Kitay (Liquidator) v Frigger, in the matter of Frigger

1. The application for a costs order pursuant to the liberty reserved by order 3 of the orders dated 20 July 2018 is refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 On 11 July 2018, sequestration orders were made against the estates of Mrs and Mr Frigger: Kitay, in the matter of Frigger (No 2) [2018] FCA 1032. The order reserved liberty to certain supporting creditors to apply for orders for costs. On 28 November 2023, solicitors acting for four supporting creditors sought to exercise that liberty. An affidavit of Mr Eastwood, a lawyer acting for the respondents deposed an affidavit in support of the application for a costs order. The costs involved were said to be of the order of $20,000. 2 I determined that the application should be refused and indicated that I would provide my reasons for doing so. These are my reasons. 3 As to the delay of more than five years in bringing the application, the affidavit in support of the application said: Prior to making this application the Firm has attempted to resolve the issues as to costs with the trustees in bankruptcy for the Respondents and as at the date of this affidavit there is no agreement with respect to the quantum of costs with the trustee in bankruptcy recently advising that it would expect any costs to be taxed. I consider the correspondence indicates that the trustees in bankruptcy of the Respondents will not resolve the issues as to costs without this Court making an appropriate ruling. 4 Mrs Frigger deposed an affidavit in opposition. Amongst other things, it attached copies of two letters from the firm of solicitors acting for the respondents to the trustee in bankruptcy of the sequestrated estates of Mrs and Mr Frigger. The first was dated 5 December 2018. It sought the trustee's consent to cost orders in favour of the respondents. It said: Once the enclosed Orders are made we will negotiate with you regarding the quantum of the costs sought by our clients in the hope that the quantum of those costs can be agreed without the need for taxation. 5 The second letter was dated 12 May 2023. It began as follows: We thank you for your report to creditors dated 13 April 2023 in which you requested amongst other things proofs of debt to be lodged with you. We enclose herewith two more of a number of proofs of debt which we will be lodging on behalf of our various clients. As you know from correspondence, we have sent you in the past 5 years which you have largely ignored or refused to engage with we represent a significant number of creditors owed substantial debts by Mr and Mrs Frigger which are claimable in their bankruptcies. 6 It then provided an explanation as to what had occurred concerning the liberty to apply for costs that had been reserved in the order made on 11 July 2018. Amongst other things, it said: As you can see from the final orders made by Justice Colvin our clients were granted liberty to apply to seek costs orders, but, due to issues as to funding we have never gone back to the Federal Court to seek those orders on behalf of our clients albeit that it is still technically possible to do so. In our opinion the most appropriate way to proceed at this point is to attempt to agree the costs of the proceedings with you. In that regard we previously wrote to you on 5 December 2018 (copy letter attached) in an attempt to resolve these matters and confirm that our clients are still prepared to resolve them essentially on the same basis as previously, but, we now believe that it is more appropriate for the costs to be fixed rather than taxed. Therefore, we confirm that our clients are prepared to accept the amount of $21,866.50 in full & final satisfaction of that debt. It is that amount which is claimed in the enclosed proof of debt in relation to this Order. 7 No explanation was proffered for the very considerable delay in bringing the present application. 8 Issues arose as to the position of one of the respondents, Mr Donald Campbell-Smith who, it appears, may have been mentally incompetent at the time and who has since passed away. Issues also arose as to the role played by the respondents and whether some of the costs related to the attendance by the solicitor as a deponent to an affidavit rather than as legal representative. It seemed likely that it would be necessary to investigate the circumstances at the time that the petition was heard in order to form a conclusion as to the extent to which some assistance had been provided by the supporting creditors for the purposes of the hearing of the petition or there was some other reason to justify the costs order. That is to say, it was not the case that an order would be made in favour of a supporting creditor unless there was some particular justification for doing so. 9 To the extent that the reasons given at the time of making the sequestration order dealt with evidence provided by the supporting creditors (by affidavits of the solicitor acting for them), those reasons indicated that the evidence had not been of assistance: Kitay (No 2) at [12]-[15]. Other matters advanced in support of the application were not the subject of any evidence. 10 Mrs and Mr Frigger opposed the making of the order. However, the order was sought by the supporting creditors on the basis that it would be met from the assets of their sequestrated estates. The trustee of those estates did not appear. That is a further reason for refusing the application. It would be a considerable burden to now call on the trustee to consider whether to oppose the making of an order said to be justified by events that occurred many years ago, especially having regard to the amount involved. 11 In those circumstances, I was not persuaded that a reasonable basis had been made out to justify the exercise by the Court of its discretion as to costs by the making of the costs order that was sought. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.