Citation : FRIGGER -v- KITAY [2016] WASC 60

Practice and procedure - Application for security for costs in an appeal - Quantum of security - Turns on own facts

The respondent's application for security for costs allowed

Ailakis v Olivero [2013] WASCA 91

Boksmati v Girgis Nominees (WA) Pty Ltd [2014] WASCA 101

Dodds v Kennedy [2011] WASCA 32

Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258

Frigger v Kitay [2016] WASC 60

Frigger v Kitay [2016] WASC 60 (S)

Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3

George 218 Pty Ltd v Bank of Queensland Ltd [2016] WASCA 56

Mann v Dabelstein [2006] WASCA 176

Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598

Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38

Sims v Suda Ltd [No 2] [2015] WASCA 180

1 On 2 September 2016, we made certain orders including that the appellants pay $25,000 into court by way of security for the respondent's costs of the appeal. We said we would subsequently provide written reasons. These are our reasons.

2 In April 2015, the appellants (Mr and Mrs Frigger) lodged an appeal against a decision of Le Miere J. Le Miere J's decision was given in the matter of CIV 1606 of 2015 (primary proceedings). His Honour had permanently stayed the primary proceedings, which had been commenced by Mr and Mrs Frigger. His Honour also made other orders against Mr and Mrs Frigger. His Honour's reasons are contained in Frigger v Kitay [2016] WASC 60 (principal reasons) and Frigger v Kitay [2016] WASC 60 (S) (supplementary reasons).

3 In the primary proceedings, Mr and Mrs Frigger alleged that the respondent (Mr Kitay), in his capacity as liquidator of Computer Accounting and Tax Pty Ltd (in liq) (CAT), had engaged in certain breaches of fiduciary duty and contraventions of the Corporations Act 2001 (Cth). Mr Kitay applied to have the proceedings against him permanently stayed on the ground that Mr and Mrs Frigger did not have leave to commence the proceedings against him, being a court-appointed liquidator, in circumstances where the proceedings related to alleged activities and actions undertaken by him in that capacity. In the alternative, Mr Kitay applied for summary judgment, or for the statement of claim to be struck out. He contended, amongst other things, that the action or the claims within it were frivolous or vexatious, disclosed no reasonable cause of action, were an abuse of process or were embarrassing.

4 His Honour examined each of the 12 principal allegations made against Mr Kitay in the statement of claim, and found that:

(a) Mr and Mrs Frigger had not adduced sufficient evidence to justify leave being granted;

(b) the claims did not enjoy sufficient prospects of success to justify the grant of leave;

(c) a number of the allegations were an abuse of process, and the remainder had no real prospects of success; and

(d) the primary proceedings should be permanently stayed.[1]

5 Mr and Mrs Frigger were not in attendance at the publication of the principal reasons. His Honour, when handing down the principal reasons, gave directions for the parties to file written submissions concerning the appropriate dispositive orders, including costs.[2]

6 In the supplementary reasons, his Honour referred to the orders which had been proposed by Mr Kitay pursuant to those directions, and continued:[3]

Orders to give effect to reasons for judgment

The orders proposed by [Mr Kitay] in pars 1 to 4 above are appropriate and [Mr and Mrs Frigger] have made no submissions to the contrary. Accordingly, there will be orders in those terms.

[Mr Kitay] moves for an order that the proceedings be permanently stayed. In correspondence to the court [Mr and Mrs Frigger] say that they will file an application for an order lifting the stay of the proceeding. In [59] of my reasons for judgment I found that the proceedings should be permanently stayed. An order in terms of par 6 set out above will be made.

Costs

[Mr Kitay] seeks an order that [Mr and Mrs Frigger] pay [Mr Kitay's] costs of the proceedings in accordance with proposed order 5 set out above.

[Mr and Mrs Frigger] say that [Mr Kitay] was partly successful in his chamber summons of 30 June 2015 and in the circumstances is only entitled to less than 50% of the costs of the application. [Mr Kitay] was substantially successful. He should have the costs of the application.

[Mr and Mrs Frigger] say there is no basis for [Mr Kitay] having the costs of the entire proceeding because where proceedings have been stayed the order does not prevent [Mr and Mrs Frigger] seeking to lift the stay for a good reason. The proceedings were commenced against the liquidator without leave. I found that [Mr and Mrs Frigger's] claims were either an abuse of process or had no reasonable prospect of success. The proceedings are to be permanently stayed. [Mr and Mrs Frigger] should pay [Mr Kitay's] costs of the proceeding.

