Frigger v Trenfield

Federal Court of Australia|2022-04-04|Before: Jackson J

FCAFC 137 Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713 Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 Morris Finance Ltd v Free (No 2) [2017] NSWSC 1514 National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 Official Receiver in Bankruptcy v Federal Commissioner of Taxation (Fox's Case) (1956) 96 CLR 370 Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 Royal v El Ali (No 3) [2016] FCA 1573 Sandalwood Properties Ltd (Subject to a Deed of Company Arrangement) v Huntley Management Ltd (No 2) [2019] FCA 647 Sealed Air Australia Pty Ltd v Aus-Lid Enterprises Pty Ltd [2020] FCA 388 Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: General and Personal Insolvency

Date of last submissions: 2 March 2022 (applicants)

Date of hearing: 16 February 2022

Counsel for the Applicants: The applicants appeared in person

Counsel for the First Respondent: Mr SD Majteles

Solicitor for the First Respondent: Carles Solicitors

Counsel for the Second Respondent: The second respondent did not appear

BETWEEN: ANGELA CECILIA THERESA FRIGGER First Applicant

HARTMUT HUBERT JOSEF FRIGGER Second Applicant

AND: KELLY-ANNE LAVINA TRENFIELD First Respondent

H & A FRIGGER PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE FRIGGER SUPER FUND Second Respondent

order made by: JACKSON J DATE OF ORDER: 4 April 2022

The applicants must pay the first respondent's costs of the proceedings on a party-party basis (inclusive of the costs ordered in paragraph 11 below): (a) in the case of the first applicant, from the time of commencement of the proceedings, and from 14 June 2019 (inclusive) jointly and severally with the second applicant; and (b) in the case of the second applicant, from 14 June 2019 (inclusive), jointly and severally with the first applicant.
The costs referred to in paragraph 1 of these orders include costs of and incidental to the following applications and orders, which had been ordered to be reserved: (a) the applicants' interlocutory application filed 6 September 2019 as amended including the orders made on 11 September 2019 and 24 October 2019; (b) the applicants' interlocutory application for summary judgment made by minute of proposed orders emailed to Chambers on 25 July 2019, including the orders made on 29 November 2019; (c) the applicants' interlocutory application filed 6 January 2020 and the orders made on 17 February 2020; (d) the applicants' interlocutory application filed 9 June 2019 and the first respondent's interlocutory applications filed 2 June 2020 and 15 June 2020, including the orders made on 17 June 2020, 25 June 2020, 1 July 2020 and 6 July 2020, with a discount of 50% to be applied to the costs referred to in this subparagraph; (e) the orders made on 17 July 2020; (f) the applicants' interlocutory application to re-open supported by an affidavit filed 2 September 2020, including the orders made on 2 September 2020, 7 September 2020 and 9 September 2020; (g) the orders made on 21 October 2020; and (h) the orders made on 23 April 2021.
All other reserved costs orders are vacated so that there is no order as to the costs of and incidental to the orders to which those vacated orders relate.
The assessment of costs the subject of orders 1 and 2 above is to be determined by the trial judge on a lump sum basis in accordance with section 4 of the Court's Costs Practice Note (GPN-Costs).
By 26 April 2022, the first respondent must file and serve a Costs Summary affidavit in accordance with paras 4.10 to 4.12 and Annexure A of the Practice Note, with the Costs Summary to be limited to 10 pages. The Costs Summary must identify which items or categories of work are, according to the first respondent, connected to the performance of the applicants' duties and the exercise of their powers and discretions as trustees of the Frigger Super Fund.
At the same time as service of the Costs Summary referred to in the preceding paragraph, the first respondent must serve on the applicants (but not file with the Court) a copy of each costs agreement and invoice on which the first respondent relies in support of the Costs Summary.
By 17 May 2022, the applicants must file and serve a Costs Response affidavit in accordance with paras 4.13 and 4.14 of the Practice Note, limited to 10 pages plus any annexures comprised of costs agreements or invoices to which the applicants wish to refer.
By 31 May 2022, the first respondent must file and serve an outline of written submissions of no more than 5 pages in length on the quantum of costs sought.
By 14 June 2022, the applicants must file and serve an outline of written submissions of no more than 5 pages in length on the quantum of costs sought.
The assessment of the quantum of costs will be listed for hearing on a date to be fixed, not before 16 June 2022.
The applicants must pay the first respondent's costs of and incidental to these orders, including the costs of the hearing on 16 February 2022, all discounted by 75%.
Without limiting any of the above orders, the first respondent may obtain payment of her costs of and incidental to the proceeding (including costs of and incidental to these orders, and the hearing on 16 February 2022) on a solicitor-client basis, out of the bankrupt estates of the applicants. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 Judgment in this proceeding was delivered on 1 December 2021: Frigger v Trenfield (No 10) [2021] FCA 1500 (Main Judgment). These reasons concern the costs of the proceeding. 2 The matter concerned the bankruptcies of the applicants and, to a large extent, also concerned their self-managed superannuation fund, the Frigger Super Fund (FSF). The applicants were discharged from bankruptcy on 26 July 2021. They are, however, seeking orders in a different proceeding in this Court, WAD 66 of 2021, in which (according to their written submissions on costs) the issue is whether their 'bankruptcies were invalid'. 3 The first respondent is the trustee in bankruptcy of the applicants' bankrupt estates. The second respondent, H & A Frigger Pty Ltd, was trustee of the FSF from before the commencement of the proceeding until 15 April 2020. 4 The applicants sought a number of orders in the proceeding, in broad terms: (a) declarations that the applicants' interests in various assets were interests in a regulated superannuation fund, namely the FSF, and orders consequential on that; (b) orders in this court concerning costs orders that had been made in the Court of Appeal of Western Australia; and (c) an order for the removal of the first respondent as the applicants' trustee. The application was dismissed in its entirety. 5 The first respondent now seeks orders relating to the costs of the proceeding. The applicants oppose the orders sought, and seek a deferral of the determination of their costs liability pending the outcome of WAD 66 of 2021. 6 The orders the first respondent now seeks are, in summary, orders that: (a) the applicants, in their own right and in their capacity as trustees of the FSF, jointly and severally pay the first respondent's costs of the proceeding on an indemnity basis, including all costs that had been reserved (save the reserved costs in relation to two interlocutory issues, which the first respondent does not seek); (b) the costs referred to above be fixed by the trial judge on a lump sum basis; and (c) the first respondent's solicitor-client costs of the proceeding, including any reserved costs and costs the subject of any interlocutory costs order in the first respondent's favour, be paid out of the bankrupt estates on terms that upon payment, any costs recovered by the first respondent pursuant to the previous orders sought shall form part of those bankrupt estates. 7 The first respondent summarises the effect of these orders as enabling her initially to recover her costs from the assets of the bankrupt estates but to then, in effect, seek to recover the costs against the applicants, with those costs then going into the pool of assets available for distribution to the creditors of the bankrupt estates. She submits this is appropriate because the bankrupt estates may not be sufficient to discharge all the costs of the litigation and, in any event, the creditors of the bankrupt estates should not have to bear the burden of the costs of defending the applicants' unsuccessful pursuit of the litigation. 8 The first respondent also seeks orders programming the quantification of the costs she seeks against the applicants to a hearing. At the hearing on 16 February 2022 that has led to these reasons (Costs Hearing), she abandoned her application for a further order that the second respondent be liable jointly and severally with the applicants for costs for a certain period. 9 The applicants have appealed the Main Judgment. In their written submissions concerning costs they conceded in terms that if the appeal is unsuccessful, the first respondent is entitled to party-party costs, other than reserved costs. But at the Costs Hearing they sought to resile even from that concession. So I must proceed on the basis that the applicants do not agree to any aspect of the costs orders the first respondent seeks. 10 I will describe and determine the issues that arise in turn.

