FEDERAL COURT OF AUSTRALIA

Frigger v Banning (No 8) [2019] FCA 1319

ORDERS

THE COURT ORDERS THAT:

1.    The application by the applicants for leave to file a statement of claim in terms of the minute of proposed amended statement of claim dated 7 May 2019 and to add additional respondents is dismissed.

2.    The applicants do pay the respondents' costs of the application to be assessed if not agreed.

3.    The second respondent be removed as a party and Ann Marion Campbell-Smith in her capacity as executor of the estate of Donald Campbell-Smith be added as the second respondent with effect from the date of this order.

4.    The respondents' interlocutory application dated 24 July 2019 be listed for hearing on 26 September 2019 at 10.15 am.

5.    On or before 4 September 2019 the respondents do file and serve an outline of submissions not exceeding five pages and any affidavits in support of their interlocutory application.

6.    On or before 18 September 2019 the applicants do file and serve an outline of submissions not exceeding five pages and any affidavits in opposition to the interlocutory application.

7.    There be leave to the respondents to apply on or before 4 September 2019 for orders varying order 2 to seek orders by way of indemnity costs.

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

REASONS FOR JUDGMENT

COLVIN J:

1    There have been a number of attempts by Mr and Mrs Frigger to plead their case in these proceedings. The form of the statement of claim was last considered on 17 July 2018, when I refused leave to file a proposed statement of claim. At that time, Mr and Mrs Frigger indicated that they proposed to obtain legal assistance in the preparation of a further proposed statement of claim. I made orders for the filing of a further minute of proposed statement of claim by 28 August 2018. Soon after I made those orders, Mr and Mrs Frigger were made bankrupt.

2    It was not until 7 May 2019 that a proposed statement of claim was delivered. As well as being a new form of pleading, it sought to add claims against three additional respondents.

3    When the proposed statement of claim was advanced, the present respondents complained that it failed to conform to previous orders made by the Court. They also raised objection to the further conduct of the proceedings by Mr and Mrs Frigger because of their bankruptcy. They also said that they should not have to develop all of their objections to the proposed statement of claim until those matters were considered. I convened a hearing to first deal with the initial objections raised by the respondents, namely that by reason of the bankruptcy of Mr and Mrs Frigger or their failure to comply with previous orders, the proposed statement of claim should not be allowed.

4    I note that the respondents maintain that the proposed pleading is otherwise defective and seek to bring an application dismissing the proceedings on the basis that there should be no further opportunity afforded to Mr and Mrs Frigger to plead a case. However, those are matters for a later time, if and when the need arises.

Summary of decision

5    For the following reasons, these proceedings are not of a kind that can continue to be advanced by Mr and Mrs Frigger as bankrupts. There was a statutory stay of all claims in these proceedings that arose upon the bankruptcy of Mr and Mrs Frigger and that stay continues. In addition, the proceedings are now deemed to have been abandoned by the trustee in bankruptcy. The stay being in operation, these proceedings cannot be used to bring new claims. It follows that leave could not be granted to Mr and Mrs Frigger to take any further steps in the proceedings (including leave to file the proposed pleading).

6    In addition, the proposed statement of claim does not comply with previous orders of the Court. For that further reason, leave to file the proposed statement of claim should be refused.

7    It follows that there should not be orders joining the additional respondents.

8    The respondents have filed an interlocutory application for the dismissal of these proceedings with costs. I will make directions for the hearing of that application.

9    One of the respondents, Mr Donald Campbell-Smith has passed away since these proceedings were commenced. In the course of the hearing I allowed an application to be brought for orders to the effect that the executor of his estate be made a party to these proceedings and Mr Campbell-Smith be removed as a party. Those orders should be made.

10    The respondents having succeeded on the application, there should be orders that Mr and Mrs Frigger do pay the respondents' costs of the hearings on 12 June and 29 July 2019.

11    As these reasons confirm the operation of a statutory stay, Mr and Mrs Frigger are not able to file any further documents in these proceedings unless specifically permitted to do so by order of the Court.

Issues for determination at this stage

12    After some earlier versions of the statement of claim were proposed, on 8 March 2017 Barker J dismissed an application for an order that would have permitted Mr and Mrs Frigger to file what was then described as a proposed substituted statement of claim. The consequence of that order was that there was no statement of claim because necessarily implicit in the application was an abandonment of the existing pleading and a recognition that there needed to be a new pleading. Therefore, as the matter currently stands there is no statement of claim. In those circumstances, on 16 March 2018 I made orders concerning the filing of a proposed new pleading. I directed that it be no more than 15 pages in length and be in accordance with paras 5.11 and 5.12 of the Commercial and Corporations Practice Note. I also ordered that it not characterise any conduct as fraudulent or dishonest or attribute any improper motive to any party but rather plead any state of mind or purpose or object of a party objectively. I also directed that the proposed statement of claim shall not contain matters of detailed evidence or legal argument or submissions. I made these directions having regard to the problems that had been found with previous pleadings.

13    A minute of proposed statement of claim was filed on 10 April 2018. On 17 July 2018, I dismissed an application for leave to file a statement of claim in the terms the minute: Frigger v Banning (No 7) [2018] FCA 1074. The application was dismissed because: (a) the proposed pleading did not comply with the directions I had made concerning the form of the pleading (which sought to confine it to matters properly the subject of a pleading given the nature of the application); (b) it raised matters that had been found by Barker J to be an abuse of process; (c) it sought to bring a collateral attack on a decision of the Supreme Court concerning a deed of company arrangement; and (d) it sought to make claims against persons who were not parties to the proceedings. When I made those orders, Mr and Mrs Frigger informed the Court that they proposed to seek legal assistance in preparing a new pleading. I directed that a signed minute of proposed statement of claim complying with my orders of 16 March 2018 be filed and served by 28 August 2018.