[Mr Kitay] seeks an order that [Mr and Mrs Frigger] pay [Mr Kitay's] costs on an indemnity basis from 11 June 2015. The order is sought on the basis of an offer of compromise made in a letter of 10 June 2015 from [Mr Kitay's] solicitors, Herbert Smith Freehills, to [Mr and Mrs Frigger's] solicitors. In that letter [Mr Kitay] set out in detail the reasons why the amended statement of claim was liable to be struck out and/or why summary judgment ought to be entered for [Mr Kitay]. The letter invited [Mr and Mrs Frigger] to consent to orders dismissing the proceedings and stated that if [Mr and Mrs Frigger] did so [Mr Kitay] would not seek to recover the costs incurred to date. The letter stated that if [Mr and Mrs Frigger] failed to consent to the dismissal of the proceedings [Mr Kitay] reserved the right to rely on the letter in seeking an order for indemnity costs. The compromise offered was that [Mr Kitay] would not seek to recover [his] costs to the date of the letter. Such a concession can properly be described as a compromise: Globaltech Pty Ltd v Pareek [2006] WASC 30(S). In my opinion [Mr and Mrs Frigger's] refusal of the offer was unreasonable.

Furthermore, [Mr and Mrs Frigger] persisted to pursue a hopeless case and to raise allegations which amounted to an abuse of process. [Mr and Mrs Frigger] should pay [Mr Kitay's] costs incurred on and after 11 June 2015 on an indemnity basis.

8 The first ground concerns a charge referred to by the judge[4] as a 'charge [lodged] at ASIC against CAT dated 10 September 2009 to secure a debt allegedly owed by CAT to Mr and Mrs Frigger, primarily over certain causes of action of CAT against various parties'. Mr and Mrs Frigger lodged this charge at ASIC on 23 October 2009.

1. The learned judge erred at law at [22] by finding that:

(a) 'unless and until [Mr and Mrs Frigger] exercise their option to enforce the (Fixed) Charge they have no relevant rights with respect to the mortgaged property ... the choses in action';

(b) 'the defendant, as liquidator, was entitled and bound to deal with the various assets which were the subject of the security'; and

(c) at [21] 'the defendant challenges the authenticity and validity of the Charge'.

10 Although ground 1(a) purports to quote the judge's findings at [22] of the principal reasons, the word '(Fixed)' does not appear in [22] of his Honour's judgment.[5]

The Charge provides that at the option of the grantees, [Mr and Mrs Frigger], the Charge shall become enforceable and the right of the grantor, CAT, to deal with the mortgaged property, for any purpose shall forthwith cease on an event of default which includes the winding up of the company. Thus, the company, or its liquidator, remains in control of and entitled to deal with the assets secured by the Charge unless and until the chargee exercises its option to enforce the Charge. That accords with the nature of a charge. A charge transfers neither the property, that is beneficial ownership or title, nor the right to possession. The charge conveys nothing and merely gets the chargee certain rights over the property as security for the sum advanced. Until the chargee enforces its security the chargor has control of the assets and is entitled to deal with them unless expressly precluded from doing so by the terms of the charge. In his affidavit of 13 October 2015 [Mr Kitay] says that so far as he can determine the first occasion upon which [Mr and Mrs Frigger] took any steps to enforce the Charge was in April 2014 when they purported to send a notice to CAT under s 123(2) of the PPSA. [Mr and Mrs Frigger] did not purport to rely upon their rights as secured creditor and seek to take steps with respect to the causes of action pleaded in [the amended statement of claim] before that and therefore the validity or otherwise of the Charge is irrelevant to any of the causes of action alleged. Put simply, the Charge is irrelevant to the claims made by [Mr and Mrs Frigger] in this action. Unless and until [Mr and Mrs Frigger] exercise their option to enforce the Charge they have no relevant rights with respect to the mortgaged property, that is the choses in action referred to in [the amended statement of claim]. [Mr Kitay], as liquidator, was entitled and bound to deal with the various assets which were the subject of the security.

