Federal Court of Australia

Frigger v Trenfield (Security for costs and stay applications) [2026] FCA 158

ORDERS

THE COURT ORDERS THAT:

1.    The Applicants’ application for a stay of paragraph 1(g) of their Further Amended Application dated 19 September 2025 (Further Amended Application) is refused.

2.    The Applicants are to provide security for the costs of the Third Respondent, Mr Kitay, defending the application the subject of paragraph 1(g) of their Further Amended Application in the sum of $30,000.

3.    The security referred to in paragraph 2 above is to be provided by payment into Court, or the provision of an unconditional bank guarantee from an Australian trading bank.

4.    The security referred to in paragraph 2 above be provided no later than 21 days from the date of these orders.

5.    The Applicants are to pay the costs of the Third Respondent, Mr Kitay, of and incidental to the applications referred to in paragraphs 1 and 2 above, on a party-party basis, to be taxed if not agreed.

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

REASONS FOR JUDGMENT

BUTTON J:

Background

1    By their Further Amended Application (FAA), the Applicants (the Friggers) appeal and/or seek review of the First Respondent’s notices issued to various creditors, including one of the Third Respondents, Mr Kitay. The First Respondent (Trustee) is the Friggers’ trustee in bankruptcy. The application is made pursuant to ss 82(5) and 104(2) of the Bankruptcy Act 1966 (Cth) (the Act).

2    The Trustee issued a decision to Mr Kitay assessing one of his proofs of debt in the amount of $521,981.35. This is the decision that is the subject of paragraph 1(g) of the FAA. Although the Friggers intend by that paragraph also to appeal the Trustee’s $1000 estimate in respect of a separate proof of debt by Mr Kitay, for the purposes of the two applications, nothing turns on whether or not an amendment to paragraph 1(g) is required to introduce that estimate into the proceeding.

3    Mr Kitay has applied for an order that the Friggers provide $30,000 in security for costs pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act), and r 36.09(1) of the Federal Court Rules 2011 (Cth) (the Rules). This application relates to paragraph 1(g) of the FAA.

4    The Friggers have applied for a stay of paragraph 1(g) of the FAA pending delivery of Hill J’s reasons on a summary judgment application made by the Friggers in proceeding CIV 1613 of 2023 in the Supreme Court of Western Australia. I refer to this as the 1613 proceeding.

5    Some further background is necessary, to put the two applications in context.

6    Mr Kitay was appointed provisional liquidator, and then liquidator, of Computer Accounting and Tax Pty Ltd (CAT) in 2010. By the 1613 proceeding, the Friggers contend that the creditor, whose statutory demand precipitated the court-ordered winding up of CAT, was not properly incorporated, such that the statutory demand was by a non-existent entity, and the winding up order was obtained by fraud. The relief sought includes an order setting aside orders of the Supreme Court of Western Australia appointing a provisional liquidator to CAT and winding up CAT. Mr Kitay is not a party to the 1613 proceeding. In their first set of written submissions on the stay application, the Friggers claim to have served Mr Kitay and CAT with the Writ and Statement of Claim in the 1613 proceeding. Mr Kitay has sworn an affidavit disputing service.

7    In the 1613 proceeding, the Friggers filed a summary judgment application. That application was heard on 19 September 2025. Justice Hill of the Supreme Court of Western Australia is reserved on the summary judgment application.

8    The Friggers consider that they have a counterclaim against Mr Kitay for about $9 million. This claim has not been advanced in any litigation to this point. However, the Friggers have stated plainly that they will raise this counterclaim in answer to any attempt by Mr Kitay to enforce any costs order in his favour, including any order that may be obtained if they are unsuccessful in relation to paragraph 1(g) of their FAA.

9    The Trustee decided to allow Mr Kitay’s proof of debt in the amount of $521,981.35. Mr Kitay’s proof of debt listed 24 costs orders in his favour. Although most of those costs orders were unquantified, and had not been taxed, six of the orders were quantified or taxed.

10    Both applications relate to paragraph 1(g) of the FAA. It was accepted by the parties that it is logical first to address the Friggers’ stay application because, if the stay is granted, the security for costs application need not be determined (at least not before any stay were lifted).

