Background
3 To place the present application into context, it is necessary to briefly describe the background and the procedural history of these proceedings.
4 On 11 July 2018, Colvin J made a sequestration order against the estates of each of Mr and Mrs Frigger upon petition for sequestration orders by the second respondent in this proceeding (Mr Kitay) and Computer Accounting and Tax Pty Ltd (in liq) (CAT): Kitay, in the matter of Frigger (No 2) [2018] FCA 1032 (Frigger Sequestration No 2). Mr Kitay made the petitions in his capacity as liquidator of CAT.
5 The petition were founded on a debt in an amount of $61,000.42 assessed upon a taxation of a bill of costs by a Registrar of the Supreme Court of Western Australia. That taxation took place pursuant to an order for indemnity costs made by a Master of that court. Mr and Mrs Frigger opposed the making of sequestration orders on a number of grounds all of which were rejected by Colvin J.
6 The order for indemnity costs was made in respect of an interlocutory application that Mr Kitay, as liquidator of CAT, had made in proceedings in the Supreme Court of Western Australia concerning the liquidation of CAT. The application was made against Mr and Mrs Frigger and the orders sought were for the delivery up of a confidential affidavit, to which Mrs Frigger had obtained access through inspection of the Supreme Court file, along with ancillary orders: Re Computer Accounting & Tax Pty Ltd (in liq); Ex parte Kitay [No 4] [2014] WASC 169. The firm, Herbert Smith Freehills, acted for Mr Kitay and CAT on that interlocutory application and on the costs assessment pursuant to the Master's order for indemnity costs.
7 As part of the grounds upon which they opposed the application for sequestration orders, Mr and Mrs Frigger contended that, with respect to CAT, the costs agreement with HSF was unenforceable because it had not been approved pursuant to s 477(2B) of the Corporations Act 2001 (Cth). Colvin J found that: there was a valid and enforceable costs agreement between Mr Kitay, as liquidator of CAT, and HSF; Mr Kitay was liable for HSF's fees on that agreement; and that agreement supported the existence of the debt that was the foundation for Mr Kitay's petition for sequestration orders: Kitay Sequestration (No 2) at [128] - [138]. As to the question of whether approval was required for Mr Kitay to enter into a costs agreement with HSF, Colvin J said (at [178] - [183]):
178 It is common ground that no such approval was obtained in respect of the HSF terms of engagement concerning the conduct of the proceedings relating to the Confidential Affidavit. However, s 477(2B) only applies where a liquidator enters into an agreement on behalf of the company. It does not apply to agreements made by a liquidator personally in his capacity as liquidator. It is common for liquidators to seek legal advice as to the discharge of their responsibilities as liquidator.
179 Therefore, in the circumstances of the present case, no such approval was required because, as I have found, the agreement was between HSF and Mr Kitay. CAT was not a party to the agreement. In accordance with common practice, Mr Kitay engaged HSF in his capacity as liquidator of CAT. As Mr Kitay had been an applicant for orders based upon the Confidential Affidavit and he had prepared the affidavit in the discharge of his responsibilities as liquidator he was entitled to bring the application for orders as to the use of the Confidential Affidavit in his capacity as liquidator.
180 Accordingly, liability for the costs the subject of the indemnity costs order was incurred by Mr Kitay as liquidator, not by CAT. The application that was determined by Master Sanderson was brought by Mr Kitay. Orders were made on the application of Mr Kitay. Those orders provided for an order for indemnity costs in favour of both Mr Kitay and CAT as applicants in the substantive winding-up proceedings (being the proceedings in which the interlocutory application was made for orders concerning the Confidential Affidavit).
181 The bill of costs was presented by both Mr Kitay and CAT as the applicants. However, the only costs claimed in the bill were costs that had been incurred by Mr Kitay. The claim to the costs in the bill did not depend upon a claim that costs had been incurred by CAT. The indemnity costs order did not apply only to costs jointly incurred by Mr Kitay and CAT. It is an order in favour of each of them. No claim is advanced by the petitioning creditors that the costs that were assessed by Registrar Boyle were incurred by CAT. They rely upon the terms of engagement agreed between Mr Kitay and HSF.
182 Although the petition for sequestration orders is presented by both Mr Kitay and CAT, it is sufficient if Mr Kitay demonstrates that he is a judgment creditor in respect of the costs the subject of the assessment. For reasons I have expressed elsewhere in these reasons, he has done so.
