Frigger v Mervyn Jonathon Kitay in His Capacity as Liquidator of Computer Accounting and Tax Pty Ltd (in Liquidation) [No 17]

[2020] WASC 366

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) [No 17] [2020] WASC 366

CORAM:   ALLANSON J

HEARD:   30 SEPTEMBER 2020

DELIVERED          :   16 OCTOBER 2020

FILE NO/S:   CIV 2765 of 2010

BETWEEN:   ANGELA CECILIA THERESA FRIGGER

First Plaintiff

ANGELA CECILIA THERESA FRIGGER AND HARTMUT HUBERT JOSEF FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND

Second Plaintiff

AND

MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)

First Defendant

COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)

Second Defendant

Catchwords:

Practice and procedure - Where action is stayed due to bankruptcy of plaintiff - Whether the action should be dismissed - Turns on own facts

Practice and procedure - Standing - Where plaintiffs are bankrupt - Whether plaintiffs have standing to represent their superfund as trustee in counterclaim - Turns on own facts

Legislation:

Bankruptcy Act 1966 (Cth), s 58A, s 60, s 82
Corporations Act 2001 (Cth), s 206G
Rules of the Supreme Court 1971 (WA), O 18 r 2
Superannuation Industry (Supervision) Act 1993 (Cth), s 126J

Result:

Questions answered

Category:    B

Representation:

Counsel:

First Plaintiff	:	In person
Second Plaintiff	:	In person
First Defendant	:	D Lenhoff
Second Defendant	:	D Lenhoff

Solicitors:

First Plaintiff	:	In person
Second Plaintiff	:	In person
First Defendant	:	Holborn Lenhoff Massey
Second Defendant	:	Holborn Lenhoff Massey

Case(s) referred to in decision(s):

Clark v Loftus [2005] VSCA 155

Freeman v Joiner [2005] FCAFC 149

Frigger v Kitay (Liquidator) [2020] FCA 482

Frigger v Kitay (Liquidator) [No 16] [2020] WASC 337

Frigger v Trenfield (No 6) [2020] FCA 934

Frigger, in the matter of an application by Frigger [2019] FCA 1730

Winterfield v Bradnum (1878) 3 QBD 324

ALLANSON J:

Title

1. The action CIV 2765 of 2010 was commenced by originating summons on 4 November 2010. Mr and Mrs Frigger brought the claim in their own right and as trustee for The Frigger Superannuation Fund (the Fund).  They sought relief including declarations that specified property was held by the second defendant, Computer Accounting & Tax Pty Ltd (in liquidation), in trust for the Fund.

2. The first defendant, Mr Kitay, counterclaimed seeking relief that includes declarations to the effect that the property the subject of the claim is owned by Computer Accounting & Tax in its own right, or that any transfer of property to Computer Accounting & Tax as trustee of the Fund is not binding.  

3. Mr and Mrs Frigger have been declared bankrupt.  An application for an extension of time in which to appeal against the making of the sequestration orders was dismissed in May 2020.

4. The trustee in bankruptcy was given notice of the action in CIV 2765 of 2010. It is not disputed that, pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth), the trustee in bankruptcy is now deemed to have abandoned the action.

5. Questions have arisen that affect the continued prosecution of these proceedings: do Mr and Mrs Frigger have 'standing' to represent the Fund in the counterclaim; and should the action in CIV 2765 of 2010 be dismissed. 

Standing

1. Mr Kitay questions the standing of Mr and Mrs Frigger to represent the Fund in the counterclaim.  In support of that position he advanced two submissions. 

2. First, he submitted that, pursuant to the provisions of s 60(3) of the Bankruptcy Act 1966 (WA), Mr and Mrs Frigger are deemed to have abandoned the action, and the deemed abandonment includes the action brought by the plaintiffs as trustees of the Fund. 

3. The submission does not, in my opinion, accurately reflect the effect of the Bankruptcy Act in this case.  The trustee in bankruptcy is deemed to have abandoned the claims brought by Mr and Mrs Frigger personally.  The statutory stay remains, and any claim by Mr and Mrs Frigger as the trustee of the Fund could only be advanced by the trustee commencing new proceedings:  Frigger v Kitay (Liquidator) [2020] FCA 482 [20] ‑ [23] (Colvin J).

