EX PARTE FRIGGER [2020] WASC 365 (16 October 2020)

Order 67 r 5(1) does not state the criteria that are to be applied in determining whether to grant or refuse leave to file or issue a proposed writ. However, it is accepted that a judge or master should refuse leave to file or issue only if satisfied that the writ would be an abuse of process or a frivolous or vexatious proceeding. Moreover, the caution attendant upon the exercise of the power of summary dismissal elsewhere in the Rules of the Supreme Court applies with no less force in the context of O 67 r 5.

1. The grounds of the application, set out in the motion, are:
   1. The causes of action in the proposed Originating Process are claims by trustees of a self-managed superannuation fund and were originally claimed in this proceeding.
   2. When sequestration orders dated 20 July 2018 were made against the plaintiffs, the action vested in the bankruptcy trustee and is deemed to have been abandoned on or about 20 August 2018 pursuant to section 60 Bankruptcy Act 1966.
   3. The causes of action devolved on the new corporate trustee, H & A Frigger Pty Ltd, which was appointed on 21 July 2018.
   4. Orders were made by the Federal Court on 21 October 2019 that Mr and Mrs Frigger are not disqualified to be directors of H & A Frigger Pty Ltd, or trustees pursuant to section 120 Superannuation Industry (Supervision) Act 1993, and the plaintiffs applied to substitute H & A Frigger Pty Ltd in CIV 2765/2010.
   5. On 25 October 2019 Mrs Frigger commenced a claim in Federal Court WAD549/2019. On 15 April 2020 Colvin J found that the claims must be heard by the same judge in the Supreme Court which had carriage of CIV2765/2010, and should be consolidated with counterclaim in CIV2765/2010. The plaintiffs in the proposed Originating Process are the individual trustees of the Fund, who were appointed on 15 April 2020.
2. The reference in ground 1 and 2 to 'this proceeding' is clearly an error: the claims were originally made in CIV 2765 of 2010, and the applicants' reference is to that action. The history of CIV 2765 of 2010 is chronicled in 17 published decisions (not including supplementary costs decisions), and it is not necessary to set it out in any detail here. It is sufficient to note that the relief sought by the applicants in CIV 2765 of 2010 overlaps with that sought in the proposed application.
3. Mr and Mrs Frigger have been declared bankrupt. Their claim in CIV 2765 of 2010 is now deemed to be abandoned, at least as regards the choses in action that vested in their trustee in bankruptcy. Claims made by the applicants as trustees of the Frigger Super Fund in relation to property of the Fund may not be abandoned, but are stayed by operation of s 60(2) of the Bankruptcy Act 1966 (Cth): see Frigger v Kitay (Liquidator) [2020] FCA 482 [21] (Colvin J). But, as Colvin J continued (at [23]):

... there is no provision of the Bankruptcy Act that would prevent a new trustee of the Fund such as [H & A Frigger Pty Ltd] (or indeed Mr and Mrs Frigger had they continued to be the trustees of the Fund) from commencing proceedings to recover the property of the Fund. The bankruptcy of Mr and Mrs Frigger imposes no barrier to [H& A Frigger Pty Ltd] commencing a new claim to the property it says is property of the Trust. Indeed, it appears that such a claim could only be advanced by commencing new proceedings.

1. More generally, there is nothing in the Bankruptcy Act that prevents an undischarged bankrupt from bringing proceedings in their own name after they have been made bankrupt. In Jacks v Jakimowicz [2014] VSCA 120; (2014) 288 FLR 365, Mandie JA (Maxwell ACJ and Osborn JA agreeing said (at [22]):

The correct position ... is that a bankrupt is competent to bring a variety of proceedings in his own name but he may lack standing to bring a particular proceeding to the extent that a cause or causes of action the subject of the proceeding had vested in the bankrupt's trustee and thus could not be sued upon by the bankrupt. In a given case ... a defendant might successfully obtain an order for a stay or dismissal of the proceeding on the basis that the bankrupt had no standing to bring the proceeding because the causes of action relied upon had vested in the bankrupt's trustee.

1. The applicants propose to commence proceedings under Corporations Act sch 2 Insolvency Practice Schedule (Corporations) against Mervyn Jonathan Kitay, as the liquidator of Computer Accounting & Tax Pty Ltd (the Company). They seek orders under s 90‑20 of the schedule, including damages in relation to assets they assert are held by the Company 'as bare trustee of the Frigger Super Fund'.
2. In the proposed proceedings, the applicants would claim:

(1) An order pursuant to s 78 of the Trustees Act 1968 (WA) vesting title to a property at 140 Edward Street, Perth and 46 Pier Street, Perth in the applicants as trustees of the Frigger Super Fund.

(2) An order that the proposed defendant be removed as signatory to two Bankwest bank accounts held in the name of the Company.

(3) An order that the proposed defendant pay damages on loss of opportunity to earn capital increases and income on the funds in those bank accounts.

(4) The proceeds from the sale of a property at 269 South Western Highway Armadale (that property having been sold while the proceedings in CIV 2765 of 2010 were continuing).

(5) Retirement roll-over contribution of service station business sale proceeds.

(6) Damages for loss of opportunity to sell 269 South Western Highway, Armadale on 11 February 2016 plus loss of opportunity to earn capital and income.