183 Therefore, there is no merit in this ground.
8 In substance, Colvin J made findings to the following effect:
(a) the parties to the costs agreement that was the subject of the order for indemnity costs (referred to as the Second HSF Costs Agreement) were Mr Kitay, as liquidator of CAT, and HSF;
(b) Mr Kitay did not require approval pursuant to s 477(2B) of the Corporations Act to make the Second HSF Costs Agreement as it was made in his capacity as liquidator of CAT and not as agent for CAT; and
(c) the Second HSF Costs Agreement covered the legal costs associated with representing Mr Kitay, as liquidator of CAT, in the interlocutory proceedings that resulted in the order for indemnity costs and assessment of those costs.
9 In August 2018, Mr and Mrs Frigger made an unsuccessful application in the Federal Circuit Court in PEG 409 of 2018 for orders annulling the sequestration orders. On 25 September 2018, Judge Vasta made orders dismissing the application for want of jurisdiction.
10 Thereafter, on 6 November 2018, Mr and Mrs Frigger made an application for an extension of time within which to appeal from the sequestration orders. On 4 December 2018, the respondents to that application made an application for security for their costs of defending that application. On 7 January 2019, Mr and Mrs Frigger made an interlocutory application seeking an order to the effect that the application for security for costs be dismissed. On 6 May 2019, McKerracher J made orders requiring the provision of security for costs and dismissing Mr and Mrs Friggers' interlocutory application: Frigger v Kitay [2019] FCA 624.
11 On 30 May 2019, Mr and Mrs Frigger made a further interlocutory application by which they sought, amongst other things, to have the orders for security for costs set aside insofar as the orders required payment of security for the benefit of CAT. That application was later amended on 29 September 2019 to be an application to set aside the orders of 6 May 2019 altogether. That application was founded on a contention to the effect that HSF had no authority to act for CAT, including for the purposes of applying for security for costs, because Mr Kitay required approval under s 477(2B) of the Corporations Act to enter into a retainer with HSF as agent for CAT. On 1 July 2019, the respondents in those proceedings made an interlocutory application for self-executing orders dismissing the proceedings if the security ordered were not provided. On 28 August 2019, the respondents made an interlocutory application, in effect, requesting orders be made to the extent necessary to approve retrospectively a costs agreement between CAT and HSF and validating that agreement (the relevant costs agreement was not the Second HSF Costs Agreement). On 17 April 2020, Charlesworth J made orders dismissing the interlocutory applications of Mr and Mrs Frigger and, to the extent necessary, approving and validating the relevant costs agreement from 28 August 2018 and for self-executing orders dismissing the application for an extension of time if security were not provided on or before 15 May 2020: Frigger v Kitay (No 2) [2020] FCA 497.
12 Mr and Mrs Frigger have not provided the security. As a consequence, the proceedings for an application for an extension of time within which to appeal from the sequestration orders have been dismissed.
13 On 23 March 2021, Mr and Mrs Frigger filed an originating application in these proceedings. The application seeks an order annulling the sequestration orders of 11 July 2019 under s 153B of the Bankruptcy Act 1966 (Cth), alternatively an order setting aside the sequestration orders. The application also seeks orders that Mr Kitay and Mr John pay the costs, expenses and remuneration of their trustee in bankruptcy (Ms Trenfield) to be assessed and compensation for losses caused by the sequestration order. The respondents named in the originating application are Ms Trenfield, Mr Kitay and Mr John.
14 On 7 May 2021, Colvin J made orders, amongst others, requiring Mr and Mrs Frigger to file a statement of the grounds upon which the annulment of the bankruptcy is sought and a statement of the claims made against Mr John. On 12 May 2021, Mr and Mrs Frigger filed that statement of grounds.
15 On 28 May 2021, Mr John made an application, in effect, to remove him as a party to the proceedings and dismiss the claim against him. Mr John, as a solicitor and member of HSF, had acted in the proceedings that resulted in the order for indemnity costs and sequestration orders. On 31 May 2021, Colvin J made orders, amongst others, dismissing the application against Mr John: Frigger v Trenfield (Annulment Proceedings).
16 On 11 June 2021, Mr Kitay made an interlocutory application for security for his costs of defending these proceedings. On 13 July 2021, Colvin J made orders, amongst others, requiring Mr and Mrs Frigger to provide Mr Kitay with security for his costs in the sum of $25,000: Frigger v Trenfield [2021] FCA 792. Mr and Mrs Frigger provided the security so ordered.
17 On 16 June 2021, Mr and Mrs Frigger filed an amended statement of grounds of annulment. Grounds 1 - 5 and 7 are expressed as follows:
FIRST GROUND
1. The judgment debt that founded the bankruptcy notices was a cost judgment in the interlocutory process of 23 November 2013 (the November 2013 Application) which sought to enforce the confidentiality order made in the January 2012 Application.
2. The interlocutory process of 6 January 2012 (the January 2012 Application) was brought by Kitay pursuant to s 477 (2B) Corporations Act 2001. Orders were sought for Kitay. Orders were made for Kitay only. No orders were sought nor obtained in Computer Accounting & Tax Pty Ltd's (CAT) name.
