Frigger v Professional Services of Australia Pty Ltd

Background of proceedings 5 It is necessary to explain something of the long history of litigation involving the Friggers and Ms Banning, and corporate entities associated with them to understand the context to both the originating application and the interlocutory application for security for costs. The following summary is drawn from the published reasons for various decisions involving the Friggers, PSA, Ms Banning and others. The summary is not comprehensive and limited to that required to supply the necessary context.

Supreme Court of Western Australia 6 The primary source of the summary of the proceedings in the Supreme Court of Western Australia is the recent decision of the Western Australian Court of Appeal: Frigger v Professional Services of Australia Pty Ltd [2022] WASCA 119. 7 The Friggers in their own capacity or as directors of a company of which they were formerly directors, Computer Accounting and Tax Pty Ltd and PSA and its former director, Mr Martin Banning and after his death his executor, Mr Donald Campbell-Smith, and Ms Banning have been involved in litigation in the Supreme Court and this Court for more than 15 years.

CIV 2265 of 2006 8 The first proceedings in the Supreme Court were CIV 2265 of 2006 in which CAT was the plaintiff and it brought proceedings against PSA and Mr Banning for misleading or deceptive conduct in relation to the sale of a service station to CAT in 2003. CAT was a corporate vehicle used by the Friggers for that transaction. 9 On 9 July 2008, CAT obtained judgment against PSA in CIV 2265 of 2006 resulting in an award for damages and a costs in favour of CAT. PSA and Mr Banning appealed that judgment on the question of damages. Prior to the hearing of the appeal, Mr Banning died and his estate was then administered by Mr Campbell-Smith. Also, PSA paid the judgment sum of $1,165,661.54 (including interest) to CAT and that in turn was paid by CAT to the Friggers. 10 On 23 October 2009, the appeal was allowed and the quantum of damages was reduced: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 2) [2009] WASCA 183; Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 2) [2009] WASCA 183(S). The outcome of the orders made in the Court of Appeal was that CAT had to repay a portion of the judgment together with interest (the overpayment sum), the costs of the appeal and the original costs order was set aside and the matter was remitted to the trial judge for determination on the question of costs in light of the Court of Appeal's decision. 11 More than five years after the final orders in the Court of Appeal, the Friggers applied, purportedly under the slip rule, to set aside the overpayment sum orders which the Court of Appeal had made in December 2009. That application was dismissed on 10 December 2015: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 4) [2015] WASCA 253.

CIV 2001 of 2009 12 In connection with the judgment in CIV 2265 of 2006, PSA was placed into administration and entered into a deed of company arrangement (DOCA) in March 2009. The DOCA allowed for payment of the judgment in CIV 2265 of 2006 through a company associated with Mr Banning, Banning Holdings Pty Ltd. 13 In 2009, Banning Holdings commenced proceedings CIV 2001 of 2009 to extend the time for operation of the DOCA. By June 2009, Banning Holdings had repaid the majority of the amount owed to CAT: Holbrook v Professional Services of Australia Pty Ltd [2012] WASC 444. The Friggers unsuccessfully opposed that application: Banning Holdings Pty Ltd v Holbrook [2009] WASC 178. Also, CAT applied for orders to the effect that the DOCA be terminated. The Friggers claimed, amongst other things, that the DOCA was oppressive, unfairly prejudicial and discriminatory against CAT. That application was dismissed. 14 The Friggers also made an application for orders suspending the operation of certain costs orders against them in which they raised the question of the effect of the operation of the DOCA. That application was also dismissed: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd (No 10) [2015] WASC 380.

COR 2 of 2010 15 Following the adverse decision against CAT in the Court of Appeal, on 3 December 2009, the Friggers, amongst other things, resolved to place CAT into voluntary liquidation and subsequently, on 12 December 2009, passed a resolution for a members' voluntary winding-up. On 21 January 2010, in response to an application by PSA, the Supreme Court appointed a provisional liquidator to CAT in company proceedings COR 2 of 2010: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38. The Friggers applied to have the provisional liquidator removed and that application was dismissed on 15 February 2010: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 2) [2010] WASC 113. Further, on 6 May 2010, the Supreme Court made an order that CAT be wound-up in insolvency following non-compliance with a statutory demand: Professional Services of Australia Pty Ltd (administrator appointed) v Computer Accounting and Tax Pty Ltd (No 3) [2010] WASC 93. CAT had not repaid the amount ordered to be repaid under the Court of Appeal orders. There was no appeal from the judgment to wind-up CAT in insolvency. 16 Many years later, on 11 November 2019, the Friggers attempted to file an interlocutory process in the winding-up proceedings seeking orders setting aside the winding-up orders of CAT. That application was also dismissed on the basis that it was an abuse of the court process: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 5) [2020] WASC 39.

CIV 2765 of 2010 17 On 4 November 2010, the Friggers commenced proceedings CIV 2765 of 2010 against Mr Kitay, the liquidator of CAT. Those proceedings generated numerous interlocutory written decisions. The proceedings were stayed on the Friggers' bankruptcy and have not been substantially progressed since their bankruptcy or discharge from bankruptcy. The bankruptcy of the Friggers is described later in these reasons.

CIV 1606 of 2015 18 In 2015, the Friggers commenced another action, CIV 1606 of 2015, against Mr Kitay. On 2 March 2016, the Supreme Court permanently stayed those proceedings and the Court of Appeal dismissed an appeal from that decision: Frigger v Kitay [2016] WASC 60; Frigger v Kitay (No 2) [2017] WASC 139.

