Frigger v Banning

Federal Court of Australia|2022-04-06|Before: Barker J, Colvin J

The application to further extend the date for objecting to the cost estimate given by Registrar Parkyn on 15 March 2022 is dismissed.
The costs of and incidental to the application are reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 In 2015, Mrs and Mr Frigger brought proceedings in this Court against four respondents seeking compensation calculated by reference to the amount of costs that Mrs and Mr Frigger had been ordered to pay in proceedings in the Supreme Court of Western Australia. In 2017, Barker J dismissed an application by Mrs and Mr Frigger to file a proposed substituted statement of claim in those proceedings. The pleading had been proposed to deal with various objections to the statement of claim as filed. Implicit in the application to file the proposed pleading was an abandonment of the existing pleading and a recognition that there needed to be a new pleading. Therefore, after the dismissal of the application there was no statement of claim, but the proceedings remained on foot. 2 Mrs and Mr Frigger were made bankrupt on 20 July 2018. 3 In 2019, whilst still undischarged bankrupts, Mrs and Mr Frigger sought unsuccessfully to file another proposed statement of claim in the proceedings: Frigger v Banning (No 8) [2019] FCA 1319. At that time, I determined that the whole of the proceedings had been abandoned by the trustee in bankruptcy and there was a statutory stay by operation of s 60 of the Bankruptcy Act 1966 (Cth): at [69]. I rejected a claim that there was some respect in which the proceedings might be continued by Mrs and Mr Frigger in their own name despite the bankruptcy: at [62]-[68]. 4 In 2020, the respondents sought an order dismissing the proceedings and an order for costs. Orders were made dismissing the proceedings and for Mrs and Mr Frigger to pay the costs of the proceedings to be assessed on a lump sum basis by a Registrar, if not agreed: Frigger v Banning (No 11) [2020] FCA 1257. Those orders were made in favour of all four respondents, being Ms Sandra Banning, Ms Ann Campbell-Smith in her capacity as the executor of the estate of Mr Donald Campbell-Smith, Professional Services of Australia Ltd (PSA) and Banning Holdings Pty Ltd. 5 There were also other cost orders that had been made in the proceedings. Upon the dismissal of the proceedings the relevant event occurred which allowed the respondents to claim the costs in accordance with the orders. 6 Thereafter, Mrs and Mr Frigger commenced fresh proceedings in the Supreme Court of Western Australia (numbered CIV1309/2021) against two of the respondents to the proceedings in this Court, namely Ms Sandra Banning and PSA. Mrs Frigger describes those proceedings as a claim 'for losses caused by malicious prosecution of civil and criminal proceedings, collateral abuse of process, and breach of warranty of authority by Timothy Stephenson and Cameron Eastwood'. Mr Stephenson and Mr Eastwood have acted as counsel and solicitor respectively for the respondents throughout the course of these proceedings. 7 On 19 November 2021, the respondents lodged a bill of costs for taxation. As provided for in r 40.20 of the Federal Court Rules 2011 (Cth), an estimate of the likely certificate of taxation was provided to the parties on 15 March 2022. By r 40.21 a party who wants to object to the estimate must, within 21 days after the estimate, file a notice of objection and pay $2,000 as security for the costs of any taxation of the bill. 8 Mrs and Mr Frigger now apply by interlocutory application for an order that the cost orders made in these proceedings be stayed permanently. Their application was lodged on 25 March 2022. They also seek an order that the date for objecting to the estimate be extended until 21 days after the determination of their application for a permanent stay of the costs orders. A deferral of that kind would mean that the taxation process would be held in abeyance pending the determination of the application for a permanent stay. 9 Therefore, the present application before the Court is for interlocutory relief that would restrain the further conduct of the taxation of costs. In effect, Mrs and Mr Frigger seek to pause the taxation process pending the outcome of their application by Mrs and Mr Frigger for a permanent stay.

