Frigger v Kitay
[2016] WASC 60
•2 MARCH 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FRIGGER -v- KITAY [2016] WASC 60
CORAM: LE MIERE J
HEARD: 23 NOVEMBER & 4 DECEMBER 2015
DELIVERED : 2 MARCH 2016
FILE NO/S: CIV 1606 of 2015
BETWEEN: ANGELA FRIGGER
First Plaintiff
HARTMUT FRIGGER
Second PlaintiffAND
MERVYN JONATHAN KITAY
Defendant
Catchwords:
Leave to proceed against court appointed liquidator - Turns on own facts
Leave to bring application out of time - Permanently stay proceedings - Strike out application - Abuse of process - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Personal Property Securities Act (Commonwealth Laws) Act 2011 (WA)
Rules of the Supreme Court 1971 (WA)
Trustees Act 1962 (WA)
Result:
Leave given for defendants to bring application out of time
Leave for plaintiffs to proceed refused
Proceedings permanently stayed
Category: B
Representation:
Counsel:
First Plaintiff : In person 25 November 2015
No appearance 4 December 2015
Second Plaintiff : In person 25 November 2015
No appearance 4 December 2015
Defendant: Mr D W John
Solicitors:
First Plaintiff : In person
Second Plaintiff : In person
Defendant: Herbert Smith Freehills
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133
Computer Accounting and Tax Pty Ltd (in Liq) v Professional Services of Australia Pty Ltd [No 8] [2015] WASC 166
Frigger v Mervyn Jonathon Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 5] [2014] WASC 195
Manone v Pantzer [2001] NSWSC 26; (2001) 36 ACSR 743
Mineralogy Pty Ltd v Sino Iron Pty Ltd (2015) WASC 454
Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93
Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38
Re Computer Accounting and Tax Pty Ltd; Ex parte Mervyn Jonathan Kitay in his capacity as liquidator of Computer Accounting and Tax Pty Ltd [2014] WASC 169
LE MIERE J: The defendant is the liquidator of Computer Accounting & Tax Pty Ltd (in liquidation). I will sometimes refer to the defendant as the Liquidator and the company as CAT. The plaintiffs are husband and wife and are the directors of CAT. I will briefly refer to the circumstances which preceded this proceeding.
CAT brought an action in this court for damages against Professional Services of Australia Pty Ltd (PSA) and Martin Banning for economic loss or damage for misleading or deceptive conduct, negligent misstatement and deceit (CIV 2265 of 2006). On 9 July 2008, after a trial, Simmonds J entered judgment for CAT and ordered PSA and Mr Banning to pay to CAT sums totalling $967,202.50, with interest, and ordered PSA and Mr Banning to pay CAT its costs of the action: Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133.
PSA and Mr Banning appealed. PSA and Mr Banning unsuccessfully applied for a stay of the judgment of Simmonds J. CAT was paid $1,165,661.54 as the judgment sum. The Court of Appeal found that the appeal should be allowed and that part of the decision of the trial judge awarding CAT damages in the sum of $675,078 together with interest thereon should be set aside and damages should be further reduced by $6,500 together with a corresponding reduction in the interest awarded on that sum: Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183. The orders of the Court of Appeal required CAT to repay to PSA and Mr Banning part of the judgment sum which they had paid to CAT. CAT did not do so. PSA served a statutory demand upon CAT which CAT did not comply with. PSA and Mr Campbell‑Smith as executor of the estate of Mr Banning (Banning) commenced proceedings for an order that CAT be wound up and for the appointment of a provisional liquidator (COR 2 of 2010). Simmonds J appointed the defendant as provisional liquidator: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38 (PSA v CAT [2010] WASC 38). Master Sanderson subsequently ordered that CAT be wound up and appointed the defendant liquidator of CAT: Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93.
Among the assets of CAT that may be available for the benefit of its creditors are: land situated at Edward Street and Pier Street Perth (the Perth property), land situated at Armadale (the Armadale property) and a term deposit at St George Bank (the Term Deposit). CAT is the registered proprietor of the Perth property and the Armadale property and the Term Deposit is in its name. The plaintiffs, however, claim that the two properties are held on trust for them, either as the beneficiaries of a resulting trust or as the beneficiaries of a self‑managed superannuation fund. The first plaintiff, Mrs Frigger, says that she is the owner of the funds in the Term Deposit. In 2010 the plaintiffs, Mr and Mrs Frigger, commenced proceedings against the defendant and CAT (CIV 2765 of 2010). The plaintiffs sought relief including an order pursuant to s 78 of the Trustees Act 1962 (WA) that the Perth property and the Armadale property vest in Mr and Mrs Frigger in their capacity as trustees of the superannuation fund and a declaration that the Liquidator and CAT have no right, title or interest in the Term Deposit. That proceeding has not been resolved and remains on foot.
This proceeding
The present proceeding was commenced by the plaintiffs, Mr and Mrs Frigger, against the Liquidator in April 2015. The plaintiffs commenced these proceedings without seeking leave of the court to bring the proceedings notwithstanding that the conduct of the defendant which the plaintiffs complain of relates to activities and actions undertaken by him as the liquidator of CAT.