Various costs related matters 19 On 10 December 2009, in CIV 2265 of 2006, the Supreme Court made freezing and ancillary orders against Mr and Mrs Frigger: Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd (No 3) [2010] WASC 2. The exact form of the orders were finalised on 16 December 2009 and the reasons for judgment published on 8 January 2010: Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd (No 3) [2010] WASC 2(S). These orders were made in the context of the Friggers taking a number of steps on the day of, or shortly after delivery of the Court of Appeal's decision in October 2009, including placing CAT into voluntary liquidation, that had the effect of hindering the ability of PSA to execute orders in its favour against the assets of CAT. There followed a series of applications and orders in various proceedings. The Friggers appealed against these orders. On 14 October 2013 that appeal was dismissed for non-compliance with a springing order and, on 8 April 2014, the Court of Appeal allowed a cross-appeal and made further cost orders against the Friggers: Frigger v Professional Services of Australia Pty Ltd (No 3) [2014] WASCA 69. 20 In relation to the costs of CIV 2265 of 2016, which were the subject of the costs remitter order made by the Court of Appeal, there were certain claims by Mr Banning's estate and PSA for costs orders against CAT in respect of which leave was given to proceed pursuant to s 471B of the Corporations Act. In relation to those matters, Mrs Frigger was given leave to conduct the defence of those claims for costs against CAT with the consent of CAT's liquidator. Leave was given on the condition that the Friggers appoint solicitors for that purpose. Despite leave being given in that regard, the Friggers also sought to be personally joined to the original proceedings, ostensibly for the purpose of dealing with the claims for costs against CAT. The Supreme Court refused that application on the basis that, amongst other things, it was not appropriate to allow them to be joined as parties: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd (No 7) [2014] WASC 360. The Friggers appealed against the joinder decision and sought a stay of that decision pending determination of the appeal. The application for a stay was dismissed by the Court of Appeal: Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3. The Friggers then applied for a stay of the appeal pending resolution of certain proceedings pending in this Court. That application was dismissed: Frigger v Professional Services of Australia Pty Ltd (No 2) [2016] WASCA 68. Later, the appeal was dismissed by operation of a springing order when the Friggers failed to file appeal books: Frigger v Professional Services of Australia Pty Ltd (No 3) [2018] WASCA 106. Pursuant to the costs remitter order, the Supreme Court made orders in relation to the costs of CIV 2265 of 2006 and other associated matters: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd (No 8) [2015] WASC 166.

Federal Court 21 There have been a number of proceedings involving the Friggers in this Court and the Federal Circuit Court of Australia (as that court was then known).

WAD 616 of 2017 22 In WAD 616 of 2017, Mr Kitay, in his capacity as liquidator of CAT, and CAT both petitioned the Court for sequestration orders in respect of the estates of Mr and Mrs Frigger. Sequestration orders were made on that application: Kitay, in the matter of Frigger (No 2) [2018] FCA 1032. 23 The petition for bankruptcy was a result of the Friggers non-payment of a judgment debt in the amount of $61,000.42. That judgment debt was the sum assessed upon taxation of a bill of costs by a registrar of the Supreme Court pursuant to an order for indemnity costs made by a Master of that court. The order for indemnity costs against the Friggers was made upon one of the many interlocutory applications involving the Friggers in the Supreme Court. 24 The indemnity costs order, taxation and judgment debt resulted from COR 2 of 2010: Re Computer Accounting and Tax Pty Ltd (in liq); Ex parte Mervyn Jonathan Kitay in his capacity as liquidator of Computer Accounting and Tax Pty Ltd (in liq) (No 4) [2014] WASC 169. Colvin J describes the circumstances giving rise to that judgment debt in Kitay, in the matter of Frigger (No 2) [2018] FCA 1032 at [44] - [105] that need not be here repeated.

Other bankruptcy related proceedings 25 After the sequestration orders were made on 11 July 2018, the Friggers made unsuccessful attempts to set aside and appeal those orders. First, an application was made in the Circuit Court, which was dismissed for want of jurisdiction. Then, an application was made in this Court for an extension of time to appeal and, if granted, an appeal from the sequestration orders. In May 2020, that application was dismissed for non-payment of an amount of security for the costs of the respondent in those proceedings. The circumstances of these unsuccessful attempts are described in more detail in Frigger v Trenfield (No 6) [2022] FCA 1233 at [9] - [12] and are not here repeated. 26 Subsequently, on 23 March 2021, the Friggers commenced WAD 66 of 2021 in which orders are sought to annul or set aside the sequestration orders. Those proceedings are, in effect, stayed pending the outcome of other proceedings, COR 131 of 2021, in the Supreme Court in which the same or similar issues are raised: Frigger v Trenfield (No 6) [2022] FCA 1233 at [18] - [23], [27]. 27 The Friggers also commenced proceedings WAD 141 of 2019 against Ms Trenfield, their trustee in bankruptcy, in which, amongst other things, declarations were sought to the effect that certain disputed assets were assets held for the benefit of the members of the Frigger Superannuation Fund and were not assets of the Friggers personally. The Friggers alleged that, by operation of s 116(2)(d)(iii)(A) of the Bankruptcy Act 1966 (Cth), the disputed assets were not divisible among their creditors as bankrupts. On 1 December 2021, the Friggers' application in those proceedings was dismissed: Frigger v Trenfield (No 10) [2021] FCA 1500; (2021) 397 ALR 24. In December 2021, the Friggers commenced an appeal from that judgment in WAD 278 of 2021. That appeal was heard in May and August 2022 and is subject of a reserved decision of the Full Court.