4. Further, the submission made on behalf of Mr Kitay does not address the current situation which is concerned solely with the counterclaim. 

5. The Rules of the Supreme Court 1971(WA), in O 18 r 2, provide a procedural device by which a defendant may counterclaim, rather than bring a separate action, and the court may entertain the action and cross-action in the same proceedings: see Clark v Loftus [2005] VSCA 155 [6], applying Winterfield v Bradnum (1878) 3 QBD 324, 325. A counterclaim is a distinct proceeding by way of cross-action.

6. The counterclaim in CIV 2765 of 2010 is not an action commenced by Mr and Mrs Frigger; it was not stayed pursuant to s 60(2) of the Bankruptcy Act on their bankruptcy. The deemed abandonment of the action under s 60(3) does not legally affect the position of Mr and Mrs Frigger in relation to the counterclaim.

7. Mr Kitay's second submission refers to orders made by Jackson J in other Federal Court proceedings, Frigger, in the matter of an application by Frigger [2019] FCA 1730.

8. Jackson J made an order pursuant to s 206G(1)(c) of the Corporations Act 2001 (Cth), that Mr and Mrs Frigger have leave to manage the company, H & A Frigger Pty Ltd, which was then the trustee of the Fund. The order for leave to manage the company was subject to a condition in [2] of the orders. At the same time Jackson J made an order pursuant to s 126J(1)(b) of the Superannuation Industry (Supervision) Act 1993 (Cth), that each of Mr and Mrs Frigger was not a disqualified person in relation to the Fund.  

9. Mr Kitay submitted that the orders of Jackson J should be 'restrictively interpreted', and do not empower the plaintiffs themselves to be trustees of the Fund and to appear in that capacity in the counterclaim.  I do not accept that submission. 

10. First, under s 126J(4), the order could have been expressed to be subject to exceptions and conditions determined by the court. The order was not expressed to be subject to conditions.

11. Second, Jackson J has subsequently given reasons in Frigger v Trenfield (No 6) [2020] FCA 934, in which Mr and Mrs Frigger purported to appear as trustees of the Fund. While his Honour commented that 'who has been trustee of [the Fund], and when, will be in issue at the trial of this proceeding', he did not suggest that the appearance of Mr and Mrs Frigger, as the current trustees, was outside the terms of the orders he had made.

12. In oral submissions on 30 September 2020, counsel for Mr Kitay further submitted that the appearance of Mr and Mrs Frigger as trustees and on behalf of the Fund is inconsistent with the decision of Curthoys J, on 22 September 2020:  Frigger v Kitay (Liquidator) [No 16] [2020] WASC 337. His Honour did not purport to determine the question of standing, but adjourned it to me as case manager. And while Curthoys J commented on whether H & A Frigger Pty Ltd could be substituted as the trustee in the counterclaim, his Honour did not make any finding that Mr and Mrs Frigger were precluded from acting.

Should the action be dismissed

1. As Colvin J said, in the passage quoted above, whether the proceedings should be dismissed is a separate and subsequent question to whether there is an abandonment of the claim by the trustee in bankruptcy.  The abandonment does not itself operate as a dismissal, but prevents the trustee in bankruptcy from later electing to prosecute the action.  

2. In Freeman v Joiner [2005] FCAFC 149 at [14] the court summarised the effect of an abandonment by the trustee:

   The position is that, whilst the proceedings brought by the bankrupt are deemed to have been abandoned by the trustee, the cause of action remains.  The provision, properly construed, operates only upon the trustee.  There is no bar to the trustee commencing a fresh proceeding on the same cause of action or a bankrupt, on discharge, doing so whether there has been no determination of the issues.  There is a line of authority to this effect. 

3. In the present case, where there are overlapping issues regarding whether property claimed by Mr Kitay, as liquidator, was owned by Computer Accounting & Tax in its own right or as trustee for the Fund, and where the claim by the present trustees of the Fund in relation to that property is stayed, an order for dismissal is not appropriate.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CG
Associate to the Honourable Justice Allanson

16 OCTOBER 2020