Federal Court of Australia

El Rihani v Hotait (No 3) [2023] FCA 595

ORDERS

IN THESE ORDERS the following words bear the following meanings:

Gavel & Page means Gavel & Page Lawyers Pty Ltd ABN 89 152 559 610;

Mr Hotait’s email address means the address specified as Mr Hotait’s email address in his email sent to the Court on 18 May 2023 at 7:48 pm which is marked as exhibit “FO-2” or such other address as Mr Hotait notifies in writing to Gavel & Page and Mr El Rihani from time to time as his email address for the purposes of these orders;

Reasons means El Rihani v Hotait (No 2) [2023] FCA 375; and

Trust Account means the account identified in the letter to the Court dated 24 May 2023 from Gavel & Page which is marked exhibit “FO-1” in these proceedings.

THE COURT ORDERS THAT:

1.    It is a condition of Mr Hotait’s obligations in Order 2 that Gavel & Page confirms by an email sent to Mr Hotait’s email address on or before 5 pm (Sydney time) on the Wednesday immediately preceding the Friday on which Mr Hotait is required to pay an amount specified in paragraphs (a) to (e) of Order 2 (relevant amount) to the Trust Account that the relevant amount has been received into the Trust Account from Mr El Rihani in cleared funds. Any funds paid by Mr El Rihani as contemplated by this order will be paid subject to the escrow arrangement set out in Order 3.

2.    Mr Hotait must pay or cause to be paid the following amounts in cleared funds to the Trust Account by 5 pm (Sydney time) on the following specified dates:

(a)    $200,000 by Friday, 16 June 2023;

(b)    $600,000 by Friday, 30 June 2023;

(c)    $600,000 by Friday, 28 July 2023;

(d)    $600,000 by Friday, 25 August 2023; and

(e)    $73,343.93 by Friday, 22 September 2023.

3.    Any funds paid by Mr El Rihani to Gavel & Page as contemplated by Order 1 will be held by that firm subject to the following escrow arrangement:

(a)    Mr El Rihani must not call for repayment of the relevant amount paid by him any time before 5 pm on the Monday immediately following the time specified in Order 2 as the time by which Mr Hotait must pay the same relevant amount;

(b)    If Mr Hotait pays the relevant amount in cleared funds into the Trust Account by the time specified in Order 2, the escrow applying to the relevant amount contributed by Mr El Rihani ends immediately and the relevant amounts contributed by Messrs Hotait and El Rihani must be held in the Trust Account subject to the Deed of Separation; and

(c)    If Mr Hotait does not pay the relevant amount in cleared funds into the Trust Account by the specified date in Order 2, the relevant amount paid by Mr El Rihani remains subject to escrow and Mr El Rihani may request their return at any time after 5 pm on the relevant Monday. The relevant amount contributed by Mr El Rihani will not be held subject to the Deed of Separation unless and until Mr Hotait pays the same relevant amount to the Trust Account to be held subject to the Deed of Separation.

4.    The money paid by the parties into Court, in the aggregate amount of $100,000, is to be transferred to the Trust Account.

5.    Mr Hotait is to pay Mr El Rihani’s costs of the proceedings as agreed or taxed.

6.    There be liberty to apply as necessary to give effect to these Orders and the Reasons.

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

REASONS FOR JUDGMENT

FARRELL J:

Introduction

1    In El Rihani v Hotait (No 2) [2023] FCA 375, I made orders requiring the parties to provide agreed draft orders consistent with those reasons by 9 May 2023 or, failing agreement, that they were each to provide draft orders consistent with the reasons for which they respectively contend and brief submissions by 11 May 2023 (Mr El Rihani) and by 18 May 2023 (Mr Hotait). Those orders provided that unless either party indicated in its submissions that it required an oral hearing, a decision as to final orders would be made on the papers.

2    The parties were not able to agree orders and they have each provided draft orders and brief submissions. Neither party requested an oral hearing. I note that Mr El Rihani’s submissions were made by his counsel and Mr Hotait made his own submissions as he appears to be currently unrepresented.