WAD 607 of 2015 28 In 2015, the Friggers commenced proceedings against Ms Banning, Mr Campbell-Smith, PSA and Banning Holdings in WAD 607 of 2015. In those proceedings, the Friggers sought compensation calculated by reference to the amount of costs the Friggers have been ordered to pay in proceedings in the Supreme Court. 29 In March 2017, an application by the Friggers to file a proposed substituted statement of claim in those proceedings was dismissed: Frigger v Banning (No 3) [2017] FCA 221. The pleading proposed to deal with various objections by the respondents to the statement of claim as filed and implicit in the application to file a proposed pleading was an abandonment of the existing pleading and recognition that there needed to be a new pleading. Therefore, after dismissal of the application, there was no statement of claim, but the proceedings remained on foot. 30 In 2019, whilst still undischarged bankrupts, the Friggers sought unsuccessfully to file another proposed statement of claim in the proceedings: Frigger v Banning (No 8) [2019] FCA 1319. At that time, Colvin J determined that the whole of the proceeding had been abandoned by the trustee in bankruptcy and that there was a statutory stay by operation of s 60 of the Bankruptcy Act. 31 In 2020, the respondents sought an order dismissing the proceedings and an order for costs. Orders were made dismissing the proceedings and for the Friggers to pay the costs of the proceeding to be assessed on a lump sum basis by a registrar, if not agreed: Frigger v Banning (No 11) [2020] FCA 1257. Thereafter, the Friggers commenced fresh proceedings in the Supreme Court (CIV 1309 of 2021) against PSA, Ms Banning and others. In May 2022, summary judgment was awarded to the respondents in CIV 1309 of 2021: Frigger v Professional Services of Australia Pty Ltd [2022] WASC 158. 32 On 19 November 2021, the respondents lodged a bill of costs for taxation in WAD 607 of 2015. An estimate of the bill was provided in March 2022 and, thereafter, the Friggers applied by interlocutory application for an order extending the date for objections to the taxation estimate and that the costs orders made in the proceedings be permanently stayed. The application for a stay was dismissed: Frigger v Banning (No 12) [2022] FCA 347.

Evidence in relation to respondents' application for security for costs 33 An affidavit of Mr Cameron Victor Eastwood, sworn 26 October 2022 was read in support of the application for security for costs. An affidavit of Mrs Frigger, sworn 25 November 2022, in opposition to that application was also read.

Mrs Frigger's affidavit 34 Mrs Frigger's affidavit was directed to an assertion that the application for security for costs had not been made in accordance with the orders of the Court of 12 October 2022 and the Rules. The orders of the Court of 12 October 2022 required the defendants to file and serve any application for security for costs together with any submissions and affidavits in support on or before 26 October 2022. The Friggers submit that the interlocutory application for security for costs should be dismissed for non-compliance with those orders and other orders of the Court. 35 The Court file indicates that the application, affidavit of Mr Eastwood and defendants' submissions were not formally filed until 8 November 2022. An email dated 26 October 2022 and exhibited to Mrs Frigger's affidavit of 25 November 2022 indicates that unsealed copies of these documents were sent to the Friggers and the Court, by email, on 26 October 2022. The author of the email said that there had been a difficulty in e-filing the documents via the Court's eLodgment portal and that after filing, sealed copies would be served on the Friggers. An email dated 8 November 2022, from Mr Eastwood to the Friggers, is also an exhibit to Mrs Frigger's affidavit. In that email, Mr Eastwood said that the application, supporting affidavit and supporting submissions had been filed via the Court's eLodgment portal and that sealed copies would be served on the Friggers the following day. Mrs Frigger deposed that she and her husband were not served with the application that was filed by the defendants.

Mr Eastwood's affidavit 36 The facts deposed to in Mr Eastwood's affidavit are largely expressed as conclusions of fact or opinion stated at a high level of generality. 37 Mr Eastwood deposed that, in effect, in his opinion a reasonable estimate of the defendants' costs of defending the proceedings is $125,000. The body of Mr Eastwood's affidavit identifies at a high level of generality the nature of the work he considers will be undertaken, and the time that will be required for that work. However, the affidavit does not identify in detail the assumptions underpinning the estimate. It does not identify the precise work upon which the estimate is based, the time it is estimated would be required to perform that work, the fee earners it is considered would undertake that work, or the rate(s) applicable to the time estimated for each item of work to be performed. Some, but not all, of that information is contained in a letter dated 19 September 2022 from the defendants' solicitors to the Friggers. However, the letter reveals that the estimate is based on an assumption that the trial or final hearing in the matter will require five days. 38 Although no specific objection was taken to Mr Eastwood's affidavit, I have given no weight to the estimated fees set out in the letter to the Friggers. First, because none of the assumptions are identified with sufficient detail to assess the veracity of the opinion expressed. Second, the trial or hearing has been provisionally listed for two days. Third, for the reasons set out in greater detail below, I am not persuaded that the trial or hearing of this matter will require more than two days or that the defendants' defence will require significant factual investigation to be undertaken and the calling of many witnesses to meet the case against them. 39 Again, although no specific objection was taken, I give no weight to the opinion Mr Eastwood expresses to the effect that the contentious signatures on the memorandum of articles of PSA are those of Mr and Mrs Boyle. There are no facts deposed to in Mr Eastwood's affidavit by which he purports to qualify himself as a handwriting expert or by which he gives evidence that would permit him to express an opinion as a lay person. 40 In paras 4.2 - 4.8 of Mr Eastwood's affidavit he deposed to facts more-or-less consistent with parts of the summary of the Supreme Court litigation referred to in [6] to [20] above. These are expressed largely as conclusions and are to the effect that a number of costs orders were made in favour of PSA against the Friggers in the litigation in the Supreme Court. In respect of those costs orders, not all have been assessed or taxed and, consequently, not all are the subject of judgment debts for sums certain resulting from a taxation of the costs. However, a number of costs have been assessed or taxed and are the subject of judgment debts. These are: (a) an order for costs in action CIV 1727 of 2009 for $64,461.88; (b) a further order for tax costs in CIV 1727 of 2009 for $4,284 in favour of PSA and others; (c) an order for costs payable by the Friggers to PSA personally, fixed in the sum of $1,500; (d) an order for the Friggers to pay the costs of PSA and another in the sum of $31,599.72; and (e) an order for the Friggers to pay the costs PSA and another, fixed in the sum of $43,328.65 as part of proceedings for a means inquiry. Mr Eastwood deposed that none of these costs orders has been paid. 41 Further, Mr Eastwood deposed that the Friggers have placed a mortgage over real property in Western Australia in favour of H & A Frigger Pty Ltd (a company with share capital of $2) of which the Friggers were the only shareholders, but are no longer shareholders. The shareholders are friends or family of the Friggers located in Germany. The mortgage is said to be in an amount in excess of the value of all the real estate. Mr Eastwood deposed that to the best of his knowledge and belief there are no other assets available to creditors to enable the Friggers to pay their debts.