12 Ground 1(c) refers to [21] of the judge's principal reasons. In the principal reasons, at [21], his Honour said:

[Mr Kitay] challenges the authenticity and validity of the Charge. However, [Mr Kitay] does not rely upon those challenges for the purposes of this application. [Mr Kitay's] argument in relation to the Charge is that the Charge is irrelevant to any of the claims which [Mr and Mrs Frigger] seek to advance in this action. [Mr and Mrs Frigger] rely upon their rights or entitlements under the Charge to support the fifth contravention. The fifth contravention is based upon the conduct of [Mr Kitay] in refusing to give consent for CAT's Legal and Enforcement Costs claim to be brought back before the trial judge for orders and assessments as requested by Mrs Frigger on or about 4 June 2010. [Mr and Mrs Frigger] also rely upon the Charge in advancing the sixth contravention. The sixth contravention alleges that on or about 10 June 2010 [Mr Kitay] refused to consent to Mrs Frigger representing CAT at the taxation of a bill of costs rendered by CAT's solicitors, Bowen Bookbinder Valanski (BBV) and the conduct of [Mr Kitay], in or about October 2010, in refusing to request BBV to file its bills of March and April 2007 and counsel bills. [Mr and Mrs Frigger] also rely upon the Charge in advancing the seventh contravention. The conduct of [Mr Kitay] complained of is also his failure in 2010 to consent to Mrs Frigger representing CAT at the taxation of BBV's bills of costs. The relevance of these matters for present purposes is that the conduct of [Mr Kitay] complained of all took place before April 2014. It is not alleged by [Mr and Mrs Frigger] that they took any steps to enforce the Charge until April 2014 when they issued a notice under s 123(2) of the Personal Property Securities Act (Commonwealth Laws) Act 2011 (WA) (PPSA) purporting to take possession of the assets of CAT which are the subject of the Charge. None of the actions which [Mr and Mrs Frigger] allege were improperly undertaken by the Liquidator occurred after that date.

13 Ground 2 alleges that the judge erred in law in finding at [24] of the principal reasons that the matters pleaded in par 101(1) of the statement of claim were a collateral attack upon the decision of Simmonds J to appoint Mr Kitay as provisional liquidator of CAT in Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38, and upon the decision of Master Sanderson in ordering the winding-up of CAT in Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93.

14 The particulars to ground 2 are in the following terms:

2.1 PSA was subject to a Deed of Company Arrangement [(DOCA)];

2.2 PSA varied the terms of the DOCA without a creditor's resolution in contravention of s 445 Corporations Act 2001;

2.3 PSA attempted to give effect to those variations by filing false submissions in CACV 76/2008;

2.4 The false submissions constituted a collateral abuse of process because they gave effect to variations of a DOCA, which variations had never taken effect, and which DOCA had nothing to do with the proper purpose of the appeal;

2.5 It is not a collateral attack to challenge a judgment obtained by collateral abuse of process. (original emphasis)

15 His Honour's findings were, relevantly:[7]

Paragraph 101(1) alleges that from 4 December 2009 when he accepted appointment as liquidator of CAT [Mr Kitay] knew or ought to have known the matters pleaded in pars 10 to 24 of the [amended statement of claim]. Those matters cover: the judgment in favour of CAT against PSA and Banning in CIV 2256 of 2006, the appeal, the DOCA, the submissions made by Mr Lenhoff to the Court of Appeal allegedly contrary to the terms of the DOCA, the obtaining of the Freezing Orders, the issue by PSA and Banning of the statutory demand, and the appointment of [Mr Kitay] as provisional liquidator and subsequently liquidator of CAT on the application of PSA and Banning. Paragraph 101(1)(i) then pleads that [Mr Kitay] accepted appointment as liquidator when he knew or ought to have known the terms and the statutory effect of the DOCA was, amongst other things, that CAT had no liability to repay the reduction in the judgment to PSA and Banning and CAT had a right to set off the Legal and Enforcement Costs against the reduction in the judgment. Paragraph 101(1)(ii) is that [Mr Kitay] accepted appointment as liquidator in circumstances where CAT was not insolvent or near insolvent. Paragraph 101(1)(iv) is that [Mr Kitay] knew or ought to have known that his appointment was not in the best interests of CAT. Those pleas are all a collateral attack upon the winding up order made by this court. Mrs Frigger, on behalf of [Mr and Mrs Frigger], in her oral submissions specifically disavowed any allegation of fraud in par 101(1) (ts 80).

The learned judge erred at law by:

(a) considering each of [Mr Kitay's] eleven contraventions of Corporations Act 2001 ... in a piecemeal manner rather than as a whole;

(b) accepting [Mr Kitay's] cleverly worded affidavit evidence and submissions;

(c) refusing to consider [Mr and Mrs Frigger's] evidence and submissions that contradicted [Mr Kitay's] evidence;

(d) imposing the legal consequences of strike-out, summary judgment and permanent stay[.]

Had the learned judge considered the contraventions in totality and fully he would have concluded that each of the eleven contraventions were steps taken by [Mr Kitay], who was counselled, aided and abetted by Herbert Smith Freehills' partners ... in the execution of a plan to gain advantages for [Mr Kitay], Freehills and four South African compatriots to the detriment of CAT and [Mr and Mrs Frigger] as shareholders and Secured Creditors, resulting in four heads of damages claimed by [Mr and Mrs Frigger].