3    Terms defined in El Rihani v Hotait (No 2) bear the same meaning in these reasons unless otherwise indicated.

Submissions

Mr El Rihani’s submissions in chief and proposed orders

4    In general terms, Mr El Rihani sought orders that:

(1)    On condition that he first pay a specified amount by cheque or direct credit to an account operated by Gavel & Page Lawyers (Trust Account) by the day before Mr Hotait was required to make the equivalent payment, Mr Hotait must pay an equivalent amount to that account by dates set out in the orders. The proposed schedule for payments was that Mr Hotait pay:

(a)    $200,000 within seven days of the Court’s order;

(b)    $600,000 by 16 June 2023;

(c)    $600,000 by 14 July 2023;

(d)    $600,000 by 11 August 2023;

(e)    $73,343.93 by 8 September 2023.

The amount paid by Mr El Rihani would be received in escrow pending Mr Hotait’s payment;

(2)    If Mr Hotait did not pay the required amount by the specified time, moneys contributed by Mr El Rihani would be returned to him;

(3)    The amount of $100,000 currently held in Court be paid to the Trust Account; and

(4)    Mr Hotait pay costs of the proceedings as agreed or taxed.

I note that the numbering of the subparagraphs reflects the numbering of the orders proposed by Mr El Rihani.

5    Mr El Rihani’s written submissions dated 10 May 2023 were to the following effect:

(1)    The provision made for payment of his contribution to the Trust Account to be received in escrow was necessary because, having regard to cl 10.14(b)(i) of the Deed of Separation dated 19 December 2016, if Mr El Rihani made a contribution but Mr Hotait did not, then Mr Hotait may become entitled to half of the amount contributed by Mr El Rihani. I note that cl 10.14 of the Deed of Separation provides as follows:

Upon either of the following events occurring:

(a)    the expiry of all building defect warranty periods which Skyworks NSW must comply by contract, statue or common law (excluding tort) and receipt of all funds payable to Skyworks NSW; or

(b)    agreement between the parties in writing,

the following shall occur:

(i)    the funds held in the Trust Account shall be distributed to the parties equally (if there are funds available for distribution). For this purpose, the parties agree to provide written authority to Madison Marcus Law Firm Pty Ltd to deal with the funds held in the Trust Account in accordance with this clause; and

(ii)    Skyworks NSW is to be deregistered in accordance with clause 5.3.

(2)    It is not necessary to make provision for Mr Hotait’s contribution to be received in escrow as Mr Hotait would only be required to pay if Mr El Rihani had already paid; and

(3)    The proposed costs order reflects El Rihani v Hotait (No 2) at [188].

Mr Hotait’s submissions in response and proposed draft orders

6    In his written submissions dated 18 May 2023, Mr Hotait asked that the Court “makes orders consistent with Mr El Rihani’s orders accept that the monies are not held in escrow for the reasons outlined in my submission …” (as written). He submitted that provision for escrow of Mr El Rihani’s contributions was not in accordance with the Deed of Separation or El Rihani v Hotait (No 2) at [184].

7    Mr Hotait then submitted that (as written):

1.1    By reasons of Mr El Rihani’s own admission in “Mr El Rihani’s submissions on final orders” he states in paragraph 1.5, due to the effect of 10.14(b)(i) being enlivened, I am entitled to half of the El Rihani contribution. I agree with Mr El Rihani on this point, Clause 10.14(b)(i) has come to effect due to the event specified under clause 10.14(a) has occurred, which is that the defects warranty period of Skyworks NSW has expired, and receipt of funds payable to Skyworks has happened.

1.2    By reasons admitted in Mr El Rihani’s submission on final orders, we cannot make payments to creditors because monies in Trust will be due and payable equally to the parties (being Mr El Rihani and myself) due to clause 10.14(b)(i) of the Deed of Separation being enlivened.

1.3    Mr El Rihani’s assertion in paragraph 1.6 of his submission of final orders is false. The deed states that I am required to pay into Trust account when Mr El Rihani pays into the Trust Account. This is in line with Mr El Rihani Amended Statement of Claim, and order of court paragraph 184. If I was to make a payment into Trust account, and Mr El Rihani pay into escrow, then for the same reason stated by Mr El Rihani, he can also be entitled to half of my contribution due clause 10.14(b)(i) being triggered.

1.4    I have asserted my position that the liquidator be the nominated Trust account is the proper Trust account for the reason I have stated in the file (Final Orders – Billal Hotait) see attached. This is in the event that 10.14(b)(i) of the deed of separation has not occurred. But the fact remains that this clause is now triggered.