14    On 20 July 2018, in separate proceedings, I made sequestration orders in respect of the estates of each of Mr and Mrs Frigger: Kitay, in the matter of Frigger (No 2) [2018] FCA 1032.

15    On 14 September 2018, a form of consent was filed signed by the solicitors for the respondents and the trustees in bankruptcy of the estates of Mr and Mrs Frigger. Amongst other things it sought an order that the proceedings be dismissed. There was no formal application and no affidavit in support. The matter came before me for a case management hearing on that date. Issues were raised as to the application of aspects of the provisions of s 60 of the Bankruptcy Act 1966 (Cth) which deals with the circumstances in which an action commenced by a person who subsequently becomes a bankrupt may be continued. On that occasion, Mr and Mrs Frigger were legally represented. There was no evidence before the Court as to notification to the trustees for the purposes of s 60 or as to the position in relation to any election. The consent of the trustees was advanced in an informal manner. In those circumstances, no orders were made given that the proceedings, as matters then stood, were stayed by operation of s 60(2). The matter was otherwise left on the basis that the respondents should bring a proper application if they wished to seek an order for the dismissal of the proceedings.

16    Thereafter, for a considerable time, no application by the respondents for dismissal of the proceedings was forthcoming.

17    The next step in the proceedings occurred on 7 May 2019, when Mr and Mrs Frigger filed an interlocutory application in which they sought an order joining Mr Timothy Stephenson, Mr Cameron Eastwood and Mr David Lenhoff as respondents. Each of them is a legal practitioner who has been involved in representing parties in proceedings in which Mr and Mrs Frigger and certain of their related entities have been involved. Indeed, Mr Stephenson appears as counsel for the respondents in these proceedings, instructed by Mr Eastwood.

18    On 7 May 2019, a document described as a proposed statement of claim and bearing a reference to it having been prepared by a named barrister and having been filed by a named firm of solicitors was received by the Court. The document is just over 23 pages in length and is presented in single-spaced typing. It is unsigned. On 30 May 2019, the Court was informed by email from the barrister concerned that the document was not settled by the barrister named in the document. The firm of solicitors are not on the record for Mr and Mrs Frigger.

19    Mr and Mrs Frigger maintain that the proposed statement of claim was settled by the barrister and have produced copies of fee notes which include narrations to the effect that time was spent in April 2019 drafting a proposed statement of claim and then settling the statement of claim. In oral submissions, Mrs Frigger said that she added some factual matters to the proposed statement of claim because they were not known to the barrister.

20    It appears that the interlocutory application and proposed statement of claim were then served on the solicitors for the respondents in late May 2019 together with a notice that Mr and Mrs Frigger were acting in person. There is no evidence that Mr Lenhoff has been served with the application and there was no appearance on his behalf. The documents came to the attention of Mr Stephenson and Mr Eastwood by reason of their representation of the respondents. However, Mr Stephenson has not appeared in the proceedings on his own behalf or on behalf of Mr Eastwood.

21    The interlocutory application came before me for a case management hearing on 12 June 2019. It was apparent that Mr and Mrs Frigger maintained that they could continue with these proceedings despite their bankruptcy and that they sought to have the proposed statement of claim accepted as the statement of claim in these proceedings. The respondents objected. As I have noted, submissions were advanced to the effect that the costs of objecting to the pleading should not be incurred when they could not advance the claim as bankrupts and the proposed pleading did not comply with earlier orders. In the result I ordered that there be leave granted to Mr and Mrs Frigger to amend their interlocutory application to include an application for an order that the minute of proposed statement of claim do stand as the statement of claim in these proceedings.

22    I made directions for the parties to file submissions and affidavits as to why the amended interlocutory application and these proceedings should not be dismissed by reason that the minute of proposed statement of claim fails to comply with the orders made on 16 March 2018. I also listed those issues for hearing on 29 July 2019. In the context of the course of the proceedings, it was apparent that the two issues to be determined on 29 July 2019 were the question whether the proceedings could be maintained by reason of the bankruptcy of Mr and Mrs Frigger and the question whether the proposed pleading failed to comply with the orders of 16 March 2018. The submissions filed by both parties reflected that position because they both dealt only with the consequences of the bankruptcy for the proceedings and whether the proposed statement of claim complied with the orders of 16 March 2018.

23    On 25 July 2019, the respondents filed an interlocutory application for Mr Donald Campbell-Smith to be removed as the second respondent and for Ms Ann Marion Campbell-Smith to be joined. The application also sought orders that the proceedings be dismissed with costs. Mr Campbell-Smith died on 3 August 2018. Ms Campbell-Smith was appointed as the executor of his estate by a grant of probate obtained on 8 April 2019. It appears that the orders as to the addition of Ms Campbell-Smith were sought to facilitate the application for the proceedings to be dismissed as against all parties and for claims to be made for costs orders on behalf of the estate of Mr Campbell-Smith.

24    At the hearing on 29 July 2019, I abridged time to allow the application concerning the identity of the second respondent to be raised at the hearing. This was a matter that had been raised informally at earlier hearings. There was no dispute as to the relevant factual position (although Mrs Frigger raised concerns about whether there had been proper authority in the past to conduct the proceedings for the second respondent). However, the rest of the respondents' interlocutory application (particularly the application for an order that the proceedings be dismissed) was not listed for hearing at that time.

25    Therefore, at this stage, only the following issues arise for determination:

(1)    Are Mr and Mrs Frigger prevented from maintaining these proceedings by reason of their bankruptcy?

(2)    Does the proposed statement of claim comply with orders of the Court made on 16 March 2018 and if not should leave be refused to amend in the proposed terms for that reason?

(3)    Should Mr Lenhoff, Mr Eastwood and Mr Stephenson be joined as respondents?

(4)    Should Ms Campbell-Smith be joined as the second respondent in place of Mr Campbell-Smith?

