Federal Court of Australia

Miraki v El-Cheikh [2022] FCA 1570

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to extend the time for filing of the application for leave to appeal.

2.    The application for leave to appeal be dismissed with costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

HESPE J:

1    The applicant, by an application dated 16 May 2022, applies for an extension of time to seek leave to appeal against orders made on 13 April 2022 and 2 May 2022 by the primary judge pursuant to r 39.05 of the Federal Court Rules 2011 (Cth) (Federal Court Rules) and for the reasons set out by his Honour in Deputy Commissioner of Taxation v Miraki (Funds Paid out of Court) [2022] FCA 392. His Honour set aside orders made by consent on 20 August 2021, 16 September 2021 and 2 November 2021. The application is supported by an affidavit explaining the relevant delay and annexing a proposed notice of appeal. On 8 September 2022, the applicant sought to file an amended proposed notice of appeal.

BACKGROUND

2    The orders set aside by the primary judge essentially relate to the payment out of Court of moneys paid into Court as a consequence of the sale of assets that were subject to a freezing order.

3    The general background to this application may be found in Deputy Commissioner of Taxation v Miraki (Summary Judgment) [2021] FCA 1361 and Deputy Commissioner of Taxation v Miraki (Freezing Orders) [2021] FCA 1367.

4    Briefly, freezing orders were made in connection with Ms Miraki’s tax liabilities and liabilities to administrative penalties of over $5 million. The freezing orders have been varied from time to time and consent orders were made to facilitate the sale by Ms Miraki of properties owned by her. Two of the properties which were sold were a property in Wollstonecraft and a property in Castle Hill. The parties to the freezing order agreed that the net proceeds from the sale of those two properties were to be paid into Court.

5    Mr El-Cheikh made a claim to beneficial ownership of moneys which had been paid into Court based on arrangements he had with Ms Miraki. Those arrangements were the subject of a judgment of the New South Wales Court of Appeal handed down on 8 November 2021: see El-Cheikh v Miraki [2021] NSWCA 271. Mr El-Cheikh had claimed that he was beneficially entitled to the moneys paid into Court based on an entitlement to:

(a)    be repaid an amount of $450,000 (charged against the property of Ms Miraki); and

(b)    half of the profits of sale (in respect of which he also claimed an equitable interest). The net proceeds of sale were $1,154,047.41.

6    Some of the moneys paid into Court had subsequently been paid out of Court pursuant to consent orders. At the time those orders were made, the Court had not been informed of Mr El‑Cheikh’s claims to the moneys, which claims were the subject of an appeal to the NSW Court of Appeal.

7    On 10 November 2021, the primary judge granted leave to Mr El-Cheikh to intervene in the proceedings. By an interlocutory application dated 1 December 2021, Mr El-Cheikh applied for various declarations and orders. Mr El-Cheikh submitted to the primary judge that the moneys should not have been paid out in accordance with consent orders of the parties and that there was a procedure which should have been followed, including that the Court should have been informed of Mr El-Cheikh’s claim to the moneys which had been paid into Court.

8    The primary judge made orders on 13 April and 2 May 2022 to set aside the consent orders for the payment of moneys out and required Ms Miraki and her legal representatives to pay equivalent sums back into Court. It is against those orders that the Ms Miraki seeks to appeal.

EXTENSION OF TIME

9    The application for the extension of time relates only to the application for leave to appeal against the orders of 13 April 2022. The application for leave to appeal against those orders was required to be made within 14 days. In so far as the application for an extension of time is concerned, the applicant relied upon the affidavit of Mr John Tomaras, which states that:

An extension of time is required to appeal order 1 made on 13 April 2022. I overlooked, after reading paragraphs [45] to [47] that order 1 had been made and concentrated on what order ought to be made as directed by his Honour in paragraph [47] and the argument to be had on 2 May 2022.

10    Whilst the explanation for the delay is not entirely satisfactory, in all the circumstances, I am satisfied that it is appropriate to grant an extension of time because (i) the delay was not significant, (ii) the error was inadvertent, and (iii) most importantly, there was no prejudice to the respondents if an extension of time were granted in relation to the application for leave against the April orders, particularly given that the application for leave against the orders made on 2 May 2022 was made within time.

