Frigger v Trenfield

1. The interlocutory application filed 12 April 2021 is dismissed.
2. The applicants must pay the first respondent's costs of the interlocutory application in any event. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 The applicants seek a stay of delivery of judgment in this proceeding. The trial was held last year. It occurred over five days at the end of July and then five more days in August and September. On one further day of hearing, 27 November 2020, I dismissed an application by the applicants to reopen their case, and reserved judgment. 2 The stay application arises in the following context. The applicants are bankrupt and the first respondent is their trustee in bankruptcy. This proceeding concerns three broad groups of issues. One is whether the first respondent is liable for losses caused, the applicants say, by the first respondent signing certain consent orders in relation to costs in the Court of Appeal of Western Australia, which the applicants say she should not have signed. Another group of issues is whether certain assets are held on trust in the applicants' self-managed superannuation fund (the Frigger Super Fund or FSF) and whether that fund is a regulated superannuation fund for the purposes of s 116(2)(d)(iii)(A) of the Bankruptcy Act 1966 (Cth). There is a claim for damages in respect of an inability to trade in or deal with some of those assets, namely a bank account and shares and other securities. The third group of issues is whether the first respondent's conduct in relation to the bankruptcies warrants her removal as trustee in bankruptcy. 3 The basis of the stay application is that on 23 March 2021, the applicants applied under s 153B of the Bankruptcy Act for the annulment of their bankruptcies. They did so in a separate proceeding in this court, WAD 66 of 2021 (Annulment Proceeding). They submit that if the bankruptcies are annulled, many of their claims in the present proceeding will fall away, with only the damages claim remaining. They value that claim at $5.2 million and rising. 4 The applicants say that they will file a 'notice of discontinuance' in relation to certain specified orders sought in the originating application in this proceeding. It is more likely that any reduction in the scope of the claim will be achieved by amendment of the originating application, but the precise procedure to be adopted does not matter for the purposes of today. The applicants' point is that claims for declarations as to the ownership of accounts with the Bank of Queensland and of certain residential properties in Como and Bayswater, Western Australia, as well as other enumerated paragraphs of the originating application, will all fall away. 5 It will be necessary to describe some of the issues in this proceeding and the effect of any annulment in more detail shortly. Before doing so the principles applicable to stay applications can be stated briefly. 6 The power to order a stay in circumstances such as the present is found in r 30.11(f) of the Federal Court Rules 2011 (Cth), which relevantly provides that if several proceedings are pending in the court and the proceedings involve some common question of law or fact, or are the subject of claims arising out of the same transaction or series of transactions, then any party to any of the proceedings may apply to the court for an order that the proceedings be stayed until after the determination of any of the other proceedings. 7 Independently of that rule, the court has a general discretion to grant a stay as a result of its general power to control its own proceedings: Hughes Motor Service Pty Ltd v Wang Computer Pty Ltd (1978) 35 FLR 346 at 351. As always in matters involving civil practice and procedure the court must exercise the discretion in the way that best promotes the overarching purpose of the civil practice and procedure rules to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: s 37M of the Federal Court of Australia Act 1976 (Cth). 8 In Sterling Pharmaceuticals Pty Ltd v Boots Co (Aust) Pty Ltd (1992) 34 FCR 287 at 291, Lockhart J gave a useful list of considerations that can be relevant to the discretion to grant a stay. But I do not consider it necessary to repeat that list in full. In light of the way the parties joined issue on the stay application the following matters are relevant here: (1) what effect the determination of each proceeding will have on the other if it is ongoing, including the use of the court's resources that will ensue in each case. (2) the relative stage which each proceeding has reached; (3) the balance of advantages and disadvantages to each party; and (4) the public interest in the finality of litigation. 9 I have come to the view that the first of these factors weighs heavily against granting a stay here. In order to understand why, it is necessary as I foreshadowed to explain the present issues in the proceeding and the effect of any annulment in a little more detail. 