26    It is not necessary to adjudicate whether the form of the proposed statement of claim is a document that has been settled by counsel. Irrespective of its authorship, each of the above questions arise for determination.

Section 60 of the Bankruptcy Act

27    Section 60(2) of the Bankruptcy Act provides that an action commenced by a person who subsequently becomes a bankrupt is stayed upon that person becoming a bankrupt. The stay operates 'until the trustee makes election, in writing, to prosecute or discontinue the action'. Further, s 60(3) provides that if the trustee does not make an election within 28 days after notice of the action is served on the trustee by a party to the action then the trustee shall be deemed to have abandoned the action. Both these provisions are subject to s 60(4) which provides (so far as is presently relevant) that a bankrupt may continue in his or her own name an action in respect of 'any personal injury or wrong done to the bankrupt'. Relatedly, s 116(2)(g) excludes from the bankrupt estate any right of the bankrupt to recover damages or compensation for 'personal injury or wrong done to the bankrupt'.

28    An action for defamation is plainly an action in respect of personal injury or wrong: Moss v Eaglestone [2011] NSWCA 404; (2011) 83 NSWLR 476 at [8] (Allsop P, Campbell and Young JJA agreeing). Otherwise, as to whether an action is in respect of a personal injury or wrong done to the bankrupt, the test is 'whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property': Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713 at 721. The concluding words are significant. Where the same wrong or cause of action gives rise to both property and personal damage then the bankrupt may not be able to pursue the part of the claim that relates to personal injury or harm. In Moss v Eaglestone it was held that 'to the extent that damages for personal injury or wrong are inseverable from or directly consequential upon interference with property rights, a claim for them does not survive the stay brought about by s 60(2))': at [77].

29    The evidence before me shows that the respondents have given notice of these proceedings to the trustees in bankruptcy of the estates of Mr and Mrs Frigger and that the trustees have made no election within 28 days thereafter. Therefore, the proceedings have been abandoned by the trustees, save to the extent that s 60(4) operates. An abandonment does not operate as a dismissal. It appears only to prevent a trustee in bankruptcy from thereafter electing to prosecute the action. The statutory stay appears to continue to operate even when there has been an abandonment by operation of s 60(3). However, for the following reasons, if the respondents seek an order for final dismissal of the proceedings or any costs order consequent upon the abandonment then there must be a separate application.

30    In Tyne v UBS AG (No 4) [2017] FCA 374 at [15], Greenwood J expressed the view that where an action has been abandoned the appropriate order is that the action be dismissed, citing two authorities. The first authority was Cole v Challenge Bank Limited [2002] FCAFC 200 where there was an appeal against orders striking out a statement of claim and dismissing the proceedings. The appellants were bankrupted in the intervening period before the appeal was heard. The trustee in bankruptcy communicated to the respondent that he did not intend to pursue the appeal and would not oppose an application to dismiss the appeal. Gray J held that the preferable view was that the trustee had made an election to discontinue the appeal: at [14]. Alternatively, if there had been no election, the trustee had been deemed to have abandoned the appeal for the purposes of s 60(3): at [15]. His Honour then held that where there had been abandonment of an appeal 'it would be open to the respondent to put an end to it by moving the Court to have the appeal dismissed for want of prosecution': at [16]. In those circumstances, his Honour allowed an application for an order that the appeal be dismissed with costs. RD Nicholson J agreed, approaching the matter on the basis of an abandonment: at [20]. Emmett J agreed with the making of the orders saying that whether there had been a discontinuance or an abandonment did not matter: at [22]. Therefore, to the extent that the order dismissing the proceedings was based on abandonment it was made on the basis of an application to dismiss for want of prosecution. Importantly, the dismissal order was not held to follow as a matter of course from the abandonment.

31    The second authority was Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore [2012] FCA 660 where a trustee elected to discontinue an action under s 60(2): at [2]. It did not concern abandonment. The question was whether an order for dismissal should be made. Logan J recognised that there may be reasons why an order for dismissal might not be made even though there has been an election to discontinue: at [4].

32    Therefore, Greenwood J should not be taken to be finding that a dismissal order was appropriate in all cases where there has been a deemed abandonment by operation of s 60(2).

33    The consequence of an abandonment was summarised by the Full Court (Spender, Kiefel and Dowsett JJ) in Freeman v Joiner [2005] FCAFC 149 at [14] in the following terms:

The position is that, whilst the proceedings brought by the bankrupt are deemed to have been abandoned by the trustee, the cause of action remains. The provision, properly construed, operates only upon the trustee. There is no bar to the trustee commencing a fresh proceeding on the same cause of action or a bankrupt, on discharge, doing so whether there has been no determination of the issues. There is a line of authority to this effect. They include Re Gargan; Ex parte Gargan v Official Trustee in Bankruptcy a decision of Drummond J of 18 August 1995 in QB697 of 1993; Ivor Worrell as trustee of the Bankrupt Estate of Jeffrey Ross Fletcher and Janice Berryl Fletcher v Foodlink Ltd & Ors, a decision of Cooper J of 23 December 1998 in QG 27 of 1998; Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83, a decision of Wheeler J; State of Queensland v Beames [2003] QSC 399, a decision of McMurdo J. See also Re Kwok; Ex parte Rummel (1981) 61 FLR 336 at 342, a decision to which reference is made in the above mentioned cases.

34    To these may be added the decisions of Young JA in Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 at [17] and Gilmour J in Newman as trustee for the Bankrupt Estate of Keet v Bain [2013] FCA 558; (2013) 213 FCR 370 at [30]-[31]. I expressed a similar view in Nugawela v Commissioner of Taxation [2018] FCA 1458 at [11] which was followed by Allanson J in National Australia Bank Ltd v Nyasa Nominees Pty Ltd [2019] WASC 107 at [12]. Also, the decision of Edelman J in Duckworth v Water Corporation [2012] WASC 30 contemplates that a claim that has been stayed by operation of s 60(2) could be pursued by another party entitled to make the same claim - a beneficiary in the case of a claim by a bankrupt trustee being stayed - a course that might not be available if there was an obligation to dismiss the claim. But, compare Theissbacher v MacGregor Garrick & Co [1993] 2 Qd R 223.

