal application to that effect was made by Mr Hasabo. Nevertheless, the Court has treated Mr Hasabo’s email as an informal application to vary the costs order made on 6 September 2019.

Mr Hasabo’s email refers to r 42.34 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The rule relevantly provides:

There is no doubt that Mr Adam received a judgment against Mr Hasabo that is less than the $500,000 sum provided for in r 42.34(1). It is also the case that, apart from that rule, Mr Adam was otherwise entitled to his costs against Mr Hasabo. Therefore, on its face, r 42.34 would apply to the present case.

Relevantly for present purposes, an order for costs “may be made, but will not ordinarily be made” if for proceedings that “could have been commenced in the District Court”, the commencement and continuation of the proceedings in this Court, rather than the District Court, was warranted.

Regard must be had to whether Mr Adam could have commenced these proceedings in the District Court as opposed to this Court and, if so, whether Mr Adam was so justified in continuing the proceedings in this Court. This requires analysing the nature of the relief sought in the pleadings and making a determination as to whether the relief sought was of a kind that could have been sought in the District Court.

The proceedings were commenced by Summons filed on 17 March 2017. Mr Adam named Mr Hasabo and Lamar as defendants, as well as a third defendant. The third defendant had entered into a contract with Mr Hasabo to purchase the Blacktown Shop. Mr Adam sought both interlocutory and final relief. As for interlocutory relief, Mr Adam sought both prohibitive and mandatory injunctions in relation to the stock-in-trade contained in the Blacktown Shop which would, in effect, restrain Mr Hasabo from selling or encumbering that stock to the third defendant. Mr Adam also sought injunctive relief that the defendants provide to Mr Adam any copies of a draft or final contract for sale of the Blacktown Shop. The final relief sought included a declaration that Mr Adam had an interest in the stock-in-trade of the Blacktown Shop and consequential orders for delivery up of that stock to Mr Adam. Orders were also sought for breach of contract, damages pursuant to s 236(1) of the Australian Consumer Law (contained in Sch 2 of the Competition and Consumer Act 2010 (Cth)) and a monetary sum in the order of $255,500 for money had and received.

At the time of filing the Summons, the total value of the stock-in-trade referred to in the interim and final relief was estimated to be approximately $20,000. This was set out in para 32(a)–(c) of Mr Adam’s affidavit which was filed on the same day. In that affidavit, Mr Adam deposed that the $20,000 figure comprised three separate transactions of $10,000 paid on 9 June 2016, $2,000 paid on 20 June 2016 and $8,000 paid on 29 June 2016.

While interlocutory relief was initially sought when the Summons was filed, any intention to seek such relief fell away on the first return date of the matter on 20 March 2017. On that occasion, Ward CJ in Eq made orders by consent that Mr Hasabo pay into Court any amount he received from the sale of the Blacktown Shop to the third defendant. The proceedings were also discontinued as against the third defendant with no order as to costs. The effect of making such orders was that any application seeking to restrain Mr Hasabo from dealing with the stock-in-trade as well orders compelling the production of the contract for the sale of the Blacktown Shop became unnecessary. In those circumstances, it is not necessary to give consideration to the question of whether the District Court could have granted the interlocutory relief sought by Mr Adam.

As this juncture, it is necessary to set out the relevant provisions of the District Court Act 1973 (NSW). Section 44 relevantly provides:

Section 134 relevantly provides:

The claims for damages pursuant to s 236 of the Australian Consumer Law and at general law for breach of contract are claims that could have been brought in the District Court, being “actions” that would have been assigned to the Common Law Division as at 2 February 1998 had the proceedings been commenced in this Court. So too is the claim for $255,500 on the basis of money had and received (Mega-top Cargo Pty Ltd v Moneytech Services Pty Ltd [2015] NSWCA 402 at [48]–[49]). This position is somewhat complicated by the fact that, at the time proceedings were commenced, s 44(1) of the District Court Act did not contain subparagraph (c1), which was subsequently inserted in November 2018 by the Justice Legislation Amendment Act (No 3) 2018 (NSW). Prior to that amending Act, it was held in a number of Supreme Court decisions, starting with The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194; (2017) 324 FLR 261, that the District Court did not have jurisdiction to determine claims arising out of commercial transactions. It may have been arguable (although by no means certain) that the dispute in the present case presented such characteristics. It is not necessary to discuss this further, as the amending Act, which commenced in November 2018, had retrospective effect to cover the relevant period in which these proceedings were concerned.

It is clear that the claims that Mr Adam made in debt that led to the judgments summarised in sub-pars (3) to (4) at [2] above could have been commenced in the District Court.

However, the relief summarised in sub-pars (1) and (2) at [2] above consisted of declarations that, at the time the Commissioner of Taxation garnisheed the amount of $39,845.88 standing in the name of Mr Hasabo in a bank account held by him, that amount was held by Mr Hasabo on trust for Mr Adam, and a declaration that Mr Adam is beneficially entitled to the amount of $17,189.90 that has been paid into Court in these proceedings.

I am satisfied that, for the purposes of UCPR r 42.34, Mr Adam could not have commenced his claim for the declaration in respect of the $39,845.88 in the District Court, given that it, in substance, consisted of the making of a declaration that the fund was held on trust for Mr Adam. By this claim, Mr Adam sought a declaration that a trust subsisted, where, the fund alleged to be subject to the trust exceeded $20,000, so the relevant provision of the District Court Act is s 134(e). Mr Adam’s claim was not an equitable claim for the recovery of money or damages against Mr Hasabo, to which s 134(1)(h) may have applied: see Huang v Drumm [2017] NSWCA 29 at [2]-[6], where the Court of Appeal held that it was arguable that equitable claims for the recovery of money or damages could be made in the District Court up to that Court’s monetary jurisdictional limit.

In any event, it was warranted that Mr Adam seek the declaratory relief in this Court. In the circumstances of this case, it would be unreasonable to require Mr Adam to have commenced these proceedings in the District Court in the face of any doubt as to the jurisdiction of that Court. It is not known whether Mr Hasabo has the assets to meet any of the money judgments against him personally, and it is possible that the amounts that the Court has determined are held on trust for Mr Adam will be the only fruits of these proceedings.

Consequently, the Court will not vary order (8) made at [290] of the principal judgment that the first and second defendants pay the plaintiff’s costs of the proceedings.

For the sake of certainty, the Court notes that those costs are payable on the ordinary basis.

The only additional order that the Court makes is: