Frigger v Trenfield

"4. In in the fixing of the second respondent's costs on a lump sum basis pursuant to paragraph 3 [of the costs order], the registrar do so on the basis that those costs be fixed on an indemnity basis."

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. I had thought, when delivering ex tempore reasons in respect of costs on 13 December 2024 (Frigger v Trenfield (No 9) [2024] FCA 1486) (earlier costs judgment), as a sequel to my dismissal earlier that day (Frigger v Trenfield (No 8) [2024] FCA 1438) (dismissal judgment) of the substantive application made by Mr and Mrs Frigger, that the orders as to costs then made brought to an end my involvement in this proceeding. Not so it has proved.
2. These reasons for judgment must be read in conjunction with the dismissal judgment and with the earlier costs judgment.
3. Two interlocutory applications have been filed after 13 December 2024. By an interlocutory application filed on 14 January 2025, the second respondent, Mr Mervyn Jonathan Kitay, in his capacity as liquidator of Computer Accounting and Tax Pty Ltd (in liq), in which he seeks the following orders:

1. Pursuant to r 39.05(h) of the Federal Court Rules 2011 (Cth) (Federal Court Rules):

(a) order 2 of the orders made by the Court on 13 December 2024 with respect to costs be set aside; and > > (b) in place of that order, it is ordered that the second respondent's costs be paid out of the estates of the bankrupts on an indemnity basis, with the same priority accorded by s 109(1)(a) of the Bankruptcy Act 1966 (Cth) (the Act) to the trustee's costs.

1. In the alternative to Order 1, pursuant to r 40.02(a) of the Federal Court Rules, for the purposes of order 3 of the orders made by the Court on 13 December 2024 with respect to costs, when fixing the second respondent's costs, the registrar do so on an indemnity basis.

3. Such further or order orders as the Court deems fit.

[emphasis in original]

1. To give context to Mr Kitay's application, it is necessary to set out the terms of the orders made on 13 December 2024 in respect of costs:

1. The first respondent's costs be paid out of the estates of the bankrupts.

1. The second respondent's costs be paid out of the estates of the bankrupts, with the same priority accorded by s 109(1)(a) of the Bankruptcy Act 1966 (Cth) to the trustee's costs.
2. In each instance, the costs for which this order provides be fixed by a registrar on a lump sum basis.

1. For their part, the applicants, Mrs Angela Cecilia Theresa Frigger and Mr Hartmut Hubert Josef Frigger, filed an application on 15 January 2025, by which they seek these orders:
   1. Pursuant to the order of the 13 December 2024 that the Second Respondent's cost be paid from the bankrupt estates;
   2. The Applicants apply for security of $25,000 plus accrued interested be paid out to the Applicants forthwith.

1. Upon the filing of these interlocutory applications, I made provision for the filing of written submissions by the interested parties with the applications then to be determined on the papers without an oral hearing.
2. It is convenient first to deal with the application made by Mr and Mrs Frigger.
3. In a sense, Mr and Mrs Frigger have, with respect, done the administration of justice a service by their application. That is because, at the time when I made the orders as to costs on 13 December 2024, it was not drawn to my attention either by them or by counsel on behalf of the second respondent that, on 13 July 2021, for reasons published that day (Frigger v Trenfield [2021] FCA 792), Colvin J had made, on Mr Kitay's application, orders which materially included the following:
   1. Pursuant to r 19.01 of the Federal Court Rules 2011 (Cth), the applicants are to provide the second respondent with security for their costs of and incidental to defending this proceeding in the sum of $25,000.
   2. The security referred to in order 1 is to be provided by payment into Court or the provision of an unconditional bank guarantee from an Australian trading bank.

3. Security is to be provided on or before 26 July 2021.

1. Until the provision of security in accordance with these orders, the proceeding is stayed.
2. The applicants pay the second respondent's costs of and incidental to this application