Relevant principles 10 In my view, the nature of the relief sought requires consideration of the same matters that arise where an interlocutory injunction is sought. Those principles are well established and were summarised by Jackson J in Frigger v Trenfield [2019] FCA 1746 at [6]. Relevantly for present purposes, the following aspects assume significance: (1) Any application for relief should be brought promptly and any delay should be adequately explained. (2) The applicant must demonstrate (a) a serious question to be tried; (b) that the applicant is likely to suffer injury for which damages will not be an adequate remedy; and (c) that the balance of convenience favours the grant of an interlocutory injunction. (3) The court will weigh up the injustice which might be suffered by the respondent if the injunction is granted and the applicant later fails at trial, against the injustice which might be suffered by the applicant if the injunction is not granted and the applicant later succeeds at trial.

The basis for the stay application 11 The application for a stay is made on the basis of a claim that it is an abuse of process for the respondents to proceed to seek to enforce the cost orders. 12 In support of the application for a stay, Mrs Frigger has deposed to various matters concerning three claims that are said to support the allegation that it would be an abuse of the process of this Court for the respondents to be allowed to enforce the cost orders, namely: (1) the constitution of PSA is invalid; (2) in the course of the proceedings in this Court, for the three years prior to his death, Mr Campbell-Smith was mentally incapable and therefore could not incur any liability for legal costs; and (3) during the course of the proceedings in this court, Banning Holdings Pty Ltd had insufficient directors to form a quorum and incur liability for legal costs. 13 These matters, taken together, are said to lead to the conclusion that there was no authority for any of the respondents to incur legal costs. The matters concerning the constitution of PSA are also said to support a claim that some form of fraud is being perpetrated by PSA and Ms Banning. 14 Mrs Frigger has deposed that in the course of proceeding CIV1309/2021 in the Supreme Court, a signed constitution for PSA was produced. Mrs Frigger says that she visited the persons who purported to arrange the incorporation of PSA and whose signatures appeared to be on the constitution. She has produced as an exhibit to her affidavit a copy of an affidavit in which a person deposes that the signatures on the application to register the company are those of himself and his wife (and that they arranged the incorporation), but the signatures on the constitution are forged. There is no other evidence given as to the provenance of the copy of the constitution produced in CIV1309/2021. 15 On the basis of the above evidence, Mrs and Mr Frigger now advance a claim that the registration of PSA is a nullity and PSA never came into existence. On that basis they claim that there could be no liability to pay costs to PSA. They allege that PSA is a 'non-existent person' who cannot bring court proceedings. They also advance the following written submission: Sandra Banning, who together with her late husband Martin Banning, forged signatures on a constitution for PSA, which had the sole purpose of escaping legal liability in numerous transactions entered in PSA's name. Her conduct in this proceeding, defending PSA, was fraudulent and a deception for the entirety of the proceeding. Such proceedings commenced by a non-existent person are a nullity. 16 In the course of oral submissions, Mrs Frigger was asked to articulate the respect in which there has been a fraud. It appears that the fraud is said to comprise the affixation of forged signatures on the constitution, an event which Mrs Frigger placed as having occurred when the company was formed in 1998. The evidential basis upon which Ms Banning might be said to have been involved was not articulated. 17 Further, it was not explained how it was that the alleged conduct of Mr and Ms Banning at that time, of itself, may sustain the conclusion that there was some fraud in the conduct of the defence of the proceedings in this Court many years later that might support a claim that it was an abuse of process for some or all of the respondents to enforce the cost orders. Precisely how an issue with the constitution may be a means by which a fraud may be perpetrated in the conduct of the defence of proceedings in this Court is unclear. The allegation seemed to be that Mrs Banning and PSA had allowed the defence of the claim to be conducted when PSA had no legal existence that allowed it to conduct the defence. The difficulty with presenting the claim in that way is that there is no evidence of the involvement of Ms Banning in the preparation of the allegedly fraudulent constitution beyond its recent production to the Supreme Court in CIV1309/2021 nor is there evidence that the particular constitution was used to arrange the incorporation of PSA.