11    I will now address the application for leave to appeal.

LEGAL PRINCIPLES

12    The relevant legal principles to be applied in considering an application for leave to appeal were summarised by the Full Court in Deputy Commissioner of Taxation v Miraki [2022] FCAFC 96 at [5] (Perram, Moshinsky and Hespe JJ):

The principles applicable to an application for leave to appeal from an interlocutory decision are well established. In general, the tests to be applied are: (a) whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court; and (b) whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398–400 per Sheppard, Burchett and Heerey JJ. The discretion to grant leave is not constrained by rigid rules. Leave to appeal has been granted where, for example, the questions posed for resolution on appeal “have general importance beyond the concerns of the parties”: Australian Securities and Investments Commission v P Dawson Nominees Pty Ltd (2008) 169 FCR 227 at [10] per Heerey, Moore and Tracey JJ. See also ACE Insurance Ltd v Trifunovski (2012) 291 ALR 46 at [7]–[9] per Flick J.

13    As Abrahams J observed in Elvin v Fair Work Ombudsman [2022] FCA 881 at [9], the power to grant leave should be exercised in a way that best promotes the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), being to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: citing Nationwide News Pty Limited v Rush [2018] FCAFC 70 at [2] (Allsop CJ, Rares and Lee JJ); Bellamy’s Australia Limited v Basil [2019] FCAFC 147; (2019) 372 ALR 638 at 640 [6] (Murphy, Gleeson and Lee JJ).

14    The onus is on the applicant to establish that leave should be granted: see, eg, GPV18 v Minister for Home Affairs [2020] FCA 393 at [32] (Wigney J); Singh v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCA 513 at [24] (Derrington J).

PROPOSED GROUNDS OF APPEAL

15    The applicant’s grounds of appeal in the draft amended notice of appeal may be categorised as follows:

(1)    The Court erred in determining that, at the time the consent orders were made, the first respondent had claimed a beneficial entitlement to all of the funds paid into Court. Accordingly, at the time the consent orders were made, funds in a sum at least equal to those the subject of the consent orders belonged personally to the applicant (grounds 1 to 4 of the proposed amended notice of appeal).

(2)    The Court should not have exercised its power to set aside the consent orders in circumstances where the first respondent made a deliberate decision not to intervene in the proceedings at the time the consent orders were made.

(3)    The Court erred in making certain factual findings (at [20], [28], [36] and [38]).

(4)    The Court erred in exercising its power to set aside consent orders made as part of a consent regime between the applicant and the Commissioner of Taxation.

(5)    The Court did not have jurisdiction to make the orders on the application of Mr El‑Cheikh.

16    By the conclusion of the hearing of the application for leave, the applicant maintained the following pleas for relief:

(1)    Order 1 made on 13 April 2022 be set aside. The effect of Order 1 made on 13 April 2022 was to set aside the consent orders for the payment out of moneys paid into Court on account of transfer duty payable to Revenue NSW and legal costs incurred by the applicant in connection with her dispute with the Commissioner of Taxation.

(2)    Order 1 made on 2 May 2022 be set aside. The effect of Order 1 made on 2 May 2022 was to require the applicant to pay back into Court the amount paid out on account of the transfer duty.

(3)    Order 3 made on 2 May 2022 be set aside. The effect of this order was to require the applicant and her then solicitors to pay Mr El‑Cheikh’s costs of interlocutory applications dated 9 November 2021 and 1 December 2021.

(4)    The first respondent pay the costs of the application for leave to intervene.

(5)    The respondents pay the costs of the Appeal.

CONSIDERATION

No Substantial Injustice

17    Leaving to one side the issue of whether the decision in respect of the orders sought to be appealed from is attended with sufficient doubt, I am not satisfied that substantial injustice would result if leave were refused. The orders made by Thawley J set aside a consent order providing for moneys the subject of a freezing order to be paid out of Court. Absent that consent order, the moneys would have remained subject to the freezing order and the control of the Court. The practical effect of the orders now sought to be set aside was to require the applicant to pay money back into Court. No prejudice is thereby suffered: the money will simply remain in Court to await final determination of the proceedings before the primary judge.

18    In so far as the first order now sought by Ms Miraki is concerned, it is noted that the orders made on 13 April 2022 set aside orders for the payment of moneys to cover Ms Miraki’s legal costs in connection with her taxation dispute to be paid into her then acting lawyers’ trust account and to cover transfer duty payable to the Revenue NSW by direct transfer to an account in the name of “OSR EPS Tax Remitting Account”. Following the orders of 13 April 2022 and 2 May 2022, the solicitors acting for Ms Miraki at the time paid back into Court the moneys that had been paid into their trust account.

19    The solicitors who repaid the moneys following the orders of April and May 2022 were not parties to this application for leave to appeal. Ms Miraki provided no evidence demonstrating that the order requiring her then solicitors to repay moneys received by them in their trust account on account of her legal costs resulted in significant financial hardship to her.