The present statement of claim is an amended statement of claim filed 4 June 2015 (ASOC). Paragraphs 1 to 3 of the ASOC identify the plaintiffs, the defendant and CAT and plead certain matters in relation to each of them. Paragraphs 4 to 7 plead the establishment of the Frigger Super Fund and the appointment of CAT as trustee of the fund. Paragraphs 8 and 9 plead that the defendant, as provisional liquidator and liquidator of CAT, owed CAT duties under the Corporations Act 2001 (Cth) s 181(1)(a), s 181(1)(b), s 182(1), s 183 and fiduciary duties. It is further pleaded that the defendant owed a fiduciary duty to the plaintiffs, as secured creditors of CAT pursuant to a Fixed Charge dated 10 September 2009 (Charge), under the general law not to have an interest that conflicts with the interests of the plaintiffs and to carry out his duties as an officer of CAT impartially. Paragraphs 10 to 25 refer to CIV 2265 of 2006, judgment in that action and the subsequent appeal.
Paragraph 12 of the ASOC pleads that on or about 23 February 2009 PSA executed a deed of company arrangement (DOCA) for the purposes of paying, amongst other things, the judgment debt in CIV 2265 of 2006. Paragraph 15 of the ASOC pleads that Mr Lenhoff, a legal practitioner acting on behalf of PSA and Banning, filed written submissions in relation to consequential orders to be made resulting from the decision of the Court of Appeal. It is asserted that the submissions were contrary to the terms of the DOCA and constituted a breach of the DOCA by a party bound by it.
Paragraphs 17 to 20 refer to the commencement of proceedings by PSA and Banning to obtain, and the obtaining of, freezing orders to restrain the plaintiffs from dealing with the Perth and Armadale properties and the Term Deposit. Paragraph 21 pleads that on 16 December 2009 PSA and Banning issued a statutory demand on CAT in the amount of $800,917.08 in circumstances where, amongst other things, CAT was entitled to set off its legal and enforcement costs against the reduced judgment amount (Legal and Enforcement Costs) and CAT was entitled to retain the judgment amount in CIV 2265 of 2006 which was paid by Banning Holdings Pty Ltd pursuant to the terms of the DOCA. Paragraph 22 pleads that PSA and Banning commenced proceedings in this court (COR 2 of 2010) for the appointment of a provisional liquidator to CAT. Paragraph 23 pleads that the defendant was appointed as provisional liquidator to CAT. Paragraph 24 pleads that in February 2010 Simmonds J in COR 2 of 2010 directed the defendant to provide a report to the court on the financial status of CAT for the purposes of assisting the court in the winding up application. Paragraph 25 pleads that the defendant was subsequently appointed as official liquidator to CAT.
Paragraphs 26 to 100 advance 12 separate allegations which are described as the first to twelfth contraventions. Paragraph 101 pleads that, by reason of the matters pleaded in the ASOC, the Liquidator has contravened the Corporations Act s 181(1)(a), s 181(1)(b) and s 182(1), his duty as an officer of the court and his common law fiduciary duties owed to CAT and to the plaintiffs as secured creditors of CAT. The subjoined particulars consist of 13 paragraphs. Paragraph 101(1) pleads that the defendant accepted appointment as liquidator of CAT in circumstances where, amongst other things, he knew or ought to have known the terms and statutory effect of the DOCA, where CAT was not insolvent or near insolvent, where he combined with PSA and Banning to prevent CAT from resolving the outstanding litigation including Legal and Enforcement Costs for which PSA and Banning were liable, where he knew or ought to have known that his appointment was not in the best interests of CAT and where he accepted his appointment as liquidator in order to use his position to improperly gain an advantage for himself, PSA and Banning contrary to s 182(1) of the Corporations Act. Paragraphs 101(2) to 101(13) plead that the matters pleaded earlier in the ASOC in relation to each of the alleged 12 contraventions was a breach of one or more of s 181(1)(a), s 181(1)(b) and s 182(1) of the Corporations Act.
This application
The defendant now applies for the proceedings to be permanently stayed on the ground that the plaintiffs do not have leave to commence proceedings against the defendant, being a court‑appointed liquidator, in circumstances where the proceedings relate to activities and actions undertaken by him in that capacity. In the alternative the defendant applies for summary judgment or for the statement of claim to be struck out on the grounds that; the action, or claims in it, are frivolous or vexatious, that the defendant has a good defence on the merits, that the action should be disposed of summarily or that the claims disclose no reasonable cause of action, are an abuse of the process of the court or are embarrassing.
Leave to proceed
The defendant seeks an order that the proceedings be permanently stayed on the ground that the plaintiffs do not have leave to commence proceedings against the defendant. The plaintiffs initially asserted that they had been granted leave which permitted them to bring these proceedings but subsequently resiled from that assertion and have applied for leave.
The defendant accepts that leave may be granted retrospectively. The defendant submits that leave ought not be granted to the plaintiffs to pursue these proceedings against the Liquidator if the ASOC is liable to be struck out or summary judgment ought to be granted to the Liquidator. I accept that submission. I will consider the defendant's application for summary judgment or to strike out the ASOC in the course of determining whether the court should grant the plaintiffs leave to proceed. Before considering those matters I will refer to the defendant's application to extend time to apply for summary judgment or to strike out the statement of claim.
Leave to bring applications out of time
An application by a defendant for summary judgment must be brought within 21 days after appearances are entered or at any later time by leave of the court. An application to strike out pleadings must be made within 21 days of the service of the pleading. The defendant filed a memorandum of appearance on 6 May 2015. The ASOC was filed on 4 June 2015. The defendant's application for summary judgment or to strike out the ASOC was filed on 30 June 2015. The applications for summary judgment and to strike out the ASOC were filed about two weeks and five days respectively out of time.