Should determination of the costs issues be deferred pending judgment in WAD 66 of 2021? 11 At the Costs Hearing the applicants sought an order that the resolution of the costs issue in this proceeding be deferred pending the resolution of WAD 66 of 2021. The first respondent opposed that. I reserved my decision on that issue and heard substantive argument on all the other costs issues. 12 The applicants submit that if the bankruptcies are declared invalid, this proceeding would be otiose and the Main Judgment would be a nullity. They also submit that if the bankruptcies are not declared invalid but the appeal from the Main Judgment is successful, the first respondent will not be entitled to any costs other than costs orders already made in her favour. But they did not apply for any stay of the proceeding, in so far as it concerns costs, pending the outcome of the appeal. 13 The applicants have adduced no evidence in this proceeding as to the nature and status of WAD 66 of 2021. From the bar table, Mrs Frigger described that proceeding as being founded on an admission by one of the petitioning creditors in their bankruptcies, Mervyn Kitay, that a firm of solicitors 'had no authority to appear on behalf of one of the creditors which immediately means that the bankruptcy notices were invalid'. Mrs Frigger said that this means that the petition and sequestration orders 'were a nullity'. She cited in favour of that last proposition Cranes 'R' Us Pty Ltd v Busselton Mini Crane Hire Pty Ltd [2012] WADC 24; (2012) 79 SR (WA) 322, a case in which the District Court found that proceedings commenced by one director of a company in the name of the company without the authority of the board of directors were a nullity. 14 Mrs Frigger said that there was pending, at the time of the Costs Hearing, an application in the Supreme Court of Western Australia (presumably by Mr Kitay) 'for retrospective approval for the issue of the bankruptcy notices'. But she claimed that any such approval would have no effect on the validity of the notices. At the time of the Costs Hearing, the judge in WAD 66 of 2021 was awaiting the outcome of that application before resolving the proceeding before him. Mrs Frigger said that she hoped that 'within four weeks something will happen'. 15 There is no evidence before me to permit me to assess the correctness of these propositions, or the likelihood that the Friggers will succeed in WAD 66 of 2021 and if so, when. Even if the applicants establish that the bankruptcy petition was instituted by solicitors purporting to act on behalf of Mr Kitay but in fact without his authority, it does not necessarily follow that the bankruptcy proceeding was a nullity. It is not appropriate for me to comment on whether Cranes 'R' Us establishes or demonstrates any principle to the effect that Mrs Frigger claims, as that is an issue that should be determined by the judge in WAD 66 of 2021, assuming his Honour ends up being seized of it. It is enough to say that for the purposes of their present application for a deferral of the determination of the first respondent's application for costs, the applicants have established no factual basis for the applicability of Cranes 'R' Us that permits any assessment of the likelihood that their arguments will be successful. 16 Further, even if the bankruptcy was a nullity, and even if, in Mrs Frigger's words, 'the whole basis of this proceeding [WAD 141 of 2019] was otiose', it does not necessarily follow that this proceeding is a nullity, or that the first respondent is not entitled to her costs. After all, it is Mrs Frigger who commenced it and she and Mr Frigger who prosecuted it. If they did so on the basis of a bankruptcy that is subsequently shown to be 'a nullity', then they did so on the basis of a state of affairs that has turned out not to be the case, and it may be that they should bear the costs of it anyway. 17 These doubts, and the absence of any evidence permitting me to assess the prospects, status and likely timeframe for determination of WAD 66 of 2021, lead me to refuse to defer determination of the costs issues before me until the outcome of that proceeding.