Other matters 42 It does not appear to be in issue that the Friggers were discharged from bankruptcy, by operation of s 149 of the Bankruptcy Act, on 26 July 2021. With the exception of orders that the Friggers pay the costs of PSA made in WAD 607 of 2015 made on 28 April 2022 and made in the Court of Appeal on 7 September 2022 and, possibly, orders of Master Sanderson made at the time he delivered his reasons on 6 May 2022, all of the costs orders were made before the Friggers were discharged from bankruptcy. Likewise, all the judgment debts for costs orders referred to above were incurred before the Friggers were discharged from bankruptcy. Counsel for the defendants confirmed that these matters were accepted by the defendants at the hearing on 29 November 2022. It follows that there is no evidence that the Friggers have refused or failed to pay any judgment debt for costs incurred after they were discharged from bankruptcy.

Conclusions on the evidence 43 Mrs Frigger's affidavit does not depose to any facts concerning the Friggers' present financial position. However, Mrs Frigger confirmed that the Friggers make no submission to the effect that an order for security for costs would stifle the proceedings. I infer from that submission that the Friggers accept, for the purposes of the security for costs application, that they have some capacity to provide security for costs if ordered to do so. 44 Although the Friggers have been discharged from bankruptcy, all their personal property before and after acquired (except for property acquired after discharge from bankruptcy) is vested in their trustee in bankruptcy by operation of s 58 of the Bankruptcy Act. There was no evidence before the Court of the current state of their bankruptcy or the extent to which they may have personal assets against which a judgment debt could be executed. 45 The facts deposed in Mr Eastwood's affidavit demonstrate that the Friggers were subject to a number of judgment debts for costs in the Supreme Court that were not paid. At least one of those judgments resulted in the sequestration orders against them. There is no evidence before the Court to suggest that the Friggers' financial circumstances has changed to any significant degree from the time of the sequestration orders or after they were discharged from bankruptcy. 46 I note that Colvin J made sequestration orders against the Friggers notwithstanding that he found that they were not insolvent. On the evidence before Colvin J on the application for sequestration orders, his Honour made the sequestration orders because the Friggers were unwilling to pay the judgment debt, not that they lacked the financial means to do so. However, a sequestration order was justified in the circumstances of that case because the assets from which the judgment debt could be satisfied were not available to the judgment creditor as they were assets of the Frigger Superannuation Fund: Kitay, in the matter of Frigger (No 2) [2018] FCA 1032 at [126]. 47 Based on the evidence before the Court and matters otherwise accepted by the parties on the defendants' application, I am satisfied that there is a real risk that any costs order made in favour of the defendants in these proceedings would not be satisfied due to the Friggers' financial circumstances.

Non-compliance with the Court's orders 48 As to the Friggers' submission that the defendants' application should be dismissed for non-compliance with the orders of 12 October 2022, the evidence in Mrs Friggers' affidavit indicates that the defendants attempted to file the application and supporting documents on 26 October 2022 and the Friggers were served with unsealed copies of the application and supporting documents on that day. The application and supporting documents were formally e-lodged on 8 November 2022 and sealed copies have not been served on the Friggers. It follows that the evidence establishes that there was not formal compliance with the Court's orders, but there was substantive compliance with those orders and the Friggers have had notice of the application and supporting documents as of 26 October 2022. Further, there is no apparent prejudice resulting from non-compliance. 49 I am not persuaded that the defendants' application should be summarily dismissed for non-compliance with the Court's orders. Accordingly, there will be an order that the time for compliance with paragraph 6 of the Court's orders of 12 October 2022 is extended to 8 November 2022 and service of the application, affidavit in support and submissions in support is dispensed with.