The defendant submits, and I accept, that the rationale for the time limit is to ensure that summary judgment applications are brought at an early stage of proceedings, before unnecessary expense has been incurred. In this case no steps were taken between the filing of the defence and the application for summary judgment, except for the parties attendance at a case management conference at which the application for summary judgment was foreshadowed. The delay in filing the strike out application is insignificant. The court should extend time where strict compliance with the rules will work an injustice. Where, as here, the delay is slight and no great expenditure has been incurred on the litigation during the delay, the court should extend time if the defendant's application has merit. The defendant has explained the reasons for the delay in bringing the summary judgment application. The plaintiffs have not suffered any prejudice by reason of the delay. For the reasons which follow the defendant's applications have merit. The time for bringing the application for summary judgment and to strike out the ASOC will be extended.
Legal principles
Before a court‑appointed liquidator can be sued personally the leave of the court must be obtained: see Austin R and Ramsay I, Ford, Austin & Ramsay's, Principles of Corporations Law (at February 2016) [27.183.12]. The principles applicable to the grounds of leave to sue a liquidator personally were referred to by Santow J in Manone v Pantzer [2001] NSWSC 26; (2001) 36 ACSR 743:
The applicable principles and their public purpose which underlie the requirement that a prospective litigant must obtain leave to sue a court appointed liquidator can be stated in the following propositions.
(i)The Court will protect its officer from spurious or vexatious litigation: Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25 at 29; Re Magic Aust Pty Ltd(in liq) (1992) 7 ACSR 742, at 746; 10 ACLC 929 at 932; and
(ii)The Court will protect the integrity of the winding up process to ensure no wrongful interference with that process: Sydlow Pty Ltd (in liq) v T G Kotselas Pty Ltd & Ors (1996) 65 FCR 234 at 241; 144 ALR 159 at 165-166.
To those ends, a prospective litigant must, to obtain the necessary leave, demonstrate its claim has sufficient merit. What is sufficient is affected by the circumstances and timing in which that leave is sought. Moreover courts recognise that liquidators, like administrators, often have to make decisions on the run; to expect perfection in those circumstances is unrealistic. In Sydlow, above, Tamberlin J stated:
'The discretionary power of the court to grant leave must be exercised having regard to all the circumstances of the particular cases and bearing in mind the need to protect the integrity of its process. It does not necessarily follow that, in order to obtain leave, a prima facie case must be demonstrated. There is no specific threshold appropriate in all cases, however there must be more than mere assertion. The court's discretion may be exercised on many grounds, including, but not limited to, the sufficiency of the evidence adduced, as to the prospects of success of the action on the application for leave.' [4].
Order 16 rule 1 of the Rules of the Supreme Court 1971 (WA) provides that the court may order summary judgment in favour of a defendant if it is satisfied of any of the following:
(a)the action is frivolous or vexatious;
(b)the defendant has a good defence on the merits; or
(c)the action should be disposed of summarily.
Order 20 rule 19 of the Rules of the Supreme Court provides that the court may strike out any pleading on the ground that:
(a)it discloses no reasonable cause of action;
(b)it is scandalous, frivolous or vexatious;
(c)it may prejudice, embarrass or delay the fair trial of the action; or
(d)it is otherwise an abuse of the process of the court.
A court whose jurisdiction is regularly invoked should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to a trial in the ordinary way: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, 576 [57] (Gaudron, McHugh, Gummow & Hayne JJ).
An application that a proceeding, or a claim in a proceeding, is an abuse of process may be supported by affidavit evidence to show that the action is an abuse. It is an abuse of process to commence a proceeding where its subject matter has already been dealt with and rejected in earlier proceedings and the orders have not been disturbed on appeal. In general, it is an abuse to litigate a cause of action where its subject matter has ready been dealt with in earlier proceedings or is pending in earlier proceedings and it is appropriate that the matter be resolved in the earlier proceedings.
The Charge
The decision of the Court of Appeal, Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2], was delivered on 23 October 2009. As I have said, the consequence of the decision of the Court of Appeal was that CAT was obliged to repay to PSA and Banning an amount in the order of $800,000. On the same day, 23 October 2009, Mr and Mrs Frigger lodged a charge at ASIC against CAT dated 10 September 2009 to secure a debt allegedly owed by CAT to Mr and Mrs Frigger, primarily over certain causes of action of CAT against various parties (the Charge). The plaintiffs place some reliance upon the Charge. The plaintiffs say that by reason of the Charge, which CAT had granted over causes of action, it was the plaintiffs as the chargees who were entitled to have the conduct of those causes of action. The plaintiffs say that the steps taken by the Liquidator on behalf of CAT, which proceeded on the assumption that CAT was the beneficial owner of those causes of action, were inappropriate where the plaintiffs were the chargees.
The defendant challenges the authenticity and validity of the Charge. However, the defendant does not rely upon those challenges for the purposes of this application. The defendant's argument in relation to the Charge is that the Charge is irrelevant to any of the claims which the plaintiffs seek to advance in this action. The plaintiffs rely upon their rights or entitlements under the Charge to support the fifth contravention. The fifth contravention is based upon the conduct of the defendant in refusing to give consent for CAT's Legal and Enforcement Costs claim to be brought back before the trial judge for orders and assessments as requested by Mrs Frigger on or about 4 June 2010. The plaintiffs also rely upon the Charge in advancing the sixth contravention. The sixth contravention alleges that on or about 10 June 2010 the defendant refused to consent to Mrs Frigger representing CAT at the taxation of a bill of costs rendered by CAT's solicitors, Bowen Bookbinder Valanski (BBV) and the conduct of the defendants, in or about October 2010, in refusing to request BBV to file its bills of March and April 2007 and counsel bills. The plaintiffs also rely upon the Charge in advancing the seventh contravention. The conduct of the defendant complained of is also his failure in 2010 to consent to Mrs Frigger representing CAT at the taxation of BBV's bills of costs. The relevance of these matters for present purposes is that the conduct of the defendant complained of all took place before April 2014. It is not alleged by the plaintiffs that they took any steps to enforce the Charge until April 2014 when they issued a notice under s 123(2) of the Personal Property Securities Act (Commonwealth Laws) Act 2011 (WA) (PPSA) purporting to take possession of the assets of CAT which are the subject of the Charge. None of the actions which the plaintiffs allege were improperly undertaken by the Liquidator occurred after that date.