The context for the claims sought to be made in the proposed statement of claim

35    As Barker J explained in an earlier interlocutory judgment, these proceedings have their origin in a claim by Computer Accounting & Tax Pty Ltd (CAT) brought in the Supreme Court of Western Australia: Frigger v Banning [2016] FCA 359. The following account is taken from Barker J's summary.

36    The original Supreme Court proceedings brought by CAT sought damages against Professional Services of Australia Pty Ltd (PSA) and Mr Martin Banning, its director. The claim arose from a dispute concerning the sale of a service station by PSA to CAT. The original proceedings resulted in a significant monetary judgment in favour of CAT. Mr Banning passed away after judgment was entered.

37    A deed of company arrangement was entered into by PSA (DOCA). The DOCA was expressed to be without prejudice to the rights of PSA to pursue an appeal against the judgment. Mr Banning's executor, Ms Sandra Banning, and PSA pursued an appeal. Pending the appeal hearing, an amount of about $1,165,000 was paid by PSA to CAT under the terms of the DOCA.

38    On 23 October 2009 the Court of Appeal of Western Australia allowed the appeal and substantially reduced the damages award by an amount of about $850,000. On the day that the decision was published, Mr and Mrs Frigger registered a charge over assets of CAT to secure the repayment of loans allegedly made by them to CAT of $2 million (Charge). A month later they lodged caveats over three pieces of real estate registered in the name of CAT. The caveats claimed that the properties were held by CAT as trustee of the Frigger Superannuation Fund. About 10 days later, Mr and Mrs Frigger as its shareholders, resolved to put CAT into voluntary liquidation. However, on the application of PSA and Mr Banning, Mr Mervin Kitay was appointed as provisional liquidator of CAT on 21 January 2010.

39    On 6 May 2010, CAT was ordered to be wound-up in insolvency. On 6 November 2012, orders were made terminating the DOCA on the basis that it had been wholly effectuated.

40    Mr and Mrs Frigger sought leave to bring a further appeal against the original decision in the Supreme Court in their own name and to set aside the orders on appeal. Their applications were dismissed in December 2015.

41    On 2 March 2016, Mr and Mrs Frigger's application for leave to commence or continue proceedings against the liquidator of CAT was refused on the basis that the action constituted an abuse of process and had no real prospects of success.

42    These and other proceedings resulted in a number of costs orders being made against Mr and Mrs Frigger.

Nature of these proceedings

43    The originating application in these proceedings which has never been amended claims the legal costs 'incurred and ordered to be paid' in each of seven separate proceedings in the Supreme Court of Western Australia, two proceedings in the District Court and one proceeding in the Magistrates Court and the liquidation costs and expenses of CAT. In addition to the costs claims, the application claims losses of the Frigger Superannuation Fund, 'reputation damages' and 'aggravated damages'.

44    The statement of claim filed with the application was prepared by Mr and Mrs Frigger personally. It contained claims about the following matters:

(1)    the validity of the Charge;

(2)    an allegation that the DOCA provided that in the event of its termination, funds received prior to termination shall be retained by those parties;

(3)    an allegation that monies provided by Banning Holdings Pty Ltd for the purposes of the DOCA did not become the property of PSA, but were funds held to be administered for the purposes of the DOCA;

(4)    a claim that the DOCA was made to frustrate orders that had been made by the Supreme Court of Western Australia to enforce the original judgment in favour of CAT;

(5)    the alleged termination of the DOCA;

(6)    an alleged entitlement of CAT to retain the amount of about $1,165,000 because it had been paid under the terms of the DOCA;

(7)    claims that submissions filed by Mr Lenhoff as PSA's solicitor breached the DOCA because, amongst other things, they did not reflect the entitlement to retain the amount of $1,165,000;

(8)    allegations that applications for freezing orders had been made for collateral purposes, including seeking to coerce CAT and Mr and Mrs Frigger to repay the amount required by the appeal judgment without setoff and outside the ambit of the DOCA (including, within a litany of complaints, a claim that all was done in order to 'harass, humiliate, embarrass, coerce and damage the credit and reputation' of Mr and Mrs Frigger);

(9)    similar allegations made about other proceedings that had been taken to secure payment of the amount required by the appeal judgment (including the winding up of CAT and PSA);

(10)    alleged preparation of false invoices for legal costs claimed;

(11)    alleged instructions by the respondents to Mr Stephenson to make unsubstantiated allegations of criminality against Mr and Mrs Frigger;

(12)    alleged instructions by the respondents to tortiously interfere in CAT's and Mr and Mrs Frigger's legal representation;

(13)    a complaint about allegations made by the respondents by instructing Mr Eastwood to make allegations against CAT and Mr and Mrs Frigger to the liquidator of CAT and consequences for the insolvent administration of CAT;

(14)    a claim that the final version of the DOCA was as found by Simmonds J in Holbrook v Professional Services Australia Pty Ltd [2012] WASC 444 at [16]; and

(15)    complaints about how the proceeds of the appeal judgment were to be used by the respondents, including complaints about the manner of administration of the estate of Mr Banning.

