security for costs application
59 The Court has power to make an order requiring Mrs and Mr Frigger to provide security for the costs of the parties' interlocutory applications under s 56 of the Federal Court of Australia Act 1976 (Cth) and R 19.01 of the Federal Court Rules 2011 (Cth). The discretions conferred on the court under both s 56 and R 19.01 are broad and should be exercised having regard to all the relevant facts. In Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50,635; [1989] FCA 361, Hill J referred to the following factors as relevant to the question whether security should be ordered:
(a) the chances of success of the applicant;
(b) whether the applicant's claim is bona fide or a sham;
(c) the quantum of risk that the applicant cannot satisfy a court order;
(d) whether the power is being used oppressively;
(e) whether the impecuniosity arises out of the conduct in respect to which relief is sought;
(f) whether there are aspects of public interest which weigh in the balance against the making of an order; and
(g) whether there are any particular discretionary matters peculiar to the circumstances of the case.
These principles have been applied in the context of the current Rules. See, for example, Southern Equity Pty Ltd v Timevale Pty Ltd [2015] FCA 1364 at [23], citing Mecrus Pty Ltd (ACN 088 126 756) v Industrial Energy Pty Ltd (ACN 080 687 681) and Another (2015) 327 ALR 523 at [19]; [2015] FCA 103. In that case, Murphy J, at [42], also had regard to whether an order for security would stultify the proceeding.
60 In relation to the security for costs application, the issues identified by counsel for the parties for consideration, in accordance with these principles, were the relative weakness of the case that Mrs and Mr Frigger wish to advance, their financial position and their ability to meet any subsequent costs order.
61 By their application filed 26 February 2016, the respondents sought an order that security be provided in the sum of $359,268 by payment into the Court within seven days, pursuant to R 19.01 of the Rules.
62 On the hearing of the interlocutory application, counsel for the respondents explained that an order in those terms would reflect costs likely to be incurred through to the conduct of a trial in the proceeding. He said that the respondents would, however, be satisfied, if a staged order were made, so that security be given, in the first instance, in the sum of $75,000, to the end of the completion of the current interlocutory applications, with liberty to apply for further payments.
63 The application was supported by an affidavit of Mr Cameron Victor Eastwood made 24 February 2016. Mr Eastwood is a solicitor for the respondents in the employ of the solicitor on the record and with a knowledge of the history of the above proceedings in the Supreme Court and elsewhere. He provided evidence of a number of steps taken, and statements and materials provided in the relevant Supreme Court proceedings. He also noted costs orders made and not paid in those proceedings. He further noted the existence of mortgages over real estate property registered in the name of Mrs and Mr Frigger. He also noted that on 13 January 2016, Mrs Frigger described herself and her husband to this Court, at a case management hearing, as "high wealth individuals", with millions of dollars of assets. He also noted that the Friggers had previously informed the Supreme Court of their intention to leave the country in a letter to Justice Allanson, dated 26 September 2014, a copy of which was produced.
64 The respondents fundamentally dispute the case that the Friggers wish to pursue, submitting that it constitutes a collateral attack on a final decision over central issues ultimately encapsulated in the decision of the Court of Appeal in CACV 76/2008 of 10 December 2015, which found they had no standing to dispute the earlier decision of the Court of Appeal of 7 December 2009.
65 This is the not the occasion fully to rehearse the arguments that might subsequently be agitated in any summary judgment application or a subsequent trial. It is sufficient to note that counsel for the Friggers, at the hearing on 5 April 2016, said that the kernel of the case that would be put (on the proposed amended materials) is that submissions made to the Court of Appeal in 2009 were inconsistent with obligations owed under cl 6.13 of the DoCA referred to above, and that Mrs and Mr Frigger had a sufficient interest for the purpose of s 447A of the Corporations Act to seek the relief that they claim in this Court. Counsel said that the case put would be that the terms of the DoCA were not mentioned to the Court and cl 6.13 in particular was not brought to the Court's attention.