Can the costs of the proceeding be ordered against the applicants in their own right? 18 The applicants commenced and prosecuted this proceeding against the first respondent. They were unsuccessful and the first respondent was successful. On the face of things, costs should follow the event. That would result in an order for costs against the applicants. 19 The applicants nevertheless submit that their claims in this proceeding 'were as regulated debtors only'. So, they say, at no time did they appear in this proceeding 'personally'. They also say that the proceeding 'was finalised, pending reserved judgment' prior to their discharge from bankruptcy on 26 July 2021. They submit that any right that the first respondent has to a cost order accrued prior to the discharge. So, they submit, no order for costs can be made against them personally. 20 Another argument the applicants make is that the first respondent cannot become a creditor of theirs 'outside of the bankruptcy'. That appears to be based on a submission that the first respondent has no right of execution against any assets acquired post-bankruptcy, or otherwise falling outside of the bankruptcy, because she incurred all the costs in the course of the administration of the bankrupt estate so, the implication appears to be, any costs liability can only be executed against the bankrupt estate. The applicants also submit that the first respondent cannot both be a priority creditor in the bankrupt estate for her costs, and be a creditor of theirs with a right to levy execution outside the bankrupt estate. 21 These submissions are misconceived. It is true that in the orders the first respondent seeks, she asserts two rights. It is important to be clear about what they are. One is a right to recover costs from the applicants, as unsuccessful litigants, which will arise if the Court exercises its discretion as to the costs of the proceeding in favour of the first respondent. That discretion arises under s 43 of the Federal Court of Australia Act 1976 (Cth) which, with exceptions that are not presently relevant, gives the Court the jurisdiction (in this context, power) to award costs in all proceedings before it. The second right that the first respondent asserts is a right to recover expenses that she has properly incurred in the course of acting as trustee in bankruptcy from the relevant trust estates, that is, the bankrupt estates, on generally applicable principles concerning a trustee's right of indemnity which will be described below. 22 There is no need for the first respondent to elect between these two rights. While the expenses of which the first respondent relevantly seeks reimbursement pursuant to the second right are legal expenses, that gives rise to no inconsistency with the first right. A situation where a successful litigant pursues an unsuccessful one for legal costs, and at the same time seeks indemnity for its legal costs from another source, is commonplace. 23 The applicants have articulated no coherent reason why the situation should not be permitted to arise in this case. They relied on s 109 of the Bankruptcy Act 1966 (Cth), but the fact that s 109(1)(a) has the effect of making the first respondent a priority creditor when she exercises the second right makes no difference to whether she can also assert the first right. Certainly, on the face of things she should not be permitted to recover the same costs twice, but that is a different matter, to which I will return below. 24 The applicants also relied on Coyne v Douglas-Brown [2002] FCA 1324, a case where French J ordered that a trustee in bankruptcy's costs of successfully defending at a preliminary stage litigation brought by a discharged bankrupt were to be paid out of the bankrupt estate. But the making of that order does not appear to have been in issue, and his Honour gave no explanation of the basis on which it was made. Orders of that kind are also commonplace, but properly understood they reflect the second right of the trustee in bankruptcy I have described, the right of indemnity, and do not present any necessary inconsistency with the first right, the right to seek costs from the unsuccessful litigants. 25 It is also misconceived for the applicants to submit as a general proposition that because the first respondent was acting in her capacity as trustee in bankruptcy she can only recover her costs from the bankrupt estate and cannot levy execution from assets of the applicants (including, potentially, assets held in their capacity as trustees of the FSF). The first respondent has been sued and she has won; she has a prima facie claim to recover her costs from the unsuccessful litigants. There is no principle that the status of those litigants as (former) bankrupts in the bankruptcy confines the trustee in bankruptcy to recovery from the bankrupt estate. That would be to confuse the first and second rights I have described. It is true that the applicants had standing to commence this proceeding by reason of their position as regulated debtors: see s 5-15(a), s 5-30(a)(i) and s 90-20 of Schedule 2 to the Bankruptcy Act, that is, the Insolvency Practice Schedule (Bankruptcy). But there is no dichotomy between that status and their personal capacities. Their subsequent change in status on the discharge of the bankruptcy, to no longer being undischarged bankrupts, did not make them immune to liabilities that were incurred when the bankruptcy was current, including liabilities for costs. 26 In any event, the costs liability has not yet arisen, and so will only arise at a time when the bankruptcy is no longer current. The position is made clear by Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52. A court entered judgment in a proceeding against Mr Foots on 1 September 2005, without making any costs order against him at that point. Mr Foots became a bankrupt on 15 September 2005. On 3 February 2006, the court made a costs order in the proceeding against Mr Foots. He argued, among other things, that the costs liability was provable in the bankruptcy so that on his discharge, he was released from it. 27 The High Court (Gleeson CJ, Gummow, Hayne and Crennan JJ, Kirby J dissenting) held that the liability for costs was an obligation that did not arise until the costs order was made: Foots at [35]-[36]. An untaxed order for costs made after the date of the bankruptcy was held not to be a provable debt and the stay contained in s 58(3) of the Bankruptcy Act was not engaged: Foots at [60], [65], [67]. At [67] the majority concluded that the primary judge 'was therefore entitled to make the costs order against Mr Foots'. The case is even clearer here, because not only will any costs order be made against the applicants after the date of their bankruptcy, it will be made after their discharge from bankruptcy. 28 Consistently with that reasoning, there are various cases in which costs have been ordered against a bankrupt who was unsuccessful in litigation 'personally', that is, on the basis that recourse may be had to assets that do not form part of the bankrupt estate: see e.g. Fitzpatrick v Keelty (No 2) [2008] FCA 742 at [11], [14] (Moore J); Morris Finance Ltd v Free (No 2) [2017] NSWSC 1514 at [30], [32] (Ward CJ in Eq, as she then was). An order of that kind may be made in favour of a trustee in bankruptcy who is successful in litigation against the bankrupt: see Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713 at [72] (Lee J). 29 In oral submissions Mrs Frigger asked rhetorically: Why would we have to pay money into a bankrupt estate now, after the bankruptcy has ended, when we don't owe anything to it? We don't owe anything to the bankrupt estate. It's only assets that vested, as at the date of bankruptcy, which goes into the bankrupt estate. Anything that we owe now doesn't belong there. We don't have to pay anybody anything. 30 The answer to that rhetorical question emerges from the discussion above: if the Court awards costs against the applicants, they will owe money to the bankrupt estate, or, more correctly, will owe money to the trustee in bankruptcy who was defending litigation brought against her in connection with her rights, powers and activities as trustee in bankruptcy. And, as Foots makes clear, that liability will arise at the time the costs order is made. 31 So while the first respondent will be limited to the assets of the bankrupt estate when she asserts the second right I have described above, being her right of indemnity out of trust assets, there is no such limitation in relation to the first right, being the right that will arise if the Court orders the applicants to pay the costs of the proceeding to the first respondent. To the contrary, in so far as the first respondent relies on that first right, it is not a debt provable in the bankruptcy and so cannot be recovered from the bankrupt estate. 32 The applicants also submitted that this issue had been raised by the first respondent in November 2020 and the Court gave her leave to file submissions, but she did not. They submit that it is an abuse of process for the first respondent to 'attempt to re-litigate the issue again'. That appears to be a reference to the orders made in Frigger v Trenfield (No 7) [2020] FCA 1740, in which I dismissed an application by the applicants to reopen their case after judgment had been reserved. I awarded the costs of that application in favour of the first respondent, but gave her liberty to apply within seven days for any order that the costs so awarded be paid out of the assets of the FSF. It is true that she did not exercise that liberty. But if that has any ongoing relevance, it is to the issue addressed in the next section of this judgment, not to whether a costs order can be made against the applicants personally, and whether execution of any resulting money judgment can be levied against assets outside the bankrupt estate. Given the way I propose to deal with the issue in the next section, this argument does not presently arise. 33 I do not accept that the matters raised by the applicants present any necessary impediment to the Court exercising its broad costs discretion to make a costs order against them personally. There is no other reason why the discretion should not be exercised that way. The applicants have pursued litigation against the first respondent and have been unsuccessful. An order requiring the applicants to pay the costs of the first respondent will be made. In the case of the second applicant, Mr Frigger, it will reflect the fact that he only became an applicant on 14 June 2019. Finalisation of the precise terms of that order must, however, await the outcome of the issue determined in the next section of this judgment.

