Frigger v Trenfield

1. The respondent be released from her undertaking given to the Court in these proceedings and noted in the order of the Court made on 16 December 2021.
2. The appellants pay the respondent's costs of this application to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

FEUTRILL J 1 On 16 December 2021 the respondent (Ms Trenfield) gave an undertaking to the Court in her capacity as trustee of the bankrupt estates of each of the first appellant (Mrs Frigger) and second appellant (Mr Frigger) to take no steps to dispose of, transfer or otherwise deal with the shares held by Commonwealth Securities Limited in Portfolio 270815 without first giving 30 days prior notice to the Friggers. That undertaking was subject to Ms Trenfield complying with any court order concerning the CommSec shares and Ms Trenfield having liberty to apply on notice to vary or be released from the undertaking: Frigger v Trenfield (Application for Stay Pending Appeal) [2021] FCA 1605 (Frigger No 1 WAD 278/2021). By an interlocutory application made on 8 May 2023, Ms Trenfield applied, on notice to the Friggers, to be released from that undertaking. These reasons concern that application. 2 On 20 July 2018 a sequestration order was made against the Friggers' respective estates. On 31 August 2018 Ms Trenfield and Mr Paul Allen were appointed as joint and several trustees of each of the estates in bankruptcy. On 19 March 2020 Mr Allen ceased to be a trustee and Ms Trenfield continued as the sole trustee in bankruptcy of each estate. On 26 July 2021, by operation of s 149 of the Bankruptcy Act 1966 (Cth), the Friggers were discharged from bankruptcy. However, the assets of the bankrupt estates, which had vested in the trustee in bankruptcy, continue to be administered by Ms Trenfield as trustee. 3 In 2019 Mrs Frigger commenced proceedings against Ms Trenfield, as trustee. Later, Mr Frigger was joined and added as an applicant in those proceedings. In substance, the Friggers sought declarations to the effect that certain disputed assets were not divisible amongst their creditors pursuant to s 116(2)(d)(iii)(A) of the Bankruptcy Act because those assets formed part of their interests in the assets of a registered superannuation fund, the Frigger Superannuation Fund (FSF). On 1 December 2021 the Friggers' originating process, as amended, was dismissed: Frigger v Trenfield (No 10) [2021] FCA 1500. The effect of that judgment was to confirm that the disputed assets, including the CommSec shares, had vested in Ms Trenfield as trustee in bankruptcy of each of the estates. 4 In December 2021 the Friggers commenced an appeal in these proceedings and made an interlocutory application for a stay of the primary judge's judgment pending resolution of the appeal. Although framed as a stay, in effect, the Friggers sought an interlocutory injunction restraining Ms Trenfield from selling the CommSec shares, from paying amounts from the estates in respect of the costs of the administration, from doing anything that would affect their claim on the disputed assets and from making any distribution to creditors from the estates. The relevant question on that application was whether the appeal would be rendered nugatory in the absence of a stay or interlocutory injunction. On 16 December 2021, based on the undertaking, the Friggers' application for a stay or interlocutory injunction was dismissed because, assuming that there was sufficient merit in the grounds of appeal to otherwise warrant the grant of an injunction, the Court was not satisfied that there was any real risk that steps would be taken on the basis of the correctness of the primary judge's decision that would mean funds could not be recovered if the appeal was successful: Frigger No 1 WAD 278/2021. 5 On 24 March 2023 the appeal was dismissed: Frigger v Trenfield (No 3) [2023] FCAFC 49 (Frigger No 3 WAD 278/2021). As already mentioned, on 8 May 2023, Ms Trenfield applied to be released from the undertaking on the ground that the foundation for the undertaking (uncertainty of the correctness of the primary judge's decision about the CommSec shares) had been resolved in her favour. Ms Trenfield also filed an affidavit in support that was read (over the Friggers' objection) at the hearing of the application. 6 Ms Trenfield deposes that she has complied with the undertaking. She deposes that she has requested that any creditors of the Friggers' estates lodge formal proofs of debt. She deposes that she wishes to be released from the undertaking in light of her intention to commence the process of adjudication of proofs of debt. She also deposes that, on 20 April 2023, the Friggers made an application to the High Court of Australia for special leave to appeal from the judgment in Frigger No 3 WAD 278/2021 and to various correspondence that passed between her solicitors and the Friggers which is exhibited to her affidavit. 7 The Friggers oppose the application on a number of grounds raised in oral submissions. Also, as the oral hearing of the application was not completed within the allocated time, the Friggers were permitted to file written submissions to deal with any points that they had not been able to raise during the oral hearing. The respondent was also permitted to file written submissions in reply. The Friggers filed written submissions dated 29 May 2023 and an affidavit of Mrs Frigger of the same date. Ms Trenfield filed submissions in reply dated 31 May 2023. While the Friggers were not granted leave to file Mrs Frigger's affidavit, as no objection was taken to it in Ms Trenfield's submission in reply and it provides the asserted factual foundation for certain of the Friggers' written submissions, I take it as read on the application without objection. 