Frigger v Banning

Case [2016] FCA 359

FEDERAL COURT OF AUSTRALIA

Frigger v Banning [2016] FCA 359

File number: WAD 607 of 2015
Judge: BARKER J
Date of judgment: 13 April 2016
Catchwords: PRACTICE AND PROCEDURE – application for security for costs – relevant factors in exercise of discretion to order security for costs – order for security for costs made  
Legislation:

Corporations Act 2001 (Cth) s 447A

Federal Court of Australia Act 1976 (Cth) s 56

Federal Court Rules 2011 (Cth) R 19.01

Cases cited:

Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972; [1989] FCA 361

Mecrus Pty Ltd (ACN 088 126 756) v Industrial Energy Pty Ltd (ACN 080 687 681) and Another (2015) 327 ALR 523; [2015] FCA 103

Professional Services of Australia Pty Ltd and Another v Computer Accounting and Tax Pty Ltd (No 2) (2009) 261 ALR 179; [2009] WASCA 183

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (S)

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 4] [2015] WASCA 253

Southern Equity Pty Ltd v Timevale Pty Ltd [2015] FCA 1364

Date of hearing: 5 April 2016
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 80
Counsel for the Applicants: Mr D Crennen
Solicitor for the Applicants: Hoe Lawyers
Counsel for the Respondents: Mr TR Stephenson
Solicitor for the Respondents: Eastwood Sweeney Law

ORDERS

WAD 607 of 2015
BETWEEN:

ANGELA CECILIA THERESA FRIGGER

First Applicant

HARTMUT HUBERT JOSEF FRIGGER

Second Applicant
AND:

SANDRA MAY BANNING

First Respondent

DONALD CAMPBELL-SMITH

Second Respondent

PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD ACN 082 879 641 (and another named in the Schedule)

Third Respondent

JUDGE:

BARKER J

DATE OF ORDER:

13 APRIL 2016

THE COURT ORDERS THAT:

1.The applicants do pay into Court within seven (7) days of the date of this order the sum of $75,000 by way of security for costs in relation to the first stage of this proceeding up to and including a hearing and determination of any interlocutory application by the respondents for summary judgment and the hearing and determination of any interlocutory application of the applicants to restrain the named lawyers from acting in the proceeding, with liberty to the respondents thereafter to apply for further security.

2.The applicants do pay the respondents’ costs of this interlocutory application for security for costs to be taxed, if not agreed.

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


REASONS FOR JUDGMENT

BARKER J:

  1. On 20 October 2015, the applicants, Mrs and Mr Frigger (who may also be referred to as the Friggers) commenced this proceeding in the Federal Court of Australia against the four respondents claiming, in effect, the payment to them of legal costs “incurred and ordered to be paid” in various concluded proceedings in the Supreme Court of Western Australia, as well as in…

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AGLC
Frigger v Banning [2016] FCA 359
Case
[2016] FCA 359
Decision Date

CaseChat Overview and Summary

The case of Frigger v Banning was heard by the Federal Court of Australia. The Friggers, who are the directors of Computer Accounting & Tax, sought an order for security for costs against the Banning respondents in relation to an ongoing legal dispute. The dispute originated from a commercial transaction involving the purchase of a service station and workshop by the Friggers from PSA, which was managed by the late Martin Banning. The Friggers alleged that they were misled by Banning during the negotiations, leading to a claim for damages. The primary legal issue before the court was whether the applicants were entitled to an order for security for costs under the Federal Court Rules.

The court considered the criteria for granting security for costs, which includes the merits of the applicant’s case, the applicant's ability to meet the respondent's costs, and the respondent's ability to satisfy a potential judgment. The court also examined the financial position of the respondents, including their assets and liabilities. Given the complex nature of the case and the significant costs involved, the court found that it was appropriate to order the applicants to provide security for costs. This was to ensure that the respondents would not be unfairly disadvantaged by potentially exorbitant legal expenses if the applicants were ultimately unsuccessful in their claims. The court ordered the applicants to pay $75,000 as security for costs and also directed that the applicants pay the respondents' costs of the interlocutory application.

Orders

Orders of the court

1. The applicants do pay into Court within seven (7) days of the date of this order the sum of $75,000 by way of security for costs in relation to the first stage of this proceeding up to and including a hearing and determination of any interlocutory application by the respondents for summary judgment and the hearing and determination of any interlocutory application of the applicants to restrain the named lawyers from acting in the proceeding, with liberty to the respondents thereafter to apply for further security.

2. The applicants do pay the respondents’ costs of this interlocutory application for security for costs to be taxed, if not agreed.