17 The particulars to this ground set out Mr and Mrs Frigger's allegations in respect of the alleged contraventions, but say that the tenth contravention 'is not pressed'.

18 Ground 4 is to the effect that the judge erred in mixed fact and law by finding that the second, third and fourth alleged contraventions were an abuse of process. The particulars effectively repeat certain matters set out under the particulars in relation to grounds 1 and 3.

19 Ground 5 alleges that the judge 'erred at law by imposing the penalty of indemnity costs against the appellants in circumstances where the letter upon which such order was based had 38 false facts'. It is stated that '[i]n those circumstances [Mr and Mrs Frigger] did not act unreasonably by refusing the letter of compromise'. There are no particulars to this ground, and the alleged 'false facts' are not specified.

The application for security, the evidence and the parties' arguments

20 The respondent's application for security for costs was filed on 19 July 2016, supported by an affidavit of Ms Michelle Guy, a solicitor with Herbert Smith Freehills (Freehills), of the same date. Mrs Frigger, on behalf of Mr and Mrs Frigger, swore an affidavit in opposition on 12 August 2016, which was filed on 15 August 2016 (Mrs Frigger's first affidavit). Mrs Frigger also filed, without leave, an affidavit sworn on 29 August 2015 on behalf of herself and her husband (Mrs Frigger's second affidavit). The parties also provided written and oral submissions.

The affidavit in support of the application for security

21 Ms Guy's affidavit included evidence to the following effect. Mr and Mrs Frigger are the registered proprietors of a property in Applecross (Applecross property). Mrs Frigger is also the registered proprietor of properties in Bayswater and Como (Bayswater property and Como property, respectively). Each of these three properties is subject to a registered mortgage in favour of a company called 'H & A Frigger Pty Ltd'. In each case, the mortgage bears the date 1 July 2012, but was not registered at Landgate until 7 April 2014. The mortgage over the Applecross property is said to secure the sum of $2.5 million. The other mortgages are said to secure the sum of $800,000 each.

22 Three Property (Seizure and Sale) Orders have been registered in respect of the Applecross property; four Property (Seizure and Sale) Orders have been registered in respect of the Bayswater property; and three Property (Seizure and Sale) Orders have been registered in respect of the Como property.

23 A search of the mortgagee, H & A Frigger Pty Ltd, indicates that:

(a) Mr and Mrs Frigger are the directors of H & A Frigger Pty Ltd;

(b) there are two ordinary shares issued in H & A Frigger Pty Ltd for a total value of $2;

(c) Mr and Mrs Frigger were originally the shareholders of H & A Frigger Pty Ltd;

(d) on 1 July 2012 (the same date as the date on the mortgages over the Applecross, Bayswater and Como properties), Mr and Mrs Frigger transferred their shares to Wolfgang Popitz and Helga Popitz, who are residents of Germany; and

(e) the Australian Securities and Investments Commission (ASIC) was not notified of the change in shareholding until 4 April 2014, which is around the date that the mortgages referred to earlier were registered with Landgate.

24 Each of the mortgages contains terms to the following effect:

6.5% pa and as agreed between the parties from time to time

25 Mr and Mrs Frigger have not paid a sum in respect of costs pursuant to a costs order by Master Sanderson in the matter of COR 2 of 2010 against Mr and Mrs Frigger in favour of Mr Kitay on 17 June 2014. The costs were assessed by Registrar S Boyle, who issued a certificate of taxation, in the sum of approximately $61,000, on 6 July 2015. The costs remain unpaid (costs debt).

26 On 30 September 2015, a Property (Seizure and Sale) Order was obtained in favour of Mr Kitay in respect of the costs debt against the Applecross property, the Bayswater property and the Como property (sale order). On or about 6 October 2015, the sale order was provided to the Sheriff's Office for execution. On 9 October 2015, the Deputy Sheriff wrote to Freehills, advising that:

(a) the Sheriff's Office had received five Property (Seizure and Sale) Orders in respect of Mr and Mrs Frigger;

(b) Mrs Frigger had advised that the Applecross property, the Bayswater property and the Como property were 'over encumbered';

(c) the premises are 'modestly furnished with nothing of any real significant commercial value'; and

(d) the Deputy Sheriff had not issued the sale order to an officer for execution as he could not 'see there being much chance of success until all matters with the real properties are resolved'.

27 The sale order was registered in respect of the Applecross property, the Bayswater property and the Como property on 26 November 2015.

