Frigger v Kitay

Case [2019] FCA 624

FEDERAL COURT OF AUSTRALIA

Frigger v Kitay [2019] FCA 624

Appeal from: Application for extension of time:  Kitay, in the matter of Frigger (No 2) [2018] FCA 1032
File number: WAD 492 of 2018
Judge: MCKERRACHER J
Date of judgment: 6 May 2019
Catchwords: COSTS – application for security for costs – application in relation to the costs of defending an application for leave to extend the time within which to appeal – whether the Court lacks jurisdiction to award security for costs against an applicant in the Court’s appellate jurisdiction – whether discretionary considerations favour an award of security for costs – where the history of proceedings favour an award of security for costs – where different principles apply in relation to ordering security for costs in a first instance matter rather than at an appellate level – where the Court not satisfied the applicants are unable to satisfy the costs sought
Legislation:

Federal Court of Australia Act 1976 (Cth) ss 4, 56(1)

Federal Court Rules 2011 (Cth) rr 19.01,19.02, 36.09

Cases cited:

AUF15 v Minister for Immigration and Border Protection [2016] FCA 115

BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (2014) 226 FCR 240

Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317

Equity Access Ltd v Westpac Banking Corporation [1989] FCA 361

Fernance v Nominal Defendant (1989) 17 NSWLR 710

Frigger v Banning [2016] FCA 359

Frigger v Banning (No 2) [2016] FCA 749

Frigger v Clavey Legal Pty Ltd (No 2) [2015] WASCA 258

Frigger v Clavey Legal Pty Ltd [2016] WASCA 67

Frigger, in the matter of Computer Accounting & Tax Pty Ltd (in Liq) (No 2) [2018] FCA 612

Frigger v Mervyn Jonathan Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 9] [2016] WASC 92

Frigger v Kitay [2016] WASCA 173

Frigger v Mervyn Jonathan Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (in liq) [2016] WASCA 204

Frigger v Kitay [2017] FCA 1278

Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3

Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1994) 3 FCR 344

Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440

Maher v Official Trustee in Bankruptcy [2013] FCA 1143

Mecrus Pty Ltd (ACN 088 126 756) v Industrial Energy Pty Ltd (ACN 080 687 681) (2015) 327 ALR 523

Mulhern v Pearce (No 2) [2014] FCA 805

Patdith Services Pty Ltd v Mitronics Corporation Pty Ltd [2016] FCA 1315

SZQGO v Minister for Immigration and Citizenship [2012] FCA 177

Tran v The Commonwealth [2009] FCA 921

Vaysman v Deckers Outdoor Corporation Inc (2014) 222 FCR 387

Date of hearing: 5 March 2019
Date of last submissions: 18 March 2019
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 38
Counsel for the Applicants: The Applicants appeared in person
Counsel for the…

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AGLC
Frigger v Kitay [2019] FCA 624
Case
[2019] FCA 624
Decision Date

CaseChat Overview and Summary

In the matter of Frigger v Kitay, the applicants, the Friggers, sought to dismiss an application by the respondents, the Kitays, for security for costs. The Kitays sought security for the costs they incurred in defending the Friggers' application for leave to extend the time within which to appeal a sequestration order made against the Friggers. The Friggers contested the Kitays' application on two primary grounds: firstly, that the court lacked jurisdiction to order security for costs in the context of an application for leave to appeal; and secondly, that discretionary considerations favoured declining to order security for costs. The history of the proceedings indicated a series of unsuccessful attempts by the Kitays to enforce a costs order against the Friggers, culminating in the issuance of a bankruptcy notice and subsequent sequestration orders.

The court considered the jurisdictional issue by examining the statutory framework, particularly section 56 of the Federal Court of Australia Act 1976, which provides for the court to order security for costs in certain proceedings. The court determined that the application for leave to extend the time to appeal was not an appeal itself but was subject to the court's appellate jurisdiction. Despite the Friggers' argument that they were not yet appellants, the court found that the application for security for costs was permissible under the statutory provisions and the court's inherent jurisdiction. The court further noted that the principles governing security for costs at the appellate level differ from those in first instance matters, and the history of the proceedings favoured the grant of security for costs. Ultimately, the court was not satisfied that the Friggers would be unable to satisfy the costs sought.

The court dismissed the Friggers' application to dismiss the Kitays' application for security for costs. It ordered the Friggers to provide security for the Kitays' costs in the amount of $12,500. The court also provided that if the Friggers failed to comply with the order for security, the proceedings would be stayed until the security was paid. The Friggers were further ordered to pay the Kitays' costs of the interlocutory application, and the Kitays were granted liberty to apply for further security if necessary.

Orders

Orders of the court

1. The applicants’ application to dismiss the respondents’ security for costs application be dismissed.

2. The applicants provide security for the respondents’ costs of defending the application for leave to extend the time within which to appeal by paying the amount of $12,500 into the Court.

3. In the event of a failure to comply with the order for the provision of security, the proceedings be stayed until such security is paid.

4. The respondents have liberty to apply for an amount of further security.

5. The applicants pay the respondents’ costs of this interlocutory application.

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

Background

Background to the litigation

The Friggers resist the security for costs on two principal bases:(1)The Court lacks jurisdiction to make the orders sought. (2)There are discretionary reasons why the Court should decline to order security for costs, including the fact that the quantum of security sought by the respondents, if ordered to be paid, would have the consequence of stifling these proceedings. BACKGROUND The history of the dispute between the parties, which gave rise to the debt the subject of the creditor’s petition, appears at [45] to [105] of the Primary Decision. This background is summarised as follows in the respondents’ written submissions in support of their interlocutory application and no issue was taken by the Friggers to this summary:(a)the debt arose out of a costs order made in Supreme Court of Western Australia proceedings, which was taxed in an amount of $61,000.42 (Judgment Debt) on 5 July 2015;(b)despite demand, the Friggers refused to pay the Judgment Debt and the attempts by the respondents to enforce against the assets of the Friggers were unsuccessful;(c)the respondents caused a bankruptcy notice to be issued against the Friggers with respect to the Judgment Debt. The Friggers applied to set aside the bankruptcy notice. On 28 February 2016, a Deputy District Registrar (as he then was) dismissed that application;(d)the Friggers applied for a review of the decision of the Deputy District Registrar, but on 1 November 2017, a judge of this Court dismissed the application for a review (see Frigger v Kitay [2017] FCA 1278); and(e)the respondents then presented a creditor’s petition in December 2017 and after a heavily contested hearing, sequestration orders were made in the Primary Decision against the estates of the Friggers on 20 July 2018. On 6 November 2018, the Friggers filed an application in this Court to extend the time within which to appeal the sequestration order made against them on 20 July 2018. Any appeal from the Primary Decision should have been filed within 21 days of the date of judgment of the Primary Decision. The Friggers were therefore almost three months out of time.THE COURT’S JURISDICTION The Friggers challenge the jurisdiction of this Court to entertain the respondents’ security for costs application at this stage in the proceedings. The Friggers contend: 1.The application for extension of time within which to institute an appeal is an exercise of appellate jurisdiction: Federal Court of Australia Act 1976 - section 25 (2)(b). The application must be heard and determined by a single Judge unless a judge refers the application to the Full Court for determination. 2.The application has not been heard or determined, nor has it been referred to the Full Court for determination. 3.The jurisdiction to order security for costs is given in section 56 the Act. Such an order is limited to proceedings in the court, or to an appellant in division 2 of part III, being section 25(2)(b). 4.The court has jurisdiction to order security for costs of an appeal: Federal Court Rule 36.09. The application for extension of time to appeal is not an appeal, but nevertheless comes under the appellate jurisdiction of the court. 5.As the application comes under the appellant [sic] jurisdiction of the court, the court can only order security for costs against a person who is an appellant. The [Friggers] are not yet appellants and in those circumstances, until a single judge has allowed the application and the appeal is commenced, there exists no jurisdiction to order security for costs.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

As the respondents’ reliance on Patdith at that time was only raised at the hearing, I granted the Friggers leave to file supplementary written submissions on the issue of the Court’s jurisdiction. They submitted as follows with respect to Patdith:1.At the hearing of Kitay’s application for security for costs on 5 June 2019, Kitay’s solicitor relied on the authority in Patdith Services Pty Ltd v Mitronics Corporation Pty Ltd [2016] FCCA 1611 @ [25] for the proposition that although no appeal has been commenced, Kitay is entitled to an order for security for costs pursuant to r 36.09. With respect, the learned judge Markovic’s discretionary exercise to order security for costs miscarried, in circumstances where numerous other authorities state that where no appeal has yet been commenced, there is no jurisdiction to order security for costs pursuant to r 36.09, [which] specifically names an appellant and not an applicant. 2.In Charara v Integrex Pty Ltd [2010] NSWCA 342, it was found @ [10] – [12] that the equivalent UCPR 51.50, which authorizes the Court of Appeal to make orders for security for costs, do not apply to an application for leave to appeal. The learned judge decided that the court could only rely on its inherent jurisdiction to make such an order: see also Bell v Bay-Jesperson [2004] QCA and Islander v Merpati Nusantara Airlines [2006] NTCA 3. In Bahr v Nicolay (No. 1) [1987] HCA 32, Toohey J rejected an application for security for costs for an application for special leave in the absence of proof that the application was an abuse of process. In that case, Toohey J did not express a view on the likely outcome of the application for special leave. In Bell’s case, security for costs was ordered principally because the application had no merits or prospects of success. This Court has no inherent jurisdiction, unlike the State Supreme Courts. Although decision in the State Supreme Courts are not binding in this Court, those decisions are persuasive and ought to be seriously considered. Consideration I have had regard to both Patdith and the authorities referred to by the Friggers in their supplementary submissions. However, I do not consider it necessary, as the Friggers contend, to consider the correctness of Markovic J’s decision to exercise the Court’s discretion to order security for costs in Patdith, nor the decisions of other courts concerning different statutory regimes. The application before Markovic J concerned both security for costs for the application for leave to appeal and the appeal itself. The interlocutory orders sought by the respondents in these proceedings solely concern the Friggers’ application for leave to extend the time within which to appeal, not the substantive appeal should leave be granted. The issue as to the Court’s jurisdiction to entertain the respondents’ interlocutory application for security for costs can be determined from a consideration of the statutory regime. Section 56(1) of the Federal Court of Australia Act 1976 (Cth) provides: 56 Security(1)The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.