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

Background

Background to the litigation

By way of interlocutory relief, they seek to restrain solicitors David Abraham Lenhoff, Cameron Victor Eastwood, Timothy Richard Stephenson and Stewart Vivyan Forbes, who have variously been involved in the above litigation against them, from representing the respondents in the proceeding on the ground they will be material witnesses at the trial of this proceeding.BACKGROUND TO THIS PROCEEDING An abbreviated background to this proceeding follows. In February 2003, the Friggers, in their capacity as directors of Computer Accounting & Tax, contacted the late Mr Martin Banning about the purchase of a service station and workshop in Osborne Park, which were owned by PSA, of which Mr Banning was the sole director. At the time of the negotiation for the purchase, the service station and workshop premises were leased to separate tenants – each lease the subject of renewal rights. On 10 March 2003, copies of the leases were provided to the Friggers. On 13 March 2003, Computer Accounting & Tax contracted to purchase the service station for a total price of $665,000. Settlement occurred on 1 May 2003. The very next day, on 2 May 2003, PSA commenced proceedings against the lessee of the service station, claiming payment of rates and taxes due under the lease. On 3 May 2003, Computer Accounting & Tax wrote to Mr Banning requesting a reduction of $20,000 in the purchase price by reason of the dispute with the lessee. On 10 July 2003, the lessee vacated the service station, causing Computer Accounting & Tax – which understood it had a continuing lease agreement with the lessee – to give it a notice of default on 16 July 2003. On 31 July 2003, Computer Accounting & Tax terminated that lease by reason of the lessee’s failure to remedy the default. On 15 July 2003, Mr Frigger agreed to reduce the rental paid by the second lessee, in respect of the workshop, to $1,200 per month, pursuant to the request in his letter dated 25 June 2003. On 6 August 2003, Mr Frigger informed that lessee the reduction of rent due under his lease no longer applied. On 15 September 2004, Computer Accounting & Tax gave notice of default to that lessee as a result of his failure to punctually pay rent. After Computer Accounting & Tax recovered possession of the workshop, it remained vacant until June 2006, when it was leased to a new lessee for a term of seven months. After that term expired, subsequent attempts to lease the workshop were not successful. In 2003, in what became CIV 2265/2006 in the Supreme Court, the Friggers sued PSA and Mr Banning personally for damages for misleading and deceptive conduct under consumer legislation. On 9 July 2008, the trial judge, Simmonds J, found that Mr Banning, acting on behalf of PSA, made misleading and deceptive representations to Computer Accounting & Tax in contravention of the Trade Practices Act 1974 (Cth) and/or the Fair Trading Act 1987 (WA) during the course of those negotiations. In the result, Simmonds J ordered damages in Computer Accounting & Tax’s favour in the sum of $675,078 together with interest (trial judgment sum) payable by PSA and Mr Banning. See Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In the result, Simmonds J ordered damages in Computer Accounting & Tax’s favour in the sum of $675,078 together with interest (trial judgment sum) payable by PSA and Mr Banning. See Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133. On 8 September 2008, Mr Banning passed away, with the result that Mr Donald Campbell‑Smith was appointed executor of his estate. In 2008, in CACV 76/2008, PSA and Mr Campbell-Smith, on behalf of Mr Banning’s estate, appealed to the Court of Appeal of the Supreme Court from the judgment of Simmonds J. Soon after this, on 7 November 2008, PSA was placed into voluntary administration. On 27 November 2008, Mr Holbrook was appointed administrator of PSA. On 20 March 2009, a DoCA was executed, the effect of which was to bring the administration of PSA to an end. The DoCA was between PSA, Banning Holdings Pty Ltd, Mr Holbrook and Baystar Holdings Pty Ltd. Before this Court, cl 6.13 of the DoCA is said by the parties to be at the “core” of the matters in issue. Clause 6.13 provided that:That notwithstanding anything contained in this Deed appearing to the contrary, the payments to be made to [Computer Accounting & Tax] by Banning Holdings shall be ‘without prejudice’ to the rights of [PSA] and the estate of [Mr Banning] to pursue the Appeal [being the appeal to the Court of Appeal against the decision of Simmonds J]. Should the Appeal result in a reduction of the judgment sum payable to [Computer Accounting & Tax] any amount owing to [PSA] and/or the estate of [Mr Banning] by [Computer Accounting & Tax] as a result may be set-off against any other amount which would otherwise be payable pursuant to this Deed. One of the pre-administration creditors was Computer Accounting & Tax, in respect of the trial judgment sum, plus the taxed costs of the proceeding before Simmonds J. On 2 and 5 June 2009, PSA paid to Computer Accounting & Tax the sum of $1,165,661.54 as the trial judgment sum. On 24 June 2009, at a meeting of PSA’s creditors, the DoCA was amended. On 23 October 2009, in Professional Services of Australia Pty Ltd and Another v Computer Accounting and Tax Pty Ltd (No 2) (2009) 261 ALR 179; [2009] WASCA 183, the Court of Appeal allowed the appeal and made the following orders with the parties’ consent: 1.The appeal against the judgment of Simmonds J be allowed.2.Order 1 of the orders made by Simmonds J on 10 July 2008 be set aside.3.In lieu of the order referred to in paragraph 2 hereof, it is ordered that:1. The defendants do forthwith pay to the plaintiff:1.1 The sum of $280,625.00 together with the sum of $87,370.48 being interest at the rate of 6 per cent per annum from 1 May 2003 to 9 July 2008, and thereafter $46.13 per day from 9 July 2008 to the date of payment.1.2 The sum of $4,999.50 together with the sum of $1,444.24 being interest thereon at the rate of 6 per cent per annum from 15 September 2003 to 9 July 2008, and thereafter $0.82 per day from 9 July 2008 to the date of payment.…7. The amount of $38,000.00 paid into court by the appellants on 10 December 2008 as security for the respondent’s costs of the appeal to be paid out of court to the appellant’s solicitors forthwith.

Ratio Decidendi

Legal Principle Established

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