Should the Court make a costs order against the applicants in their capacities as trustees of the FSF? 34 The FSF is structured as a trust, and as detailed in the Main Judgment has had various trustees over the course of its existence. The applicants are its only trustees at present and have been since 5 June 2020: Main Judgment [196(5)]. Much of the litigation and much of the Main Judgment concerned the FSF. Specifically, there were numerous issues about whether particular assets, described as the disputed assets, were subject to the trusts of the FSF and part of that fund. 35 The first respondent submits that the relief sought by the applicants in relation to the disputed assets alleged to be assets of the FSF was in effect for the benefit of the FSF and was, and ought to have been from its commencement, prosecuted by the trustees of the FSF, so an order for costs against the applicants in their capacities as trustees should be made. 36 The applicants disagree. They submit that since the result in the Main Judgment was that the disputed assets were found not to be part of the FSF, they have no right of exoneration or reimbursement from the FSF for any costs ordered against them in the proceeding. As I have said, they submit that their claim was as 'regulated debtors only'. They note that it was the first respondent's position in the proceeding, held to be correct in the Main Judgment, that their interests in the disputed assets were not held as interests in the FSF as a regulated superannuation fund. They say this means that the first respondent's involvement in the proceeding did not constitute work on behalf of the FSF's trust creditors, so that any costs she has incurred were not incurred in administering the FSF and she has no right of exoneration against the FSF. They appeared to be submitting that there were no creditors of the FSF who were creditors of the bankrupt estates, so the first respondent could not have been recovering or protecting property for the benefit of creditors of the FSF, so she has no right to take her costs out of the assets of the FSF. 37 These submissions are also misconceived. The first respondent is asserting no direct right of indemnity out of the assets of the FSF, that is, the right of indemnity she would have if she were a trustee of the FSF. Her claim is not based on any suggestion that she was acting on behalf of or for the benefit of creditors of the FSF as such (albeit that creditors proving in the bankrupt estate may be claiming debts that were incurred by the applicants in the course of the proper administration of the FSF). She is, rather, asserting the first right I have mentioned above, that the applicants pay her the costs of the proceeding. The question that then arises is whether the applicants are entitled to meet that costs liability out of the assets of the FSF or, if they decline to do so, whether the first respondent can be subrogated to that entitlement. 38 In order to answer that question, it is necessary to consider the issues in the proceeding and their possible relationship to the applicants' positions as trustees of the FSF. The question is whether the liability for costs that will arise if a costs order is made was properly incurred by the applicants as trustees in the course of trust business. In Cardaci v Filippo Primo Cardaci as executor of the estate of Marco Antonio Cardaci (No 5) [2021] WASC 331 (S) at [4], Le Miere J summarised the position as follows (footnotes omitted): Whether pursuant to the Trustees Act 1962 (WA) s 71 or in equity, a trustee acting within his powers who incurs a liability in the course of the administration of the trust is entitled to indemnity out of the trust estate. If he has not discharged it out of his individual property, he is entitled to apply the trust property in discharging it, that is he is entitled to exoneration. The trustee's power of exoneration is a power to use trust funds to discharge debts that were properly incurred by the trustee in the course of trust business. The power of indemnity is the means by which the trustee uses the right to discharge his liabilities out of trust funds. 39 In Cardaci at [6] Le Miere J said (footnotes omitted): The general principle is that a trustee is entitled to indemnity out of the trust fund in respect of costs and expenses properly incurred by him in connection with the performance of his duties and the exercise of his powers and discretions as a trustee. The right of a trustee to indemnity in respect of costs extends only to costs properly incurred in the execution of the trust. 40 The main set of issues that were ultimately fought and decided in this proceeding are set out in the Main Judgment at [21]-[40]. It was necessary to determine whether the disputed assets were held in the FSF. At [22] the Main Judgment explained that this was because the applicants relied on s 116(2)(d)(iii)(A) of the Bankruptcy Act as an exception to the broad rule that all property of a bankrupt as at the commencement of the bankruptcy is divisible among creditors. That subsection provides that the rule does not extend to the interest of the bankrupt in a regulated superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act). The applicants did not rely on s 116(2)(a), which exempts from the broad rule 'property held by the bankrupt in trust for another person'. 41 The key issues that thus arose were described as follows (Main Judgment [22]): So the central issue is whether the applicants hold beneficial interests in the disputed assets by way of their interests in the FSF. Since there is no question that between them they held substantial interests in the FSF, the key question is whether the disputed assets were assets of the FSF. Whether the FSF is a regulated superannuation fund within the meaning of the SIS Act is also in issue. 42 There were two other groups of issues determined in the Main Judgment. One concerned orders for costs, or for payment out of security for costs, that had been made in proceedings in the Court of Appeal of Western Australia between the applicants and Mr Kitay, and between the applicants and a law firm: see Main Judgment [41]-[45]. If there was any connection between those orders and the FSF, it has not been made apparent. 43 The other group of issues arose out of the applicants' application for an order removing the first respondent as their trustee in bankruptcy. This relied on a number of disparate allegations: see Main Judgment [46]-[49]. Some of them related to the first respondent's conduct in asserting control over the disputed assets, being the assets that the applicants claimed were part of the FSF. Some related to conduct associated with those assets, such as the first respondent allegedly failing to follow up on information said to be relevant to the question of whether they were held in the FSF, or allegedly trying to persuade the Australian Taxation Office that the FSF was not a regulated superannuation fund. Some of it related to more general allegations with no specific connection with the FSF, such as claims that the first respondent failed to interview the applicants or colluded with Mr Kitay and his lawyers. 44 The first respondent's claim that the applicants should be liable in their capacities as trustees for all the costs ordered against them in the proceeding needs to be assessed in all that context. In my view, that is more appropriately done after the quantum of costs has been determined. In Ford & Lee, The Law of Trusts (online at 28 March 2022, [14.3380]), the learned authors say: It is necessary to distinguish the obligation of a trustee to pay costs to another party arising from litigation unsuccessfully begun or defended by the trustee from the trustee's entitlement to indemnity out of the trust estate. The existence of the trustee's right of indemnity is of no concern when the question is as to the scale of costs that should be awarded to the successful party. Strictly speaking, when the normal rule is applied that costs follow the event and a trustee has been the unsuccessful party, the order should be against the trustee personally, leaving the trustee to obtain indemnity out of the trust estate. On occasion, these two stages are telescoped by the court ordering that the costs of the successful party be paid out of the trust estate. 45 In Hopkins v Edwards [2020] VSC 456 at [185]-[186], Lyons J stated the preferable approach as follows (footnotes omitted): Before addressing the relevant legal principles, it is necessary to distinguish between: (1) the trustee's own costs and expenses of proceedings brought or defended by the trustee; and (2) the trustee's obligation, either imposed at law or assumed by the trustee, to pay the costs of another party to the litigation in respect of unsuccessful proceedings brought or defended by the trustee. The first is a cost or expense of the trustee, the second is a liability of the trustee. In relation to the latter liability, as Ford and Lee make plain, the existence of a right of indemnity is of 'no concern' when determining the scale of costs that should be awarded to the successful party: it is only once that liability has been assessed that the question of the right to indemnity arises. 46 I am not persuaded that it would be appropriate at the present time to make an order as sought by the first respondent that any costs order is against the applicants in their capacities as trustees of the FSF. In my view, it would be premature in this case to telescope the two issues so as to determine now whether, and to what extent, any costs liability of the applicants to the first respondent was properly incurred by them in the course of trust business. As the account of the issues in the proceeding above shows, and as the applicants submit, not all of the proceeding concerned the trust. While the lion's share of the time spent at trial and most of the Main Judgment concerned the FSF, not all of it did. The first respondent has proposed no way of apportioning the costs liability between trust and non-trust matters. It appears that it would not be possible to do so in any principled way at least until the quantum of costs is determined on a lump sum basis or on taxation. And this all pertains to a question that will not arise in practice until a costs order is made, the quantum of costs is determined and the first respondent seeks to levy execution of the resulting judgment as to costs. 47 The appropriate time to determine the extent to which the costs were properly incurred by the applicants in the course of trust business is, at the earliest, after the applicants' costs liability has been crystallised by a costs order and the quantum has been assessed. It may be necessary to pay attention to the purpose of specific claims made by the applicants that led to liability being ordered for particular costs. It may also be necessary to consider matters such as the capacities in which the applicants caused the liabilities to be incurred and the relationship of the claims and the liabilities to the applicants' positions as trustees (during the periods when they were trustees) as distinct from their positions as beneficiaries of the trust. It is possible, for example, that a claim is properly characterised as having been brought by the applicants in their capacities as beneficiaries of the FSF, in which case costs liabilities attributable to the claim may not be liabilities incurred by the trustees in the course of administering the trust. In my view these things are better addressed after particular amounts of costs owing are identified as a result of a taxation or lump sum assessment, that is, after an assessment of costs. That is not to say that each costs liability will be neatly attributable to a given claim, for example to a particular order sought by the applicants. But to the extent that there is any mixture of any claims or capacities and any difficulty in attributing them to any particular item of costs, that is best addressed after the assessment has been conducted, rather than before as an abstract hypothetical. 48 To that end, it will be helpful to define the issues further by requiring the first respondent to make it clear during the lump sum assessment process (which I consider below) what parts of the lump sum breakdown she says are in connection with the performance of the applicants' duties and the exercise of their powers and discretions as trustees of the FSF, and to give the applicants an opportunity to respond. 49 I will not express any costs order as applying to the applicants in their capacities as trustees of the FSF. The extent to which the applicants wish to rely on their rights of exoneration out of the FSF in order to satisfy part or all of their costs liabilities, or to which the first respondent wishes to seek subrogation to those rights, are matters that should be determined after the assessment of costs. 50 So the order that will be made will simply require the applicants to pay the first respondent's costs. To be clear, that will not foreclose the question of the capacities in which the costs liabilities were incurred. Nor will the fact that the first respondent is required to identify the alleged capacity in the course of the costs assessment mean that the capacity question will be determined as part of that assessment. As I have said, in my view that is better done after the costs assessment has been conducted. 51 In seeking an order that the costs be paid by the applicants in their capacities as trustees, the first respondent professes to be motivated by the goal of minimising further disputation. That goal is understandable, and I acknowledge that the course I have decided to take does not promote it. But I suspect that whatever order I make, further disputation is inevitable, and the desire to minimise it should not lead to a summary and premature determination of difficult issues as to the capacities in which the applicants have incurred various costs liabilities over the course of this protracted and complicated litigation.