8 The Friggers submit that they have made an application to the High Court for an order for a stay of the Full Court's judgment in Frigger No 3 WAD278/2021 and that this Court should not release Ms Trenfield from the undertaking pending determination of that application in the High Court. For the purposes of that submission, I accept that a single judge exercising appellate jurisdiction may make an interlocutory order in the form of a stay or interlocutory injunction pending resolution of an application for special leave to appeal from a judgment of this Court. However, after hearing the application, on 3 August 2023, the High Court refused the Friggers' application for special leave to appeal and dismissed their application for a stay of the judgment: Frigger v Trenfield [2023] HCASL 110. 9 On 10 October 2023, during a hearing in a related proceeding (WAD 85 of 2022), I drew the parties' attention to the High Court's refusal of special leave and asked if any party had any objection to the Court taking into account the fact of that refusal when considering the resolution of the present application in these proceedings. Neither party had any objection. Accordingly, the primary ground for the Friggers' opposition to releasing Ms Trenfield from the undertaking is no longer of any force or relevance. Moreover, there can no longer be any doubt about the correctness of the primary judge's judgment. 10 The Friggers also oppose the release on the ground that there is a condition of the undertaking to the effect that Ms Trenfield promises not to deal with the CommSec shares until after adjudication of the creditors' proofs of debt in the administration of the estates. The Friggers submit that condition has not been fulfilled and, otherwise, the balance of convenience favours maintaining the undertaking that restrains Ms Trenfield from dealing with the shares. The Friggers make a number of submissions, largely based on assertions of inappropriate administration or absence of authority to administer each of the estates, as the grounds upon which they contend the balance of convenience lies in their favour. These grounds may be summarised as follows. 11 Ms Trenfield, as an insolvency practitioner and officer of the Court, is obliged to give full and frank disclosure to the Court of the factual basis and background to her application to be released from the undertaking. The Friggers submit Ms Trenfield has failed to do so for various reasons. 12 The Friggers contend that Ms Trenfield has been 'coy' about her intentions concerning the CommSec shares. They submit that at the time the undertaking was given, Ms Trenfield had represented that she had no intention of dealing with the CommSec shares before she had adjudicated on proofs of debt. However, she now deposes that she wishes to be released before adjudicating on proofs of debt without providing any explanation as to what, if anything, has changed since December 2021. 13 The absence of disclosure of her intentions is also in a context in which, so the Friggers submit, Ms Trenfield is only permitted to take possession of assets necessary to discharge the debts of the creditors of the bankrupt estates and she is already in possession of more than sufficient assets for that purpose. Further, the Friggers contend that Ms Trenfield is not entitled to pay the trustee remuneration out of the assets of the estates because she is an employee of FTI Consulting and the remuneration she intends paying comprises costs and expenses of FTI Consulting, which is not the trustee in bankruptcy, and are those of Ms Trenfield as trustee. 14 Additionally, the Friggers submit that Ms Trenfield is in breach of r 42-40 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) (IPR) because she has a conflict of interest between her capacity as trustee in bankruptcy and as an employee of FTI Consulting and that she has realised assets of the bankrupt estates before adjudicating proofs of debt and in circumstances in which she has no entitlement to pay FTI Consulting's costs of the administration. Further, Ms Trenfield obtained creditor approval to pay remuneration without notice to H & A Frigger Pty Ltd (the appellants' company and asserted creditor) about the approved remuneration, without lodging a remuneration claim notice as required by r 70-47(3) of the IPR and in circumstances in which FTI Consulting is, in effect, acting as trustee without registration. The Friggers submit that Ms Trenfield failed to inform the Court of any of these matters. 15 The Friggers submit, in substance, it is to be inferred from the above matters that Ms Trenfield wishes to obtain possession of the CommSec shares for a collateral purpose of disposing of them and using the proceeds to pay, amongst other things, remuneration to which she or FTI Consulting is not entitled before the resolution of other proceedings the Friggers have commenced in this Court in which they seek orders setting aside or annulling the sequestration orders. 16 The Friggers submit that if Ms Trenfield deals with the CommSec shares it will trigger a capital gains tax event. The Friggers submit that they will be prejudiced by that event and if it takes place that prejudice cannot be reversed. 17 The Friggers submit that the benefits to be obtained from disposal of the CommSec shares do not outweigh the prejudice to them. In these circumstances, Ms Trenfield should not be released from the undertaking. 18 For the reasons that follow, I do not accept the Friggers' submissions and Ms Trenfield should be released from the undertaking. 19 An undertaking is given to the Court. It may be accepted in lieu of the grant of injunctive relief against the party giving the undertaking. An undertaking has the same effect as an injunction. As such, non-compliance may be enforced by contempt proceedings: Thomson Australian Holdings Pty Ltd v Trade Practices Commission [1981] HCA 48; (1981) 148 CLR 150 at 164-165. Nonetheless, the Court has undoubted power to release a party from an undertaking given in lieu of an interlocutory injunction: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 177-178 (Gibbs CJ, Aickin, Wilson and Brennan JJ). 