20    In so far as the second order sought by Ms Miraki is concerned, Ms Miraki did not contend, or provide evidence to the Court demonstrating, that the requirement for her to pay the moneys back into Court in a sum equal to those that had been paid to Revenue NSW would cause her significant financial hardship. The evidence before the Court is that, as at June 2022, she had over $6.9m in net assets, although assets to the value of $5,844,558.03 are subject to a freezing order.

21    As observed above at [13], the power of the Court to grant leave should be exercised in a way that best promotes the overarching purpose in s 37M of the Federal Court Act; namely, to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. The matters complained of relate to orders made to preserve assets pending resolution of a matter which has not yet completed. They are matters which could be the subject of further applications to the primary judge.

22    For this reason, leave to appeal will be refused.

Not Attended with Sufficient Doubt

23    In so far as the substance of the applicant’s complaints is concerned, based on the proposed grounds of appeal, I am not satisfied that the primary judge’s exercise of his discretion to set aside the consent orders was attended with sufficient doubt to warrant a grant of leave.

24    As was conceded at the hearing, the terms of the first ground of appeal are not reflected in the primary judge’s reasons. The learned primary judge made no determination that Mr El-Cheikh had a beneficial entitlement to all the funds held in Court. As his Honour’s reasons disclose, the consent orders were set aside because the parties to those consent orders had not informed the Court of a third party’s claims in relation to the funds held in Court at the time those orders were sought, notwithstanding that the solicitors for Ms Miraki and the Commissioner of Taxation were aware of Mr El-Cheikh’s claims at that time.

25    It was submitted for Ms Miraki, that the primary judge’s decision to set aside the consent orders was wrong because the funds which remain in Court after the payments out were sufficient to satisfy Mr El-Cheikh’s claim to half of the profits of sale, a claim totalling $577,023.70. The amount which remains in Court is $669,857.57.

26    Ms Miraki’s submissions do not accurately reflect the nature or extent of Mr El‐Cheikh’s claims. His claims had two components: (a) an entitlement to be repaid an amount of $450,000 (charged against the property); and (b) half of the profits on sale (in respect of which he also claimed an equitable interest). Contrary to Ms Miraki’s contentions, the Court of Appeal did not determine that Mr El‐Cheikh was an unsecured creditor of Ms Miraki. The Court of Appeal in Miraki [2021] NSWCA 271 found that Ms Miraki was liable to repay the amount of $450,000 to Mr El-Cheikh and that “liability arose by virtue of the terms of the loan agreement between Mr El-Cheikh and Ms Miraki executed on 12 October 2016” (at [2] per Bathurst CJ), and that, “[p]ursuant to the loan agreement, Mr El‑Cheikh was intended to have a security by way of mortgage over the Castle Hill property to protect his interest in the repayment of the loan” (at [15] per Basten JA): see also at [118] per Emmett AJA. The declarations made by the NSW Court of Appeal were not made to give effect to a determination by the Court of Appeal that Mr El-Cheikh was an unsecured creditor of Ms Miraki.

27    The form of the declarations made by the Court of Appeal were the result of the fact that the Castle Hill property had been sold and the proceeds paid into this Court. The Court of Appeal recognised (at [8] per Bathurst CJ) that there were a number of outstanding issues which required determination to finally settle the rights of the parties. The order of the Court of Appeal provided for the matter to be remitted to the Equity Division for the taking of any further steps necessary in order to give effect to the orders. Any outstanding issues which needed to be determined in order to finally settle the rights of the parties were to be subject to further application to the Court (Miraki [2021] NSWCA 271 at [8] per Bathurst CJ, [20] per Basten J, [120]–[121] per Emmett AJA). The orders made by the Court of Appeal enabled the parties to apply to a judge of the Equity Division in respect of any matter arising out of the orders made: El‑Cheikh v Miraki (No 2) [2022] NSWCA 6 at [5].

28    There was no error in the primary judge’s construction of the findings or reasons of the Court of Appeal or of the size of Mr El-Cheikh’s claim to the funds paid into Court. As noted above, further applications may be made to the primary judge should further orders be made by the Equity Division of the NSW Supreme Court or by the NSW Court of Appeal.

29    In so far as the second and third categories of appeal grounds are concerned, the setting aside of the consent orders made in the absence of an affected party was a matter for the exercise of the primary judge’s discretion under r 39.05 of the Federal Court Rules. The gravamen of the primary judge’s concern was that the parties to the consent order had not informed him, at the time the orders were sought, that Mr El-Cheikh had unresolved claims to the funds paid into Court and those claims could be prejudiced by the payment of funds out of Court: Miraki (Funds Paid out of Court) [2022] FCA 392 at [37]–[38]. The primary judge found that Mr El-Cheikh had not been informed of the parties’ intention to seek orders for the payment of moneys out of Court. No challenge was made to that finding of fact.