1.5    I also propose that the $100,000 held in the court Trust account be returned to myself and Mr El Rihani equally, simply for the reasons mentioned above in this this submission.

8    Mr Hotait’s proposed orders had only one order as follows (as written):

I do not oppose orders sought by Mr El Rihani, however, I strongly oppose the that any monies get held in escrow, simply because it is not in accordance with deed of separation, nor in accordance with his statement of claim in this proceedings, and not accordance with the court order paragraph 184, “…..Accordingly, I consider that it would be open to me to order that, on condition that Mr El Rihani also contributes $2,073,343.93 to the Trust Account, Mr Hotait contributes $2,073,343.93 within a time set by the Court (say, 28 days). “

The company has been placed into voluntary administration by Mr El Rihani and myself. Prior to this event, the Trust account was operated by Gavel and Page. Clause 10 of the Deed of Separation states:

10.     Trust Account

10.1    The parties acknowledge and agree that moneys shall be held in the Trust Account on behalf of Skyworks NSW.

10.2    The parties agree that these funds shall be held in the Trust Account on account of future liabilities of Skyworks NSW, including, but not limited to, potential building defect liabilities arising from construction works undertaken by Skyworks NSW in the state of New South Wales.

10.3    The parties acting reasonably and in good faith, agree to direct Madison Marcus Law Firm Pty Ltd to pay the liabilities of Skyworks NSW from the Trust Account.

I would like to state that since Mr El Rihani and myself have mutually agreed to place the company in to external administration, and given the judgment and the operation of cl. 10.1 (of The Deed of Separation), I now consider that all monies to be paid into the Trust Account are to be held on behalf of the Company and in these circumstances, the money to be paid into the Trust Account should be administered by the liquidator in accordance with s.556 of the Corporations Act.

I would also like to put the court on notice of the Liquidator of Skyworks NSW Pty Ltd that shares the same view, (I attach a letter from the liquidators’ solicitor to these court orders). I understand that the liquidator is not a party to the Deed, but it is noted that clause 10.1 that monies held in Trust are on behalf of the company.

9    Included with Mr Hotait’s draft order was a letter dated 16 May 2023 from Holman Webb Lawyers, acting for the liquidator of Skyworks NSW, addressed to Ashley Holland of HWL Ebsworth Lawyers and Mr Hotait. Relevantly, the letter stated:

We refer to the Reasons for Judgment dated 24 April 2023 in the matter of El Rihani v Hotait (No 2) [2023] FCA 375 (the judgment).

We are instructed as follows:

1.    Pursuant to the judgment, the Court held that there is an amount payable by Mr El-Rihani and Mr Hotait to the Trust Account of $4,146,687.87.

2.    At paragraph 186 of the judgment, Her Honour refers to the prospect of Gavel & Page Lawyers operating the Trust Account and indicates that the issue of whether that firm operates the Trust Account should be established before final orders are made, and indicates that Mr El-Rihani and Mr Hotait should address this issue in draft orders to be provided to the Court.

3.    Clause 10.1 of the Deed of Separation provides that all moneys shall be held in the Trust Account on behalf of the Company.

4.    Given the judgment and the operation of cl. 10.1, our client considers that all monies to be paid into the Trust Account are to be held on behalf of the Company and in these circumstances, the money to be paid into the Trust Account should be administered by our client in accordance with s.556 of the Corporations Act.

5.    The purpose of this letter is to seek the agreement of Mr El-Rihani and Mr Hotait that the Trust Account be administered in the way suggested in numbered paragraph 4 of this letter.

6.    Please indicate your respective positions on the above request by no later than 12.00 noon on 17 May 2023.

What occurred next

10    In light of the content of Mr Hotait’s submissions, which raised an issue not addressed in El Rihani v Hotait (No 2), on 19 May 2023, Mr Holland sought an opportunity for Mr El Rihani to provide submissions addressing the issue raised in Mr Hotait’s submissions and the letter sent on behalf of the liquidator and suggesting that Mr Hotait be given an opportunity to respond to those further submissions.