The Charge provides that at the option of the grantees, the plaintiffs, the Charge shall become enforceable and the right of the grantor, CAT, to deal with the mortgaged property, for any purpose shall forthwith cease on an event of default which includes the winding up of the company. Thus, the company, or its liquidator, remains in control of and entitled to deal with the assets secured by the Charge unless and until the chargee exercises its option to enforce the Charge. That accords with the nature of a charge. A charge transfers neither the property, that is beneficial ownership or title, nor the right to possession. The charge conveys nothing and merely gets the chargee certain rights over the property as security for the sum advanced. Until the chargee enforces its security the chargor has control of the assets and is entitled to deal with them unless expressly precluded from doing so by the terms of the charge. In his affidavit of 13 October 2015 the defendant says that so far as he can determine the first occasion upon which the plaintiffs took any steps to enforce the Charge was in April 2014 when they purported to send a notice to CAT under s 123(2) of the PPSA. The plaintiffs did not purport to rely upon their rights as secured creditor and seek to take steps with respect to the causes of action pleaded in the ASOC before that and therefore the validity or otherwise of the Charge is irrelevant to any of the causes of action alleged. Put simply, the Charge is irrelevant to the claims made by the plaintiffs in this action. Unless and until the plaintiffs exercise their option to enforce the Charge they have no relevant rights with respect to the mortgaged property, that is the choses in action referred to in the ASOC. The defendant, as liquidator, was entitled and bound to deal with the various assets which were the subject of the security.
It is now necessary to consider each of the claims or allegations or contraventions raised by the plaintiffs in the ASOC. The plaintiffs' first claim is made in par 101(1). The claims advanced by the plaintiffs described as 'first to twelfth contraventions' are made at pars 101(2) ‑ (13). Each depends upon facts and matters pleaded earlier in the ASOC. I will consider each claim or allegation in turn.
ASOC paragraph 101(1)
Paragraph 101(1) alleges that from 4 December 2009 when he accepted appointment as liquidator of CAT the defendant knew or ought to have known the matters pleaded in pars 10 to 24 of the ASOC. Those matters cover: the judgment in favour of CAT against PSA and Banning in CIV 2256 of 2006, the appeal, the DOCA, the submissions made by Mr Lenhoff to the Court of Appeal allegedly contrary to the terms of the DOCA, the obtaining of the Freezing Orders, the issue by PSA and Banning of the statutory demand, and the appointment of the defendant as provisional liquidator and subsequently liquidator of CAT on the application of PSA and Banning. Paragraph 101(1)(i) then pleads that the defendant accepted appointment as liquidator when he knew or ought to have known the terms and the statutory effect of the DOCA was, amongst other things, that CAT had no liability to repay the reduction in the judgment to PSA and Banning and CAT had a right to set off the Legal and Enforcement Costs against the reduction in the judgment. Paragraph 101(1)(ii) is that the defendant accepted appointment as liquidator in circumstances where CAT was not insolvent or near insolvent. Paragraph 101(1)(iv) is that the defendant knew or ought to have known that his appointment was not in the best interests of CAT. Those pleas are all a collateral attack upon the winding up order made by this court. Mrs Frigger, on behalf of the plaintiffs, in her oral submissions specifically disavowed any allegation of fraud in par 101(1) (ts 80).
In my opinion, the matters pleaded in par 101(1) are a collateral attack upon the decision of Simmonds J in PSA v CAT [2010] WASC 38 to appoint the defendant as provisional liquidator of CAT and the decision of Master Sanderson in Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] to order that CAT be wound up and the defendant be appointed liquidator. The plea is an abuse of process and should be struck out.
First contravention
In pars 26 and 101(2) of the ASOC the plaintiffs allege that the Liquidator swore an affidavit on 17 February 2010 in the winding up proceedings, COR 2 of 2010, which contained false evidence as to the liabilities of CAT. At pars 7 and 38 of the affidavit the Liquidator says that he had not had any opportunity to inspect the books and records of CAT and had not adjudicated upon the claims of CAT. Paragraph 38 sets out, with respect to each alleged liability recorded, the amount set out in Mrs Frigger's report as to affairs, and the amount claimed by the particular creditor.
At par 26(a) of the ASOC the plaintiffs plead that in the affidavit the defendant reported the liabilities there set out as being due and payable and that that evidence is false. That claim has no prospect of success. The affidavit does not purport to give the evidence alleged by the plaintiffs in par 26(a) of the ASOC.
At par 26(b) of the ASOC the plaintiffs allege that in his affidavit the Liquidator stated that he 'had no knowledge of the term deposit the plaintiffs have offered to loan to CAT'. The plaintiffs claim that that evidence was false. The Liquidator did not give that evidence in his affidavit. In par 39 of the affidavit the Liquidator deposed that he had 'no knowledge of a term deposit account having been assigned to CAT'. The plaintiffs' claim has no prospect of success. The plaintiffs' claim in relation to the first contravention should be struck out.