Delay 18 In written submissions in support of the application for a stay, Mrs and Mr Frigger state: (1) 'The Friggers have been aware for some time that Donald Campbell-Smith was mentally incapable of retaining Stephenson and Eastwood for the entirety of this proceeding'; and (2) 'Likewise, the Friggers have been aware for some time that Banning Holdings Pty Ltd was found by Justice H Smith in WA Supreme Court not to have the required number of directors to form a quorum to retain Stephenson and Eastwood'. 19 In the above circumstances, quite properly, Mrs and Mr Frigger accepted that the complaints they raise about the mental capacity of Mr Campbell-Smith and whether there was a quorum of directors for Banning Holdings Pty Ltd have been known to them for a number of years. They say that as the cost orders were in favour of all four respondents there was no point in raising those issues before now because they related to only two of the respondents and the cost orders could be enforced by the other two respondents. The matter that they say has arisen recently and which has prompted their application is the claim about the constitution of PSA and what they allege to be the involvement of Ms Banning in those matters. 20 It is said that the claim based upon the constitution forms the basis upon which the authority to incur costs for PSA and the conduct of Ms Banning is now able to be challenged. This is a matter that has only recently become known to them. 21 Putting to one side at this point the issue of merit (addressed below), I accept these submissions as an adequate explanation for the delay in bringing the application for a permanent stay.

