Frigger v Trenfield (No 10)
[2021] FCA 1500
•1 December 2021
FEDERAL COURT OF AUSTRALIA
Frigger v Trenfield (No 10) [2021] FCA 1500
File number: WAD 141 of 2019 Judgment of: JACKSON J Date of judgment: 1 December 2021 Catchwords: BANKRUPTCY AND INSOLVENCY - application for declarations that various assets held in regulated superannuation fund and so not divisible among creditors - s 116(2)(d)(iii)(A) of the Bankruptcy Act 1966 (Cth) - principles as to when an asset is part of a fund - beneficial or remedial legislation - possible disposition of property after sequestration orders - purported dispositions ineffective - finding that assets not held in regulated superannuation fund - application dismissed
SUPERANNUATION - meaning of 'regulated superannuation fund' in Superannuation Industry (Supervision) Act 1996 (Cth) (SIS Act) - finding that applicants' SMSF is a regulated superannuation fund - duties of trustees of self-managed superannuation funds (SMSFs) - failure to adequately distinguish SMSF assets and personal assets - purported contributions not compliant with SMSF trust deed - alleged contribution of residential property to SMSF in breach of s 65 and s 66 of the SIS Act - meaning of 'business real property' - contributions not effective and would have infringed SIS Act - failure to establish that claimed assets formed part of SMSF
TRUSTS AND TRUSTEES - creation of express trusts - objective manifestation of intention - inferring intention - burden of proving existence of trust - lack of written evidence manifesting required intention - no reliable evidence of objective manifestation of intention before sequestration order - documents put before court deliberately altered by first applicant - mixing of trust funds and personal funds - significance of registration of 'trust receipts' on Personal Property Securities Register - whether notification of tax file number to financial institutions an objective manifestation of intention - uncertainty as to mechanism of contribution - uncertainty as to beneficiaries - no trust established over certain assets - construction of declarations of trust - lack of objective intention to transfer legal title to other trustees of SMSF - declarations effective to create separate trust, but not effective to contribute properties to SMSF
BANKRUPTCY AND INSOLVENCY - administration of bankrupt estates - duties of trustee in bankruptcy - application for order removing trustee in bankruptcy - effect of bankruptcy on separate legal proceedings - claim that trustee not 'competent' to sign consent orders in separate proceedings by virtue of s 58(3) of the Bankruptcy Act - costs liabilities are debts provable in bankruptcy - s 58(3) only applies in respect of steps in proceedings commenced by creditors - successful appeal parties secured creditors due to security for costs - no proven loss or damage - claim relating to consent orders dismissed - alleged failure to take necessary steps in administration of bankrupt estate - inhibiting bankrupts' dealings with assets - allegation of improper purpose - allegations that trustee in bankruptcy gave false evidence - scope of trustee in bankruptcy's investigatory inquiries - allegation of collusion with third party - uncooperative and belligerent bankrupts - reasonable for trustee in bankruptcy to form view that it was not necessary to interview bankrupts - application for removal dismissed
Legislation: Acts Interpretation Act 1901 (Cth) s 13
Bankruptcy Act 1966 (Cth) ss 5, 19, 30, 40, 52, 58, 60, 115, 116, 157, 179, Schedule 2 (Insolvency Practice Schedule (Bankruptcy)) ss 1-1, 90-15(3)
Evidence Act 1995 (Cth) ss 46, 60, 138
Federal Court of Australia Act 1976 (Cth) s 21
Income Tax Assessment Act 1936 (Cth) ss 6, 202, 202A, 202B, Part VA
Income Tax Assessment Act 1997 (Cth) ss 995-1, 292-85
Personal Properties Securities Act 2009 (Cth) ss 12, 150, 151
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 (Cth) s 5
Superannuation Industry (Supervision) Act 1993 (Cth) ss 10, 17A, 19, 31, 34, 35AE, 35B, 36, 40, 42, 42A, 45, 52, 65, 66, 67, 120, 126J, 126K, Part 15
Superannuation Industry (Supervision) Regulations 1994 (Cth) regs 4.09A, 6.01, 6.18, 8.03, Schedule 1
Federal Court Rules 2011 (Cth) r 39.11
Insolvency Practice Rules (Bankruptcy) 2016 (Cth) rr 42‑10, 42-15, 42-30
Electronic Transactions (Queensland) Act 2001 (Qld) s 14
Property Law Act 1974 (Qld) s 199
Electronic Transactions Act 2011 (WA) s 10
Property Law Act 1969 (WA) s 20
Transfer of Land Act 1893 (WA) s 55
Rules of the Supreme Court 1971 (WA) O25, r 7
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Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (in liquidation) [2000] HCA 25; (2005) 202 CLR 588
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Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442; (2020) 389 ALR 17
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Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969
Boensch v Pascoe [2019] HCA 49; (2019) 268 CLR 593
Borg v de Vries (Trustee), in the matter of the Bankrupt Estate of David Morton Bertram [2018] FCA 2116
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Carter Holt Harvey Wood Products Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Commonwealth v Fernando [2012] FCAFC 18; (2012) 200 FCR 1
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Conway and Insolvency and Trustee Service Australia [2002] AATA 1343; (2002) 72 ALD 791
Conway v Insolvency & Trustee Service Australia [2003] FCA 321