Second contravention
The second contravention is alleged in pars 27 and 101(3) of the ASOC. It is necessary to give some background to the allegation. In January 2012 the Liquidator applied to the court in the Winding Up Proceedings, COR 2 of 2010, under the Corporations Act s 477(2B) for leave to enter into a litigation funding agreement. This was to fund the defence of the Main Proceedings, CIV 2765 of 2010, and pursue a counterclaim in those proceedings, effectively seeking title to: the Perth property, the Armadale property and the Term Deposit; so that those assets were available for distribution to the creditors of CAT. The application was supported by two affidavits sworn by the defendant including a confidential affidavit of 5 January 2012. On 17 January 2012 orders were made approving the entry into the Litigation Funding Agreement and that:
The confidential affidavit of [the defendant] dated 5 January 2012 (Confidential Affidavit) and the annexures thereto remain in the court file in a sealed enveloped marked 'Confidential' such Confidential Affidavit not to be accessed by any person without order of the court (Confidentiality Order).
Mrs Frigger obtained access to the Confidential Affidavit and sought to rely on matters contained in the affidavit in various proceedings. Despite demand, Mrs Frigger refused to agree to deliver up or destroy all copies of the Confidential Affidavit and the annexures. As a consequence the defendant applied in the Winding Up Proceedings for orders to protect the confidentiality of the affidavit and annexures. On 15 May 2014 Master Sanderson made orders protecting the confidentiality of the Confidential Affidavit. The Master's reasons were published: Re Computer Accounting and Tax Pty Ltd; Ex parte Mervyn Jonathan Kitay in his capacity as liquidator of Computer Accounting and Tax Pty Ltd [2014] WASC 169. The Master found that Mrs Frigger had obtained a copy of the Confidential Affidavit from the court file. Mrs Frigger says that she asked to inspect the court file and the Confidential Affidavit was on the file. The Confidential Affidavit was so entitled. A copy of the Confidentiality Order was on the file. The Master noted Mrs Frigger's allegation that the Confidential Affidavit and the privileged communications are fraudulent and dishonest but found that there was nothing in the Confidential Affidavit nor the privileged materials which in any way suggested the defendant is engaged in some fraudulent or dishonest act. The Master found that there can be no possible justification for Mrs Frigger retaining possession of any copies of the Confidential Affidavit. The master ordered Mrs Frigger to deliver up or destroy all copies of the Confidential Affidavit and that she not use it in any proceedings. The orders were varied on 22 May 2014.
In par 27 of the ASOC the plaintiffs allege that the defendant combined with: PSA, Banning, Mr Lenhoff, the solicitor for PSA and Banning, and Mr John, a partner in Freehills assisting the defendant in the conduct of the liquidation, to conduct an informal public examination of Mrs Frigger in the Freezing Order Application, that is the application to the court for freezing orders. The plaintiffs say that in doing so the defendant improperly used his position to gain an advantage for himself in his counterclaim against the plaintiffs in CIV 2765 of 2010, which conduct contravened the Corporations Act s 182(1). In their particulars of this claim the plaintiffs rely on a letter dated 25 August 2010 from Freehills to the defendant. That letter is an annexure to the Confidential Affidavit and is therefore, to the plaintiffs' knowledge, subject to the Confidentiality Order.
The defendant submits, and I accept, that any attempt to rely upon the 25 August 2010 letter, where it is subject to the Confidentiality Order, is an abuse of process and any plea based upon it should be struck out. The alleged second contravention is dependent upon the contents of the letter which was an annexure to the Confidential Affidavit, which Mrs Frigger obtained in the circumstances I have set out earlier. The claim in relation to the second contravention is an abuse of process, has no real prospect of success and should be struck out.
Third contravention
In pars 28 and 101(4) of the ASOC the plaintiffs allege that for the purposes of the informal public examination referred to in relation to the alleged second contravention, the defendant sought certain documents from the ATO.
This allegation depends upon the alleged second contravention and relies upon the 25 August 2010 letter, which is subject to the Confidentiality Order. It is an abuse of process, has no real prospect of success and should be struck out.
There are further things stated by the plaintiffs in relation to the third contravention but they do not give rise to any cause of action with any real prospect of success.
Fourth contravention
The fourth contravention is pleaded in pars 34 to 42 and 101(5) of the ASOC. The allegations in pars 34 to 39 relate to and rely upon the 25 August 2010 letter. Those claims are an abuse of process.
Paragraphs 40 to 42 of the ASOC relate to and refer to a letter of advice to the defendant in September 2010. The letter was an annexure to the Confidential Affidavit and is the subject of the Confidentiality Order. The defendant submits, and I accept, that the paragraphs which seek to rely upon the September 2010 confidential letter must be struck out as an abuse of process. The claim has no real prospect of success and should be struck out.
Fifth contravention
The fifth contravention is pleaded in pars 43 to 46 and 101(6) of the ASOC. The essence of the allegation is that although CAT was obliged by the orders of the Court of Appeal to repay an amount in the order of $800,000 to PSA and Banning, it was entitled to costs (Legal Enforcement Costs) which would be set off against the debt and under cl 6.13 of the DOCA and the defendant refused to consent to Mrs Frigger progressing the resolution of those Legal Enforcement Costs. The plaintiffs say that the defendant's conduct was in contravention of s 181(1) of the Corporations Act which requires the Liquidator to exercise his powers and discharge his duties in good faith in the best interests of CAT and for a proper purpose.