Merits of the claim to a permanent stay 22 In written submissions, reliance was placed upon authorities concerned with proceedings commenced in the name of deceased persons. It may be accepted that those authorities establish that proceedings taken in the name of a deceased person are a nullity: Tetlow v Orela Ltd [1920] 2 Ch 24; Marshall v DG Sundin & Co Pty Ltd (1989) 16 NSWLR 463; and Budimir v McMahon [2000] FCA 1312. However, those authorities do not assist. The case advanced here is to the effect that PSA does not exist because of the production of a fraudulent constitution to the Supreme Court. 23 Reliance was also placed upon United Service Insurance Co Ltd (in liq) v Lang (1935) 35 SR (NSW) 487, a case where a company had been dissolved and was therefore non-existent. In that case it was determined that the proper course to be followed by a party upon becoming aware that a party was incapable of authorising an action or a defence was to apply to have the proceeding stayed and seek indemnification from the solicitor who has acted without authority: at 496-497 (Jordan CJ). However, again that case does not assist because it concerned an instance where the company plainly did not exist. 24 In the course of oral submissions, Mrs Frigger indicated that reliance was placed upon the decision in Darvall v North Sydney Brick & Tile Co Ltd (No 4) (1988) 14 ACLR 474. However, nothing in that case assists Mrs and Mr Frigger. 25 The affidavit of the person involved in the incorporation of PSA produced by Mrs Frigger says that he has been involved in practice as a public accountant since 1976 and that he was provided with documents relating to a company named Liberty Oil (Australia) Pty Ltd by Mrs and Mr Frigger. It appears that PSA used that name at the time of its incorporation. Two documents were produced to him. The first was an application for registration. He confirmed that it was a true copy of a document that he lodged with the then Australian Securities Commission on or about 5 June 1998. 26 The application for registration appears to be a standard printed form the details of which have been completed. It is headed 'Application for registration as an Australian company'. It begins 'We apply for incorporation of the company under the Corporations Law of WA'. 27 The affidavit also explained the normal procedure of the deponent when requested to register a new company in the following terms: (a) I obtain the proposed company name and details of authorised share capital from the prospective members; (b) I prepare Form 201, sign it and lodge it with ASIC; (c) After receiving confirmation of ASIC registration, I provide the members with constitution which includes the original shareholders' names and addresses; (d) I also provide the members with proforma minutes of meeting to enable the shareholders to pass resolutions. (i) appoint initial directors (ii) subscribe to the constitution (iii) redeem the subscriber shares in my wife's and my names (iv) issue shares to the members 28 The reference to form 201 is to the application for registration. 29 At the time of the application for registration of PSA (then to be known as Liberty Oil (Australia) Pty Ltd), s 114 of the Corporations Law (as enacted by the Corporations Act 1989 (Cth) and state legislation applying those laws), provided that a proprietary company may be formed by persons 'subscribing their names to a memorandum' and by complying with the registration requirements. Section 117 provided that the memorandum shall be printed and divided into paragraphs and shall state certain matters listed in the provision. Section 118 provided for the lodgement of a form of the kind produced by the deponent. The form was required to be signed by those who had subscribed to the memorandum. The application form produced by the deponent recorded that he and his wife were the persons proposing the incorporation and were the subscribers to the memorandum. The signatures on that document are verified as correct. 30 As to the memorandum, s 118(2) provided that the application form was to be accompanied by the memorandum 'unless subsection (3) applies'. Section 118(3) provided that: If: (a) the proposed company's memorandum states the matters that are required to be stated under paragraphs 117(1)(a), (b), (c) and (g); and (b) the company is to be registered as a proprietary company; The application must also set out those matters. 31 The application form set out the matters as required by s 118(3). Therefore, it appears that the memorandum did not need to be produced with the application. This is confirmed by the terms of s 119 (which conferred a power to refuse to register the company in circumstances where the application purported to comply with s 118(3) unless and until the memorandum had been lodged) and s 120(3) (which provided that an assumption may be made that the persons who signed the application are the subscribers to the memorandum). 32 However, there could be no application unless there was a memorandum. The affidavit does not suggest that there was no such memorandum. Rather, it produces a form of constitution (setting out both the memorandum and articles for the company) that the deponent identifies as the form in which the document would have been provided to the shareholders of the company at the time. What the deponent says is that the memorandum that was produced to the deponent by Mrs and Mr Frigger had forged signatures and was not in the form of such memoranda prepared by the deponent at the relevant time. This rather suggests that there was such a memorandum for PSA at the time of the application but it was not the memorandum shown to the deponent by Mrs and Mr Frigger. 33 Further, at the time, s 162 of the Corporations Law provided that a company's constitution may contain a provision that may contain an express restriction on the company's powers. Otherwise, s 161 provided that a company had the legal capacity and powers of an individual. There are similar provisions to be found in the current legislation: see s 124 and s 125 of the Corporations Act 2001 (Cth). 34 In any event, upon registration, a certificate was to issue that stated that the company was registered and because of that registration was an incorporated company; s 121(2) of the Corporations Law. A court is precluded from going behind such a certificate of registration: Re Australian Securities Commission v SIB Resources NL [1991] FCA 261; (1991) 30 FCR 221 at 226. 35 It follows that on the basis of the available evidence it appears that PSA was incorporated and registered. The only issue raised is whether the constitution produced in CIV1309/2021 was the true constitution of PSA. On the evidence of the deponent, the true constitution (incorporating the memorandum that was provided at the time that the company was incorporated and registered) was in the form produced by the deponent as the usual form of constitution that he used at the time. 36 In all the circumstances, there are real issues as to whether Mr and Mrs Frigger have an arguable case as to their claim that PSA does not exist. As their submissions recognise, the entitlement to costs is joint and any one party may seek to enforce the cost orders. Therefore, the basis for their claim that PSA (and Ms Banning) cannot enforce the cost orders has not been articulated in a manner that would provide sufficiently arguable basis to support the relief sought.