10 As I have said, one group of issues concerns whether certain assets are held on trust in the FSF as a regulated superannuation fund. The disputed assets are two bank accounts with Bank of Queensland; the shares and securities already mentioned, which are convenient to describe as a portfolio, and which is administered by Commonwealth Securities Limited (CommSec); and two parcels of residential property in suburbs of Perth. The likely value of those assets is substantial. The bank accounts hold a total of about $2.8 million (almost all of which is in one of the accounts, which I will call BOQ1). As at 30 June 2018, the market value of the CommSec portfolio was over $2.5 million. And the value of the residential properties, while not known, will no doubt be significant. 11 The outcome of this proceeding as it is presently constituted will determine whether or not those assets and/or the applicants' interests in the FSF vested in the first respondent as their trustee in bankruptcy, and whether those assets are divisible among the creditors of their bankrupt estates. In relation to the CommSec portfolio and BOQ1, the proceeding will also determine whether the first respondent has, in effect, acted beyond her power by procuring a freeze on those assets so as to entitle the applicants to compensation. 12 Pursuant to orders that were made on 5 June 2020, the quantum of any such compensation was not the subject of last year's trial, but will be determined subsequently if the first respondent is found to be liable for compensation. 13 Turning to the effect of any annulment of the bankruptcies, that is governed by s 154 of the Bankruptcy Act, which relevantly states: (1) If the bankruptcy of a person (in this section called the former bankrupt) is annulled under this Division: (a) all sales and dispositions of property and payments duly made, and all acts done, by the trustee or any person acting under the authority of the trustee or the Court before the annulment are taken to have been validly made or done; and (b) the trustee may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee; and (c) subject to subsections (3), (6) and (7), the remainder (if any) of the property of the former bankrupt still vested in the trustee reverts to the bankrupt. (2) If the property of the former bankrupt referred to in paragraph (1)(b) is insufficient to meet the costs, charges and expenses referred to in that paragraph, the amount of the deficiency is a debt due by the former bankrupt to the trustee and is recoverable by the trustee by action against the former bankrupt in a court of competent jurisdiction. (3) If an application is made to the Court by a person claiming an interest in property referred to in paragraph (1)(c), the Court, after hearing such persons as it thinks fit, may make an order, either unconditionally or on such conditions as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or to a trustee for that person. … 14 Both s 153B and s 154 are in Part VII Division 5 of the Bankruptcy Act, so any annulment resulting from the Annulment Proceeding will be 'under this Division'. Section 154(6) and (7), referred to in s 154(1)(c) above, concern proceeds of crime legislation and are not relevant. 15 It is necessary to consider what would follow under s 154 if the stay of this proceeding is granted and the bankruptcies are annulled in the Annulment Proceeding. 16 Firstly, the annulment would not invalidate anything the first respondent has done as trustee in bankruptcy. To the extent that the applicants want to maintain that certain acts of hers were invalid for other reasons they will still need to establish that, by the application of the relevant law to the evidence. I have in mind, in particular, the aspects of the applicants' claims which concern the first respondent's signing of consent orders in the Court of Appeal. In submissions today, Mrs Frigger indicated that she was not sure whether or not the applicants would proceed with those aspects of their claims should the bankruptcy be annulled and that she would need to consider it further. That means that the court needs to assume, for the purposes of today, that those aspects of the claim may be pursued. In any event, they are not going to fall away by reason of the annulment. 17 Secondly, and importantly, such property as has vested in the first respondent will remain vested in her so that she may apply it in payment of costs, charges and expenses of the administration of the bankruptcies including her remuneration and expenses: see s 154(1)(b). The quantum of the first respondent's claim in that regard will be substantial. She has sworn an affidavit to the effect that her total remuneration and expenses exceed $1 million. The expenses are mostly the legal costs of this proceeding. The first respondent has also deposed that she is not currently able to realise any assets other than the disputed assets to satisfy her claims. She refers in her evidence to an asset which is not the subject of this proceeding, namely the applicants' current residence. She deposes as to the existence of a mortgage over that asset to H & A Frigger Pty Ltd, a company of which the applicants are directors. Further disputes would be likely if the first respondent were to attempt to realise that asset. The first respondent also refers to other assets which are the subject of disputes with the liquidator of the company alleged to be the former trustee of the FSF, Computer Accounting & Tax Pty Ltd (CAT). 