The defendant submits that the charge is irrelevant unless and until the plaintiffs, as the chargees, seek to enforce against, and/or take possession of, the assets the subject of the charge. Further, the quantum of the Legal Enforcement Costs is less than the amount payable by CAT to PSA and the estate of Mr Banning and by reason of the statutory set off obligation, the right to recover the Legal Enforcement Costs is not an asset. In any event, the defendant submits the gravamen of the cause of action alleged by the fifth contravention appears to be that the Legal Enforcement Costs were not progressed. However, as appears from the reasons for judgment of Simmonds J in CIV 2265 of 2006, Computer Accounting and Tax Pty Ltd (in Liq) v Professional Services of Australia Pty Ltd [No 8] [2015] WASC 166, the Legal Enforcement Costs have been the subject of a decision and the plaintiffs were given the right to appear, through counsel, and make submissions regarding the Legal Enforcement Costs. This claim has no real prospect of success.
Sixth contravention
The sixth contravention is pleaded in pars 47 to 53 and 101(7) of the ASOC. The plaintiffs allege that the Liquidator acted improperly by:
(a)not consenting to Mrs Frigger representing CAT at the taxation of the costs of BBV, the solicitors for CAT in CIV 2265 of 2006;
(b)not requesting BBV file its bills for April and May 2007 for taxation; and
(c)not requesting that the bills of counsel who was engaged by BBV be taxed.
In his affidavit of 30 June 2015 the defendant swears:
(1)the Liquidator consented to Mrs Frigger's representation at the taxation but Mrs Frigger refused to agree to the conditions imposed which the defendant says are reasonable;
(2)BBV did file its bills for April and May 2007 for taxation and those bills were taxed; and
(3)the Liquidator did request that counsel's bills be taxed.
Those matters are apparent from the transcript of the hearing before Registrar C Boyle on 12 November 2010. Those matters are established by the evidence before the court. I find that the conditions imposed by the defendant were reasonable and there is no reasonable prospect of a contrary finding. These claims, or alleged contravention, have no real prospect of success and should be struck out.
Seventh contravention
The seventh contravention is pleaded in pars 54 to 58 and 101(8) of the ASOC. The plaintiffs allege that the Liquidator failed to consent to Mrs Frigger pursuing proceedings against Vogt Graham on behalf of CAT or on behalf of Mrs Frigger. The defendant deposes in his affidavit of 30 June 2015 that he did consent to Mrs Frigger having the conduct of the Vogt Graham proceedings, subject to certain conditions which he says are reasonable and Mr and Mrs Frigger refused to accept the conditions. The plaintiffs have advanced no evidence or basis upon which it is arguable that the defendant, as liquidator, breached his statutory or fiduciary duties. This alleged contravention has no real prospect of success and should be struck out.
Eighth contravention
The eighth contravention is pleaded in pars 59 to 61 and 101(9) of the ASOC. The allegation appears to be that on 5 January 2012 the defendant swore a false affidavit in support of his application for leave to enter into a litigation funding contract pursuant to s 477(2B) of the Corporations Act. It is alleged that the statement by the defendant at par 17 of the affidavit that 'very limited funding was available to me as at the date of my appointment as provisional liquidator of CAT' was false. The plaintiffs assert that the evidence was false because:
(a)at par 39 of the affidavit the defendant said he had no knowledge of the term deposit the plaintiffs had offered to loan to CAT;
(b)an email of 23 January 2010 from Mrs Frigger;
(c)an offer from Mr and Mrs Frigger contained in a letter from their solicitors of 18 May 2010.
In relation to the plaintiffs' assertion that the defendant swore in his affidavit that he had no knowledge of the term deposit the plaintiffs had offered to loan to CAT, the defendant did not give that evidence. In par 39 of the affidavit the defendant swore that he had 'no knowledge of a term deposit account having been assigned to [CAT]'. The allegation must fail. In any event, in his affidavit of 30 June 2015 the defendant has set out his knowledge regarding an 'assigned' term deposit. It is not in any way contradicted by evidence from the plaintiffs. The allegation must fail.
In relation to the email of 23 January 2010, the email does not offer any funding. In relation to the offer from the plaintiffs in a letter from their solicitors dated 18 May 2010, for the reasons set out at pars 33 to 37 of the defendant's affidavit of 30 June 2015 the proposal put forward by Mr and Mrs Frigger could not be accepted by the Liquidator alone and the creditor who petitioned to appoint the Liquidator also needed to agree to the proposal. That creditor refused to do so.
It is further alleged at par 61(ii) of the ASOC that at par 20 of his affidavit the defendant advised the court of alleged creditors of CAT, which evidence was false. Paragraph 21 of the affidavit expressly records that the Liquidator has 'not adjudicated upon these proofs of debt and [has] therefore not formed a view as to whether these debts are properly claimed'. The plaintiffs' allegation must fail.
Further, at par 101(9) of the ASOC the plaintiffs allege that the defendant gave false evidence to the Master for the purposes of falsely stating that CAT was insolvent in order to obtain a winding up order. The affidavit was sworn on 5 January 2012, almost two years after the winding up order was made on 6 May 2010. The allegation is not sustainable.
None of the allegations made by the plaintiffs on which the eighth contravention depend are sustainable. The allegations must be struck out.
Ninth contravention
The ninth contravention is pleaded in pars 62 to 74 and 101(10) of the ASOC. The plaintiffs allege that by refusing to progress the review of the taxed bill of costs made in Mr Forbes' favour in CIV 1261 of 2009 the Liquidator contravened s 181(1), s 182(1)(a) and s 182(1)(b) of the Corporations Act.