66 The respondents make a number of salient points about the kernel of the claim that Mrs and Mr Frigger intimated they wished to pursue:
(1) Mrs and Mr Frigger are not now, and never have been, "creditors" of the DoCA and have no standing to commence the proceedings, referring to the Court of Appeal decision of 10 December 2015.
(2) Mrs Frigger has previously produced a true copy of an alleged notice by her to Computer Accounting & Tax dated 1 September 2003 and a true copy of an alleged minute of directors' meeting of that company dated 1 September 2003, and has made a number of affidavits in proceedings in the Supreme Court and in the District Court representing these documents as the "contract for litigation" which is referred to in para 1(d) of the presently filed statement of claim.
(3) The validity of the deed of charge made by Computer Accounting & Tax in favour of Mrs and Mr Frigger is disputed by the liquidator of that company (and also by the respondents) and it was not until 7 April 2014, that the Friggers made any attempt to seize the property the subject of that charge by making a demand of the liquidator pursuant to the deed. In that regard, the respondents produce the notice served on the liquidator on that date, under s 123 of the Personal Property Securities Act 2009 (Cth) (s 123 notice).
(4) The decision of Simmonds J in Holbrook v Professional Services of Australia Pty Ltd [2012] WASC 444, was a decision whereby his Honour ordered the DoCA be terminated. The order was made on 6 November 2012. Simmonds J did not find that the DoCA needed to be terminated as a result of any breach but that it had served its intended purpose.
(5) Special orders for costs originally made by Simmonds J on 6 May 2009, were set aside by the Court of Appeal in its orders of 7 December 2009. No orders in favour of Computer Accounting & Tax were reinstated in CIV 2265/2006 until the orders made by Simmonds J on 18 September 2015. It follows there was no "property" in existence which could have been the subject to any seizure at any earlier material time. At the time of the purported s 123 notice, not only had the DoCA long since been terminated, but the costs order in favour of that company did not then exist.
(6) The respondents, like the liquidator, say they dispute the validity of the s 123 notice as at no time prior to the termination of the DoCA in 2012 had Mrs and Mr Frigger ever been possessed of any rights of Computer Accounting & Tax as a "creditor" pursuant to the DoCA. In short, while the company might theoretically have standing as a "creditor" affected by the DoCA or its termination to take some action in respect of an alleged breach of its terms, neither Mrs nor Mr Frigger have any such right.
67 The respondents also say that, contrary to the allegations made in [18] and [19] of the currently filed statement of claim, a claim made by Mrs and Mr Frigger, effectively on behalf of Computer Accounting & Tax, in respect of the non-payment of costs to the company being in breach of the DoCA is without legal merit. The costs order of 6 May 2009 in question, the respondents point out, was set aside and had never been taxed. The respondents say that the Friggers, in effect, claim that even though the company was required, by a judgment of the Court of Appeal, to pay the second and third respondents approximately $730,000 (the respondents say the amount was actually over $800,000), Computer Accounting & Tax was entitled to retain the judgment sum paid to it pursuant to the DoCA by the loan money made available from Banning Holdings Pty Ltd for the purposes of effecting the agreement encapsulated in the DoCA. The respondents say the judgment of the Court of Appeal was never stayed and therefore this plea is nonsensical and has no legal merit. Further, even if either of those matters had any merit, they would be for the liquidator to act upon and not Mrs and Mr Frigger. They say that the lawyer for the liquidator has advised that the Friggers have not approached him to take any action on behalf of the company in relation to the DoCA, nor to set aside the judgment of the Court of Appeal, such as the Friggers appear to propose in this proceeding. Nor have they placed the liquidator in funds to take any such action.
68 So far as unpaid costs are concerned, it is apparent, while Mrs Frigger asserts they are "fictitious", that the following costs orders were made and remain unsatisfied:
(1) Judgment for costs in action CIV 1727/2009 for $64,461.88 in favour of Ms Sandra May Banning, Mr Campbell-Smith and Banning Holdings Pty Ltd against the Friggers.