Should costs be awarded against the applicants on an indemnity basis? 52 The first respondent submits that an order for indemnity costs is appropriate because of two aspects of the applicants' conduct of the proceeding. The first is that there were significant adverse credibility findings against Mrs Frigger, including that she knowingly altered documents in order to create a false impression that the documents supported the applicants' case, and otherwise gave false or conflicting evidence. According to the first respondent's written submissions, the 'significance of that in the context of the proceedings is not to be overstated [sic understated], as the applicants' case was based entirely on Mrs Frigger's evidence, and any documents produced by the applicants were to be treated with caution'. 53 The second aspect of the applicants' conduct which the first respondent says justifies indemnity costs can broadly be described as the manner in which the applicants conducted the proceeding. According to the first respondent, key documents were only produced very late in the proceedings, or not produced at all, the evidence was provided in a piecemeal way over time and was not complete, various applications to reopen were brought with no reasonable explanation as to why documents were not produced earlier, and a number of interlocutory applications were also brought. 54 All this, the first respondent says, has meant that the proceedings were unnecessarily prolonged and she has been put to unnecessary expense to deal with evidence that was false or late or not provided by the applicants. The first respondent does not, however, rely on the ground that is often the basis of an award of indemnity costs, namely that a case is so weak that an applicant, properly advised, should never have brought it. 55 The applicants oppose any order for indemnity costs. They rely on a number of matters which, they say, undermine the findings made in the Main Judgment about falsified documents. They also say that the documents found to have been doctored 'represent an immaterial proportion of the vast amount of evidence proffered by the Friggers'. They say that the evidence they allegedly produced late 'was produced in response to Trenfield's changing position and ambush'. They point to a number of aspects of the first respondent's conduct of the proceeding which, they say, unnecessarily prolonged it. 56 The general principles that apply where indemnity costs are sought appear in Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 at [82] (Newnes JA, Murphy JA and Hall J agreeing, citations removed): It is well-established that a court has a wide discretion as to costs (albeit, a discretion to be exercised judicially) … Whether or not an order for indemnity costs is appropriate must depend upon the facts of the particular case. There are not, and cannot be, any hard and fast rules. But an indemnity costs order is a departure from the usual order that costs are awarded on a party and party basis. Ordinarily an indemnity costs order is appropriate only where the unsuccessful party has been involved in some unreasonable conduct in relation to the proceedings, such as where the institution or continuation of the proceeding was plainly unreasonable or the proceeding was issued or maintained for an ulterior or collateral purpose. An order for indemnity costs reflects the court's disapproval of the conduct of the unsuccessful party. 57 In broad terms an order for indemnity costs requires that some special or unusual feature arises: Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 at [5] (Jagot, Yates and Murphy JJ). In LFDB v SM (No 2) [2017] FCAFC 207 at [7], Besanko, Jagot and Lee JJ stated the general position when indemnity costs are sought on the basis of the other party's conduct of the litigation as follows (citations omitted, emphasis in original): When it comes to the respondent's submission, the principles guiding the exercise of the discretion to make a special costs order can be shortly stated. It is trite that the Court has a broad power to award costs, including indemnity costs, under s 43 of the Federal Court of Australia Act 1976 (Cth) (Act). It has often been remarked that the discretion as to costs is unfettered, but in exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, namely to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M(1). An award of indemnity costs is not a punitive measure, but is designed for 'compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs'. Consistently with facilitating the overarching purpose, such circumstances may include where a proceeding is unduly prolonged by groundless contentions. 58 In relation to false evidence specifically, there are indeed cases where that has been the basis of an award on an indemnity basis of part or all of the costs incurred: see e.g. Barrett Property Group Ltd v Metricon Homes Pty Ltd (No 2) [2007] FCA 1823 (Gilmour J); Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (No 3) [2008] FCA 1592 (Gordon J); Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 4) [2016] FCA 218 (Perram J); Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat (No 2) [2019] NSWSC 584 (Slattery J). 59 As the applicants submit, however, there is no automatic rule to the effect that falsification of evidence should lead to indemnity costs: Barrett Property Group at [12]. Cases in which the latter has not followed the former include: Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866 (Kenny J); Currie v Currie (No 3) [2018] WASC 306 (Le Miere J); and Sealed Air Australia Pty Ltd v Aus-Lid Enterprises Pty Ltd [2020] FCA 388 (Kenny J). 60 Another possible outcome is that indemnity costs are not awarded, but the amount of costs is increased in recognition that misconduct by a party has extended the hearing: see Boomerang Investments Pty Ltd v Padgett (Costs of the Liability Phase) [2021] FCA 385 at [28]-[30] (Perram J). 61 There is no point in multiplying examples further because, as the passage from Civil Properties makes plain, each case depends on its own facts and there can be no hard and fast rules. It is worth noting, though, that in most of the cases I have cited, a matter to which the court has given some weight is the extent to which the falsification of evidence or other misconduct has prolonged or even caused the trial, or has otherwise caused the successful party to incur costs. That the causal relationship between the false evidence and the incurring of costs should be relevant is unsurprising, and is consistent with the principle that indemnity costs are not awarded by way of punishment. 62 To briefly recap the findings I made about false evidence in the Main Judgment, I found that Mrs Frigger put into evidence the following three documents, which she knew she had altered or, in the case of the third, had prepared, in order to make them appear to support the applicants' case: (a) a bank statement issued by St George Bank for an account in the name of the applicants' adult daughter, Jessica Frigger, which had been altered to make it appear that it was in Mrs Frigger's name and that it bore the notation 'Frigger Super Fund' (Main Judgment [52]-[72]); (b) a financial year summary statement issued by Commonwealth Securities Ltd to which Mrs Frigger had added the notation 'Frigger Super Fund' (Main Judgment [73]-[85]); and (c) purported minutes of a meeting of the trustees of the FSF on 1 July 2014 in which the trustees accepted two real properties as in specie contributions to the FSF (Main Judgment [468]-[472]). 63 There were many other problems with the credibility of Mrs Frigger's evidence; an example is given at Main Judgment [86]-[87] and further instances appear throughout the Main Judgment. But the above three instances were the most egregious. It should be noted that there was no finding that Mr Frigger had engaged in any falsification of the above documents or was knowingly involved with the decision to put them into evidence. 64 The applicants made submissions as to why the findings as to alteration of the first two documents are wrong, but that is a matter for appeal, and for the purposes of this judgment I will proceed on the basis that the Main Judgment is correct. 65 As serious a matter as it is for a party to put falsified documents into evidence, I do not consider that in the end this significantly prolonged the trial or otherwise added to the first respondent's costs. The St George statement was not central to the applicants' case. The CommSec statement was not central to the case at the time that it was put into evidence, as the question of whether the securities referred to in it were part of the FSF was not directly in issue at that time. It only became directly in issue in September 2019, when discovering that the notation 'Frigger Super Fund' had been added by Mrs Frigger appeared to have caused the first respondent to take steps to freeze trades on the account: see Main Judgment [75], [628]-[629], [632]-[633], [637]. So by the time it became an important issue, the first respondent was aware of the falsity of the annotation. The purported minutes of the trustees' meeting could have been central to the issues around the real properties, but were dealt with effectively in cross-examination of Mrs Frigger and so did not add substantially to the length of trial. 66 That is all against a background where Mrs Frigger's credibility was always going to be in issue and the first respondent was always going to spend considerable effort to impugn it, and did expend such effort, including in relation to many matters unrelated to the three falsified documents. While, as I have said, each case will depend on its own facts, this is not a case like Calokerinos, for example, where Slattery J found (at [265]) that the fabricated evidence 'infused every part of' the proceedings. 67 Turning to the other category of the applicants' conduct on which the first respondent relies, it is certainly true that the evidence provided by the applicants was provided in a piecemeal fashion, and often late in the course of the proceedings. Much of that was a function of Mrs Frigger's repeated approach of filing an affidavit (often without leave) containing selected evidence about a certain issue, asserting that the evidence incontrovertibly established the applicants' claim, and then filing an affidavit with more evidence after flaws in the argument based on the first evidence were exposed. That approach is to be deprecated, but by the same token, allowances must be made for the fact that the applicants were self-represented litigants who had to marshal a large amount of material that, in some cases, went back in time for many years. 68 My impression is that the piecemeal approach to the provision of evidence was a reflection of the general disorganisation of the administration, documentation and files of the FSF. That disorganisation is palpable from several parts of the Main Judgment, such as [178]-[197] (concerning the identity of the trustees and members of the FSF over time); [225]-[243] (concerning balance sheets of the FSF); [244]-[257] (concerning annual returns); and [298]-[303] (concerning the mixture of transactions in the account designated BW1). While that disorganisation is regrettable, and undoubtedly increased the first respondent's costs, it is a function of the way in which the FSF was administered over many years and not clearly or mainly attributable to unreasonable conduct of the litigation. 69 Also, some of the lateness of provision of documents, and applications to reopen, seem explicable by the fact that the documents themselves could only ever have been generated after the proceeding had been commenced in March 2019, for example an annual return for the financial year ending June 2019 (Main Judgment [244]) or audits for the same financial year (see Main Judgment [259]-[260]). The first respondent gives as an example of documents 'not produced at all' the complete absence of share registry records supporting the applicants' claim. But the essential conclusion reached about that in the Main Judgment was that, although the applicants claimed that they had records of that kind, in fact such records probably never existed. So it is not a case of withholding documents: Main Judgment [408]-[412]. 70 As for the costs and delay caused by the applications to reopen and the other interlocutory applications that the applicants brought, they should generally be reflected in the costs orders made in respect of the applications themselves. To the extent that an application to reopen, say, has prolonged the proceeding and caused the first respondent to incur expense, the first respondent will be compensated by any costs order made in respect of the application. To the extent that an interlocutory application should not have been brought, say, it was open to the first respondent to seek the costs of that application on an indemnity basis. As will be seen, there were a number of interlocutory orders to which reserved costs were attached, but the first respondent did not make any submission about indemnity costs that was specific to the merits or conduct of the applications or disputes that resulted in the orders. In the circumstances of this case, at least, I see no reason to broaden out the implications of the frequent interlocutory disputation in this case to justify a blanket order for the indemnity costs of the whole proceeding. 71 For those reasons, I am not persuaded that any of the matters on which the first respondent relies warrant an order that the costs of the proceeding be assessed on an indemnity basis. That is so even if the matters are considered, as they should be, not in isolation but collectively. As required by s 37N of the Federal Court Act, I have taken into account the undoubted fact that many aspects of the applicants' conduct involved breaches of the duty imposed by s 37N(1). But while many aspects of the applicants' conduct of the proceeding have been extraordinary, I do not consider that it has been so far beyond the pale as to warrant a blanket order for indemnity costs.