20 The same principles that govern the grant of an injunction guide the Court as to whether to accept an undertaking. Limitations which affect the Court's jurisdiction or power to grant an injunction are to be observed in the acceptance of an undertaking: Thomson at 165. It follows that the principles that apply to varying or discharging interlocutory injunctions also guide the Court's power to vary or release a party from an undertaking. Therefore, '[j]ust as an interlocutory injunction continues "until further order", so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust': Adam Brown at 178. 21 In Frigger No 1 WAD 278/2021 Colvin J (at [10]) summarised the approach to an application for an interlocutory injunction pending the outcome of an appeal in the following terms: In Barngarla Determination Aboriginal Corporation RNTBC v District Council of Kimba [2019] FCA 1585 at [27]-[38], I reviewed the authorities concerning the general principles to be applied when considering whether to grant an injunction pending the hearing of an appeal. Prima facie, a successful party is entitled to the fruits of its success. A stay or injunction pending appeal is granted to protect the right to an appeal. Therefore, there must be shown to be some risk of an event occurring that may jeopardise the subject matter of the appeal and there must be merit in the appeal. Some cases, especially those in Western Australia (which have been approved of in this Court) use the term 'special circumstances' to describe what is required. Having regard to the approach in the decided cases, I summarised the required approach at [39]-[40]: Therefore, it is necessary for the applicant for injunctive relief pending the outcome in an appeal to demonstrate (a) the ultimate benefit of a successful exercise of the appeal right is in jeopardy if there is no injunction; (b) there is sufficient strength in the argument to the effect that there was error in the primary decision to contemplate a restraint upon its being given effect; and (c) a sufficiently serious consequence for the applicant if an injunction was not granted to justify depriving a party until the outcome of the appeal is known of the benefit of what is a considered determination of the issues after a final hearing. Whether these matters together be described as a requirement that there be 'special circumstances' may be a matter of semantics. Finally, whether an appeal right would be rendered nugatory if an injunction were not granted is a matter to be adjudged in a practical way having regard to the consequences to the appellant if the appeal was to succeed in circumstances where the respondent had taken steps on the basis of the correctness of the decision of the primary judge. 22 As is revealed in the required approach to which Colvin J referred, in the context of a pending appeal, the underlying rationale for the grant of an interlocutory injunction is to prevent injustice arising from an appellant ultimately being deprived of the benefit of a successful appeal. Colvin J assumed, without expressing a view, that there was sufficient strength in the arguments to be advanced in the appeal to contemplate placing a restraint upon giving effect to the primary judge's judgment. However, he was not satisfied that the outcome of a successful appeal was in jeopardy because, amongst other things, due to the undertaking, there was no threat of steps being taken that may call into question whether the right of appeal would be jeopardised: Frigger No 1 WAD 278/2021 at [12], [17], [21]. 23 The appeal has now been resolved in favour of Ms Trenfield. Special leave to appeal from that judgment has been refused. Therefore, any foundation for the grant of an interlocutory order restraining Ms Trenfield from acting upon the correctness of the primary judge's decision has been removed. Likewise, there is no foundation for continuation of an undertaking given to the Court, in substance, not to act upon the correctness of that decision. 24 While there is no express term of the undertaking that places any temporal or other condition on its operation, it is expressly subject to variation or release. In circumstances in which there is no continuing foundation for an interlocutory order restraining the trustee in bankruptcy from acting on the correctness of the primary judge's decision plainly, it would be unjust to enforce or continue the effect of the undertaking beyond the resolution of the appeal. 25 I do not accept the Friggers' submission to the effect that there is a condition of the undertaking that it operates, irrespective of the outcome of the appeal, until after adjudication of the creditors' proofs of debt. While it may have been Ms Trenfield's intention at the time the undertaking was given not to deal with the CommSec shares until after adjudication of the creditors' proofs of debt and that may have been a reason that she was prepared to proffer the undertaking, it is not an express condition of the undertaking. Nor does such a condition arise by necessary implication. 26 The Friggers' interlocutory application sought a stay of the primary judge's judgment 'pending the resolution of the appeal'. In that context, the undertaking was given in lieu of an interlocutory order that would otherwise have operated 'pending the resolution of the appeal'. Therefore, if any condition of the undertaking that arises, by necessary implication, it is to the effect that it operates 'pending the resolution of the appeal'. Accordingly, in the circumstances, again, there is no foundation for continuation of the undertaking now that the appeal has been resolved against the Friggers. 27 It follows that no question of the balance of convenience or risk of prejudice to the Friggers arises for consideration and it is not necessary to address the merits, or otherwise, of the Friggers various submissions and assertions about the conduct of the administration of their bankrupt estates. Moreover, there is no relevant risk of injustice arising from the trustee in bankruptcy acting on the correctness of the primary judge's judgment because the correctness of that judgment is not in doubt. 28 The application must be allowed. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.