28 On 5 May 2016, a bankruptcy notice was issued against each of Mr and Mrs Frigger with respect to the costs debt. The bankruptcy notice was served on Mr and Mrs Frigger, but the debt the subject of the bankruptcy notice has still not been paid.

29 Ms Guy also deposed to her belief, and the basis of her belief, based on findings in an earlier judgment of this court, that Mr and Mrs Frigger had unpaid debts in respect of costs in other proceedings totalling approximately $97,000.[8]

30 Ms Guy also annexed certain correspondence deposing to an attempted conferral with Mr and Mrs Frigger in relation to the security for costs application.

31 Ms Guy's affidavit also included a schedule of the estimated costs that would be incurred by Mr Kitay in resisting the appeal. The estimate for costs is approximately $33,000.

32 Mrs Frigger's first affidavit contained statements to the following effect. Mrs Frigger gave an historical account of certain purchases of property which she and her husband had undertaken between 1980 and 2003. In 2012, she decided to purchase a property in Shoalwater for her son, and in 2014, she decided to purchase a property in Cockburn Central for her daughter. She could not obtain a bank loan for either of these two purchases because of a caveat lodged over the Applecross, Bayswater and Como properties. She had to 'withdraw' funds from the Frigger Superannuation Fund to purchase these properties. In 2014, the Frigger Superannuation Fund decided to purchase a commercial property. In that regard, a property was purchased in Hobart for $7,850,000 (Hobart property). The attached certificate of title indicates that the Hobart property was transferred to Mr and Mrs Frigger on 13 May 2015.

33 The certificate of title for the Hobart property also indicates that there is no registered mortgage over it, although Mrs Frigger says that money was borrowed from 'overseas' to provide funding for its purchase, and that those loans 'are secured by mortgages over Como, Bayswater and Applecross'. Mrs Frigger also annexed what she said is a copy of the 'most recent annual return' for the Frigger Superannuation Fund. This document, which is an extract only, refers to 'borrowings' of $2,425,050, but the lenders are not identified in the extract. Mrs Frigger also said that she was involved in proceedings this year in the District Court in which security for costs had not been ordered against her and her husband.

34 Mrs Frigger also referred to certain documents indicating that there was a sale of a property in Armadale (Armadale property), and the sale of a service station business run from that property, on or about 11 February 2016. There was a dispute between Mr Kitay as liquidator of CAT, and Mr and Mrs Frigger, concerning to whom the proceeds should be paid. Mr and Mrs Frigger, and Mr Kitay as liquidator of CAT, agreed that, pending resolution of the dispute, the sale proceeds should be paid into a bank account in the name of CAT, and for Mr Kitay and Mr and Mrs Frigger to be joint signatories to the account. Mrs Frigger states that she and her husband felt Mr Kitay 'forced' them into signing the agreement.

35 Mrs Frigger said that Mr Kitay maintained a 'claim' over the Armadale property, and 'commenced a claim over the service station business' in July 2014 in CIV 2765 of 2010. Mrs Frigger said that Mr Kitay had received legal advice in 2010 from Freehills that the claim for the Armadale property would not be successful. She also said that certain discovery orders had been made against Mr Kitay, that Mr Kitay was claiming legal professional privilege, and that the claim for privilege is being contested.

36 Mrs Frigger also said that on 9 June 2010 [sic], she filed for default judgment against CAT in CIV 2765 of 2010. In that regard, she annexed a document entitled 'Plaintiffs' Re-Amended Motion for Judgment Against Second Defendant Pursuant to RSC O 13 r 8', filed 5 July 2016. She said that if default judgment was entered, she and her husband would obtain an order that the 'Armadale sale proceeds be paid to us as trustees of the Frigger Super Fund'.

37 Mrs Frigger said that she and her husband are allocated pensions from the Frigger Superannuation Fund; that they have been unable to pay court fees in this and other appeals; and that they would be unable to pay any security for costs that may be ordered against them 'unless the sale proceeds of the Armadale property are paid to us as trustees of the Frigger Super Fund where those funds belong'.

38 In relation to the costs debt, Mrs Frigger said that she understands that Master Sanderson's judgment was a judgment in favour of both Mr Kitay and CAT; that CAT is indebted to Mr and Mrs Frigger in the sum of $3.7 million; and that she and her husband 'have enforced our right under s 553C Corporations Act 2001 and we paid the Judgment by setting it off against the Running Account' of debt owed by CAT to Mr and Mrs Frigger. Mrs Frigger states that '[a]ccordingly, all the enforcement action taken by Mr Kitay is null and void. There is nothing owing to Mr Kitay'.