Should the costs be assessed on a lump sum basis, and if so by whom? 72 The first respondent seeks an order that the costs be assessed in the manner set out in section 4 of the Court's Costs Practice Note (GPN-Costs), entitled 'Costs Obtained via a Lump-sum Costs Order'. I designate the process with that particularity because in oral submissions Mrs Frigger said that it would not be accurate just to say that the costs were to be determined on a lump sum basis, because there would have to be some sort of breakdown and the Court could not assess a proposal for costs based on a single lump sum. While that is correct (see Sandalwood Properties Ltd (Subject to a Deed of Company Arrangement) v Huntley Management Ltd (No 2) [2019] FCA 647 at [19]-[22]), referring to it as assessment on a lump sum basis is the standard nomenclature used in this Court and it is the nomenclature I will use. 73 Terminology aside, it is not clear that the applicants oppose the application for the costs to be assessed on a lump sum basis, although they do dispute that it should be conducted by the trial judge (that is, me) and were insistent that certain documents and information must be provided as part of the process. Although at one point in her oral submissions Mrs Frigger appeared to be saying that the costs should be taxed, she did not make any submission saying that a lump sum assessment would be inappropriate or why. Indeed, at another point she appeared to suggest that under para 4.10 of the practice note 'that is done automatically'. 74 In fact, the practice note says that the Court's preference is for the making of a lump-sum costs order wherever it is practicable and appropriate to do so: para 4.1. In Sandalwood Properties at [8]-[11], Colvin J summarised the relevant principles as follows: Although the preference of the Court is for the making of a lump-sum costs order, the utilisation of the procedure is always at the discretion of the judge. A lump-sum assessment is made to avoid the expense, delay and protraction of litigation which is particularly associated with satellite disputation about the quantification of costs payable in accordance with costs orders. In undertaking a lump-sum assessment the court applies a broader brush than would be undertaken on taxation or other detailed assessment by reference to individual items of costs. The lump-sum assessment, if undertaken, should ordinarily be guided by the aim of seeking to fix a sum that is proportionate to the nature of the case. The process is not to be adopted if the case is not suitable for lump-sum assessment. It will not be suitable if the Court is not persuaded that the matters advanced to support the application enable a determination that, though robust, is fair, logical and reasonable. 75 In Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at [20] the Full Court (Allsop CJ, Besanko and Middleton JJ) said: There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 76 A lump-sum costs order may also be appropriate where the proceedings are complex and where it may be more efficient for a trial judge to determine the issue of costs than to condemn the parties to a taxation: Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 at [189]; Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [10]; Innes v AAL Aviation Ltd (No 2) [2018] FCAFC 130 at [16(c)]. 77 I am satisfied that those considerations apply here so that an assessment on a lump sum basis is appropriate. This litigation consumed 12 days of trial as well as many hours spent dealing with numerous interlocutory applications. It resulted in a long judgment that dealt with three discrete sets of issues, each of which had sub-issues. The potential for satellite disputation about costs is large. The Court should make every effort to minimise the realisation of that potential. In the absence of any real submission opposing a lump sum assessment, I need not expand on those reasons. 78 As I have said, the applicants were, however, insistent that the first respondent should be required to provide all costs agreements and invoices in relation to her costs of the proceeding and proof of payment. It seems that they wish to make a submission that she is not actually liable for any costs. Counsel for the first respondent accepted that the costs agreements and any invoices that include costs that are sought to be made part of the lump sum assessment should be provided at the same time as the costs summary that is required by the process outlined in the practice note (see para 4.10). For the avoidance of doubt, I will make an order to that effect. 79 I will not, however, order that the first respondent produce all invoices for legal costs of the matter - only those on which she relies to claim any costs will be relevant. I will also not order that she provide evidence of payments, that being something else that the applicants sought. The indemnity principle that is the basis of any order for costs only requires that the party claiming the costs be liable to pay them to its legal representatives; there is no need for the costs to have been actually paid: Royal v El Ali (No 3) [2016] FCA 1573 at [37]. The orders I propose to make in this respect mean that there is no need to make separately the second order sought by the applicants at the Costs Hearing, namely an order for production of the costs agreements and invoices within seven days. 80 This is a case where it is more efficient for me as the trial judge to make the assessment in view of my knowledge of the matter. The applicants submitted that it should instead go to a registrar. That submission was based on a contention that I was unfair and biased against them in the proceeding and the trial. It was put in terms as broad as that, and was not supported by any example of the alleged bias or unfairness. I therefore do not accept it.

Reserved costs 81 As has been said, interlocutory disputation and the need to make directions in the course of these proceedings have been frequent occurrences. Some 15 sets of orders made along the way provided that costs were reserved. The first respondent seeks that those costs be ordered in her favour in all but two cases. The applicants oppose that. The parties made brief submissions in relation to most of the disputed orders. I have considered those submissions. But it would be disproportionate to the nature and value of the subject matter for this judgment to be made any longer than necessary by laborious recitation of those submissions, or by the delivery of detailed reasons in respect of each disputed reserved costs order. Instead, reasons and the outcome in relation to each reserved costs order are given in summary form in the schedule to this judgment.