45    Later in the statement of claim (para 47) there was the following allegation:

47)    The Applicants have suffered loss of reputation:

a)    The freezing orders in CIV2265/06 were made against Mr & Mrs Frigger personally in circumstances where:

i)    CAT was entitled to retain the payment referred to in paragraph 8;

ii)    Further and or alternatively CAT was entitled to set off its legal and enforcement costs against the payment referred to in paragraph 8;

b)    The Applicants are directors of CAT being a company placed into insolvent liquidation in circumstances where:

i)    CAT was not insolvent;

ii)    CAT was not required to repay the Appeal Judgment alternatively was entitled to a statutory and contractual set off of its legal and enforcements costs in CIV2265/2006;

iii)    The Applicants made 7 written offers to secure $850,000 for the purposes of the Appeal Judgment;

c)    The Applicants are unable to obtain mortgage loans in Australia as the above matters are now contained on credit reports held by VEDA credit reporting agency:

Particulars

The Applicants applied for loans from 10 Australian banks, all of whom rejected the applications in circumstances where Mr & Mrs Frigger are considered high-worth individuals

d)    In CACV23/2012 and CACV24/2013 a judgment by Justice Pullin dated 8 April 2014 contains findings against the first named plaintiff based on the breaches of the DOCA by the respondents; the judgment was referred by Justice Pullin to the Director of Public Prosecutions which office has taken no action in relation to those findings.

46    The claim is not arranged in a manner that enables the ready identification of the nature of the causes of action being advanced. However, what is apparent is that the claim depends to a substantial extent upon the alleged validity of the DOCA as amended and allegations about the character of the payment made to CAT under the terms of the DOCA. Further, it is clear that there is no defamation claim. Finally, the complaints about alleged damage to reputation concern the conduct by which claims have been made in relation to the recovery of the amount payable by reason of the appeal decision. They are alleged consequences of the steps taken in pursuing a claim to money and other enforcement steps such as seeking freezing orders and the appointment of liquidators.

47    On 30 December 2015, an amended statement of claim was filed by Mr and Mrs Frigger. It made the following changes that are relevant for present purposes:

(1)    it added allegations that the submissions made to the Court that were said to have been false were submissions made fraudulently;

(2)    it alleged that a judgment of the Court of Appeal in which orders had been made for the repayment of part of the original judgment amount by CAT was based on fraudulent submissions as to the effect of the DOCA;

(3)    it claimed that the orders of the Court of Appeal should be set aside;

(4)    it claimed that freezing orders made against the assets of Mr and Mrs Frigger and assets of CAT said to have been held as trustee of the Frigger Superannuation Fund were based on the repayment orders and were also obtained by fraud and should be set aside;

(5)    it alleged that as the winding up orders for CAT were also based upon the repayment orders they too had been obtained by fraud and were liable to be set aside;

(6)    it claimed that costs orders made against Mr and Mrs Frigger in various proceedings were also obtained by fraud and liable to be set aside;

(7)    it claimed that the alleged fraudulent conduct caused losses to Mr and Mrs Frigger including damage to their reputation;

(8)    it added a prayer for relief in different terms to that set out in the application which sought orders that various judgments be set aside as having been obtained by fraud and payment of loss and damage, including damages for loss of reputation.

48    The amendments made did not alter the underlying character of the claims made in the proceedings. They continued to depend upon claims about the manner of operation of the DOCA and the character of the payments that had been made to CAT under the terms of the DOCA. The alleged false statements and fraudulent conduct concerned alleged statements about the effect of the DOCA and whether the repayment orders could be made given that payment to CAT had been made under the DOCA. The case focussed upon allegations that various court orders had been obtained by fraud and those orders should be set aside. There was no claim of malicious prosecution or defamation of any kind.

49    Thereafter, as I have noted, there was an attempt to amend in terms that were disallowed by Barker J in 2017.

50    The claim as now sought to be advanced bears no resemblance to the statement of claim filed with the application. Further, the statement of claim includes a prayer for relief in entirely new terms. In the course of oral argument Mrs Frigger said that if the proposed statement of claim was allowed then there would need to be an amendment to the application to reflect the new relief that is sought. Mr Frigger adopted the submissions made by Mrs Frigger. Therefore, what is proposed is a wholesale change to the application.

Overview of the proposed statement of claim

51    The proposed statement of claim pleads claims against a number of parties. First, against Ms Banning on the basis that she is, amongst other things, the sole beneficiary of the estate of Mr Banning and the owner of one of the two shares in PSA. Second, against Mr Campbell-Smith on the basis that he was one of two shareholders in PSA, until his death was the executor of the estate of Mr Banning and was mentally incapable because of dementia from about 16 March 2015 (though alleging that Ms Campbell-Smith is now the executor of his deceased estate). Third, PSA. Fourth, Banning Holdings Pty Ltd which is said to have been used to hold assets of Mr Banning. Fifth, Mr Lenhoff who is said to have acted on the basis of retainer agreements executed by Mr Campbell-Smith. Sixth, Mr Eastwood, who is also said to have acted on the basis of retainer agreements executed by Mr Campbell-Smith. Seventh, Mr Stephenson who is said to have acted as barrister for Mr Banning, Mr Campbell-Smith, PSA and Banning Holdings.

52    As I have noted, Mr Lenhoff, Mr Eastwood and Mr Stephenson are not parties to the action and Mr and Mrs Frigger seek orders that they be added as parties.

53    The proposed statement of claim pleads that events occurred which mean that there was a deemed winding up of PSA because it did not perform the terms of the DOCA. The failure to perform the DOCA is said to arise because the DOCA required the payment of the original judgment sum awarded in favour of CAT and an amount of about $6,700 was not paid to CAT. It also pleads that a purported amendment to the terms of the DOCA was invalid. It pleads that untrue evidence was given about matters concerning the DOCA that caused Mr and Mrs Frigger to believe that the amended DOCA was valid. It is alleged that it was not until April 2015 that Mr and Mrs Frigger became aware that the amendment to the DOCA had not been properly approved. It is then alleged, in the alternative, that there were uncertain terms and conditions of the DOCA that made it void.