Applicable principles 50 The Court has power to make an order requiring the Friggers to provide security for costs of the defendants under s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Rules. The discretion conferred on the Court under both s 56 and r 19.01 is broad and should be exercised having regard to all the relevant facts. The nature of the discretion was described by Murphy J in the following way in Mecrus Pty Ltd v Industrial Energy Pty Ltd (2015) 327 ALR 523; [2015] FCA 103 at [18]-[20]: 18 The discretion conferred by s 56 is broad. Many attempts to set limitations upon the discretion have been rejected by the Courts, and the only limitation is that it must be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 3; 52 ALR 176 per Sheppard, Morling and Neaves JJ. It is a discretion to be exercised according to the particular merits and circumstances of each case and without any particular predisposition: Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd and Others (1987) 16 FCR 497 (Fencott) at 511 per French J; Gentry Bros Pty Ltd v Wilson Brown and Associates Pty Ltd and Others (1992) 8 ACSR 405 at 411, per Cooper J. The weight to be attached to a particular circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: P S Chellaram and Co Ltd v China Ocean Shipping Co and Another (1991) 102 ALR 321; 5 ACSR 633 at 323 per McHugh J. 19 Notwithstanding the broad discretion there are a number of well established guidelines which the Court typically takes into account. In Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50, 635 per Hill J, his Honour identified the following six factors: (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 cost order; (d) whether use of the power would shut out a small company from making a genuine claim against a large company (i.e. whether the power is being used oppressively); (e) whether the impecuniosity arises out of the act 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. 20 In KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Others (1995) 56 FCR 189 (KP Cable) at 196-198 Beazley J referred to the following additional matters: (a) security for costs applications should be brought promptly; (b) having regard to the strength and bona fides of the plaintiff's case, as a general rule, where a claim is regular on its face and discloses a cause of action, in the absence of evidence to the contrary the Court should proceed on the basis that the claim is bona fide with a reasonable prospect of success; (c) whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate; (d) whether there are any persons standing behind the company who are likely to benefit from the litigation. An issue related to this is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking; and (e) security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate. 51 As to chances of success, the Court is not obliged to assess the merits of the claim at length, as to do so would ordinarily be a waste of resources: Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 at 441; Mecrus at [42]. However, it is common for the Court to undertake a preliminary assessment of the strength of the applicant's claim in considering a security for costs application: Bray v F Hoffmann-La Roche Ltd (2003) 130 FCR 317; [2003] FCAFC 153 at [252] and Mecrus at [43]. As to the risk that a costs order will not be satisfied, where an applicant is an individual person then usually there must be some additional factor that is present beyond a concern as to whether a costs order will be met due to impecuniosity before an order for costs will be made. These include, an absence of merit and (or) that the proceedings will not be stifled: Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [33]. 52 Nonetheless, when considering the above factors and r 19.01 of the Rules, it should be kept in mind that it is the discretionary power of the Court to order security for costs conferred by s 56 of the FCA Act that is relevant. Reliance on usual factors or the Rules and the matters that should be stated in the affidavit accompanying the application do not limit the broad power conferred in s 56 of the FCA Act. As McKerracher J said in Frigger v Kitay [2019] FCA 624 at [17]: While the Rules patently identify certain circumstances in which security for costs may be ordered by the Court, they should not be seen as the authority by which the Court acts. Rather, they are a guide to the parties and their legal advisers as to the way in which the Court will conduct proceedings: BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (2014) 226 FCR 240 per Dowsett, Kenny and Flick JJ (at [20]). As Kirby P said in Fernance v Nominal Defendant (1989) 17 NSWLR 710 (at 729): 'The Rules of Court must never become the master of the court. They are servants for the better administration of justice'. 53 Therefore, the discretion to order security for costs is not fettered by r 19.01 and, in particular, the extent to which any affidavit in support states the matters set out in r 19.01(3).