11    On 19 May 2023, by email from my chambers sent to the parties:

(1)    I granted leave to Mr El Rihani to provide submissions in reply, noting that no provision had been made for them in the orders made on 24 April 2023, but a right of reply was not unusual. I considered it appropriate in this case. I noted that I was aware of what I had said in my reasons in El Rihani v Hotait [2020] FCA 912 (El Rihani v Hotait (No 1)) at [103]-[133]; and

(2)    I requested evidence that Gavel & Page was will willing to receive moneys and operate the Trust Account for the purposes of the Deed of Separation. I indicated that I was willing to accept a letter on Gavel & Page letterhead advising the Court of its trust account details as sufficient evidence. I note that my chambers received a letter from Gavel & Page dated 24 May 2023 providing the Trust Account details and I have marked that letter as exhibit FO-1.

12    Mr Hotait sought leave to respond to any submission in reply filed by Mr El Rihani. Following receipt of Mr El Rihani’s submissions in reply, my associate advised Mr Hotait that I would not be assisted by further submissions.

Mr El Rihani’s submissions in reply

13    Mr El Rihani provided written submissions in reply dated 24 May 2023.

14    Mr El Rihani submitted that:

(1)    In El Rihani v Hotait (No 2) at [183]-[184], the Court decided that, on condition that Mr El Rihani also do so, Mr Hotait is liable to contribute $2,073,343.93 to the Trust Account;

(2)    Nevertheless, Mr Hotait submits that the “escrow” arrangement proposed by Mr El Rihani exposes Mr Hotait to the risk of Mr El Rihani becoming entitled to control the return of any contribution made by Mr Hotait without having himself contributed an equal amount. The proposed escrow does not operate as Mr Hotait submits because if Mr El Rihani has not first contributed an equivalent amount, Mr Hotait would not be required to make a contribution to the Trust Account otherwise due in accordance with the proposed orders. It is only if Mr Hotait does not make his contribution by the required time that Mr El Rihani’s contribution is returned to him. Mr Hotait’s concerns are unfounded; and

(3)    There is no dispute between the parties as to the proposed timetable for contributions in aggregate amount of $4,146, 687.86. Mr El Rihani’s proposed Orders 1 and 2 give effect to the Court’s reasons published in El Rihani v Hotait (No 2). Nor has proposed Order 3, relating to the transfer of moneys held in Court to the Trust Account been opposed.

15    Otherwise, Mr Hotait’s submissions go well beyond the ambit of the Court’s orders made on 24 April 2023 that draft orders be “consistent with the reasons published”.

16    Mr El Rihani submitted that Mr Hotait’s submissions which rely on cl 10.14(a) of the Deed of Separation should not be accepted. Mr Hotait contended that no orders for contribution should be made because all building defect warranty periods have now expired and receipt of all funds payable to Skyworks NSW has now occurred within cl 10.14(a). Mr El Rihani says that:

(1)    It is expedient to note that no amounts due to Skyworks NSW under cl 5.1(d) of the Deed of Separation (that is, payments due to Skyworks NSW as a contracted builder) and cl 5.2(b) (all future payments to be made to Skyworks NSW of any nature) have been so received. Mr El Rihani relied on an unexplained document at Court Book p 600 and a document in a tender bundle which was not admitted to evidence in the proceedings, a topic raised with the parties at recent case management hearings;

(2)    No evidence has been led as to the expiration of warranty periods;

(3)    This issue was not raised in the litigation decided on 24 April 2023 and it cannot now be raised;

(4)    Mr Hotait’s submission ignores the central fact that his obligation to make contributions to the Trust Account is in respect of amounts that had been requested from him had been decided against him in El Rihani v Hotait (No 2); and

(5)    It is not open to Mr Hotait to rely on his failure to comply with his obligations under cl 10 of the Deed of Separation to defeat its operation.

17    In relation to Mr Hotait’s submission that contributions due under cl 10 should be paid to or be under the control of Skyworks NSW’s liquidator should not be accepted because:

(1)    Section 556 of the Corporations Act 2001 (Cth) operates to bind liquidators in respect of property of the company to which they had been appointed. Funds in the Trust Account pursuant to cl 10 of the Deed of Separation are not property of Skyworks NSW;

(2)    A similarly premised argument was advanced by Mr Hotait at the hearing of separate questions on 26 September 2020. It was rejected and nothing has changed since then: see El Rihani v Hotait (No1) at [104]-[105] and [124]-[125].