54    These claims as to the DOCA stand in contrast to the claims made initially which depended upon the valid operation of the DOCA and its alleged termination in accordance with its operative provisions.

55    It is then alleged that PSA ought to have been in liquidation prior to the appeal judgment in which the damages award in favour of CAT was reduced. If that had occurred then Mr and Mrs Frigger would have dealt with the liquidator as to repayment of the amount of $850,000. It is not entirely clear, but it appears that it is alleged that there would have been some different sort of outcome as a result. There is then a plea that 'CAT and the Friggers were prevented from making appropriate submissions to the Court in the related proceedings to utilise the legal arguments, statutory and common law relief and remedies which ought to have been available to them'. This appears to be a claim that they could have argued that there was no authority under the DOCA to press for the repayment of the $850,000. The pleading then goes on to claim, in effect, that the numerous proceedings in which Mr and Mrs Frigger have been involved since the unsuccessful appeal would not have unfolded in the same way if there had been a liquidator appointed to PSA. In the course of those claims there are numerous attempts to attack in a collateral way what occurred in those proceedings by complaining about what occurred in the course of those proceedings. This is not articulated in a coherent way. The attacks include complaints about what are said to be false allegations including that Mr and Mrs Frigger intended to abscond from Australia and had put their assets out of reach of unsecured creditors.

56    There is then a complaint about what are said to have been false written and oral submissions made in the course of various proceedings. At some points they appear to be expressed as a separate complaint while at others they appear to be part of a causation claim as to the consequences of the alleged invalidity or termination of the DOCA.

57    In the course of oral submissions, Mrs Frigger sought to claim that there had been malicious prosecutions and the application sought to impugn the decisions in which costs orders were made on that basis. However, the allegations in the proposed statement of claim as to malicious prosecution are confined to the following:

(1)    a claim that the provisional liquidation and winding up of CAT was based on an invalid statutory demand and was a malicious prosecution of CAT and caused injury, harm and loss to the reputation and credit of Mr and Mrs Frigger as directors (para 51);

(2)    a claim that the malicious prosecution of CAT 'referred to herein' has caused harm to Mr and Mrs Frigger (para 61). I observe that a complaint on behalf of CAT could not be raised in these proceedings which are brought on behalf of Mr and Mrs Frigger personally; and

(3)    a claim that the malicious prosecution of Mrs Frigger 'referred to herein' has caused harm to Mr and Mrs Frigger (para 62). In oral submissions, Mrs Frigger pointed to the allegations made elsewhere in the proposed statement of claim as describing this alleged malicious prosecution. There is no identifiable plea in the proposed statement of claim of the elements of a claim of malicious prosecution brought against Mrs Frigger.

58    There is a separate complaint that Mr Lenhoff has consistently contacted lawyers retained by Mr and Mrs Frigger and made disparaging and harmful allegations against them to the effect that they are untrustworthy and unreliable. A similar claim is proposed against Mr Stephenson and Mr Eastwood. As I have noted, there is a claim that false submissions have been made to the Court in various proceedings. I note that there has been no response from these parties as to these allegations and I express no view as to the merits of the claims against them as expressed in the proposed statement of claim.

59    There is a claim that a letter sent to the Director of Public Prosecutions on or about 5 May 2016 (Letter) was defamatory. There is no plea at all of what was alleged to have been said in the Letter or how it is said to have been defamatory. An application for discovery of the Letter is foreshadowed. Mrs Frigger says it must have been defamatory because it was sent to the Director of Public Prosecutions and therefore must have made adverse allegations about the conduct of Mr and Mrs Frigger. Mrs Frigger made plain in oral submissions that the claim in defamation was confined to the Letter and did not include the matters the subject of the alleged malicious prosecution and complaints about false submissions made in court proceedings. I note that absolute privilege would apply to statements made in court proceedings: Jamieson v R [1993] HCA 48; (1993) 177 CLR 574 at 582, 594; and McJannett v Daley [No 2] [2012] WASC 386 at [10]. It extends to any document published on any occasion properly incidental to judicial proceedings and necessary for them: Mann v O'Neill [1997] HCA 28; (1997) 191 CLR 204 at 212.

60    There is then a general claim that each of the existing respondents and the legal representatives as proposed additional respondents received a personal benefit 'from PSA avoiding liquidation'. These include the payment to them of legal costs in relation to the various proceedings agitated by Mr and Mrs Frigger.

61    The relief sought in the statement of claim is extensive. It refers to the Corporations Act 2001 (Cth) as the Act and is expressed in the following terms:

A.    A declaration pursuant to section 447A(1) the Act [sic] that PSA entered creditors' voluntary liquidation on 31 August 2009 alternatively on 20 March 2009.

B.    An order pursuant to section 447A(1) the Act [sic] that Malcolm Field be appointed liquidator.

C.    A declaration that the Purported Further DOCA and the Incorrect Representations were fraudulent.

D.    In relation to C, damages.

E.    A declaration that the False Submissions and Defamatory Imputations were false and defamatory.

F.    In relation to E, orders for compensation, including:

a.    the Respondents are jointly and severally liable to pay Angela Frigger $115,000 for loss of goodwill and reputation as a public accountant and registered tax agent as valued by expert Martin Smoothy in in [sic] report dated March 2013 plus statutory interest from 6 May 2010;

b.    The costs paid by, and ordered to be paid, by the Friggers in the Freezing Order Proceeding and related appeals;

c.    The costs paid by, and ordered to be paid by the Friggers in the provisional liquidation proceeding;

d.    The costs paid by, and ordered to be paid by the Friggers in the winding up of CAT;

e.    Costs paid by, and ordered to be paid to, the Friggers' solicitors Clavey Legal Pty Ltd and Murfett Legal Pty Ltd;

f.    Damages, including exemplary damages, for loss of credit and reputation.