39 Mrs Frigger says that the grounds of appeal have merit. In outlining the reasons why the grounds of appeal have merit, Mrs Frigger also makes allegations to the effect that Mr Kitay had caused her and her husband to lose money on the sale of the Armadale property as a result of a 'deliberate abuse of power', and that such a claim was a triable issue and not susceptible to summary judgment.

40 Mrs Frigger's second affidavit includes evidence that Mr and Mrs Frigger would not be able to pay $33,000 in security for costs as they do not have the funds available.

41 It is also stated that Mr and Mrs Frigger received email communications dated 26 August 2016 to the effect that Mr Kitay does not seek to rely on the failure of Mr and Mrs Frigger to comply with the bankruptcy notice dated 5 May 2016, on the basis that he accepts that the notice is defective.

42 In relation to the unpaid costs orders in other proceedings, Mrs Frigger says that these costs orders were all 'obtained by collateral abuses of process and are the subject of an application for injunction' in the Federal Court.

43 Mrs Frigger denied that she and her husband had lodged mortgages over the Applecross property, the Bayswater property and the Como property in order to put those properties beyond the reach of creditors. She stated that they 'do not have any creditors'. Mrs Frigger said that the mortgage transactions were bona fide.

44 Mrs Frigger alleged that a partner of Freehills was 'knowingly concerned in, and aided and abetted', a number of additional contraventions by Mr Kitay, the alleged contraventions being set out in a schedule to her affidavit.

45 In relation to the allegation in ground 3 of the grounds of appeal to the effect that Mr Kitay acted to 'gain advantages for ... South African compatriots', Mrs Frigger said:[9]

The Appellants' Case does not allege 'South African conspiracy'. The reason why I had referred to the person's origins [was] to demonstrate one possible and probable reason why Mr Kitay preferred the interests of those persons rather than the interests of CAT and the appellants.

46 She also says, again, that Mr and Mrs Frigger have good prospects of success on the appeal.

The parties' arguments regarding the application for security

47 Mr Kitay contended, in effect, that the evidence indicates that Mr and Mrs Frigger are unlikely to be able to satisfy an adverse costs order against them in the appeal. Further, the Hobart property would not be available to meet any costs order as it owned beneficially by the Frigger Superannuation Fund, and not by Mr and Mrs Frigger personally. He also contended that Mr and Mrs Frigger have no reasonable prospects of success in the appeal, and that there is no compelling evidence that an order for security would stifle the appeal. He also contended that there has been no relevant delay in making the application.

48 Mrs Frigger's written submissions were as follows:

1. The merits of appeal are important when resolving this application for security for costs. The appellants submit that the respondent has not answered any of the errors identified in the appellants' case and in those circumstances the appeal has good prospects of success ...
2. The liquidator and his solicitor David John have engaged in substantial contraventions of the Corporations Act as identified in the Schedule attached to the affidavit of 29 August 2016. The trial judge simply ignored the contraventions and accepted false evidence and submissions made by those 'officers of court'. In CIV2765/2010 the application for discovery is to be heard on 29 September 2016 and evidence of misfeasance contained in those documents will be scrutinized by a judge in this court.
3. The appellants will be able to satisfy any costs that may be ordered against them in this appeal because they have substantial unencumbered assets. The appellants are suffering cash flow problems at present because of the respondent's contraventions of the Corporations Act and deliberate abuse of power identified in the appellants' affidavits ...
4. The appellants will be shut out of the appeal if security is ordered because without selling real estate, they are unable to pay $33,000 or any such amount into court.
5. In those circumstances the discretion is not enlivened and security ought not to be ordered. (original emphasis)

49 In oral submissions, Mrs Frigger also said that:

(a) the Applecross, Bayswater and Como properties are not 'over-encumbered' and that there is equity in them;

(b) whilst the Hobart property is held by Mr and Mrs Frigger as trustee for the Frigger Superannuation Fund, Mr and Mrs Frigger are the only beneficiaries of the fund;

(c) Mr and Mrs Frigger were 'forced' by Mr Kitay into agreeing that the sale proceeds of the Armadale property and business be deposited into an account in the name of CAT;

(d) in relation to the costs debt, the bankruptcy proceedings have been dismissed, and, further, Mr and Mrs Frigger intend to apply to set aside the taxation certificate issued by Registrar S Boyle;

(e) if security were ordered, 'it would be very difficult for us';

(f) Mr Kitay's estimate of the amount required for security is inflated, and that the $33,000 claimed as security should be reduced by 'at least' half.