3. CAT had no standing under s 477 (2B) Corporations Act 2001. CAT's inclusion was a misjoinder and the January 2012 Application in respect of CAT was a nullity.
4. As the confidentiality order in the January 2012 Application was for Kitay's benefit only, only Kitay had standing to make the November 2013 Application to enforce that order. CAT had no standing in the November 2013 application and its inclusion was a misjoinder. The November 2013 Application in respect of CAT was a nullity.
5. In the above circumstances, the consequential cost order in the November 2013 Application in favour of CAT was a nullity.
SECOND GROUND
6. In the circumstances of the first ground, CAT's application for a cost order in the November 2013 Application breached the indemnity principle.
THIRD GROUND
7. David John had no retainer/cost agreement in respect of CAT in the January 2012 Application and November 2013 Application. The cost judgment in favour of CAT was a nullity on this additional ground.
FOURTH GROUND
8. Colvin J found that CAT had no liability to pay costs pursuant to the retainer/cost agreement between Kitay and John (the Retainer/Cost Agreement).
9. CAT's application for a cost order breached the indemnity principle on this additional ground.
FIFTH GROUND
10. The Retainer/Cost Agreement between Kitay and John did not include:
(a) An application for bankruptcy notices against the applicants;
(b) A petition for sequestration orders against the applicants;
11. The processes were brought by John in breach of warranty of authority to act. The processes were nullities.
12. Even if, which is denied, there was a verbal retainer for the above processes in respect of Kitay, there was no such agreement in respect of CAT, which required approval pursuant to s 477(2B) Corporations Act 2001.
…
SEVENTH GROUND
18. On 28 May 2021 David John stated on oath in this proceeding neither he nor his firm Herbert Smith Freehills had direct retainers with Computer Accounting & Tax Pty Ltd and stated further on oath he represented CAT in the relevant proceedings on the instructions of Kitay given in the course of the Retainer/Cost Agreement.
19. Such instructions constituted an agreement on CAT's behalf pursuant to s 477(2B) Corporations Act 2001, being part of the scope of the Retainer/Cost Agreement, which agreement could not be entered into without court approval. On 5 June 2018 John made an oral application for such approval, which application was dismissed.
20. In the above circumstances, the Retainer/Cost Agreement is a nullity and David John had no authority to:
(a) file the January 2012 or the November 2013 Applications;
(b) issue bankruptcy notices;
(c) file creditors petition on behalf of Kitay and CAT.
21. In the above circumstances, the bankruptcy notices are invalid.
18 On 26 July 2021, Mr and Mrs Frigger made an interlocutory application for, in substance, summary judgment. On 3 August 2021, Mr Kitay and CAT commenced proceedings in the Supreme Court of Western Australia against Mr and Mrs Frigger seeking certain declaratory and other relief (COR 131 of 2021). The orders sought included a declaration that Mr Kitay, and to the extent necessary CAT, did not require leave of the Supreme Court of Western Australia, pursuant to s 477(2B) of the Corporations Act, to enter into the Second HSF Costs Agreement and certain retainers, and alternatively for orders retrospectively approving and validating the Second HSF Costs agreement and certain retainers pursuant to ss 477(2B) and 1322(4)(a) of the Corporations Act.
19 On 18 August 2021, Mr Kitay sought and was granted an adjournment of the case management hearing listed for that day in these proceedings and of the application for summary judgment. Logan J made an order to the effect that the application of summary judgment was adjourned to a date to be fixed pending the outcome of the COR 131 of 2021. In giving reasons for his decision Logan J said as follows: Frigger v Trenfield (No 2) [2021] FCA 1255 at [2] - [4].
2 The reason why I am adjourning the application is that both in respect of the summary judgment application made by Mr and Mrs Frigger, and for that matter their substantive annulment application, one issue at large is whether or not there was a need for the liquidator first to have approval under s 477(2B) of the Corporations Act 2001 (Cth) (Corporations Act) in respect of the entering into, with solicitors, of costs agreements, which would extend for more than three months. It is by no means apparent to me that that is the only issue which would be relevant, either in respect of the summary judgment application or the substantive annulment application, but it is an issue.
3 Further, it may or may not be the case, either in the context of summary judgment or the substantive annulment application, that approval of a court exercising jurisdiction under the Corporations Act is a panacea in terms of the bankruptcy notice and the validity of the bankruptcy notice, which grounded the act of bankruptcy upon which sequestration was ordered. It is neither necessary nor desirable to embark on any consideration whatsoever of that subject today, much less whether, even if the point about absence of approval at the time is good, that would have any impact whatsoever on the validity of costs orders, which created a debt or debts, which grounded the bankruptcy notice. For the present, it is enough to recognise that a court of competent jurisdiction, namely, the West Australian Supreme Court is seized with an application by the liquidator, either for a declaration that approval was not - for a declaration that approval was not necessary or, alternatively, for approval and related nunc pro tunc provision under the Corporations Act.