The Stay Application

11    When the Friggers initiated the present proceeding, the relief sought was directed to requiring the Trustee to adjudicate on the proofs of debt. When the Trustee proceeded to make decisions on most of the proofs pursuant to s 102, and estimates in respect of some others pursuant to s 82(4), the Friggers amended their application. As now amended, by paragraph 1 of the FAA, pursuant to ss 82(5) and 104(2) of the Act, the Friggers appeal and seek review of all decisions and estimates made by the Trustee. By paragraph 2 of the FAA, the Friggers seek an order under s 30 of the Act that the Trustee forthwith reject two proofs of debt (Mr Kitay for $2,165,661, and CAT for $5,426,422). Paragraph 2 of the FAA was stayed by consent, pursuant to orders made on 11 December 2025.

12    The Friggers have applied to stay paragraph 1(g) of the FAA until Hill J hands down her Honour’s reserved judgment in the 1613 proceeding. As mentioned above, the Figgers have sought summary judgment in the 1613 proceeding, and the relief sought in that proceeding includes an order setting aside an order dated 21 January 2010 appointing a provisional liquidator to CAT — which was Mr Kitay — on the basis that the order was procured by fraud. An order is also sought setting aside an order dated 6 May 2010 winding up CAT in insolvency, and ancillary orders, also on the basis of fraud. A further order is sought in that proceeding directing the rectification of the Australian Securities and Investments Commission’s register to remove all documents lodged in relation to CAT between 11 January 2010 and 10 June 2023.

13    The Friggers’ contention is that, if they prevail in the 1613 proceeding, this will affect Mr Kitay’s “standing”. They submit that, if orders appointing Mr Kitay as liquidator are set aside, his entitlement to lodge proofs of debt in his capacity as liquidator will fall away. Accordingly, they submit, it is not consistent with the overarching purpose (s 37M of the FCA Act) for the proceeding to progress in relation to paragraph 1(g) of the FAA, while Hill J remains reserved.

14    The Friggers accept, as they must, that the costs orders upon which Mr Kitay’s proof of debt rested, are valid until set aside. They submit that, if they succeed in their summary judgment application, “[i]t will then be necessary to determine what consequences flow for the costs orders, including whether applications should be made to the courts that made those orders to set them aside”. Their submissions continue, acknowledging that this question is “inherently complex”, and that the answer may vary for different costs orders.

15    The Friggers’ submissions also acknowledge that Mr Kitay’s contention — that even if he were not properly appointed, he should be entitled to recover costs as a liquidator who successfully defended claims brought against him — is “not without force”. They continue, acknowledging that “[w]hether Kitay retains any entitlement to costs personally, as distinct from in his capacity as liquidator, is a complex question”. At various other points, the Friggers’ submissions acknowledge that a successful outcome in the 1613 proceeding will not have any automatic effect on the costs orders underpinning Mr Kitay’s proof of debt. They contend that the number of “downstream steps” that would be required in fact makes the case for a stay stronger.

16    I am not persuaded that the proceeding concerning paragraph 1(g) of the FAA should be stayed pending the determination of the summary judgment application in the 1613 proceeding.

17    As the Figgers’ submissions acknowledge, the costs orders are valid and effective unless and until set aside. The Friggers brought this proceeding, expressly to force the Trustee to adjudicate on the proofs of debt. Now that she has done that, they seek to stay their own challenge to one of those adjudications. While the review and appeal applications had to be filed within the statutory timeframes, that does not change the fact that the present situation — whereby Mr Kitay’s proof of debt was accepted by the Trustee while the Friggers’ summary judgment application remained undetermined in the Supreme Court of Western Australia — is of the Friggers’ own making.

18    That is one point. But the main reason why I refuse a stay is that the outcome of the summary judgment application in the 1613 proceeding will not have any automatic effect on the costs orders underpinning Mr Kitay’s proof of debt. Even if they succeed in that application, the Friggers’ own submissions acknowledge on multiple occasions that a series of further steps and applications would be required to even attempt to unwind the costs orders.

19    Against this, if later events ultimately lead to the point that the Trustee considers that Mr Kitay’s proof of debt was wrongly admitted, she may revoke or amend it, and require Mr Kitay to repay funds received: s 102(3) and (5) of the Act. I note that the Friggers contend that Mr Kitay has refused to disclose details of his professional indemnity insurance coverage, his home is not held in his own name, and that they are unaware of other assets Mr Kitay may own. I do not consider that it is incumbent on Mr Kitay to volunteer details of his personal financial situation to the Friggers in order to defeat this stay application. Mr Kitay is a registered liquidator and was appointed pursuant to orders of a superior court. It is speculative to suggest that, were a great series of contingencies to come to pass, ultimately resulting in the Trustee revoking or amending her decision, any funds received pursuant to the Trustee’s favourable decision that were required to be returned, would not be repaid.