G.    A declaration that the provisional liquidation and winding up of CAT was a malicious prosecution.

H.    Pursuant to the inherent jurisdiction of this Court, an order setting aside the 6 May 2010 winding up order of CAT, and returning the company to its directors.

I.    Pursuant to section 1324(1) the Act [sic], orders that:

a.    the Respondents are prevented from enforcing cost orders made in freezing orders appeal, provisional liquidation and winding up proceedings and other related proceedings; and

b.    the Respondents pay CAT's costs of the provisional liquidation and liquidation, including any costs, expenses and remuneration that may be assessed for the provisional liquidator and/or liquidator.

c.    Cameron Eastwood repay the Friggers $18,000 security for costs paid out by the Supreme Court of WA plus statutory interest from date of payment into court.

J.    Pursuant to section 1324(10) the Act, orders that:

a.    the Respondents are jointly and severally liable to pay the Applicants' costs in the related proceedings,

b.    the Respondents are jointly and severally liable to pay any costs orders made against the Applicants' [sic] in the related proceedings,

c.    the Respondents are jointly and severally liable to pay Applicants exemplary damages for malicious prosecution; and

d.    the Respondents are jointly and severally liable to pay Applicants exemplary damages for loss of credit and reputation, and for stress and anxiety to be assessed.

K.    Interest pursuant to statute.

L.    Costs.

M.    Such other or further order as the Court considers appropriate.

The application of s 60 of the Bankruptcy Act

62    As I have noted, the proceedings are deemed to have been abandoned by the trustee. Therefore, the stay effected by s 60(2) of the Bankruptcy Act continues. The stay operates irrespective of the capacity in which the proceeding are brought by Mr and Mrs Frigger: Bell v Cribb [2013] WASC 32 at [53] (Beech J). One of the main reasons why s 60(2) is construed to operate in that way is because of the burden that would result if proceedings could continue to be prosecuted against a party without the protection of being able to recover costs in the event that the proceedings were unsuccessful. The only exception is that provided for by s 60(4).

63    Plainly, much of the relief described in the proposed statement of claim concerns matters entirely unrelated to any claim in respect of personal injury or wrong to Mr and Mrs Frigger. As to those aspects of the claim there is undoubtedly a statutory stay. They include all elements of the proposed claim that are advanced as the basis upon which the relief specified in prayers A, B, C, D, H, I and J is sought. Which leaves only the claim about the alleged defamation arising from the Letter and the claims of malicious prosecution (and related allegations of false submissions in other court proceedings).

64    As I have noted, a claim in defamation is a claim to which s 60(4) applies. However, these proceedings were not commenced as defamation proceedings. The question whether they may be continued on the basis of the exception stated in s 60(4) is to be determined at the time of the bankruptcy of Mr and Mrs Frigger. At that time, there was no statement of claim. In my view, the nature of the claim as commenced was to be determined by reference to the statement of claim as originally filed and originally amended (although the original pleadings had been abandoned as part of the unsuccessful attempts to advance a substitute statement of claim). The defamation claim now sought to be advanced is by reference to the publication of the Letter to the Director of Public Prosecutions. The original statement of claim made no reference to the Letter. It is possible that the matters stated in the Letter do, to some extent, traverse part of the same course of events that Mr and Mrs Frigger seek to complain about in these proceedings. However, for reasons I have given there is no part of the present claim that is in respect of any personal injury or wrong done to the bankrupts, Mr and Mrs Frigger. Therefore, there is no claim to which the defamation claim (assuming it could be properly pleaded, a matter about which I express no view) might attach. In those circumstances, if there is a proper basis for such a claim (there being no such basis evident on the materials presented on the present application) then it could be advanced by separate proceedings. However, it is not an instance where the defamation claim is part of the action that has been commenced by Mr and Mrs Frigger. The permission given by s 60(4) to continue an action in respect of any personal injury or wrong is confined to an action that is on foot at the time of bankruptcy. It is not a mechanism by which to subsequently introduce a new claim into proceedings that have been stayed by operation of s 60(2).

65    It follows that a defamation claim based upon the Letter is not a basis upon which Mr and Mrs Frigger may claim to be entitled to continue with the present proceedings.

66    For completeness, I note that there are other issues that would arise if this Court was to consider whether to allow these proceedings to be turned into a claim in defamation against different respondents. They include whether the claim is out of time, whether there has been compliance with the requirements of the Defamation Act 2005 (WA) and whether this Court could entertain a defamation claim of the kind proposed as the only claim in these proceedings. Some submissions were advanced as to those issues. In addition there would be an issue as to whether qualified privilege applies: see Defamation Act s 30; Roberts v Bass [2002] HCA 57; (2002) 212 CLR 1 at [62]; and Bashford v Information Australia (Newsletters) Pty Ltd [2004] HCA 5; (2004) 218 CLR 366 at [68]-[72] (McHugh J). However, they are not matters that arise for determination at this point given the limited issues for consideration on this occasion.

67    There is no allegation of malicious prosecution made by Mr Frigger. As to Mrs Frigger, the form in which the pleading is expressed makes it impossible to identify what proceedings are alleged to have been advanced maliciously, against whom they were advanced, what facts are relied upon to support the elements of the claim and how there was loss to reputation and personal injury as a consequence. Therefore, even assuming for present purposes that such a claim might be a claim in respect of personal injury or wrong done to the bankrupt, no such claim is articulated in any meaningful way in the proposed statement of claim. More importantly, it was not a claim that was raised by the application when it was commenced (it not being stated in the original statement of claim). It cannot now be added after the statutory stay is in operation. Therefore, allegations of malicious prosecution do not raise claims of a kind that might justify the continuation of the proceedings by Mr and Mrs Frigger on the basis of the exception stated in s 60(4).