Recusal application 82 It is necessary to give reasons for a decision I made at the Costs Hearing to refuse an oral application by the applicants that I recuse myself, whether for actual bias or apprehended bias was not made clear. 83 The application was prompted by a ruling that I made permitting counsel for the first respondent to make oral responsive submissions in relation to the reserved costs. 84 Mrs Frigger submitted that my ruling was unfair because I was letting the first respondent 'get away with' failing to observe s 37N of the Federal Court Act, requiring that matters should be finalised on a cost-efficient basis. Her essential complaint was that the first respondent had not put on any submissions about the point at the outset, and so should not be permitted to put on any submissions in reply to the points the applicants had made. She had earlier complained of being 'ambushed' and of the first respondent 'having a chance to do yet another bite of the cherry'. She said (without giving any particulars) that this is what happened in the trial, in that the applicants were denied natural justice, because they did not know the case they were supposed to meet. 85 I refused to recuse myself, because merely making a procedural ruling adverse to the applicants does not bespeak bias and would not without more indicate bias to a reasonable observer: see Doggett v Commonwealth Bank of Australia [2019] FCAFC 19 at [11]. Perhaps a consistent pattern of such rulings might be different, but Mrs Frigger's broad assertion about the trial did not establish any such pattern.

Should there be an order for the first respondent to recover her solicitor-client costs from the bankrupt estates? 86 As I have said, the first respondent submitted that the effect of the orders she sought would be to enable her to initially reimburse her costs from the assets of the applicants' bankrupt estates but then seek to recover costs against the applicants that will go into the pool of assets available for distribution to the creditors of those estates. While I will not at this stage make an order that the applicants are liable to pay the costs in their capacities as trustees of the FSF, that does not change the other aspect of the proposal as put by the first respondent. What she seeks is an order firstly, confirming her entitlement to draw on the assets of the bankrupt estates in order to satisfy her liability to pay the fees of her legal representatives and also confirmation that this includes the reserved costs in the proceeding, and secondly, confirmation that if she recovers costs from the applicants where the legal expenses to which those costs are attributable have already been taken from the bankrupt estates, the costs recovered must be paid into the estates for the benefit of creditors. 87 The applicants oppose this on the basis I have described above, namely that the first respondent cannot both take her costs out of the bankrupt estate and pursue the applicants for costs. They also take issue with the concept that the first respondent could put money she has recovered pursuant to any costs order against them - in Mrs Frigger's words 'outside of the bankruptcy administration' - into the bankrupt estate. The applicants also oppose it on the basis that it is unnecessary. They also say that the Court only has the power to order costs on a party-party basis or on an indemnity basis, so an order for costs on a solicitor-client basis cannot be made. 88 The conceptual difficulties of which the applicants complain are not real difficulties. I have already explained how the notion that the first respondent must choose between pursuing the applicants for costs and obtaining reimbursement out of the bankrupt estates is wrong. I do consider, however, that it is not expedient to make an order at this stage explicitly providing that any funds that the first respondent recovers from the applicants by pursuing that first course should be paid into the bankrupt estate. That is not because of any necessary conceptual difficulty but simply because I consider it premature to resolve it on a hypothetical basis. If the first respondent does obtain reimbursement for legal expenses of this proceeding out of the bankrupt estates, and also recovers a sum of money pursuant to a costs order against the applicants, no doubt she will take advice as to what she should do with the latter sum and, if there is any doubt, she may seek directions from the Court. 89 The order will also not explicitly specify that it covers reserved costs, as the first respondent seeks. That is not because there is any reason to suppose that the solicitor-client costs in respect of matters that were the subject of reserved costs orders cannot be recovered from the estates. It is merely because to specify that will, once again, conflate the first and second rights described above. To be clear, my declining to specify it does not imply any view that those costs are not recoverable. They are encompassed by the terms of the order that will be made, permitting recovery of the first respondent's solicitor-client costs generally. 90 With those qualifications, I propose to make the order sought. Stripped back to its basics, the order proposed by the first respondent merely expresses the orthodox approach in a situation such as this. The costs of a trustee in bankruptcy are governed by general law principles, with some limited modification of those principles by provisions of the Bankruptcy Act which are not presently relevant. So, the trustee in bankruptcy is entitled as of right to a full indemnity out of the trust estate against all costs, charges and expenses properly incurred: Adsett v Berlouis (1992) 37 FCR 201 at 209-210 (Northrop, Wilcox and Cooper JJ); McDonald v Young [2012] FCAFC 137 at [67]-[68] (Emmett, Middleton and Robertson JJ). I have given other formulations of the criterion for indemnity above in connection with a trustee's right of exoneration. 91 That right gives rise an equitable charge or lien over the trust assets: Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 at [32] (Kiefel CJ, Keane and Edelman JJ), [83] (Bell, Gageler and Nettle JJ), [132] (Gordon J). A trustee may exercise its right of indemnity without judicial intervention where property is not required to be sold, but the lien does not confer a power of sale, and if sale is necessary a court order or the appointment of a receiver to sell is required: Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at [44] (Allsop CJ). In the present context, however, that last proposition should be read bearing in mind that one of the essential functions of a trustee in bankruptcy is to get in the assets of the bankrupt estate and convert them into money: see Official Receiver in Bankruptcy v Federal Commissioner of Taxation (Fox's Case) (1956) 96 CLR 370 at 384. Often, then, the trustee in bankruptcy will be entitled to exercise the power of exoneration out of the assets of the bankrupt estate without the need for judicial intervention. 92 On their face, and as a general proposition, the first respondent's legal costs of defending this proceeding were properly incurred by her in the course of trust business, that is, in the course of acting as trustee in bankruptcy of the bankrupt estates. I say that as a general proposition because the first respondent will not be entitled to reimbursement or exoneration in respect of costs that are unreasonable in nature or unreasonably excessive in amount. But it is not the role of the court to police any such issues in advance. 93 Fundamentally, here, the applicants sued the first respondent in that capacity and in relation to her conduct in that role. The first respondent successfully defended all their claims. The applicants have advanced no cogent reason why the first respondent is not entitled to obtain reimbursement (recoupment) or exoneration out of the trust estates, that is, the bankrupt estates. The first respondent may well have been entitled to those costs even if she had been unsuccessful in her defence but since the first respondent has been wholly successful, that question does not even arise: see National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 279 (Williams J). 94 While there is a case to be made, as the applicants do, that the order is unnecessary, in the end that discretionary reason does not persuade me. To make an order in a proceeding confirming the trustee in bankruptcy's right to recoup the costs of a proceeding is standard (see for example Douglas-Brown) and it is appropriate for the Court to acknowledge that right in connection with the costs of this proceeding by making an order to that effect. 95 Costs to which the trustee is entitled by reason of these principles are commonly ordered to be paid on a solicitor and client basis: see the order made in Barnes at 281 and see also Lewis v Lewis (No 2) [2020] NSWSC 1519 at [34], [43]. The applicants' argument that there are only two bases of recovery under the Federal Court costs regime - party-party or indemnity - is plainly incorrect. Quite apart from the breadth of the discretion in s 43 of the Federal Court Act, r 40.02(a) of the Federal Court Rules 2011 (Cth) provides that 'A party or a person who is entitled to costs may apply to the Court for an order that costs awarded in their favour be paid other than as between party and party …'. This is not limited to indemnity costs. In any event, as I explained at the outset of these reasons, the order sought by the first respondent is not made in the exercise of the Court's power to make an order as to the costs of a proceeding before it. It is made in recognition of the right of indemnity of the trustee (in bankruptcy) out of the trust (bankrupt) estates. That is not a right as between adversarial parties to litigation and is not limited to costs on a party-party basis. 96 I will make an order confirming that the first respondent's solicitor-client costs may be paid out of the bankrupt estates.