20    I do not accept the Friggers’ submission that it is premature and wasteful to determine this aspect of their application now. Any series of events that would result in determination of paragraph 1(g) of the FAA having been a waste of time is subject to many contingencies and uncertainties. The business of the Court is to determine the proceedings filed, and that is what will occur. The stay application is refused.

21    I should note that the parties made a number of other submissions, which are not material to the disposition of the stay application. In particular, Mr Kitay advanced extensive submissions to the effect that the Friggers had advanced similar arguments in another proceeding, which had there been described as seeking to create an “alternative universe”. Not surprisingly, the Friggers engaged with this contention and made submissions about the litigation in which that expression was used (and other pieces of litigation in which they have been involved). Given my conclusion that a stay is not warranted when the outcome of the summary judgment application in the 1613 proceeding will not itself have any definite effect on the costs orders in Mr Kitay’s favour, and the outcome of any further applications concerning those costs orders is subject to so many contingencies, it is not necessary to delve into the extent to which the Friggers are reviving positions criticised in previous proceedings, or related Anshun estoppel arguments.

22    The parties also engaged in a satellite dispute about whether Mr Kitay would be bound by the outcome of the 1613 proceeding, and whether he and/or CAT had been served. This point requires a slight detour into some procedural matters.

23    At the hearing, Mr Kitay submitted that the Friggers’ evidence concerning the nature of the issues in the 1613 proceeding was inadequate as the pleadings had not been provided to the Court, and that he knew little about the proceeding, not being a party and not having been served. Mr Kitay also made the point that, as he is not a party to the 1613 proceeding, which is correct, he would not be bound by it. In argument, the Friggers maintained that Mr Kitay and CAT had been served, and wished to rely on a case — the details of which Mrs Frigger could not immediately recall — to support a contention that the outcome of the 1613 proceeding would bind Mr Kitay even if he was not a party on the basis of a principle that the orders would be “good against the world” (or words to that effect).

24    As Mr Kitay’s written submissions referred only obliquely to inadequacies in the Friggers’ evidence, and did not detail what they were, I acceded to an oral application by the Friggers to provide an affidavit of service that Mrs Frigger stated she had sworn (affidavit of service), and to provide the Court with the Statement of Claim and Writ in the 1613 proceeding.

25    I made orders on 16 February 2026 allowing the Friggers to provide the affidavit of service, together with the Writ and Statement of Claim in the 1613 proceeding, allowing Mr Kitay to file any evidence in reply to these documents and allowing the parties to notify chambers by 5:00pm AWST on 24 February 2026 if they wished to put on any further submissions or evidence. The orders also allowed the Friggers to send chambers a copy of the case they had in mind but could not recall, and allowed Mr Kitay to file and serve any submissions (limited to one page) regarding this decision.

26    The Friggers duly provided the affidavit of service, together with the Writ and Statement of Claim in the 1613 proceeding (the new evidence). The affidavit of service included a single sentence stating that CAT had been served with the Writ and Statement of Claim in the 1613 proceeding, but did not detail how service had been effected. Mr Kitay swore an affidavit dated 20 February 2026 disputing service (without clearly distinguishing between service on himself as liquidator and service on CAT).

27    The Friggers identified Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd (No 5) [2012] WASC 382 (CAT v PSA) at [82] (Simmonds J) as the case they had in mind, stating the principle that a judgment in rem binds all persons, whether parties, privies or strangers. Mr Kitay then put on a one page submission regarding limits of the “in rem” principle and contending that the Friggers’ contentions are flawed also because CAT was already in (voluntary) liquidation when Mr Kitay was appointed.

28    The deadline set by my orders for any indication that a party wanted to put on further material or submissions arising out of the new evidence, and Mr Kitay’s response, was 5:00pm AWST on 24 February 2026. That deadline passed, after Mr Kitay had notified the Court that he did not seek to put on further submissions.