4 In light of that recognition, the interests of justice emphatically favour an adjournment. I note that neither Mr and Mrs Frigger, nor the trustee in bankruptcy oppose that adjournment. That lack of opposition, with respect, was an appropriate course to take in the circumstances. It is for those reasons that I have made the adjournment order.
20 On 20 October 2021, by letter to the associate of Logan J, Mr and Mrs Frigger made an interlocutory application for orders to vacate the order of 18 August 2021 by which the application for summary judgment was adjourned. On 4 November 2021, Logan J made orders dismissing the application to vacate the order for adjournment: Frigger v Trenfield (No 3) [2021] FCA 1471.
21 On 14 March 2022, Mr and Mrs Frigger filed an interlocutory application by which they sought orders, amongst others, to withdraw the summary judgment application and amend the originating application. On 14 March 2022, O'Sullivan J made orders granting leave to discontinue the summary judgment application. On 5 April 2022, Logan J made an order adjourning the application to amend to a date to be fixed. In his reason for decision Logan J said: Frigger v Trenfield (No 5) [2022] FCA 531 at [6] - [8]:
6 More substantively, on 18 August 2021, I made orders adjourning the applicant's interim application filed on 26 July 2021 to a date to be fixed pending the outcome of proceeding COR131 of 2021 in the Supreme Court of Western Australia. Although the overlap is not complete, it is a noteworthy feature of the draft originating application that it has these features in common with the interim application filed on 26 July 2021, namely:
(i) orders annulling the sequestration orders made on 20 July 2018: see paras 1(a) and 2 of the draft originating application, and para 4.2 of the interim application filed on 26 July 2021; and
(ii) damages for losses allegedly caused by the second respondent; see para 3 of the draft originating application and paragraph 4.4 of the interim application filed on 26 July 2021.
7 It appears that proceeding COR131 of 2021 is yet finally to be determined in the Western Australian Supreme Court, although at least, as to some aspects, I was informed today that the relevant judge, Hill J, has reserved judgment. It was put, on behalf of the applicants by Ms Frigger, that a discrete issue might, nonetheless, be the subject of final hearing as proposed in the draft originating application. However, it is my firm view that that any such bifurcation issues would be antithetical to the interests of justice. It appears to me that the position is, in substance, no different to that which persuaded me in August last year to adjourn the interim application to a date to be fixed.
8 I therefore propose to adjourn for hearing on a date to be fixed the question as to whether or not leave should be given to the applicants to amend the originating application in terms of exhibit 1. In this regard, I note that the second respondent had, in any event, proposed to seek such an order. It was obviously desirable not to burden any of the parties, Mr and Ms Frigger included, with a separate hearing of that issue when it could be - and was - conveniently dealt with today.
22 The reserved decision of Hill J referred to in the passage above was delivered on 30 August 2021: Kitay v Frigger [2022] WASC 284. In COR 131 of 2021, amongst other things, Mr and Mrs Frigger had sought an order striking out parts of the originating application in those proceedings as an abuse of process on the grounds that the orders sought involved re-litigating issues that Colvin J had determined in Frigger Sequestration No 2. Hill J granted Mr and Mrs Frigger's application to that extent on the ground that the originating application sought orders that dealt with the issues described in [8] above: Kitay v Frigger [2022] WASC 284 at [176] - [187].
23 Subsequently, Hill J granted the plaintiffs in COR 131 of 2021 leave to amend the originating application in a manner that excluded issues that had been determined in Frigger Sequestration No 2: Kitay v Frigger [2022] WASC 284 (S). The orders of Hill J and amended originating application in COR 131 of 2021 were in evidence before the Court. The amendments include amendments by which orders are sought for a declaration that Mr Kitay, and to the extent necessary, CAT did not require leave of the Supreme Court of Western Australia, pursuant to s 477(2B) of the Corporations Act, to retain HSF to act on behalf of the liquidator and (or) CAT to obtain certain orders in connection with the proceedings in which the orders for indemnity costs were made, alternatively for retrospective approval and validation of the retainers pursuant to ss 477(2B) and 1322(4)(a) of the Corporations Act. These proposed orders do not overlap with or rely on issues determined in Frigger Sequestration No 2 because the orders concern a retainer between CAT and HSF and not a costs agreement between those parties: Kitay v Frigger [2022] WASC 284 (S) at [15] - [17].