Consideration

18    In his submissions and in his draft orders, Mr Hotait submitted that the Court should make orders consistent with those proposed by Mr El Rihani and that he had no objection to the proposed orders save with respect to escrow. Mr Hotait raised no specific objection to the timetable for his contributions to the Trust Account in an aggregate amount of $2,073,343.93 or to Gavel & Page operating the Trust Account.

19    Notwithstanding that, it appears that Mr Hotait also seeks to argue that cl 10.14(a) has come into effect and any funds in the Trust Account are the property of Skyworks NSW and therefore under the control of the liquidator. Those contentions are inconsistent with his agreement that orders consistent with those proposed by Mr El Rihani should be made. His reason for suggesting that the $100,000 currently held in Court be paid to himself and Mr El Rihani in equal shares was said to be based on his submissions with respect to the role of the liquidator and the effect of cl 10.14(a) of the Deed of Separation.

20    I respond to the issues raised in submissions in relation to the proposed orders as follows.

21    First, I reject Mr Hotait’s submission that cl 10.14(a) of the Deed of Separation is now satisfied so that he has no obligations under cl 10 because:

(a)    I accept Mr El Rihani’s submission that that argument was not raised at any time before Mr Hotait provided his written submissions dated 18 May 2023. It is too late to raise that matter now and in any event, there is no evidence that supports that position; and

(b)    I do not accept that Mr Hotait has a prospective entitlement under cl 10.14 to funds which would prevent the Court allowing Mr El Rihani to pay funds to Gavel & Page in escrow pending Mr Hotait’s equal contribution.

22    Second, during the course of these proceedings, both parties have exhibited concern that if one of them contributes moneys to the Trust Account and the other party does not contribute, cl 10.14 will (at some time) have the effect that the other party will receive half of what remains of the contribution, rather than the contributing party getting all of the remaining money that they contributed back. To my mind, the escrow proposal is a neat way of avoiding that concern and it is not inconsistent with either of the Deed of Separation or my reasons in El Rihani v Hotait (No 2). Subject to what is said in the next paragraph, I accept the submission that if the escrow lasts only until Mr Hotait makes his contribution, Mr Hotait is not at risk that Mr El Rihani’s contribution may be withdrawn. In any event, in my view, any risk to Mr Hotait could be addressed in drafting.

23    I was not satisfied that Mr El Rihani’s proposed orders contained sufficient machinery to enable Mr Hotait to know that cleared funds had been deposited with Gavel & Page. Mr El Rihani’s proposal was that he pay money to the Trust Account by cheque or direct credit the day before Mr Hotait was due to make an equivalent contribution to the Trust Account as set out at [4(1)] above. There was no provision for Mr Hotait to be advised that the payment had in fact been made and no requirement that the funds paid by Mr El Rihani be cleared funds. I raised proposed amendments to the orders to address these issues by emails sent to the parties by Registry on 30 May 2023. The proposed amendments provided for Mr El Rihani’s contribution to the Trust Account be made in cleared funds and for Gavel & Page to advise Mr Hotait of their receipt of the funds by a time on the Wednesday immediately preceding a contribution on a Friday (since all of the proposed dates in [4(1)(b)–(e)] were Fridays). I received responses from Mr El Rihani’s legal representatives (mainly with respect to lengthening the timetable for contributions to the Trust Account) and from Gavel & Page, but not Mr Hotait.

24    I note that Gavel & Page advised that the terms of any Costs Disclosure and Agreement with respect to the operation of the Trust Account under the Deed of Separation would include that:

(1)    Gavel & Page’s fees would be paid from the Trust Account and to that end the parties irrevocably authorise Gavel & Page to apply the moneys in trust to the payment of their invoice/s at the due date; and

(2)    Invoices not be subjected to the process in the Deed of Separation (ie cll 10.6-10.11).

There does not appear to be express provision in the Deed of Separation for payment of fees associated with the operation of the Trust Account and in my view it is open to Gavel & Page to require such terms as a condition of providing that service should they wish to do so.