68    As a result it is not necessary to consider the extent to which malicious prosecution is recognised in Australia as a tort that may be committed by bringing a civil as opposed to a criminal action (as to which, see Eleizer v The Owners - Strata Plan No 51682 [2017] NSWSC 278 at [75]; The Beach Club Port Douglas Pty Ltd v Page [2005] QCA 475; [2006] 1 Qd R 307 at [14]; and Little v Law Institute of Victoria (No 3) [1990] VR 257 at 267) or whether the elements of such a tort (as to which, see A v New South Wales [2007] HCA 10; (2007) 230 CLR 500 at [1]) are properly raised by the proposed pleading.

69    It follows that the whole of the proceedings have been abandoned by the trustee in bankruptcy and the statutory stay continues to apply.

The requirements of the orders dated 16 March 2018

70    Strictly speaking it is not necessary to consider the additional complaint that the proposed statement of claim fails to comply with the orders made on 16 March 2018. However, as the matter was argued, I will briefly express my reasons on that aspect.

71    The submission advanced for the respondents was to the effect that the requirements of the orders of 16 March 2018 should be complied with strictly. In that context it was submitted that 'the proposed pleading exceeds 15 pages, is prolix, and, the substantive claims are substantially unintelligible'. It was also said that there was repetition of clams that had been rejected previously by the Court as improper or as an abuse of the Court, particularly the attacks on the DOCA and on orders made by other courts in previous proceedings.

72    The proposed statement of claim is just over 23 pages in length. The orders imposed a limit of 15 pages. Mr and Mrs Frigger sought a dispensation from that requirement. The failure to meet that requirement, of itself, would not be a sufficient reason to refuse to allow an amendment in terms of the proposed statement of claim, provided the pleading was otherwise acceptable.

73    As I have explained, much of the proposed statement of claim is founded upon a complaint that the DOCA was terminated or was invalid. There is also a claim that what is described as a Purported Further DOCA was never approved by creditors or by the Court. These claims seem to be advanced to support an overall claim that the Court of Appeal should not have ordered the amount of $850,000 to be repaid by CAT. The claim seems to be made on the basis of some alleged aspect of the DOCA as it should have operated or the DOCA's termination or invalidity.

74    When Barker J refused leave to amend in terms of the earlier proposed substituted statement of claim, his Honour considered the claims then made about the DOCA. In particular, his Honour considered a version of the claim that the order requiring CAT to repay monies after the successful appeal by PSA and Mr Banning should not have been made because of the terms of the DOCA. His Honour found that these claims were a collateral attack on decisions where the same argument had been rejected and substantially criticised: at [37]-[40]. Also, it was found that in key respects, they constituted an abuse of process: at [38]. Although the presently proposed statement of claim is difficult to comprehend, it is apparent that the claim being advanced is simply a reformulation of claims that have been rejected as improper pleadings and they meet the same difficulties articulated by Barker J in respect of the earlier proposed substituted statement of claim.

75    The issue for present consideration is whether these matters mean that the proposed statement of claim fails to meet the requirements of paras 5.11 and 5.12 of the Commercial and Corporations Practice Note. Those paragraphs include a requirement that where identifying legal grounds, the statement of claim shall identify concisely the legal grounds that are realistically provable. The repetition of a claim of a kind that has already been found by the Court to be a collateral attack on other court decisions and an abuse of process fails to meet this requirement.

76    For that reason, I find that the statement of claim fails to meet the requirements of the orders of 16 March 2018.

77    In expressing that view I should not be taken to be concluding that it is the only respect in which there was a failure to meet those requirements.

Application to join respondents

78    It would only be appropriate to contemplate orders for the joinder of additional respondents if the proposed statement of claim was in a form where leave to amend in terms of the claim might be contemplated. For reasons I have given I accept that both the bankruptcy of Mr and Mrs Frigger and the failure to comply with the orders of 16 March 2018 stand in the way of that outcome. It follows that there should not be orders for joinder.

Ms Campbell-Smith

79    There is no dispute that Ms Campbell-Smith has been appointed as the executor of the estate of Mr Campbell-Smith. Until this point, Mr and Mrs Frigger have sought to advance these proceedings against Mr Campbell-Smith. They have made no attempt to substitute a representative of his estate as respondent or make any application under r 9.24 of the Federal Court Rules 2011 (Cth) for an order concerning how the proceedings might continue in the absence of a representative of Mr Campbell-Smith. I note that there now being a representative appointed of the estate of Mr Campbell-Smith, no order could be sought under r 9.24. In those circumstances, there may be an issue as to whether the proceedings have continued since the death of Mr Campbell-Smith insofar as they name him as a respondent. In any event, Mrs Frigger says that she wishes to proceed with the claim concerning the conduct of Mr Campbell-Smith. Mr Frigger adopts that position.

80    All of the respondents now wish to pursue an application dismissing the proceedings and seeking various cost orders and, it appears, Ms Campbell-Smith seeks to be joined as a party for the purpose of supporting that application. The application is made under r 9.09. It provides that if a party dies the proceeding is not dismissed only because of the party's death. It also provides that if the interest or liability of the party passes to another then the party to who the interest has passed may apply to be joined and for the removal of the other party. I am satisfied that it is appropriate for those orders to be made in respect of Ms Campbell-Smith and Mr Campbell-Smith. The result will be that to the extent that claims to costs can be demonstrated to form part of the estate of Mr Campbell-Smith they may be pursued by Ms Campbell-Smith.

Summary and costs

81    For the above reasons, the application for leave to amend in terms of the proposed statement of claim and to add additional respondents should be dismissed with costs. There should be an order removing Mr Campbell-Smith as a party and an order adding Ms Campbell-Smith as the second respondent. In accordance with the Federal Court Rules, the addition of Ms Campbell-Smith will start from the date of the order.

82    The application by the respondents for dismissal of these proceedings and for costs orders will be listed for hearing and I will make orders for the filing of affidavits and submissions on that application.

Associate:

Dated:    21 August 2019