50 The principles are well known. Part 5 r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (Court of Appeal Rules) provides that a party may apply for an 'interim order'. An 'interim order' is defined in pt 1 r 3(1) to include an order that an appellant provide security for a respondent's costs. An order made in the exercise of the power to order security is an order made to serve the interests of justice.[10] The power to order security is unfettered but must be exercised judicially.[11] 'Special circumstances' do not have to be shown, and this court's discretion is not subject to O 25 r 1 of the Rules of the Supreme Court 1971 (WA).[12] Order 25 r 1 applies to applications for security for costs at first instance and provides, in effect, that no order shall be made merely on account of the poverty of the plaintiff, or the likely inability of the plaintiff to meet an adverse costs order. Further, the old common law rule that natural persons, however poor they were, would not be ordered to give security, historically had no application in the case of appeals, given that the appellant had already had the benefit of a decision by a court of justice.[13]

51 Ultimately, each case will turn on its own circumstances, and it is not possible to set out an exhaustive list of the relevant considerations. Nevertheless, the relevant factors to be taken into account will ordinarily include whether the appellant is likely to be able to satisfy an order for costs if the appeal is unsuccessful; the appellant's prospects of success on the appeal; the fact that the appellant has already lost at first instance on the merits, that being a circumstance which favours the exercise of discretion in favour of an order for security for costs in an appeal; whether the appellant would be shut out of the appeal if security were ordered; and whether there has been any delay in the filing of the application for security for costs.[14] An appellant's non-compliance with an earlier relevant costs order in favour of the respondent, at least to the extent that the non-compliance is not adequately explained, is also a relevant consideration.[15]

52 Where an order for security for costs is made and the appellant is impecunious, the security order should not be greater than is absolutely necessary.[16]

53 Having considered the parties' affidavits and submissions, it appeared to us that security should be ordered. The following matters were particularly pertinent.

54 First, the evidence as a whole indicated that Mr and Mrs Frigger would be unlikely to be in a position to meet any costs order in the appeal made against them. Mrs Frigger, in her first affidavit, said, in effect, that Mr and Mrs Frigger could not meet an adverse costs order made in the appeal, unless the dispute as to the Armadale property was resolved in their favour. There is no basis for concluding that that dispute would be determined prior to, or within a reasonable time after, the disposition of the appeal herein or that the dispute was likely to be resolved in their favour.

55 In any event, Mrs Frigger appears to contend that the beneficial ownership of the Armadale property resides in Mr and Mrs Frigger in their capacity as trustees of the Frigger Superannuation Fund. Whilst the Hobart property is, apparently, unencumbered, it also appears that Mr and Mrs Frigger own that property on trust for the Frigger Superannuation Fund. Assets held on trust for the Frigger Superannuation Fund would not prima facie be available to meet any costs order made against Mr and Mrs Frigger personally. Mr and Mrs Frigger did not put the trust deed in evidence.

56 Moreover, although Mrs Frigger said that the Applecross, Bayswater and Como properties had equity in them, the assertion was unsupported by any independent or valuation evidence. Having regard to the extent of the encumbrances on those properties, we were not persuaded that an adverse costs order in the appeal could or would likely be satisfied by the sale of those properties. Nor did Mrs Frigger in her affidavit evidence dispute that she had informed the deputy sheriff that the properties were 'over-encumbered'.

57 Secondly, our preliminary (and necessarily provisional) view was that none of the grounds of appeal has reasonably good prospects of success.

58 Thirdly, there was no satisfactory explanation for the non-payment of the costs debt. Even accepting, as we do, that the bankruptcy process referred to in Ms Guy's affidavit has been or will be terminated, the fact remains that a very substantial costs debt owing to Mr Kitay and CAT has remained unpaid for over a year. The debt is based on an order of Master Sanderson which has stood for over two years without any suggestion that it has been the subject of any successful appeal. Mrs Frigger's stated intention to make an application to set aside Registrar S Boyle's certificate of taxation is irrelevant for present purposes. Moreover, such an application could not affect Mr and Mrs Frigger's underlying liability for costs stemming from Master Sanderson's order of 17 June 2014. Further, Mrs Frigger's evidence to the effect that the costs debt has been paid by way of a 'set-off' lacks specificity and, on the evidence presented in this application, has not been established.

