FEDERAL COURT OF AUSTRALIA

Frigger v Kitay (Liquidator) (No 2) [2020] FCA 721

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff's application to vary the costs orders made 15 April 2020 be dismissed.

2.    The plaintiff do pay the defendant's costs of the application to be assessed if not agreed.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Mrs Frigger commenced proceedings in this Court in which she claimed that certain property under the control of Mr Kitay as liquidator of Computer Accounting & Tax Pty Ltd (in liq) was property of the Frigger Superannuation Fund (Fund). Mrs Frigger and her husband had been the trustees of the Fund but, after their bankruptcy, they had been replaced by a company controlled by them, H & A Frigger Pty Ltd (HAF). Mrs Frigger claimed to be entitled to bring the proceedings in this Court as a beneficiary of the Fund. The same claims had been the subject of long-running proceedings in the Supreme Court of Western Australia in which Mr and Mrs Frigger advanced personal claims as well as claims as trustees of the Fund.

2    At the first case management hearing in this Court, Mr Kitay raised a number of objections to the proceedings. In part those objections relied upon Mrs Frigger's status as an undischarged bankrupt. Mr Kitay claimed that there was no reasonable basis for Mrs Frigger's application, or alternatively that the proceedings were an abuse of process. He also claimed that Mrs Frigger (or the trustee of the Fund) needed leave to bring the proceedings in this Court and leave should be refused. He claimed that the proper course was for HAF as the current trustee of the Fund to advance the claims in the Supreme Court. Orders were made for each of the issues raised by Mr Kitay to be determined at a separate hearing.

3    Mr Kitay did not succeed on a number of the contentions that were raised in support of his position, in particular those concerning the consequences of the bankruptcy of Mrs Frigger and her husband and the need for leave. However, the claims that there was no reasonable basis to advance the claims raised by Mrs Frigger and that the proceedings in this Court should be dismissed were upheld. It was also concluded that if the proceedings had not been dismissed it would have been appropriate for there to be a permanent stay of the proceedings on the basis that they are an abuse of process: Frigger v Kitay (Liquidator) [2020] FCA 482.

4    As to costs, a provisional order was made that Mrs Frigger pay Mr Kitay's costs of the application to be assessed. However, liberty was reserved to Mrs Frigger to apply to vary the costs order.

5    Pursuant to that liberty, Mrs Frigger has applied for an order varying the costs order so as to allow Mr Kitay only 15% of his costs. The main basis for her application is that a number of the submissions advanced by Mr Kitay were not accepted. Mrs Frigger describes each matter the subject of a particular submission as an 'issue'. Mrs Frigger relies upon authorities where there has been an apportionment of costs by reference to issues. For the following reasons, the application to vary the costs order should be refused.

6    The award of costs is discretionary: s 43 of the Federal Court of Australia Act 1976 (Cth). The discretion to award costs is unconfined, but must be exercised judicially, that is according to relevant considerations and taking account of the contextual features and facts of the litigation: Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; (2011) 197 FCR 113 at [4]. Settled principle guides the exercise of the discretion: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [38]. Generally, the discretion is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25]; and Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at [11].

7    There is no doubt that Mr Kitay was entirely successful as to the outcome.

8    Further, this is not a case where the issues on which Mr Kitay succeeded are such that there has been a nominal victory or a lack of success on the real underlying dispute.

9    I accept that there were a number of contentions advanced for Mr Kitay that were not accepted. However, the overall thrust of the submissions was that the proceedings in this Court should not be allowed to proceed and matters should be dealt with in the Supreme Court. That position was accepted for a number of the reasons advanced by Mr Kitay.

10    The circumstances in which it may be appropriate to adjust costs orders by reference to the outcome on particular issues were summarised recently in PKT Technologies Pty Ltd (formerly known as Fairlight.au Pty Ltd) v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46 at [14]-[15] as follows:

In general, a successful party will obtain an order for costs in its favour. However, a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. If the apportionment of costs is appropriate, the object is not mathematical precision but a result that best reflects the interests of justice in the overall circumstances of the case. See EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].

However, the mere fact that a court does not accept all of a successful party's arguments does not make it appropriate to deal with costs on an issue by issue basis: The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8]. A court will be reluctant to adopt an approach of apportioning costs between different issues depending on success or failure on those issues where it is likely to be difficult, if not impossible, to allocate items of costs between the different issues. See Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (No 2) [2015] FCAFC 155 at [16] ...

11    Although there were a number of arguments advanced by Mrs Frigger that were accepted, her success was not as broad as her submissions on costs might suggest. For example, the issue of security for costs though raised was not argued. The claim that there was no evidence concerning attempts to obtain legal representation was properly raised and was redressed only after Mrs Frigger was given leave to file a further affidavit. Issues about the conduct of other proceedings by Mrs Frigger (and her husband) were not central. Although aspects of the argument advanced for Mr Kitay concerning whether a beneficiary could bring an action to enforce claims to trust property were not accepted, the claim by Mrs Frigger that she had established a basis to do so was not upheld.