Alleged injury to Mrs and Mr Frigger 37 The alleged prejudice to Mrs and Mr Frigger if the taxation was allowed to continue was said to be two-fold. First, it was said that there was prejudice if the amount of $2,000 by way of security for an objection had to be paid. However, they accepted that they were in a position to pay the amount and they had substantial financial capacity. This aspect does not give rise to prejudice. 38 Second, it was said that they would have to participate in the taxation process. Further, as they acted on their own behalf they could not recover any amount for their time and inconvenience in having to do so. These matters may be accepted.

Balance of convenience 39 It was said that there was no entitlement to interest unless and until a certificate had been granted upon assessment of the costs. This matter was advanced by Mrs and Mr Frigger to support a claim that there would be no inconvenience to the respondents through delay. However, the fact that there may not be an automatic right to interest until there was a certificate is a matter that exposes the respondents to financial risk if there is further delay in the taxation process. It is a reason that counts against the relief sought by Mrs and Mr Frigger. 40 It was also said by Mrs and Mr Frigger that there was security that had been provided for costs of $60,000 pursuant to a court order. However, it was not suggested that the amount of the security would be sufficient to cover the full amount of any costs and the financial burden of delay. 41 After the hearing, Mrs and Mr Frigger made the further informal submission (by email) that the respondents did not explain in oral submissions their 14 months delay in filing their bill of costs after the proceeding was dismissed on 2 September 2020. However, that delay does not detract from the fact that the respondents have now incurred the costs of preparing the bill and presenting it for taxation and the order now sought would suspend the taxation indefinitely while Mrs and Mr Frigger advanced their claim of abuse of process. 42 In the course of submissions, Mrs Frigger made clear that if the relief was refused then an objection would be lodged. Further, that all rights to object would be pursued. These are steps that will, in the ordinary course, take many months. Therefore, there is no imminent prospect of any liability for costs being determined and therefore no imminent obligation to pay those costs. It is possible for Mrs and Mr Frigger to articulate their case and pursue their application in the meantime.

Risk of injustice 43 The proceedings in this court that gave rise to the cost orders were pursued for many years by Mrs and Mr Frigger. The subject matter of those proceedings was itself cost orders that they had been ordered to pay by the Supreme Court, but were refusing to pay. The lack of demonstrated merit in the claim and the exposure to a risk of financial loss through delay in the taxation mean that the real risk is of injustice to the respondents if the relief sought was granted. Further, the order sought by Mrs and Mr Frigger, if made, will be likely to result in considerable delay in the respondents being able to bring these long standing proceedings to their conclusion. 44 On the other hand, as matters stand it has not been demonstrated that there is an arguable basis for the claim of abuse of process insofar as it concerns PSA and Ms Banning. As was accepted by Mrs and Mr Frigger, unless there is an arguable basis as to those claims there is no basis to dispute the claim to costs as each respondent is entitled to the benefit of the costs orders. In any event, it is open to Mrs and Mr Frigger to pursue their claim of alleged abuse of process whilst the taxation proceeds. There is no imminent prospect of any liability that they will have to meet (or release of the security for costs). Mrs and Mr Frigger are experienced litigants having been involved in numerous and lengthy court proceedings in this and other courts for many years. Even had I concluded that there was some merit in their claim of abuse of process, I do not accept that the burden of participating in the taxation is sufficient, in all the circumstances, to justify the relief sought. 45 I have made orders for a case management hearing and have indicated to Mrs and Mr Frigger that they should file any further affidavit material in support of their claim that there is an abuse of process before that hearing. Those steps will enable any claim they may have to be articulated and progressed without delay.

Conclusion 46 The application for an extension of time to lodge an objection to the taxation estimate was heard on the last day for lodging such an objection. At the conclusion of the hearing of the application by Mrs and Mr Frigger, I granted a short extension of time. I indicated that I would publish my reasons as to whether I would order any further extension. For the reasons I have given there should be no further extension and the application for the order extending the time for lodging an objection to the taxation estimate should be refused. I will hear from the parties as to costs of the application at the case management hearing. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

Corporations Act 2001(Cth)ss 124, 125

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