59 Fourthly, there was no relevant delay by Mr Kitay in making the application.

60 Fifthly, whilst the evidence indicated that Mr and Mrs Frigger would be unlikely to meet any adverse costs order out of their beneficially-owned assets, there remained the broader question of whether an order for security would stifle the appeal. On Mrs Frigger's evidence, Mr and Mrs Frigger have previously had access to funds from overseas, and have 'withdrawn' funds from the Frigger Superannuation Fund to buy assets for their children. Mrs Frigger has also deposed that presently they 'do not have any creditors'.[17] Presumably, she does not regard H and A Frigger Pty Ltd or the 'overseas' lenders as creditors.

61 Although it might be doubted that the proper inference is that an order for security would stifle the appeal, it was unnecessary to form a concluded view in that regard for present purposes. That was because in all the circumstances, and having particular regard to our preliminary (and necessarily provisional) view that none of the grounds of appeal has reasonably good prospects of success, this was one of those cases where it was in the interests of justice to order security in any event.

62 Accordingly, we were satisfied that this was an appropriate case in which to order security.

63 That conclusion was confirmed by, but not dependent on, the following observations. In our view, on the evidence referred to in [23] to [24] above, the mortgages registered in favour of H and A Frigger Pty Ltd over the Applecross, Bayswater and Como properties had the effect, and it is open to infer were done with the intention, of putting assets out of the reach of Mr and Mrs Frigger's creditors. That view is open notwithstanding Mrs Frigger's evidence in this application. Mr Frigger's evidence appears to be, in effect, that Mr and Mrs Frigger caused these properties to be secured to obtain overseas borrowings, which were used to acquire an asset, ie, the Hobart property, to augment the assets of the Frigger Superannuation Fund. On Mrs Frigger's evidence, the decision to purchase a property for the Frigger Superannuation Fund was made in 2014; the Hobart property was subsequently purchased, and the transfer to Mr and Mrs Frigger was registered on 13 May 2015; but the mortgages given to H and A Frigger Pty Ltd to secure the borrowings for the purchase were executed on 1 July 2012. In other words, the mortgages in favour of H and A Frigger Pty Ltd were executed at least some 17 months before any decision was made to buy the property for which, it is said, the mortgage funds were procured, and nearly three years before Mr and Mrs Frigger became the registered proprietors of the Hobart property.

64 In relation to the quantum of security, we were not persuaded that the amount claimed was, in all the circumstances, reasonable. We accepted that a considerable amount of work will likely be required in resisting the appeal. However, at least to some extent, the arguments to be run in resisting the appeal are likely to be a re-run of the material used before the primary judge. Therefore, we were not persuaded that the time spent in preparing for the oral hearing would be as much as that claimed. Having considered the submissions of the parties, the estimate of costs as a whole, the subject matter and scope of the appeal, and the principle referred to in [52] above, in all the circumstances, we considered that a reasonable amount for security would be $25,000.

65 We also ordered Mr and Mrs Frigger to pay Mr Kitay's costs of the application. The relevant principles in this regard were outlined in Frigger v Clavey Legal Pty Ltd [No 2].[18] In ordering costs, we had particular regard to the following matters. The respondent had invited (albeit in forthright terms) the appellants' agreement on the provision of security before the application was made, and the appellants did not, in our view, properly engage in the relevant issues in responding to this request. Even though the respondent's bankruptcy point could not be sustained as events transpired, and to that very limited extent, the appellants raised a valid point, they did not properly address the deeper point that the costs debt has remained unpaid. Also, in our view, overall, and taken as a whole, the appellants' resistance to the application objectively lacked real arguable merit.

[3] Supplementary reasons [4] - [10].

[5] At [6] of the principal reasons, his Honour noted that Mr and Mrs Frigger described the charge as being a 'Fixed Charge'.

[8] Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258 [12].

[9] Mrs Frigger's second affidavit, par 19.

[10] Ailakis v Olivero [2013] WASCA 91 [5]; Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 [47]; George 218 Pty Ltd v Bank of Queensland Ltd [2016] WASCA 56 [42].

[11] Mann v Dabelstein [2006] WASCA 176 [16]; Ailakis [1], [22]; George 218 [43].

[12] Ailakis [2] - [4], [11] - [12]; Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3 [51]; George 218 [44].

[13] George 218 [44] and the cases cited therein.

[14] Sims v Suda Ltd [No 2] [2015] WASCA 180 [18].

[15] Frigger v Personal Services of Australia Pty Ltd [52]; Boksmati v Girgis Nominees (WA) Pty Ltd [2014] WASCA 101 [53d].

[16] Sims [19]; Commonwealth of Australia v Eise (1991) 6 ACSR 1, 3 - 4; Dodds v Kennedy [2011] WASCA 32 [8(e)]; George 218 [47].

[17] Mrs Frigger's second affidavit, par 11.

[18] Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258 [43] - [47].