29    After the parties were notified that I would be delivering judgment on the two applications in the morning of 27 February 2026, an email was sent to my chambers, apparently by Mr Frigger, although signed off in Mrs Frigger’s name, that said “Please be advised that the Applicants seek to respond to Kitays affidavit and submissions filed on 20.February 2026. Angela Frigger did attempt to send this request on the 26.February, but Boronia staff forgot to send the email”. Boronia is a reference to Boronia prison, where Mrs Frigger is presently held. Notwithstanding the lack of any evidence of this attempted communication, and the apparently erroneous reference to “26” (not 24) February, I allowed the Friggers until 4:00pm AWST on 26 February 2026 to file further submissions, which they did. Those submissions made a series of assertions about service and the 1613 proceeding without evidence, and otherwise contended that Mr Kitay’s affidavit disputing service was directed to the wrong issues as Mrs Frigger served CAT at its registered office, not Mr Kitay or his firm.

30    These satellite disputes about service of the 1613 proceeding and the extent to which its outcome will bind Mr Kitay are not germane to the basis upon which I have decided the stay application. As set out above, as the outcome of that proceeding will have no effect on the various costs orders underpinning Mr Kitay’s proof of debt, and, at most, may result in the Friggers making a series of other applications seeking to unwind some or all of them, I am not persuaded that paragraph 1(g) of the FAA should be stayed pending the outcome of the summary judgment application in the 1613 proceeding.

31    For completeness, I record that I also do not regard it as relevant that the 1613 proceeding was commenced at an earlier point in time than this proceeding (a point which both parties addressed in submissions). The proceedings deal with such disparate subject matter, and the outcome of the 1613 proceeding has no immediate or automatic effect on this proceeding, nor will they determine the same issues.

Security for costs Application

32    The stay application having been refused, Mr Kitay’s application for security for costs must be determined.

33    There is a threshold issue: the Friggers rely on s 100(1) of the Act, which provides that “[a] creditor shall, unless the Court in the particular case otherwise orders, bear his or her own costs of proving a debt”. They contend that no order for security for costs should be made on the basis that this provision reflects Parliament’s intention that the burden and cost of proving debts falls on creditors.

34    Mr Kitay has only been able to point to one case in which a court has ordered security for costs in similar circumstances: Collins v Ixia Pty Ltd [2002] FMCA 312 (Raphael FM). The paucity of authority was explained on the basis that, as long as the adjudication results in the total debts exceeding the available assets, there is nothing left for the bankrupt, so that the bankrupt usually has no incentive to contest a trustee’s estimate or decision.

35    Part VI of the Act is headed “Administration of Property”. Division 1 of Pt VI is headed “Proof of debts”. A “proof of debt” is that which is lodged with the trustee pursuant to s 84 (1) of the Act. Various other provisions address what must be set out in the proof of debt, and the powers the trustee has in respect of matters such as verification of claims by statutory declaration: ss 84(2)–(4). The trustee is required by s 102(1) to examine each proof of debt and the grounds of the debt sought to be proved and to do one of four things: admit the proof of debt in whole, admit it in part and reject it in part, reject it in whole, or require further evidence in respect of it. Section 104(1) provides that a creditor, or the bankrupt, may apply to the Court for review of a decision of the trustee under, inter alia, s 102(1) in respect of a proof of debt. Pursuant to s 104(2), the Court may, upon such application, confirm, reverse or vary the “decision of the trustee”.

36    The proof of debt is that which is put before the trustee in bankruptcy. The process before the trustee culminates in the trustee making a decision in respect of a proof of debt. It is the “decision” of the trustee under (here) s 102(1) of the Act “in respect of a proof of debt” that is then the subject of an application to this Court for review. Accordingly, I do not consider that s 100(1) governs the costs of a creditor where a bankrupt brings an application under s 104(1) seeking review of a trustee’s decision in respect of that creditor’s proof of debt. Nor does that statutory provision evince any intention on the part of Parliament to the effect for which the Friggers contend. I also note that s 105 provides that the Official Trustee and a registered trustee (subject to a contrary determination of the Court) are not personally liable for the costs in relation to applications for review. This provision otherwise appears to proceed on the premise that the costs of such applications in Court are subject to the Court’s usual rules and powers.

37    There are no other matters raised by the parties taking the Friggers’ application outside the usual jurisdiction of this Court to order that security for costs be provided.

38    Subject to the foregoing point, the Friggers do not submit that no security for costs order can be made in a case such as the present, but argue that an order should not be made on the merits.

39    There is no dispute as to the factors to be considered in an application for security for costs:

(a)    whether the application has been brought promptly;

(b)    the strength of the applicant’s case;

(c)    the likelihood that a costs order will not be satisfied;

(d)    whether the making of an order would be oppressive in that it would likely stifle a reasonably arguable case;

(e)    whether an applicant’s impecuniosity arises out of the respondent’s conduct; and

(f)    whether there are aspects of the public interest weighing against the making of an order for security.