25    Third, I reject Mr Hotait’s submissions that cl 10.1 of the Deed of Separation creates a trust over the moneys held in the Trust Account of which Skyworks NSW is the beneficiary and the moneys in the Trust Account fall to be administered by the liquidator as an asset of Skyworks NSW. Those issues were addressed in El Rihani v Hotait (No 1).

26    In El Rihani v Hotait (No 1) at [104]-[105], I recorded Mr Hotait’s submissions as follows:

104    On 6 June 2018, the Court made consent orders in proceedings NSD1514/2017 winding up Skyworks NSW pursuant to s 461(1)(k) of the Corporations Act and a liquidator was appointed and continues in office. As a result, the continued joint control of Skyworks NSW by Mr Hotait and Mr El Rihani under cl 5 of the Deed of Separation has been superseded by the appointment of the liquidator who now has control of Skyworks NSW’s affairs. As directors, Mr Hotait and Mr El Rihani must not perform or exercise a function or power of that office after the appointment of a liquidator (see s 198G of the Corporations Act). For them to do so would constitute an offence. The liquidator now has control of Skyworks NSW’s assets. The directors are precluded from dealing with the liabilities of Skyworks NSW, which are also subject to the liquidator’s control.

105    The Trust Account is or, at the very least, appears to be the property of Skyworks NSW as funds held or to be held in it are to be utilised for its benefit to enable it to meet its liabilities: see cl 10.1 of the Deed. Money in the Trust Account may only be returned to Mr El Rihani and Mr Hotait after all such liabilities have been paid: see cl 10.14. In those circumstances, the Trust Account must be taken into the control or custody of the liquidator: see s 474(1) of the Corporations Act. It is then for the liquidator to determine how those funds, as assets of Skyworks NSW, are to be dealt with instead of Mr Hotait and Mr El Rihani.

27    I made findings in relation to those submissions in El Rihani v Hotait (No 1) at [124]-[131], as follows:

124    Third, it is an Agreed Fact that none of Skyworks NSW’s money has been contributed to the Trust Account. Skyworks NSW is not a party to the Deed and therefore has no obligation to contribute money to the Trust Account. The Court does not accept Mr Hotait’s contention that the money in the Trust Account or which may be contributed to it by them hereafter is property of Skyworks NSW on which the liquidator has a claim either before or after it has been determined, in accordance with the mechanisms in cll 10 and 11, that particular creditors should be paid.

125    Since the money is held in an account operated by solicitors who drew up the Deed of Separation for Mr Hotait and Mr El Rihani, not Skyworks NSW, it is not apparently money of that company. The Court does not accept that the fact that cl 10.1 of the Deed contains an express acknowledgement and agreement that moneys shall be held in an account, which is called a Trust Account, on behalf of Skyworks NSW is sufficient to constitute a trust in the context of the Deed as a whole and cl 10 in particular. Clause 10.2 provides that the moneys will be held in the Trust Account on account of future liabilities of Skyworks NSW. Clause 10.14 contains provision for the “parties”, being Mr Hotait and Beauchamp Developments on the one hand and Mr El Rihani and Parramatta Project on the other, to agree (before the end of the building defects warranty period) to direct the law firm to pay to them money in the Trust Account.

126    Although it may be true that, if Mr Hotait and Mr El Rihani had elected the course set out in cl 10.14(b), it might not have been possible to achieve voluntary deregistration of Skyworks NSW (as required by that clause) without ensuring that all of Skyworks NSW’s creditors were in fact paid (since that is a requirement of s 601AA(2)(e)), it is clear from that clause that the solicitors operating the Trust Account would have been obliged to pay them the money then in the Trust Account which had been contributed by them and it would not be the mechanism through which the creditors would be paid.

127    Further, when the mechanisms for determining the amount to be paid under cll 10 and 11 have been gone through, the solicitors are directed to pay money to Skyworks NSW’s creditors, not Skyworks NSW.

128    Those factors indicate that Skyworks NSW has no claim on the money in the Trust Account, even after the time has come for the solicitors to pay one or more creditors. Further there is nothing in either of cll 10 or 11 which suggests that a creditor would have a claim on the Trust Account should the parties to the Deed agree that a claimed amount should not be paid or an expert determination is in fact wrong. The creditors’ recourse is to Skyworks NSW, not the Trust Account.