Conclusion and the costs of the costs application 97 Orders reflecting the outcome of these reasons will be made, including orders programming the lump sum costs assessment. 98 The parties have had mixed success in relation to the contested issues about the costs of the proceeding. The first respondent's rights to costs payable by the applicants under the usual rule, and to be indemnified out of the bankrupt estates, have been vindicated. On the other hand, the first respondent has not succeeded in relation to the issue of whether costs should be paid by the applicants in their capacities of trustees and the issue of whether the costs should be paid on an indemnity basis. Those last two issues took up most of the written submissions and a large proportion of the Costs Hearing. The first respondent has been largely, but not entirely, successful in relation to the reserved costs. Therefore an allocation of costs is appropriate. 99 In allocating costs in cases of mixed failure and success, the Court will take a broad, impressionistic approach and should not strive for illusory mathematical precision: Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [52]. However in this case, the respective failures and success on both sides do not simply cancel each other out. That is because while, in the ordinary course, the first respondent would be entitled to legal costs reflecting the extent to which she succeeded, the same cannot be said of the applicants because they are self-represented: see Cachia v Hanes (1994) 179 CLR 403 at 410-411. So one set of costs cannot be set off against the other. Instead, here, it is appropriate to reflect the mixed success on the costs application by making an order against the applicants as to the costs of the costs application and the Costs Hearing, discounted by 75%. 100 Also, in any event all the arguments put by the first respondent were on their face properly put by her in the discharge of her functions as trustee in bankruptcy, including the unsuccessful arguments. The costs of the costs dispute up to this point will be expressly included in the order confirming the first respondent's right of indemnity out of the bankrupt estates. 101 The costs of the next stages in the dispute, namely the lump sum assessment, must be determined in the course of that assessment. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.

Orders made 26 April 2019 1 These were orders programming an application by the first respondent to stay the matter as a whole pending resolution of the applicants' appeal from the sequestration order. Subsequently the appeal was effectively stayed and the first respondent informed the Court that she no longer wished to proceed with the application to stay this proceeding. So the application became unnecessary due to an intervening event and was not pursued. There will be no order as to the costs of and relating to the orders of 26 April 2019.

Orders made 11 September 2019 and 24 October 2019 2 These can be dealt with together as for the most part, the first set of orders programmed an application for an interlocutory injunction that the applicants made, which was the subject of the second set of orders. The application for an injunction was dismissed, for reasons published as Frigger v Trenfield [2019] FCA 1746. The costs were reserved because it was possible that the outcome of the proceeding as a whole would have vindicated the applicants' position in relation to the interlocutory injunction application. The outcome has not vindicated the applicants' position. They have been unsuccessful both on an interlocutory basis and a final basis. The first respondent is entitled to her costs of and incidental to the application and to both of these sets of orders.

Orders made 29 November 2019 3 These orders dismissed the applicants' application for summary judgment, for reasons published as Frigger v Trenfield (No 2) [2019] FCA 2009. Once again, costs were reserved in case the ultimate outcome of the proceeding vindicated the applicants' position. It has not. In addition, orders for discovery were made substantially in terms sought by the first respondent. The applicants must pay the first respondent's costs of and incidental to the summary judgment application, the discovery application and the orders made on 29 November 2019.

Orders made on 17 February 2020 4 These orders dealt with three matters: an application by the applicants for leave to amend their originating application to add a defamation claim; orders addressing the applicants' failure to discover some documents that were the subject of the discovery orders of 29 November 2020; and discovery that the applicants sought from the first respondent. The amendment application was dismissed: Frigger v Trenfield (No 3) [2020] FCA 150. The applicants were ordered to give discovery of documents they had been resisting on the ground that the first respondent already had them, and to explain the searches they had made. As to the orders for discovery against the first respondent, the first respondent resisted the discovery the applicants sought because of its breadth, and succeeded in having the orders sought modified so as to reduce them to a scope that was reasonable in the circumstances. The first respondent was substantially successful in respect of all three matters and the applicants must pay her costs of and incidental to these orders.

Orders made 17 June 2020, 25 June 2020, 1 July 2020 and 6 July 2020 5 These orders can be addressed together because they were the result of a flurry of interlocutory activity shortly before trial. The orders of 17 June 2020 programmed the activity to a hearing after which the various issues, including further issues arising after 17 June, were determined as outlined in reasons published as Frigger v Trenfield (No 6) [2020] FCA 934. As appears from those reasons, the applicants succeeded in their application to amend to add the capacity in which they sued and to amend certain declarations sought so that the assets the subject of those declarations were not described as being held by the applicants as 'bare' trustees, but failed in respect of an amendment to add a claim which had been the subject of a reasonable offer from the first respondent. The first respondent succeeded in her application to join the second respondent to the proceeding but failed in her application to join the applicants' adult children and to join the applicants as respondents in their capacity as trustees. The first respondent also failed in her application for leave to make a cross claim. The first respondent does not seek her costs in respect of these two matters in which she failed. She succeeded in her application for discovery, but only in part. 6 So the success of each of the parties in relation to these applications was very mixed and an allocation of costs is appropriate. The approach to be taken in that situation is described in the body of this judgment. Once again, the parties' mixed success does not cancel itself out, because the applicants are self-represented. It is appropriate to reflect the parties' mixed success and failure by requiring the applicants to pay the first respondent's costs in respect of and incidental to the interlocutory applications determined by the above orders, discounted by 50%. That outcome also reflects the two matters in relation to which the first respondent is not seeking the reserved costs.

Orders made 17 July 2020 7 These orders programmed the matter to a determination as to the position of the newly joined second respondent. That was a necessary part of the conduct of the proceeding so the costs should be in the cause, meaning that the applicants will be liable to pay those costs to the first respondent.

Orders made 2 September 2020, 7 September 2020 and 9 September 2020 8 These orders were made in the course of the trial. They concerned an application to reopen prompted by the applicants' desire to rely on further documents, including documents pertaining to an audit of the FSF that had taken place in 2020. In the end the first respondent did not oppose the application to reopen, although it was necessary for several steps including further discovery by the applicants to be taken before the first respondent was satisfied that she could deal with the matter that was to be the subject of the reopening. No order as to the costs of the order made on 9 September 2020 (giving leave to reopen to tender certain documents) was made, but the parties have each addressed submissions to the costs of that order as well as the other two. All these orders were made as steps that, in essence, proved to be necessary parts of the trial. The costs of and incidental to them should be costs in the cause, so the applicants must pay those costs.

Orders made on 21 October 2020 9 These orders were made after a mention hearing which was largely about another application to reopen that the applicants made. That application was dismissed with an order that the costs of the application were to be the first respondent's in any event: Frigger v Trenfield (No 7) [2020] FCA 1740. Arguably, that order encompasses the costs of the hearing on 21 October 2020, but for the avoidance of doubt it is appropriate to say that the costs of and incidental to the hearing on 21 October 2020 should go the same way as the application to reopen. The applicants must pay those costs.

Orders made 23 April 2021 10 These orders were made at a mention to program to hearing an application by the applicants to stay delivery of judgment in the proceeding. That application was dismissed on terms that the applicants must pay the first respondent's costs in any event: Frigger v Trenfield (No 9) [2021] FCA 652. Once again, that order arguably already encompasses the costs of the hearing on 23 April 2021 but, for the avoidance of doubt, there will be an order that the applicants must pay the first respondent's costs of and incidental to that hearing.

Bankruptcy Act 1966(Cth)ss 109, 116, Schedule

At a glance

Court

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Before

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Judgment (36 paragraphs)

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Legislation Cited (5)

Cases Cited (47)