40    As is often the case, in this application, some factors are more important than others. In this application, the Friggers mounted their opposition to the grant of an order for security for costs on three bases:

(a)    there is a reserved judgment in Federal Court proceeding WAD 390 of 2024 (WAD 390) that they say may annul the bankruptcy, making their current application pointless;

(b)    they have genuine grounds to challenge the Trustee’s adjudication of debt; and

(c)    they are effectively defendants resisting claims against their estates.

41    I will deal with each of their contentions in turn.

42    An appeal was heard in November 2025 in WAD 390. The proceeding is an appeal against orders of a judge of this Court refusing to set aside or annul the sequestration orders made against the Friggers. The appeal was heard on 27 November 2025. Judgment in the appeal is reserved.

43    The Friggers contend that, if they succeed in the appeal, “the sequestration order may be set aside or the bankruptcy annulled” under s 153B of the Act.

44    The Friggers submit the Court should either refuse security, or defer the decision, until judgment in that appeal. They submit that ordering security now risks wasted costs if they succeed, and would prejudice them in the meantime. How they are prejudiced is not stated (beyond the prejudice involved in having to provide security).

45    I do not consider that this reserved judgment means no security for costs should be ordered, or a decision on the application for security for costs should be delayed.

46    This Court will deal with applications as they are made. This application is made in the context of a proceeding commenced by Mr and Mrs Frigger, and in respect of which there is no general application for a stay (I have dealt separately with the application to stay paragraph 1(g)). The proceeding is generally progressing notwithstanding this appeal being pending. There is no way of knowing how long the Full Court will be reserved in the appeal.

47    The Friggers submit that the fact that the other components of paragraph 1 of their FAA are progressing does not matter, because “there are no outstanding issues or outstanding reserved judgments that affect…those reviews”, and so “we are quite happy for those reviews to continue on and to be progressed in the normal vein”. I do not accept this distinction. Unlike the reserved judgment in the 1613 proceeding — which at least has a relevance to Mr Kitay that differs from its relevance to other creditors — the general appeal against the decision of a judge of this Court declining to set aside the sequestration orders or annul their bankruptcy has the same potential relevance to all creditors referred to in paragraph 1 of the FAA.

48    The Friggers’ own submissions are put in terms that do not suggest that setting aside the sequestration order or the annulment of their bankruptcy is a certainty in the event that the appeal succeeds. Their submissions say this is a result that “may” follow.

49    The orders of the primary judge dismissing the Friggers’ application to have the sequestration orders against them set aside, and the bankruptcy annulled are valid unless and until they are set aside: Cameron v Cole (1944) 68 CLR 571 at 590 (Rich J) (relevantly, s 5(2) of the FCA Act deems the Federal Court of Australia as a superior court of record).

50    Accordingly, I do not accept that the application should be refused, or deferred, on the basis that the reserved judgment in the Full Court appeal in WAD 390 means that it would be inefficient or wasteful of the Court’s resources to deal with it now.

51    The next factor to consider is the merits of the underlying claims.

52    The authorities make it clear that, on an application for security, it is not appropriate to assess the merits of the claims at length, as to do so will ordinarily involve a waste of resources: Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 at 441 (Pincus JA, with whom McPherson JA agreed) and Mecrus Pty Ltd v Industrial Energy Pty Ltd [2015] FCA 103 at [42]–[43] (Murphy J, also observing that whether an assessment of the merits should be undertaken may depend on the complexity of the case).

53    The waste of resources that would be entailed by delving into the merits of the arguments raised by the Friggers is significant.

54    In their submissions, the Friggers have raised numerous and disparate points concerning the various amounts that together comprise Mr Kitay’s proof of debt. Mr Kitay, for his part, not only contends that many of these points are not even raised by the grounds filed by the Friggers in support of paragraph 1(g) of the FAA, but also delves into the torturous history of many aspects of the background and extensive litigation history that stands behind elements of the proof of debt.

55    In making oral submissions, Mr Kitay pragmatically submitted that the Court should proceed on the basis that the Friggers’ challenges to the Trustee’s decision are not fanciful. On that basis, Mr Kitay submits that the Court should proceed on the basis that the question of merits is a neutral factor.