129    Mr Hotait and Mr El Rihani wanted to end their business relationship, which is an express purpose of the Deed. It is an Agreed Fact that their relationship had deteriorated. It is plain from the general terms of the Deed that cll 10 and 11 were intended to create a mechanism whereby disputes between them concerning which creditors should be paid and for how much would be resolved, with money having been put in the hands of the solicitors to facilitate payment without any further act by Mr Hotait or Mr El Rihani or the possibility that the funds would be used for some other purpose.

130    During the course of the hearing, counsel agreed that the liquidator had made a recovery from litigation with a developer. Clause 5.2(b) of the Deed would, prior to the appointment of the liquidator, have required Mr Hotait and Mr El Rihani to ensure that the amount received in that litigation be paid to the Trust Account. It is difficult to see how cl 10.14 would have justified payment of those funds to Mr El Rihani and Mr Hotait while creditors remained outstanding since it would clearly have been company money. However, since it was the liquidator which made the recovery, those funds have never formed part of the Trust Account and, while the liquidator is in place, Mr Hotait and Mr El Rihani’s powers to direct payment of company funds to the Trust Account cannot be exercised under s 198G of the Corporations Act. Having said that, the use of the moneys recovered by the liquidator to pay creditors should reduce the nett amount that Mr El Rihani and Mr Hotait would be required to contribute to the Trust Account because the creditors would be owed less by Skyworks NSW.

131    For clarity, in circumstances where the only money contributed to the Trust Account was contributed by Mr Hotait and Mr El Rihani, the Court is satisfied that:

(1)    Skyworks NSW’s liquidator has no claim on the funds in the account.

(2)    Section 588FA has no operation since the payment of a creditor out of the Trust Account is not a transaction involving Skyworks NSW. That payment would be made by Mr Hotait and Mr El Rihani out of their own funds, acting in their personal capacity and not as directors of Skyworks NSW.

(3)    The obligations imposed on a liquidator under the Corporations Act to get in and protect a company’s assets, consider proofs of debt and pay creditors are not prejudiced by the mechanisms of the Deed of Separation. Contrary to Mr Hotait’s submission that a liquidator is “charged with the responsibility” of paying a company’s debts so that the mechanisms of the Deed may not be engaged, the Corporations Act does not preclude individuals, acting in their own right and out of their own funds, from paying the debts of a company in liquidation. The liquidator’s processes and the mechanisms of the Deed are capable of existing alongside each other.

28    It is not appropriate to revisit those findings in the context of making orders consistent with reasons in El Rihani v Hotait (No 2). I also note that the liquidator is not, and has never sought to be, a party in these proceedings so that the views expressed in his solicitors’ letter dated 16 May 2023 are of no assistance in the resolution of issues between the parties to these proceedings.

29    Fourth, the $100,000 currently held in Court was contributed equally by Messrs Hotait and El Rihani for the purpose of securing the services of an independent expert to determine claims against Skyworks NSW asserted by either of Messrs Hotait or El Rihani in a process outside the operation of the Deed of Separation. Mr El Rihani says that the funds should be paid to the Trust Account operated by Gavel & Page. Mr Hotait says both that he agrees with the orders proposed by Mr El Rihani (save as to escrow) and that the moneys held in Court should be paid to Messrs Hotait and El Rihani equally on the basis of the correctness of his claims concerning the operation of cl 10.14(a) and the role of the liquidator in relation to the Trust Account.

30    Clause 10.13 of the Deed of Separation provides that the costs of the appointment of the expert and the expert’s costs shall be borne by the parties equally. It is plain from El Rihani v Hotait (No 2) that the services of an expert will be required. Clause 15.1 is a further assurances clause which requires each party to “take all steps, execute all documents and do everything reasonably required by any other party to give effect to any of the transactions contemplated by this document”. In those circumstances, I consider it appropriate to make the order that the moneys held in Court be paid to the Trust Account.

31    Fifth, as Mr Hotait has made no objection to the usual order as to costs being made as foreshadowed in El Rihani v Hotait (No 2) at [188], I will make that order.

32    Sixth, this is an apt matter to grant liberty to apply for the purposes of giving effect to the Orders which I now make and the reasons in El Rihani v Hotait (No 2).

Disposition

33    I will make orders accordingly.

Associate:

Dated:    6 June 2023