(2) On 26 November 2014, Registrar Davies issued a certificate allowing costs in action CIV 1727/2009 for $4,284 in favour of Ms Banning, Mr Campbell-Smith and Banning Holdings Pty Ltd against the Friggers.
(3) Mrs and Mr Frigger are liable to Mr Campbell-Smith and PSA for costs of the lengthy freezing order proceedings against them and Computer Accounting & Tax, and the subsequent appeals in CACV 23/2012 and CACV 24/2013 (in which costs were also ordered to be paid by them), which costs have not been assessed or taxed, but are estimated by the solicitors for the respondents to be in the vicinity of $160,000-$200,000, as most of the costs payable are pursuant to indemnity costs orders. Those appeals arose out of the applications determined by Simmonds J in CIV 2265/2006. CACV 23/2012 arose from his Honour's decision as to who should bear the costs of the freezing order proceedings against Computer Accounting & Tax and Mrs and Mr Frigger, which were commenced in December 2009, and CACV 24/2013 arose from the refusal of Mrs and Mr Friggers' applications for compensation against Mr Holbrook and Mr Campbell-Smith, pursuant to undertakings given in support of the freezing order proceedings.
(4) On 16 September 2014, Simmonds J made an order for costs to be payable to Mr Campbell-Smith and PSA by the Friggers personally in CIV 2265/2006, which have not yet been taxed, but are estimated by the solicitors for the respondents in the sum of about $10,000.
(5) On 16 September 2014, Simmonds J made an order for costs to be payable to Mr Campbell-Smith and PSA by the Friggers personally in CIV 2265/2006, fixed in the sum of $1,500.
(6) On 16 October 2012, Simmonds J made an order for costs payable to Mr Campbell-Smith and PSA by the Friggers personally in CIV 2265/2006, which was subsequently taxed in the sum of $31,599.72.
(7) On 9 October 2015, Simmonds J made an order for costs payable to Mr Campbell-Smith and PSA by the Friggers personally in CIV 2265/2006, fixed in the sum of $43,328.65.
(8) On 10 December 2015, the Court of Appeal made an order for costs to be payable to Mr Campbell-Smith and PSA by the Friggers personally in CACV 76/2008. Those costs have not yet been taxed but are estimated by the solicitors for the respondents to be in the amount of $25,000-$30,000, as the costs payable are pursuant to "indemnity" costs orders.
(9) On 9 January 2015, the Court of Appeal made an order for costs to be payable to Mr Campbell-Smith by the Friggers personally in CACV 118/2014, which have not yet been taxed, but are estimated by the solicitors for the respondents to be in the amount of $3,000-$3,500.
69 The respondents note the Friggers do personally own substantial real estate in Western Australia, but have placed a mortgage over all of their properties in favour of a "two dollar company", H & A Frigger Pty Ltd, of which they are directors and used to be shareholders, the shareholders now being persons in Germany, who the respondents believe to be either their friends or extended family. The mortgages appear to be in a sum about equal to the value of the land.
70 The respondents, by Mr Eastwood, also produce a letter of Mrs and Mr Frigger to Justice Allanson in the Supreme Court, suggesting that they might leave the country permanently.
71 On behalf of the Friggers, counsel submits that it cannot be said that the case they wish to run in this proceeding is weak, given that the terms of cl 6.13 of the DoCA are clear and that it is apparent that neither the DoCA nor that clause was mentioned in the Court of Appeal when relevant orders were made.
72 So far as standing is concerned, counsel says s 447A of the Corporations Act may be said to give them a right to seek relief.