56    In response, the Friggers submitted that the Court should not accede to Mr Kitay’s suggestion that the merits be treated as a neutral consideration, on the basis that examination of the merits will show that the prospects are such that the hearing in relation to paragraph 1(g) will not occupy a day, thereby exposing that Mr Kitay’s cost estimate is substantially overstated. The Friggers submitted that the Court will be satisfied that, as only $96,000 of the amounts the subject of the proof of debt had been taxed or assessed, those are the only amounts that the hearing would need to be concerned with. On the Friggers’ case, the balance is not provable.

57    Even if the Friggers are correct and the hearing of paragraph 1(g) of the FAA will need grapple only with claims totalling $96,000, I regard it as highly unlikely that the resultant hearing would be of such a limited compass as the Friggers contend given the ambit of the issues the Friggers intend to agitate. In addition, the premise behind the suggestion that the hearing will be of limited compass is doubtful as Mr Kitay disputes that the balance of the debts the subject of his proof are not provable. He says that, as additional evidence may be relied on in a review under s 104 of the Act (citing Re Payne; Ex parte Hurst [1986] FCA 320 at 10 (Toohey J)), if necessary, he will produce additional documentation to support the debts that are outside the $96,000 to which the Friggers refer.

58    I proceed on the basis that the Friggers have an arguable case, and treat the strength of their claims as a neutral factor in the assessment of whether or not to order security for costs. In view of the number of issues the Friggers wish to raise, the extent of the enquiries that would be required to form even a high-level view on prospects in respect of the amounts the subject of the proof of debt — which, it will be recalled, rests on 24 different costs orders — makes any enquiry into the merits inefficient and disproportionate to the task at hand (a security for costs application).

59    In this case, the likelihood that a costs order in favour of Mr Kitay will not be satisfied is the most significant factor in favour of the grant of security. As already noted, several of the debts underpinning Mr Kitay’s proof of debt arise from costs orders made in particular sums, or which have been assessed. The Friggers have not paid them. The Friggers have also stated explicitly that they would not meet any adverse costs order made against them in relation to paragraph 1(g). They would instead fight payment of any such costs order on the basis of their claimed $9 million counterclaim against Mr Kitay. The outline of that counterclaim, as it was explained by the Friggers, is that some amount crystallised in 2014, but the major part crystallised in 2016 when a property and business were sold but funds were not released to them, so that they have a big claim for the money they would have made investing on the stock exchange.

60    In addition, Mr Kitay’s evidence included evidence of numerous costs orders (in addition to those underpinning Mr Kitay’s proof of debt) having not been satisfied by the Friggers.

61    Accordingly, I am satisfied that there is a very high chance — if not a certainty — that a costs order made against the Friggers in this proceeding, in favour of Mr Kitay, would not be satisfied. Rather, Mr Kitay would be required to become embroiled in litigating a $9 million counterclaim.

62    For completeness, I note that there was no suggestion by the Friggers that their claim would be stultified by the making of an order for security for costs. During the hearing, the Friggers repeatedly emphasised the rental income stream that they have from various properties.

63    The last point to address is the Friggers’ claim that they are, in substance, defendants, and should not be required to provide security for costs on that basis.

64    That contention is at odds with the authorities, which confirm that the Friggers carry an onus of establishing that the debts on which Mr Kitay’s proof rests should not be admitted. In Rufford v Sheahan (as Trustee), in the matter of Rufford [2025] FCA 1072, Stellios J summarised the authorities as follows:

[62]    In Daevys, Flick J outlined that “the decision to accept or reject a proof of debt is a decision entrusted to the discretion of the trustee’ (at [10]). A “review” pursuant to s 104 is “not confined to the correctness of the trustee’s decision”, but a “re-hearing” (at [13]). As such, as summarised by Rares J in BDT Holdings Pty Ltd v Piscopo [2009] FCA 151 at [4]:

the function of the Court on s 104 is not to consider the correctness or otherwise of the trustee’s decision in the light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof. The Court can take into account inconsistencies in the material provided to the trustee and the evidence before the Court.

See also Re D K Rogers; Ex parte CMV Parts Distributors Pty Ltd (1989) 20 FCR 561 at 562‍–‍3, citing with approval Payne; Ex parte Levi (unreported, Federal Court of Australia, Toohey J, 23 September 1986).