The Liquidator was not obliged to personally incur costs: Corporations Act s 545(1). In the defendant's affidavit of 30 June 2015 he deposes that an agreement was reached between the Liquidator and the plaintiffs under which Mrs Frigger would be permitted to progress the review of Mr Forbes' taxed bill of costs. Notwithstanding that agreement, Mrs Frigger refused to pursue the review on the terms agreed to by her. To the extent that par 40 of Mrs Frigger's affidavit places reliance on the Charge, that is of no assistance to the plaintiffs because the Friggers had not at the relevant time taken any steps to enforce the Charge and hence the chargor, that is CAT, continued to control the asset.
There is no basis upon which the ninth contravention can be made out. It has no real prospect of success. It should be struck out.
Tenth contravention - strike out or permanent stay
The plaintiffs plead the tenth contravention in pars 75 to 77 and 101(11) of the ASOC. The plea is not altogether clear but appears to be that by withdrawing interest from the Term Deposit on four occasions the Liquidator breached his duties under s 182(1) of the Corporations Act. That is an implied assertion that the plaintiffs were entitled to the interest earned on the Term Deposit. The issue of title to the Term Deposit and therefore who is entitled to interest on it is the subject of the Main Proceedings - CIV 2765 of 2010. It is an abuse of process to seek to litigate in separate proceedings a matter the subject of an existing proceeding: Mineralogy Pty Ltd v Sino Iron Pty Ltd (2015) WASC 454 [17], [31] (Chaney J). The claim should be struck out.
Eleventh contravention
The eleventh contravention is pleaded in pars 78 to 99 and 101(12) of the ASOC. The plaintiffs make allegations in relation to the proposed sale by them of the BP Service Station business conducted upon the Armadale property and also of the Armadale property. The plaintiffs complain about the failure of the Liquidator to consent to the sale of the Armadale property and the business conducted on it. The plaintiffs twice applied to the court for orders requiring the Liquidator to consent to the sale and the applications were refused: Frigger v Mervyn Jonathon Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 5] [2014] WASC 195. This alleged contravention is an attempt to relitigate that issue and is an abuse of process.
In par 91 of the ASOC there is an allegation that the defendant provided fabricated accounting figures to the licensed valuer engaged to value the property. The valuation was adduced in evidence by the Liquidator in the Main Proceedings in opposition to an application by the plaintiffs to obtain an order that the Liquidator consent to a sale of the Armadale property. The figures provided by the Liquidator were provided by the plaintiffs: affidavit of Mervyn Jonathan Kitay, 30 June 2015, pars 40 to 44. The allegation must fail.
The plaintiffs also allege in par 99 of the ASOC that it is to be implied from the defendant's conduct that he planned to terminate the lease of the property on 30 June 2015, thereby denying the plaintiffs the internally generated goodwill of $1,300,000. That appears to be an allegation that the Liquidator exercised his powers for a collateral purpose. There is no foundation for that allegation. It should be struck out.
Twelfth contravention
The twelfth contravention is pleaded in pars 100 and 101(13) of the ASOC. The plaintiffs allege that in the Main Proceedings at page 79 of the defence and counterclaim the Liquidator fabricated amounts in the running account between the plaintiffs and CAT.
The defendant submits, and I accept, that the twelfth contravention is an attempt to litigate about a pleading from one set of proceedings in a separate proceeding and that is an abuse of process. The allegation should be struck out.
Proceedings stayed
The plaintiffs' claims in this action are in some instances an abuse of process, as I have set out in these reasons. The remaining allegations and claims of the plaintiffs have no real prospect of success.
Leave to commence, or continue, these proceedings against the defendant should be refused. The plaintiffs have not adduced sufficient evidence to justify leave being granted. The plaintiffs do not have sufficient prospects of success to justify leave to proceed. The proceeding should be permanently stayed.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FRIGGER -v- KITAY [2016] WASC 60 (S)
CORAM: LE MIERE J
HEARD: ON THE PAPERS
DELIVERED : 11 MAY 2016
FILE NO/S: CIV 1606 of 2015
BETWEEN: ANGELA FRIGGER
First Plaintiff
HARTMUT FRIGGER
Second PlaintiffAND
MERVYN JONATHAN KITAY
Defendant
Catchwords:
Orders to give effect to judgment - Where orders sought are appropriate - Turns on own facts
Costs - Stay application - Substantial success - Letter offering compromise - Indemnity costs ordered - Turns on own facts
Legislation:
Nil
Result:
Plaintiff refused leave to commence or continue the proceedings
Defendant given leave to file applications out of time
Parts of amended statement of claim struck out
Proceedings permanently stayed
Plaintiffs pay defendant's costs on indemnity basis
Category: B
Representation:
Counsel:
First Plaintiff : No appearance
Second Plaintiff : No appearance
Defendant: No appearance
Solicitors:
First Plaintiff : In person
Second Plaintiff : In person
Defendant: Herbert Smith Freehills
Case(s) referred to in judgment(s):
Frigger v Kitay [2016] WASC 60
Globaltech Pty Ltd v Pareek [2006] WASC 30(S)
LE MIERE J: The plaintiffs commenced this proceeding against the defendant as liquidator of Computer Accounting & Tax Pty Ltd (in liquidation) without seeking leave of the court to bring the proceedings notwithstanding that the conduct of the defendant which the plaintiffs complain of relates to activities and actions undertaken by him as the liquidator of CAT. The defendant applied for the proceedings to be permanently stayed on the ground that the plaintiffs do not have leave to commence the proceedings and in the alternative for summary judgment or for the statement of claim to be struck out on the grounds that the action or the claims in it are frivolous or vexatious, that the defendant has a good defence on the merits, that the action should be disposed of summarily or that the claims disclose no reasonable cause of action, or are an abuse of process of the court or are embarrassing. I found that the plaintiffs' claims are in some instances an abuse of process and the remaining allegations and claims have no real prospect of success, that leave to commence or continue the proceedings should be refused and the proceedings should be permanently stayed: Frigger v Kitay [2016] WASC 60.