30    Ms Miraki has not identified an error of the type articulated by the High Court in House v The King (1936) 55 CLR 499 in the exercise of the primary judge’s discretion. The Federal Court Rules do not prescribe any matters which must be taken into account in exercising the discretion to set aside orders made in the absence of an affected party: CCGF Holdings Pty Ltd v Coegi Group Pty Ltd [2020] FCA 1402 at [57] (Rangiah J). Even if Mr El‑Cheikh could possibly have found out about the consent orders otherwise than by being informed directly by the parties, his position is not to be equated with that of a party to proceedings making an informed decision not to attend Court in respect of an application made in those proceedings of which the party was notified: cf Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296 at [10]–[11] (Kenny J). In exercising his discretion, the primary judge considered it was the responsibility of the parties seeking the consent orders to inform the court of Mr El‑Cheikh’s unresolved claims to the funds sought to be paid out. There was no error of the primary judge in taking that matter into account.

31    By her notice of appeal, Ms Miraki essentially seeks to take issue with the merits of the primary judge’s exercise of his discretion. That is not a matter for an appellate court.

32    The fourth category of appeal grounds is premised on the assumption that, given the background to the payment of the moneys into Court, the Court’s role was limited to facilitating a position agreed as between the Deputy Commissioner of Taxation and Ms Miraki. That assumption is not correct. While it is accepted that the moneys were paid into Court pursuant to an agreed position between the Deputy Commissioner of Taxation and Ms Miraki, and as part of an agreed regime for freezing orders, the agreed regime resulted in and was governed by Court orders. The moneys had become subject to the supervision of the Court and could not be paid out without further Court order: see, eg, JKB Holdings Pty Ltd v de la Vega [2013] NSWSC 501 at [82] (Lindsay J). This was reflected in the terms of the freezing order itself. The making of an order for the payment of moneys out of Court involves the exercise of discretion: Zoo Sport (Europe) Ltd v Zoo International Pte Ltd (No 2) [2020] FCA 755 at [28] (Rangiah J); Bou-Simon v Attorney-General (Cth) [2003] FCA 1303; (2003) 133 FCR 230 at 235 [22] (Tamberlin J). That discretion is a wide one. The obligation of the Court is to administer justice in discharge of its judicial function, JKB [2013] NSWSC 501 at [112] (Lindsay J). The parties cannot, by their agreement, bind the Court as to the exercise of its powers.

33    The fifth category of the grounds of appeal sought to challenge the jurisdiction of the Court to make the orders on the application of Mr El-Cheikh. The parties invoked the jurisdiction of the Court by applying for consent orders for the payment of moneys out of Court. The Court had jurisdiction to set aside those orders. There has been no application for leave against the orders made on 10 November 2021 granting Mr El-Cheikh leave to intervene. Having granted Mr El-Cheikh leave to intervene, the Court could determine the manner of Mr El-Cheikh’s participation in the proceedings: r 9.12 of the Federal Court Rules. On 7 December 2021, the primary judge made orders for Mr El‐Cheikh to file and serve points of claim. Those orders were made to enable the determination of issues raised by Mr El-Cheikh in an interlocutory application. No application for leave to appeal was sought in relation to those orders. There is no substance to Ms Miraki’s claim that the Court did not have jurisdiction to make the orders.

34    There are a number of concerns in relation to the conduct of this matter. It appears that a reason for the narrow terms of the declarations made by the Court of Appeal was that it had not been provided with any information in relation to the nature of the proceedings before this Court and the basis on which the order for the payment of moneys into this Court had been made: Miraki [2021] NSWCA 271 at [15]–[17] (Basten JA), [104]–[105] (Emmett AJA). The primary judge in this Court was not informed of Mr El‐Cheikh’s potential claims in relation to the Castle Hill property as the holder of a security interest and an equitable interest in the profits of sale. It may be expected to have been of concern to this Court if a consequence of the variation of the freezing order to permit the sale of the Castle Hill property and to provide for the payment of moneys into this Court was to prejudice or defeat a creditor’s security interest in the Castle Hill property (such as the Court of Appeal found Mr El‑Cheikh to have). It is also not surprising, having regard to the overriding duty of the Court to make orders in the interests of justice, that the primary judge was concerned that orders for the payment of moneys out of Court were made without the parties notifying the Court of Mr El‐Cheikh’s claims in relation to those moneys.

35    The decision of the primary judge is not attended with sufficient doubt to warrant a grant of leave. The Applicant’s application for leave to appeal will be dismissed with costs.

Associate:    

Dated:        22 December 2022