73 Counsel notes that the security for costs is sought against individuals, not a company.
74 Counsel also refers to the affidavit made by Mrs Frigger on 30 March 2016, in which she notes, at [26], reasons why costs have not been paid to the receiver, Mr Lean. At [27], Mrs Frigger says she believes that the amounts claimed, which are referred to in [4(c)]-[4(i)] of Mr Eastwood's affidavit, and [68] above, are fictitious and, furthermore, those costs were obtained by the respondents pursuant to the claim of Mrs and Mr Frigger in these proceedings, and they seek an injunction against any claim until the resolution of the proceedings. Mrs Frigger also makes other general statements that allegations made in the proceedings, referred to in [5] of Mr Eastwood's affidavit, have not even been canvassed or decided in other proceedings, that there are no unpaid costs owing to other parties such as Clavey Legal Pty Ltd, and that she denies that she and her husband have placed mortgages over "all" their properties (the inference being it was only over "some").
75 Additionally, she says that she and her husband are drawing allocated pensions from the Frigger Super Fund, which holds all their assets other than their residence in Applecross. She says in the event that they are unsuccessful in this proceeding, they will have to sell assets from their superannuation fund to pay legal costs and that any order to pay security for costs now will result in real and unnecessary hardship.
76 She also says in [39] of her affidavit, that she and her husband do not intend to leave Australia permanently and that Justice Allanson, to whom she and her husband sent the letter in September 2014 in relation to leaving for a holiday, made a finding that there was a misunderstanding of the letter and that the Friggers did not intend to leave Australia permanently.
77 Counsel on behalf of the Friggers submits that the other costs orders are not relevant to the determination of the security for costs application, and that the only issues are whether they will leave the jurisdiction and what their actual financial position is.
78 In the Court's view, there should be a security for costs order, for the following reasons:
Given the background to the current proceeding in the Supreme Court of Western Australia and the rulings made by the Court of Appeal referred to above, notwithstanding that counsel submits that Mrs and Mr Frigger have standing to maintain this proceeding under the Corporations Act and that there appears, literally, some inconsistency between the terms of cl 6.13 of the DoCA and the manner in which the Court of Appeal proceeding was finalised, it is apparent to the Court that there are significant hurdles faced by Mrs and Mr Frigger in the maintenance of this proceeding. To state that is not, in any way, to prejudge or to intend to prejudge any subsequent application for summary judgment in the proceeding.
The fact of the matter remains that the history of the related proceedings in the Supreme Court and the orders made in the Court of Appeal and subsequently, including the termination of the DoCA in 2012 by Simmonds J, are issues of significance confronting Mrs and Mr Frigger. For example, if they are not capable of being classified as a "creditor" their claim is seriously undermined.
Given that there are considerable costs orders in these related proceedings against Mrs and Mr Frigger in favour of one or other of the respondents, the fact that those costs orders have not been paid and, instead, the Friggers have sought to reverse the Court of Appeal decisions, recover all expenses they say they or Computer Accounting & Tax have incurred, and reverse all costs orders, indicates an unwillingness, at least presently, to meet costs orders if and when made.
The fact that there would appear to be questions concerning the circumstances in which real property owned by Mrs and/or Mr Frigger has been mortgaged to a company apparently associated with them or their friends or relatives, additionally raises concern about the willingness or ability of the Friggers to meet any costs order made against them.
Mrs Frigger, in her recent affidavit of 30 March 2016, does not say that she and her husband cannot pay security for costs, only that any order to pay security for costs now will result in "real and unnecessary hardship". That might be said of any order for costs made against any party in any proceedings. She does not say she and her husband are impecunious.
I infer that Mrs and Mr Frigger are not impecunious. The Court is informed that security for costs orders have been made in proceedings in the Supreme Court and met. It is the case that Mrs Frigger conveyed to this Court in January 2016 that she and her husband were people of means. There is no basis for considering that the Friggers will be unable to maintain this proceeding should the security for costs order be made.
79 Altogether, in these circumstances, there should be an order made for security for costs in relation to the current stage of the proceedings in this Court, including the current interlocutory applications mentioned above. On behalf of the Friggers it was not suggested that the costs associated with this first stage of the proceeding in the sum of $75,000 was not appropriate. I consider, in the circumstances, that security for costs in relation to the first stage of this proceeding should be made in that sum.