Merits of originating application 54 I have already concluded that there is a real risk that any costs order in favour of the defendants would not be satisfied. Further, there is no suggestion that the Friggers' financial circumstances will result in the proceedings being stifled. Therefore, exercise of the power in s 56 would not evidently be oppressive. Nevertheless, I consider that the Friggers' financial circumstances is not sufficient alone to warrant an order for security for costs in this case. Accordingly, it is appropriate to consider the relative merits of the originating application. 55 As mentioned earlier in these reasons, the Friggers seek a declaration that the registration of PSA was invalid ab initio and an order that ASIC rectify its register by removing PSA from it. The application is made under s 1322(4)(b) of the Corporations Act. 56 The Friggers have filed a number of affidavits in support of the originating process. These are an affidavit of Mrs Frigger sworn 29 June 2022, an affidavit of Mrs Frigger sworn 26 July 2022, an affidavit of Mrs Frigger sworn 29 August 2022, an affidavit of Mr David John Boyle sworn 8 November 2022 and an affidavit of Mrs Frigger sworn 15 November 2022. The Friggers also filed submissions dated 30 August 2022 in support of the originating application. The Friggers filed supplementary submissions dated 1 December 2022 to further explain the basis upon which they contend the Court has power to make the orders sought on the originating process in the circumstances of this case. 57 The Friggers contend that the Court has power under s 1322(4)(b) of the Corporations Act to rectify the ASIC register to remove a company from the register where the process by which the company was placed on the register was invalid. For the purposes of an interlocutory application for security for costs, I accept that it is reasonably arguable there is such power. 58 Next, the Friggers contend that the process by which PSA was placed on the register was invalid because the memorandum of articles of PSA (then named Liberty Oil (Australia) Pty Ltd) was not signed by the original subscribers Mr Boyle and Mrs Mariangela Boyle on 5 June 1998. It is alleged that the signatures purporting to be those of Mr and Mrs Boyle on the articles of association are not, in fact, their signatures but simulations of their signatures placed on the document by a person or persons unknown. 59 The legal foundation for the alleged invalidity is contended to lie in the provisions of the Corporations Law as it applied in June 1998. Sections 112 to 125 of the Corporations Law regulated the incorporation and registration of a company at the material time. Section 114 provided that a proprietary company was formed by one or more persons subscribing their name to a memorandum and complying with the registration requirements. Section 117 set out the requirements of a memorandum which included a requirement that it be signed by each subscriber in the presence of a least one witness. The Friggers contend that requirement was not met because Mr and Mrs Boyle did not sign the memorandum, the company (PSA) was, therefore not formed, and its registration was not valid. 60 There are a number of difficulties or hurdles that stand in the way of the Friggers' success on the originating application. These are described below for the purposes of the interlocutory application for security for costs. The difficulties or hurdles identified are based on impression without the benefit of full argument or evidence and are not in any way expressing any concluded view on the factual or legal foundation for the originating application. They are identified for the purpose of explaining the reasons that I have concluded: first, that circumspection about the prospects of the Friggers' success on the originating application is a factor that weighs in favour of the grant of security for costs; and, second, the estimate of the costs of defending the proceedings upon which the defendants' application is based is excessive. 61 Colvin J identified many of the difficulties facing the Friggers in Frigger v Banning (No 12) [2022] FCA 347. As mentioned above, in that case, the Friggers had argued that the registration of PSA was invalid as a factor in support of their application in those proceedings for a stay of the costs order. Colvin J made the following observations (at [26] - [36]) about the asserted invalidity of PSA's registration with which I agree and which I consider apply equally for the purposes of the defendants' interlocutory application for security for costs in these proceedings: 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. 62 In June 1998, s 122 of the Corporations Act provided that: A certificate under the Commission's common seal stating that a specified body corporate has been registered under Division 1 of Part 2.2 of the Corporations Law of this or another jurisdiction is conclusive evidence that: (a) all requirements of that Law in respect of: (i) registration of the body corporate as a company under that Division; and (ii) matters preceding or incidental to the registration; have been complied with; and (b) the body corporate is duly registered as a company under that Division; and (c) the day of commencement of the registration is the day (if any) specified as such in the certificate. (Emphasis added.) 63 Ryan J considered the effect of s 122 of the Corporations Law in Australian Securities Commission v SIB Resources NL (1991) 30 FCR 221 referred to in the passage from Frigger v Banning (No 12) [2022] FCA 347 quoted above. In SIB Resources the Australian Securities Commission made an application under s 1322(4) to remove SIB Resources from the register ASC kept under s 120 of the Corporations Law because the articles of SIB Resources did not state the objects of that company were solely for mining purposes as was then required under other provisions of the Corporations Law. 64 Ryan J concluded (at 228) that, notwithstanding s 122, the Crown, as represented by the ASC, was not precluded from attacking the validity of the incorporation of a company. That is, registration was not conclusive evidence of the validity of the incorporation of a company as against the ASC. However, the reasoning of Ryan J (at 226) otherwise strongly suggests that, as against any person other than the Crown or a person representing the Crown, the effect of s 122 is to prevent that person from going behind the registration and attacking the validity of a company's registration. Further, as to the application of s 1322(4)(b), Ryan J concluded (at 231-233) that the section did not provide a peremptory means of removing from the register companies whose incorporation was vitiated from the outset by non-compliance with a statutory requirement. Ryan J said (at 233) 's 1322(4) does not evince an intention that the court should have power, on the application of the Commission, retrospectively to deprive a company of the corporate existence conferred by s 123 of the Law, in addition to and distinct from the express power to make a winding-up order having prospective operation conferred by ss 460 and 461'. That conclusion is yet further reason for considering that the Friggers will face significant difficulty obtaining the relief sought in the originating application. 65 Additionally, s 1389 of the Corporations Act provides that a certificate issued by ASIC stating that a company was registered under the old Corporations Law of a State or Territory is conclusive evidence that (a) all requirements of that Law for the company's registration were complied with; and (b) the company was duly registered as a company under that Law on the date (if any) specified in the certificate. See also, s 1378 of the Corporations Act. These provisions also stand in the way of the Friggers successful prosecution of the originating application. 66 In the Friggers' supplementary submissions of 1 December 2022 they have sought to distinguish or minimise the effect of SIB Resources. The Friggers submit that while a certificate under the common seal of the ASC stating that a company has been registered may be conclusive evidence that the requirements of the Corporations Law as to registration have been complied with, the certificate is not conclusive evidence of the facts stated in the memorandum and articles of association of the company: von Arnim v Federal Republic of Germany [1999] FCA 1747 at [30]. Therefore, it is open to the Friggers to challenge the authenticity of PSA's memorandum of articles. 67 Further, the Friggers submit that if there were no subscribers to a company's memorandum of articles, in fact, then the company has not been incorporated. In such circumstances the incorporation of the company may be challenged. In support of that submission the Friggers rely on the following authorities for the following propositions. (a) If there were no memorandum of association subscribed by the relevant number of persons there would not be an incorporated company. If a memorandum is changed in any way, no matter how small, it is invalid, there are no subscribers to the memorandum and no incorporated company: Oakes v Turquand and Harding (1867) 2 LRHL 325. (b) The validity of registration of a company can be challenged in appropriate proceedings. The provisions relating to the registration of a company is not severable from provisions relating to incorporation: McJannet v White [1994] FCA 228; (1994) 48 FCR 453. (c) A company is a separate and distinct legal entity so long as the individual members have subscribed their names to the memorandum of association to enable the company to be legally formed. If the provisions of the relevant companies statute have not been complied with, a relevant interested person in a proceeding can go behind the certificate of incorporation to show that a fraud has been committed upon the officer entrusted with the duty of giving the certificate and, thereby, prove the fact that the company had no legal existence: Salomon v A Salomon & Co Ltd [1897] AC 22. 