[63]     The parties accepted that the onus is on the applicant to establish that the claimed debts should not be admitted. As Hespe J said in Pekar at [37]:

The underlying application is one for review of the Respondents’ decision to admit the proofs of the debt. The onus is on the party seeking the review of the trustee’s decision to satisfy the Court that the proofs of debt should not be admitted, based on the material that is before the Court: Re Masters; Ex parte Gerovich at 3; (unreported, Toohey J, 30 July 1985); Daevys … at [13]–[14] (Flick J); Coshott v Burke [2012] FCA 517 at [56] (Rares J); Williamson v Michell (Trustee) [2019] FCA 481 at [21] (Moshinsky J); Shaw … at [30] (Snaden J).

[64]    Similarly, in Shaw, Snaden J said at [30]‍–‍[31]:

As the applicant, Mr Shaw bears the onus of establishing that the Trustee’s decision to admit the YN Proof should be reversed: Daevys … [14] (Flick J). Failure to discharge that onus requires that the decision be confirmed: Re Robert Henry Masters Ex parte: Elizabeth Gerovich and Hazel Henley v Bernard Putnin [1985] FCA 354 , [9] (Toohey J).

If, ultimately, the court is satisfied that the debt to which the YN Proof relates is owed, then the Trustee’s decision to admit it under s 102(1) of the Act should be confirmed.

[65]     Accordingly, the applicant has the onus of establishing that the claimed amounts constituting the Proofs of Debt are not owing to ABM and Suretek. In other words, he has to establish that there are no debts or, if there are debts, that they are less than what has been claimed. Because the applicant accepts that the payments were made, in order to discharge the onus he must establish that Mr Smith consented to the payments.

(Emphasis added.)

65    Having regard to the authorities on burden, I proceed on the basis that the Friggers have the burden in their application, and are the moving parties in bringing litigation to displace the Trustee’s decision to allow the proof of debt in the amount of $521,981.35.

66    I am satisfied that there should be an order for security for costs, and that it should be in the sum of $30,000. The Friggers contend that, if security for costs be ordered, it should be in a lower amount, $5,000 to $7,000 on the assumption of a two hour hearing.

67    Mr Kitay’s estimate is somewhat high, on the face of it, for a one day hearing. However, it is fair to say that the hearing of the application on this issue is unlikely to be confined to a short hearing, as the Friggers suggest. That is particularly so given the number of points they apparently intend to raise and run, and the fact that many of those points require delving into various aspects of the long litigation and related history of the Friggers’ bankruptcy.

68    Besides their contention about the likely duration of the hearing — also addressed at paragraph 56 above —, the Friggers did not otherwise take issue with the line items that make up Mr Kitay’s cost estimate.

69    Mr Kitay’s application seeks an order dismissing paragraph 1(g) of the FAA if the Court orders the provision of security for costs, and such security is not provided within the period allowed by the Court’s orders. Mr Kitay’s application proposes a period of 21 days for the provision of security. That is a reasonable period. No submission to the contrary was made by the Friggers.

70    Section 56(4) of the FCA Act provides that, if security is not given in accordance with an order under that section, the Court or a judge may order that the proceeding or appeal be dismissed. Rule 19.01(c) of the Rules similarly provides that, if an applicant fails to comply with an order to provide security within the time specified, the proceeding may be stayed or dismissed.

71    Mr Kitay’s submissions did not address whether, and if so why, he contends that a contingent order dismissing this aspect of the Friggers’ claim should be made at the same time as ordering the provision of security, although the way his interlocutory application was framed suggested he anticipated a conditional order for dismissal being made alongside orders for the provision of security. Typically, consideration of a submission that a proceeding — or part of it — ought to be dismissed and not merely stayed, is addressed following the making, and failure to comply with, an order for security for costs. In Sunshine Energy Australia Pty Ltd v Youssef [2023] FCA 189, Sarah C Derrington J set out (at [8]–[10]) the factors to be considered in determining whether a proceeding should be dismissed when security for costs is not provided in accordance with the Court’s orders. Her Honour referred to the various factors identified by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18, which have been applied in numerous cases heard by this Court. One of those factors is whether the applicant has been put on notice of the application for dismissal. Mr Kitay has done so by the terms of his application for security for costs.

72    The last matter to address is costs. Mr Kitay seeks his costs of the application for security for costs on an indemnity basis.

73    I do not consider the present circumstances warrant the award of indemnity costs on the basis that there is some “special or unusual feature”: Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152 (Black CJ).

Associate:

Dated:    27 February 2026