18 Mrs Frigger submitted that the first respondent's claims for costs were invalid or highly inflated. Mr Frigger submitted that the administration of the bankrupt estates had become 'overblown' including because of the first respondent's conduct in doing work and claiming remuneration and expenses in relation to that work. As appears from a previous decision ancillary to this one, Frigger v Trenfield (No 8) [2021] FCA 569, the applicants sought to strike out certain paragraphs of Mrs Trenfield's affidavit of 28 April 2021 on the grounds that they were irrelevant and prejudicial. The submissions made by Mrs Frigger today, however, indicated that the real basis of her objection was strong disagreement with the content of the paragraphs, including strong disagreement with the claims for costs and disagreement with the evidence about the assets that were available. For example, Mrs Frigger drew my attention to paragraph 17 of the affidavit, in which Mrs Trenfield said she had not called for formal proofs of debt. Mrs Frigger pointed to documents which may appear on their face to be proofs of debt which creditors have lodged. Mrs Frigger said that these documents showed that the affidavit was false. She made other submissions, by reference to evidence, to establish that various creditor claims to which Mrs Trenfield referred were without foundation or illusory. She also challenged Mrs Trenfield's evidence about the applicants' residence. 19 However, none of that provides a basis to strike out the evidence in the affidavit. Simply because the material adduced by a party has been admitted into evidence does not require the other parties to agree with it; submissions about the falsity of evidence do not go to its admissibility. In any event, as I indicated in Frigger v Trenfield (No 8), this stay application is not the occasion to rule on the appropriateness of the quantum of the first respondent's claim for remuneration and expenses, nor is it the occasion to determine disputes about creditor claims, or disputes about other assets such as the applicants' residence. The salient point, for present purposes is that the first respondent will maintain a claim for over $1,000,000 in remuneration and expenses, and will seek to establish that assets of that value or more vested in her on the making of the sequestration order, so that she may have recourse to those assets to satisfy that claim. 20 That will include a claim that the assets in dispute in this proceeding have vested in the first respondent. While the value of those assets is likely to substantially exceed the value of her claim, there is no prospect that the dispute can be confined to some subset of the assets. There were submissions made about the precise mechanism by which any claim to remuneration and costs out of relevant assets might be agitated. For example, in submissions counsel for Mrs Trenfield suggested that any annulment order could be made conditional on satisfaction of the first respondent's claims to remuneration and expenses. But it is not necessary, nor would it be appropriate, for me to speculate about, let alone rule on, the precise mechanism by which the issue will emerge. All that needs to be said is that there is little doubt, given the positions the parties have been taking in this proceeding, that it will emerge as an issue. 21 Quite simply, the trustee in bankruptcy is going to advance claims for remuneration and expenses, and it is clear the applicants will contest those claims vigorously. It is likely the trustee in bankruptcy will seek to have recourse to assets which she will say vested in her on the making of the sequestration order, namely the assets which are in dispute in the present proceeding. So even if the present proceeding is stayed, the question of which assets, if any, vested in the trustee in bankruptcy will still be contested between the parties. 22 In submissions at the hearing today, the applicants made it clear that even if they were to withdraw some of the claims in the originating application, they will proceed with other claims, in particular, claims for losses they say have been occasioned by the freezing of BOQ1 and the CommSec portfolio. They sought to argue, however, that the question of whether or not those particular assets vested in the first respondent as trustee in bankruptcy would not be relevant to those ongoing claims. But it is difficult to see how that could be so. While Mrs Frigger asserted that the applicants did not contend that the disputed assets had not vested in the first respondent, it is plain that the contention is central to those damages claims. In Mrs Frigger's words, the claims are founded on the argument that 'there were no grounds for her [the first respondent] to freeze those assets'. Whether or not there were grounds to freeze the assets depends, crucially, on whether or not the assets actually vested in the first respondent in the first place. 