68 The Friggers' submission have not provided pinpoint references to the part or parts of these authorities upon which they rely for the propositions referred to above. Without the benefit of argument, I have not been able to identify the manner in which any of these decisions are or could be authority for the propositions cited. Nonetheless, for the purposes of an interlocutory application for security for costs I am prepared to assume that the propositions are, at least, arguable. However, the availability of potential contrary arguments does not, in my view, diminish the impression that I have formed, that the Friggers' prospects of success on the originating application are not strong based on the provision of the Corporations Law, Corporations Act and reasons of Ryan J in SIB Resources referred to above. 69 Leaving aside the factual and legal basis for asserted invalidity of the incorporation of PSA, there are also difficulties in connection with the Friggers' standing and the extent to which the relief sought on the application may affect third parties. 70 An application under s 1322(4) of the Corporations Act is to be made by 'any interested person'. It is not obvious that the Friggers, who are not members, creditors, or directors presently or formerly of PSA, are interested persons of the kind referred to in s 1322(4). 71 In Mrs Frigger's affidavit of 29 August 2022 she deposes to facts upon which the Friggers rely in support of the contention that they are interested persons. For the purposes of the interlocutory application for security for costs, I have considered the facts stated in the affidavit to form a view, at an impressionistic level, of the relative strength of the Friggers' contention that they have standing on the assumption that the facts stated in the affidavit are admitted into evidence and accepted as true on the hearing of the originating process. 72 In para 9 of that affidavit Mrs Frigger deposes that PSA has pursued the Friggers for repayment of the overpayment sum the subject of the Court of Appeal's orders in October 2009. Reference is made to an alleged setoff of CAT's costs. Exhibit AF4 of the affidavit is a bill of costs of the plaintiff (CAT) in CIV 2265 of 2006 against the defendants in those proceedings (which include PSA). AF4 also includes a property seizure and sale order under the Civil Judgments Enforcements Act 2005 (WA). The judgment creditor is CAT and the judgment debtor is PSA. The documents exhibited as AF4 do not appear to demonstrate that the Friggers have any interest in costs orders against PSA. 73 In para 11 of that affidavit Mrs Frigger deposes to a means inquiry summons that was taken out against Mrs Frigger. Exhibit AF5 of the affidavit is notice of a means inquiry naming Mr Campbell-Smith as executor of the estate of Mr Banning and PSA as judgment creditor and the Friggers as judgment debtors. It relates to proceedings CIV 2265 of 2006 and refers to a judgment sum of $86,289.24. The means inquiry and judgment debt appear to concern a judgment debt incurred before the sequestration orders were made. Therefore, to the extent that debt remains unpaid, PSA would not have any right to enforce the debt directly against the Friggers. However, it may be a debt provable in the Friggers' bankruptcy. 74 In para 12 of that affidavit Mrs Frigger deposes that counsel and solicitors for PSA made a complaint about Mrs Frigger to the Office of the Director of Public Prosecutions in Western Australia. Exhibit AF6 of the affidavit is a letter from the defendants' solicitors to the DPP referring Mrs Frigger to the DPP to consider prosecuting her for perjury. The subject matter of the letter does not appear to involve any proceeding, costs order or any other application on the part of PSA against the Friggers. 75 In para 14 of that affidavit Mrs Frigger deposes to offers it is alleged that the Friggers made to pay PSA the difference between the overpayment sum and the amount of costs that PSA is obliged to pay CAT. Exhibit AF7 of the affidavit contains a number of documents. The first is a copy of a letter dated 21 January 2010 from the Friggers to Mr David Lenhoff, who appears to have been a solicitor acting for PSA in COR 2 of 2010. The letter contains an offer to pay an amount in satisfaction of a statutory demand pending a decision of the High Court and taxation of costs. The offer appears to be made by the Friggers as members of CAT. The next document is an undertaking of Mr Frigger dated 8 February 2010, in effect, to provide a form of security on behalf of CAT in COR 2 of 2010. The next document is another copy of the letter of 21 January 2010. The next document is a letter dated 3 February 2010 from Kott Gunning, as solicitors for the Friggers, to Freehills, as solicitors for Mr Kitay, as provisional liquidator of CAT. The letter makes reference to Mr Frigger lending funds to CAT on a conditional basis for the purpose of securing the sum due to PSA. The next document is a copy of a letter dated 5 February 2010 from Kott Gunning to Holborn Lenhoff Massey also making reference to Mr Frigger lending funds on a conditional basis to secure the sum due to PSA. The next document is another copy of the undertaking of Mr Frigger of 10 February 2010. The next document is an email from the Friggers to Mr Lenhoff of 16 February 2010. That email makes reference to an offer of settlement of PSA of 9 February 2010, which is not included in the bundle of documents. The email purports to accept that offer on certain terms (i.e., it is a form of counter-offer). The next document is a letter dated 18 May 2010 from Dutton Legal, as solicitors for the Friggers, to Freehills, as solicitors for Mr Kitay, setting out an offer for payment of sums in respect of litigation to bring about the end of the winding up of CAT. 76 It is not obvious that these communications would be admissible in evidence at trial (or at a hearing) as the may well be subject to without prejudice privilege. In any case, for the purposes of assessing the relative strength of the Friggers' case on the originating application, taken collectively, these documents appear to indicate that there were unsuccessful attempts to resolve COR 2 of 2010 on the basis that the Friggers, as members of CAT, would pay amounts to PSA to prevent CAT from being wound up. The documents do not appear to demonstrate that the Friggers have any direct interest in the orders made in favour of PSA in the Supreme Court. 77 In para 15 of the affidavit Mrs Frigger deposes that the Friggers commenced CIV 1309 of 2021 against PSA, Ms Banning and three solicitors who had represented PSA. The paragraph refers to exhibit AF8. AF8 is a substituted statement of claim in CIV 1309 of 2021. The substituted statement of claim has PSA, as the first defendant, struck out. Therefore, the proceedings appear to have nothing to do with PSA. Also, as noted above, these proceedings were dismissed. 78 The facts deposed and documents exhibited to Mrs Frigger's affidavit of 29 August 2022 do not identify any obvious interest of the Friggers in the circumstances in which PSA was incorporated, the validity of its incorporation or its continuing existence as a company. To the extent that the Friggers contend that they have an interest as parties to litigation brought against them by PSA, none of the facts stated in Mrs Frigger's affidavit appear to disclose such litigation. For instance, to the extent PSA has existing judgment debts against them these appear to be claims that can only be pursued against their trustee in bankruptcy. To the extent costs orders have been made in favour of PSA against the Friggers after they were discharged from bankruptcy, these are the consequence of claims the Friggers have made against PSA. Clearly, there is an inconsistency in asserting that a company does not exist and, at the same time, taking advantage of its apparent legal personality to make a claim against that company. In general, the law does not permit a litigant to approbate and reprobate. 79 Again, the observations above are made without the benefit of complete evidence and argument. Accordingly, the observations are made to indicate that the Friggers may have some difficulty establishing that they are 'interested persons' if there were to be a challenge to their standing to make an application under s 1322(4). That is a matter to be taken into account when considering the merits of the originating application for the purposes of the interlocutory application for security for costs. 80 Apart from standing, s 1322(6)(c) of the Corporations Act provides that a court must not make an order under s 1322 unless it is satisfied that no substantial injustice has been or is likely to be caused to any person. 81 PSA was incorporated in June 1998 and has apparently existed as a separate legal entity for more than 20 years. CAT obtained judgment against PSA and PSA apparently satisfied that judgment. PSA may have creditors whose rights may be affected by the proposed orders the Friggers seek in the proceedings. Further, Ms Banning who is the remaining shareholder of PSA and was not an original subscriber upon the incorporation of PSA has rights, as a member of PSA, that are likely to be affected by the application and proposed orders. 82 Again, as a matter of impression, I consider that the Friggers will face some difficulty establishing that, in effect, retrospective removal of PSA from the register and treating that company as if it has not existed as a separate legal person since June 1998, will not result in substantial injustice to any person. Attempting a retrospective unwinding of the affairs of a company deprived of its corporate existence retrospectively is very likely to be impracticable if not impossible to undertake without working injustice to third parties who have conducted their affairs on the assumption that the company was regularly incorporated. As noted earlier in these reasons, there are reasonable grounds for considering that s 1322(4)(b) is not intended to confer power on the Court to deprive a company of its corporate existence retrospectively in addition to and distinct from the express powers to make winding-up orders having prospective operation such as that conferred under s 461 of the Corporations Act.