1. That is not to say that the orders sought by Mr and Mrs Frigger on their application should be granted.
2. Colvin J had docket responsibility for this proceeding on 13 July 2021. Such has been the plethora of interlocutory orders made by me and other judges in this proceeding since then that the omission of making provision in respect of the fate of the funds provided by way of security for Mr Kitay's costs can, in terms of r 39.05(h) of the Federal Court Rules 2011 (Cth) (Rules) truly be characterized as "an error arising in a judgment or order from an accidental slip or omission". As that rule provides, the error is one which can be corrected even though the order in respect of costs has been entered. It is not hard to see how, in all of the events which had transpired since 13 July 2021 and in the immediacy of dealing with costs after the making of the substantive order of the dismissal of Mr and Mrs Friggers' application, the existence of a long beforehand made security for costs order escaped counsel's attention or that of Mr and Mrs Frigger. It certainly otherwise separately escaped mine.
3. Not to have made provision in respect of the sum provided as security was an error. The question is how to address that error?
4. Given that their application was dismissed, it would hardly be just to order, as they promote, that the sum be paid to Mr and Mrs Frigger. That would be subversive of the costs discretion already having been exercised in a way that saw costs following the event (the event being the order of dismissal) and an order made in favour of Mr Kitay on 13 December 2024. It would also be subversive of the Court's evident intention in ordering Mr and Mrs Frigger to provide security for Mr Kitay's costs.
5. Thus, one order which should be made is that, upon the fixing of the amount of Mr Kitay's costs, either by agreement or the registrar if the sum fixed exceeds $25,000, the sum of $25,000 paid into court by way of security be paid out to the second respondent by way of reduction of the applicants' liability in respect of costs and, if that sum be fixed in an amount less than $25,000 then, from the amount of $25,000 paid into court by way of security, that lesser amount be paid out to the second respondent by way of satisfying the applicants' costs liability with the balance of the said sum of $25,000 being paid out to the applicants. There is no reason to vary the existing provision that Mr Kitay's costs be paid out of the bankrupt estates of Mr and Mrs Frigger with the same priority accorded by s 109(1)(a) of the Bankruptcy Act 1966 (Cth) to the trustee's costs, to the extent that the amount of $25,000 paid into court is less than the lump sum the registrar comes to fix by agreement or otherwise.
6. It follows that the orders sought by Mr and Mrs Frigger on their application should not be made. To have promoted those orders burdened Mr Kitay with the additional burden of the preparation and filing of submissions to resist that application, which should be compensated by an order for costs in his favour.
7. The question as to whether to vary the costs order made in favour of the second respondent so as to provide that the lump sum as fixed by the registrar be fixed on an indemnity basis is a little more complicated.
8. Looking at the transcript of 13 December 2024 and based on a very particular recollection of events that day, I had thought that I had extended an invitation to each of the respondent parties about whether they sought a special order as to costs. However, I can see how counsel for Mr Kitay may have been confused in relation to seeking an order that his client's costs be fixed on an indemnity basis.
9. In any event, and as was correctly put on behalf of Mr Kitay, the use of a "slip rule" such as r 39.05 in the Rules is not confined to the correction of orders which do not give effect to the intention of the judicial officer who constituted the Court; the rule may also be used in an appropriate case to remedy an injustice which would otherwise be visited on a party arising from inadvertence on the part of that party's legal representative: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard v DDB Needham), at 391 (Lockhart J); Notaras v Barcelona Pty Ltd (No 2) [2019] FCA 617 (Notaras v Barcelona), at [34] - [41] (Robertson J).
10. Mawhinney v Australian Securities and Investments Commission (No 2) [2022] FCAFC 205 (Mawhinney) offers an example of the use of r 39.05(h) of the Rules to provide for the awarding of costs on an indemnity basis even though costs had not originally been sought on that basis and the resultant original order for costs had been entered. However, there was also reference in that case to r 40.01 and r 40.02. These Rules provide:

If an order is made that a party or person pay costs or be paid costs, without any further description of the costs, the costs are to be costs as between party and party.

Note: Costs as between party and party is defined in the Dictionary.

A party or a person who is entitled to costs may apply to the Court for an order that costs:

(a) awarded in their favour be paid other than as between party and party; or

(b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; or

(c) be determined otherwise than by taxation.

Note 1: The Court may order that costs be paid on an indemnity basis.

Note 2: The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory.

1. In Mawhinney, at [45], O'Bryan and Cheesman JJ expressed a provisional view that, "On its terms, r 40.02 would appear to empower the Court to exercise its discretion to permit the applications that have been made by the Interested Persons notwithstanding that [the existing costs order] was pronounced and entered". Ultimately, however, as is also revealed at [45], their Honours acted under r 39.05(h) in circumstances where there had been confusion on the part of counsel at the time when judgment was delivered.
2. In my view, the absence of provision for costs to be fixed on an indemnity basis arose via a combination of inadvertence of counsel and miscommunication or misunderstanding as between bench and Bar. So I do not absolve myself from a role in what transpired. It is just one of those disjuncts that, in the Law as in life generally sometimes happens in good faith.
3. But what if the omission relates to a failure to seek an order which required the exercise of a judicial discretion?
4. In Australian Securities and Investments Commission v Mitchell (No 4) [2021] FCA 1387, at [8], with reference to Endresz v Commonwealth [2019] FCAFC 197; (2019) 273 FCR 286, at [80] - [82], Beech J apprehended that r 39.05(h) would only be an apt foundation for the making of an order which changed the basis upon which costs would be taxed or fixed in circumstances where the discretion could only ever have been exercised one way. In other words, on this view if there were room for debate, the slip rule is not apt.
5. However, and with respect, if as Elyard v DDB Needham and Notaras v Barcelona allow, a slip rule is apt to cover circumstances in which by inadvertence counsel did not make an application, that surely must extend to the making of an application which would have entailed the exercise of a judicial discretion. Axiomatically, the exercise of the power conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) to make an order with respect to costs entails the exercise of a discretion. Mawhinney offers an example of the exercise of such a discretion.
6. For the reasons given, I prefer the approach in Mawhinney and regard r 39.05(h) as an applicable and sufficient source of authority for the application to be made and determined. However, and for the avoidance of any doubt, adopting the view provisionally expressed about r 40.02 in that case, I consider that rule provides an alternative source of authority for Mr Kitay's application to be made and determined.
7. The circumstances in which it is apt to order that costs be determined on an indemnity basis are open-ended and can be found in unreasonable conduct in litigation: see, for example and notably, Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, at 233-234 (Sheppard J). In the dismissal judgment, at [83], I expressed the view that the present was a vexatious proceeding. Notwithstanding the further submissions made by Mr and Mrs Frigger, I see no reason to depart from that view. This is one of those cases in which an order for costs to be fixed on an indemnity basis was always apt if the same were sought. Now that it clearly has been by Mr Kitay, it is apt to make provision for the Registrar to fix the second respondent's costs on this basis.

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.