(7) An order that the proposed defendant pay a term deposit and interest of a St George Bank Term Deposit Account held in joint names of the Company and Angela Frigger to the Frigger Super Fund, together with damages for loss of opportunity to earn income and capital.

(8) An order that the proposed defendant pay the Frigger Super Fund a refund of court filing fees plus interest.

(9) An order that the proposed defendant pay the Frigger Super Fund costs incurred in CIV 2765 of 2010, including security for costs paid pursuant to an order of the court, costs paid to the defendant (again pursuant to court order) and costs paid to its own solicitors.

1. The applicants say that they may apply for those orders as persons with a financial interest in the external administration of the Company: see Insolvency Practice Schedule (Corporations) s 90-20.
2. Pursuant to s 90-15 the court may make 'such orders as it thinks fit in relation to the external administration of a company', including an order determining any question arising in the external administration. The power in s 90-15 has been held to be not limited to a power to give directions but accommodates the determination of substantive rights. In Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; (2018) 125 ACSR 355, Gleeson JA said (at [7] ‑ [8]):

The ambit of s 90-15 has not yet been fully considered in the authorities. In Reidy, Re Choice Ltd (Admin apptd) [2017] FCA 1582, Yates J at [27] accepted that an application by an administrator for directions, that formerly would have been made under s 447D(1) of the Corporations Act (now repealed), would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company.

In Walley, Re Poles & Underground Pty Ltd (Admin apptd) [2017] FCA 486 at [41], Gleeson J remarked that the question of whether to exercise the power in s 90-15 was 'to be answered by reference to the principles applied to the exercise of the discretions previously contained in s 479(3) and s 511 of the Act'. That may be accepted insofar as the external administrator seeks the directions of the Court, but the power under s 90-15 to 'make such orders as it thinks fit in relation to the external administration of a company' (s 90-15(1)) including 'an order determining any question arising in the external administration of a company' (s 90-15(3)(a)), is wider and accommodates the determination of substantive rights. Of course, the Court would not do so without affording potentially affected parties an opportunity to be heard: (citations omitted).

1. The question in this application is whether leave should be granted for the proceedings to commence. I am not currently concerned with the merits of the proposed action, only whether it is an abuse of the process of the court or a frivolous or vexatious proceeding.
2. In Ex Parte Gates, Vaughan J discussed when an action should be regarded as an abuse of process or a frivolous or vexatious proceeding. Relevantly, the court must address whether a plaintiffs' proposed claim is so obviously untenable that it cannot possibly succeed, or is one in which there is no serious question to be tried. An action may also be regarded as vexatious by reference to the motive of the litigant, that is, if instituted for a collateral purpose, or with the intention of annoying or embarrassing the person against whom they are brought. A proceeding may also be vexatious 'if it is productive of serious and unjustified trouble and harassment' (at [31] ‑ [33]).
3. In my opinion, leave to file the application should be granted.
4. First, the applicants' bankruptcy is no obstacle to them pursuing these claims, to the extent that they rely on causes of action that have not vested in the trustee in bankruptcy. Whether some of the claims pursued are not available can be determined at a later date on full argument.
5. Second, the applicants' position that the proposed relief relates to questions arising in the external administration of the Company is not so clearly untenable that they should be summarily precluded from pursuing it.
6. Third, the value of the property in issue, and the question of whether that property constitutes assets of the applicants' superannuation fund, weigh against any finding that the proceedings were instituted for the purpose of harassment or for some other collateral purpose. The applicants have a genuine interest in having those issues determined.
7. Fourth, although the fresh proceedings will require the liquidator to meet further claims, to a large extent they overlap with matters that remain in issue between the liquidator and the applicants in the counterclaim in CIV 2765 of 2010.
8. Finally, I have had regard to the comments of Colvin J in Frigger v Kitay (Liquidator) (to which the applicants referred in their submissions). In the Federal Court proceedings, the applicants brought a similar application under s 90‑20 of the Insolvency Practice Schedule (Corporations) claiming that certain property under the control of Mr Kitay, as liquidator of the Company, is property of the Frigger Super Fund. The company H & A Frigger Pty Ltd was then the trustee of the Fund. Colvin J dismissed the application, commenting that it would be an abuse of process for the applicants to raise the same issues in the Federal Court that are the subject of an ongoing counterclaim in this court (at [28] - [31], [50]).
9. There are matters that cause me concern in relation to the further conduct of the proposed application.
10. First, it may not be practical for the fresh application to be dealt with together with the counterclaim in CIV 2765 of 2010. Mr Kitay is represented in that action by the firm Lenhoff & Hotz. In other proceedings brought in this court and in the Federal Court, where Mr and Mrs Frigger have made allegations of breaches of statutory and other duties against Mr Kitay, he has been represented by Herbert Smith Freehills. It may be procedurally necessary for the two matters to proceed separately.
11. Second, this court does not have bankruptcy jurisdiction. For Mr Kitay to take a fresh step in the counterclaim in CIV 2765 of 2010, he requires the leave of Federal Court or the Federal Circuit Court. The proceedings are, and remain, stalled. But that is a matter for the liquidator to deal with.
12. There may also be aspects of the proposed application which the liquidator might successfully challenge. But any 'defects' are not so obvious that the proceedings are clearly untenable. The applicants should not be denied the opportunity to have them determined in the normal course of an action.
13. The applicants will have leave to file the application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.