Disposition 83 Having regard to the conclusions set out above, I am satisfied that the power to order security for costs under s 56 of the FCA Act should be exercised in favour of the defendants in these proceedings. The grounds for the exercise of the power are primarily that I am satisfied that there is a real risk that the Friggers will not satisfy any order for costs made in the defendants' favour if they are successful in the proceedings. Further, on the information available, the Friggers' prospects of success in the proceedings are not strong. However, I am not satisfied that an order for security for costs in the sum of $125,000 should be made. 84 The matter has been provisionally listed for a two day hearing on 2 and 3 March 2023. Having regard to the affidavits the Friggers have filed in support of the application and the issues raised in the application, I would expect the authenticity of the signatures on the memorandum of articles to be addressed by expert handwriting evidence and (or) by evidence from the attesting witness to the memorandum of articles. Therefore, I anticipate that the substantive factual dispute in the proceedings will be dealt with by two to three witnesses and that evidence will be relatively brief. Also, Mrs Frigger and Ms Banning may give evidence on standing and prejudice respectively. Again, I anticipate that evidence would be on a relatively narrow range of topics and brief. I anticipate that the two days provisionally allocated will be sufficient. However, the length of the hearing may need to be re-visited after the defendants have filed and served their affidavits on 1 February 2023. 85 Having regard to the probable length of the trial or hearing and the complexity of the legal and factual issues, security in the sum of $35,000 for the defendants' costs of the originating proceedings is appropriate. Accordingly, there will be an order for the Friggers to give security for the defendants' costs in that sum. There will also be liberty for the defendants to apply for further security after 1 February 2023 to take into account the possibility that the length of the trial or hearing may require extension and (or) the issues may be more wide-ranging and complex than presently appears to be the case. There will also be an order that the Friggers pay the defendants' costs of the application, including any reserved costs to be taxed if not agreed. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.