The plaintiffs were not present when I handed down my reasons for judgment. I ordered that the parties file and serve submissions concerning the orders which should be made to give effect to my reasons and the appropriate order for costs.
Orders proposed by defendant
The defendant proposes that the following orders be made:
1.The plaintiffs' application for leave to commence or continue the proceedings (Plaintiffs' Application) be dismissed.
2.The defendant be granted leave to file, out of time:
(a)his application dated 30 June 2015 (Defendant's Applications) so far as that application constitutes an application to strike out parts of the plaintiffs' Amended Statement of Claim dated 27 May 2015 (Amended Statement of Claim) pursuant to Order 20 Rule 19(1) of the Rules of the Supreme Court of Western Australia (Rules); and
(b)the Defendant's Application so far as that application constituted an application for summary judgment against the plaintiffs pursuant to Order 16 Rule 1(1) of the Rules.
3.The following paragraphs of the Amended Statement of Claim be struck out on the basis that the matters alleged in those paragraphs constitute an abuse of process:
(a)paragraph 101(1);
(b)paragraphs 27 and 101(3);
(c)paragraphs 28-33 and 101(4);
(d)paragraphs 34-42 and 101(5);
(e)paragraphs 75-77 and 101(11);
(f)paragraphs 78-99 and 101(12); and
(g)paragraphs 100 and 101(13).
4.The following paragraphs of the Amended Statement of Claim be struck out on the basis that the matters alleged in those paragraphs have no real prospect of success or are unsustainable:
(a)paragraphs 26 and 101(2);
(b)paragraphs 27 and 101(3);
(c)paragraphs 28-33 and 101(4);
(d)paragraphs 34-42 and 101(5);
(e)paragraphs 43-46 and 101(6);
(f)paragraphs 47-53 and 101(7);
(g)paragraphs 54-58 and 101(8);
(h)paragraphs 59-61 and 101(9); and
(i)paragraphs 62-74 and 101(10).
5.The plaintiffs pay the defendant's costs of these proceedings including any reserved costs and the costs of each of the Defendant's Application, the Plaintiffs' Application and the plaintiffs' application for an injunction set out in the plaintiffs' Minute of Orders for Injunction dated 22 October 2015:
(a)up to 10 June 2015, to be taxed and paid on a party/party basis; and
(b)on and after 11 June 2015, to be taxed and paid on an indemnity basis.
6.The proceedings herein be permanently stayed.
Orders to give effect to reasons for judgment
The orders proposed by the defendant in pars 1 to 4 above are appropriate and the plaintiffs have made no submissions to the contrary. Accordingly, there will be orders in those terms.
The defendant moves for an order that the proceedings be permanently stayed. In correspondence to the court the plaintiffs say that they will file an application for an order lifting the stay of the proceeding. In [59] of my reasons for judgment I found that the proceedings should be permanently stayed. An order in terms of par 6 set out above will be made.
Costs
The defendant seeks an order that the plaintiffs pay the defendant's costs of the proceedings in accordance with proposed order 5 set out above.
The plaintiffs say that the defendant was partly successful in his chamber summons of 30 June 2015 and in the circumstances is only entitled to less than 50% of the costs of the application. The defendant was substantially successful. He should have the costs of the application.
The plaintiffs say there is no basis for the defendant having the costs of the entire proceeding because where proceedings have been stayed the order does not prevent the plaintiffs seeking to lift the stay for a good reason. The proceedings were commenced against the liquidator without leave. I found that the plaintiffs' claims were either an abuse of process or had no reasonable prospect of success. The proceedings are to be permanently stayed. The plaintiffs should pay the defendant's costs of the proceeding.
The defendant seeks an order that the plaintiffs pay the defendant's costs on an indemnity basis from 11 June 2015. The order is sought on the basis of an offer of compromise made in a letter of 10 June 2015 from the defendant's solicitors, Herbert Smith Freehills, to the plaintiffs' solicitors. In that letter the defendant set out in detail the reasons why the amended statement of claim was liable to be struck out and/or why summary judgment ought to be entered for the defendant. The letter invited the plaintiffs to consent to orders dismissing the proceedings and stated that if the plaintiffs did so the defendant would not seek to recover the costs incurred to date. The letter stated that if the plaintiffs failed to consent to the dismissal of the proceedings the defendant reserved the right to rely on the letter in seeking an order for indemnity costs. The compromise offered was that the defendant would not seek to recover its costs to the date of the letter. Such a concession can properly be described as a compromise: Globaltech Pty Ltd v Pareek [2006] WASC 30(S). In my opinion the plaintiffs' refusal of the offer was unreasonable.
Furthermore, the plaintiffs persisted to pursue a hopeless case and to raise allegations which amounted to an abuse of process. The plaintiffs should pay the defendant's costs incurred on and after 11 June 2015 on an indemnity basis.
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