12    I am not satisfied that the hearing time was substantially increased by the contentions that were unsuccessfully advanced by Mr Kitay or that there is a significant and identifiable set of discrete costs to which Mr Kitay should not be entitled by way of costs order.

13    It has not been demonstrated that the points on which Mr Kitay failed are so significant that there should be an adjustment to the general approach that costs should be awarded in favour of the successful party.

14    Mrs Frigger sought to raise other matters that were additional to the question of appropriate costs orders.

15    There was an allegation that counsel for Mr Kitay had failed to inform the Court of certain matters concerning the Supreme Court proceedings. As to informing the Court, the application was contested. It is apparent that the matters identified were of a kind that they were known to Mrs Frigger. It was open to Mrs Frigger to raise those matters. In any event, for the following reasons, the matters now raised by Mrs Frigger would not have led to a different result on the application.

16    The first issue raised is about an extension of time to pay security for costs in the Supreme Court proceedings, which were paid, and the payment by Mr and Mrs Frigger of $60,000 in other costs orders. To the extent that considerable costs had been incurred in the Supreme Court proceedings and security for costs had been ordered those were matters that supported the conclusion that the litigation of the same issues in this Court when the same matters were the subject of an ongoing counterclaim by Mr Kitay in the Supreme Court was an abuse of process. I dealt with those matters in my reasons: at [16]. Before me, those matters were raised by Mrs Frigger as part of a complaint that despite having incurred substantial legal costs and being ordered to provide security, the Supreme Court proceedings had not been advanced. In other words, Mrs Frigger herself relied on the fact that security had been ordered.

17    The next issue concerns an appeal that was brought by Mr Kitay about an extension of time to provide security that was granted in the Supreme Court proceedings. The security was in respect of the principal action brought by Mr and Mrs Frigger personally and in their former capacity as trustees of the Fund. It appears that a springing order had been made in respect of the provision of security and security was not provided within the time specified in the order. Thereafter, an extension of time was given to Mr and Mrs Frigger (with retrospective effect) and they provided the security. It appears that Mr Kitay has complained about the extension and has brought an appeal in which he contends that the springing order should have been left to operate. In that respect, the appeal appears to confront the views expressed in Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179; (2016) 50 WAR 453. The appeal is yet to be heard.

18    In the appeal, an application was brought to substitute HAF, the current trustee of the Fund, as the third respondent to the appeal. On 14 April 2020 (the day before I delivered my reserved decision dismissing the application in these proceedings), the Court of Appeal of Western Australia published reasons on the application to substitute HAF: Kitay v Frigger [No 3] [2020] WASCA 55. The reasons are to the effect that the appeal, if successful, would reinstate the springing order, which would require the payment of security for costs in accordance with the order. As that would be an event that occurred prior to the bankruptcy of Mr and Mrs Frigger it would create a liability in respect of their bankrupt estate: at [32]-[35]. Therefore, the appeal is in respect of a provable debt and leave of a court exercising bankruptcy jurisdiction is required in order for Mr Kitay to proceed with the appeal by reason of s 58(3)(b) of the Bankruptcy Act 1966 (Cth).

19    On that basis, it was reasoned that it was not competent for the Court of Appeal to consider the application to substitute HAF as the third respondent unless and until a court exercising bankruptcy jurisdiction had granted leave to proceed.

20    None of the above matters in the appeal bear upon the reasoning on the application in this Court. Even assuming, contrary to the view I have expressed, that there was some obligation on the part of Mr Kitay to explain the current position in relation to the appeal to this Court, there was no consequence for the outcome of the present proceedings. The fact that the appeal was on foot was not a matter that made it appropriate to commence proceedings in this Court while the counterclaim by Mr Kitay remained on foot in the Supreme Court. The appeal does not affect the counterclaim in the Supreme Court proceedings which counsel for Mr Kitay informed this Court would be prosecuted. That was a significant part of the basis upon which Mr Kitay succeeded in obtaining the order that the proceedings in this Court be dismissed. Counsel who appeared for Mr Kitay before me in the present proceedings also appeared in the appeal on the application to substitute HAF as the third respondent. Therefore, it is to be expected that the unqualified statement concerning prosecution of the counterclaim will be carried into effect with Mr Kitay advancing the claims that he makes as against the Fund to a prompt resolution in order to complete the administration of the liquidation in accordance with his responsibilities.

21    Finally, Mrs Frigger maintained that there had been a breach of the implied undertaking in respect of communications between the solicitors acting for Mr Kitay in these proceedings and the solicitors acting for Mr Kitay in other proceedings brought by Mrs Frigger. The documents were said to have been used to support a submission that Mrs Frigger was not a member of the Fund. The application in this Court was dealt with on the basis that Mrs Frigger was a member of the Fund. Therefore, irrespective of its merit (about which I express no view), the issue could have had no bearing on the outcome.

22    Accordingly, the application by Mrs Frigger to vary the costs order made on 15 April 2020 should be dismissed with costs.

Associate:

Dated:    26 May 2020