23 In any event, the issues about vesting of the disputed assets will remain to be agitated for the reasons concerning the first respondent's claims for remuneration and expenses which I have explained. Mrs Frigger submitted that any annulment order will put 'a different slant' on those issues, but whether or not that is so, it is plain that the annulment will neither end nor confine the current dispute over whether the relevant assets are assets of the FSF. 24 All of this means that the annulment will not lead to any of the first and second group of issues falling away. That leaves only the third group of issues concerning whether the first respondent should be removed as trustee in bankruptcy. That will fall away if the bankruptcy is annulled, but that is not, by itself, a strong reason to grant a stay. There is a great deal of overlap between that third group of issues and the first two groups because much of the conduct which is relied upon to support the application for the removal of the first respondent as trustee in bankruptcy arises from the applicants' complaints in relation to the first two groups of issues. For example, the applicants say that the first respondent's unjustified freezing of the disputed assets is one of the reasons why she should be removed. So even though there will be no need for an order removing the first respondent as trustee if the bankruptcy is annulled, many of the factual and legal issues which arise in the application for her removal will remain. 25 For those reasons, the annulment will not substantially reduce the scope of the issues which need to be determined by the court, in one proceeding or the other. Staying this proceeding will not lead to any substantial reduction in the use of the court's resources. That invalidates the chief premise of the stay application. 26 The other matters relevant to the exercise of the discretion which I have identified can be addressed more briefly. 27 The relative stage which each proceeding has reached also weighs against the stay. The Annulment Proceeding was commenced recently, whereas judgment in this proceeding is already reserved. While the applicants say that the Annulment Proceeding is ready for hearing, there is no evidence to satisfy me that the other parties to it, especially the liquidator of CAT, will not wish to put on substantial evidence and submissions before it is ready for trial. The applicants have tendered a statement of their grounds in the Annulment Proceeding which shows that they want to traverse many issues about an apparently contentious question of the liquidator's liability to pay legal costs for his solicitors in the Supreme Court of Western Australia proceedings which ultimately led to the sequestration order. Despite the applicants' expression of confidence in the strength of their case - indeed, they have applied for summary judgment in the Annulment Proceeding - I am not persuaded that any annulment is likely to happen soon. If I am wrong about that, and an annulment order is made before judgment is delivered in this proceeding, then from the point of view of the applicants, the outcome will be the same as the consequence of the stay they now seek. That is, judgment in this proceeding will have been deferred until after the resolution of the Annulment Proceeding. 28 As far as the balance of advantages and disadvantages to each party is concerned, the essential point is that in this proceeding there is nothing more for the parties to do. Judgment has been reserved and the matter is in the hands of the court. The parties need incur no more costs to bring the matter to judgment. Even if annulment were to confine the issues, no costs accruing to the parties would be saved. The first respondent points, however, to prejudice to her and potentially to creditors of the bankrupt estates if the determination as to the vesting of the disputed assets is delayed. The applicants submitted that several of the creditors' claims which are listed by the first respondent as giving rise to prejudice were illusory and/or invalid. Once again, this stay application is not the occasion for adjudication of creditors' claims. Given my conclusion that any annulment is not going to confine or remove the substantial issues agitated in this proceeding about whether certain assets were held in the FSF, I do not need to have any further regard to prejudice to creditors and there is no need to resolve what are, evidently, extensive disputes about the existence of, and validity of the various creditors' claims. 29 Lastly, the public interest in the finality of litigation also weighs against a stay. These proceedings have seen a trial and, after several attempts by the applicants to reopen, judgment has been reserved. The court should proceed to give judgment in the usual course so that (subject to appeal rights) the issues which were the subject of the trial are disposed of once and for all. 30 A further matter I raise, for completeness, is that Mrs Frigger submitted that I should look at the strength of the annulment application, and she relied on documents she filed in it so as to advance the position that the prospects of annulment are strong. But the reasons I have given for a stay being of no utility still apply even if I assume that the annulment will occur. There is no need to make any assessment of the strength of the annulment application for present purposes. 31 There were also submissions made about the applicants' alleged delay in making the annulment application. But once again, I have no need to have regard to that consideration in order to reach my conclusion on the interlocutory application. 32 That conclusion, for the reasons I have expressed, is that there is much to be said against granting a stay of this proceeding pending the outcome of the Annulment Proceeding, and little if anything to be said in favour of it. The interlocutory application will be dismissed with costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.