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Federal Commissioner of Taxation v Radnor Pty Ltd (1991) 102 ALR 187
Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Foskett v McKeown [2001] 1 AC 102
Frigger v Banning (No 8) [2019] FCA 1319
Frigger v Kitay (No 2) [2020] FCA 497; (2020) 143 ACSR 655
Frigger v Trenfield [2019] FCA 1746
Frigger v Trenfield (No 2) [2019] FCA 2009
Frigger v Trenfield (No 4) [2020] FCA 797
Frigger v Trenfield (No 6) [2020] FCA 934
Frigger v Trenfield (No 7) [2020] FCA 1740
Frigger v Trenfield (No 9) [2021] FCA 652
Frigger, in the matter of an application by Frigger [2019] FCA 1730; (2019) 139 ACSR 329
Gore v Australian Securities and Investments Commission [2017] FCAFC 13; (2017) 249 FCR 167
Harding v Harding (1886) 17 QBD 442
Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271
In re Schebsman; Ex parte Official Receiver, the Trustee v Cargo Superintendents (London) Ltd & Schebsman [1944] Ch 83
Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22
Jones v Dunkel (1959) 101 CLR 298
JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891
Kauter v Hilton (1953) 90 CLR 86
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366
Kitay, in the matter of Frigger (No 2) [2018] FCA 1032
Korda v Australian Executor Trustees (SA) Limited [2015] HCA 6; (2015) 255 CLR 62
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NM Superannuation Pty Ltd v Young (1993) 41 FCR 182
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Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 751 Date of last submissions: 24 May 2021 (applicants)
25 May 2021 (first respondent)Date of hearing: 27-31 July 2020, 31 August 2020, 1-2, 7, 15 & 21 September 2020 and 27 November 2020 Counsel for the Applicants: The applicants appeared in person Counsel for the First Respondent: Mr SD Majteles Solicitor for the First Respondent: Carles Solicitors Counsel for the Second Respondent: The second respondent did not appear ORDERS
WAD 141 of 2019 BETWEEN: ANGELA CECILIA THERESA FRIGGER
First Applicant
HARTMUT HUBERT JOSEF FRIGGER
Second Applicant
AND: KELLY-ANNE LAVINA TRENFIELD
First Respondent
H & A FRIGGER PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE FRIGGER SUPER FUND
Second Respondent
ORDER MADE BY:
JACKSON J
DATE OF ORDER:
1 DECEMBER 2021
THE COURT ORDERS THAT:
1.The application is dismissed.
2.On or before 15 December 2021, the first respondent must file and serve written submissions on the question of the costs of the proceeding, including any reserved costs, of no more than three pages in length (excluding header).
3.On or before 12 January 2022, the other parties must file and serve any written submissions in reply, of no more than three pages in length (excluding header).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Table of Contents
INTRODUCTION
[1]
Background
[12]
Description of the issues - disputed assets and the applicants' interests in the FSF
[21]
Terminology
[24]
BOQ1 and BOQ2
[29]
The CommSec Main Portfolio
[32]
The Residential Properties
[35]
Whether the FSF is a regulated superannuation fund
[40]
Description of the issues - the orders concerning costs in the Court of Appeal
[41]
Description of the issues - removal of the first respondent as the trustee in bankruptcy
[46]
THE WITNESSES
[50]
Angela Frigger
[51]
The altered St George Bank statement
[52]
The altered CommSec statement
[73]
Other matters concerning Mrs Frigger's credibility
[86]
Kelly-Anne Trenfield
[90]
FIRST GROUP OF ISSUES - ARE THE DISPUTED ASSETS PART OF THE FSF?
[96]
Principles
[96]
When a court will find that assets are held subject to a trust
[96]
When an asset is part of a fund
[120]
Questions of timing
[136]
Contextual matters
[145]
Terms of the FSF Deed
[157]
Management of the FSF
[174]
Who were trustees and members of the FSF at various times?
[178]
Is the FSF a regulated superannuation fund within the meaning of the SIS Act?
[198]
BW1
[211]
The first respondent's tracing of funds
[212]
The evidence about BW1
[221]
What can be inferred from the transactions in BW1
[295]
The applicants' tracing exercise
[304]
Other reasons advanced by the first respondent as to why BW1 is not a trust asset
[326]
Conclusions about BW1
[329]
BOQ1
[333]
Opening of BOQ1 and source of funds
[335]
Matters relied on by the applicants in connection with BOQ1
[340]
Notification of the FSF TFN
[348]
Conclusion regarding BOQ1 and BOQ2
[370]
The CommSec Main Portfolio
[371]
The parties' cases
[372]
Another necessary digression - an application to exclude evidence
[379]
The opening of the Main Portfolio
[385]
Contextual evidence about the purchase of shares in the Main Portfolio
[393]
Notation of the FSF in documents issued or kept by share registries and ASX
[407]
Notification of the FSF TFN
[416]
Conclusions regarding the Main Portfolio
[449]
The Residential Properties
[459]
The evidence as to the Residential Properties being held in the FSF
[463]
The effect of the 2014 Declarations
[482]
Breach of the SIS Act
[505]
Conclusion regarding the Residential Properties
[530]
Summary of conclusions and orders regarding the Disputed Assets
[532]
SECOND GROUP OF ISSUES - THE COURT OF APPEAL ORDERS
[537]
THIRD GROUP OF ISSUES - THE REMOVAL OF TRUSTEE IN BANKRUPTCY
[550]
Principles
[550]
The course of the administration of the bankrupt estates
[560]
The grounds for seeking the removal of the first respondent as trustee in bankruptcy
[575]
(1) Failure to obtain or review information said to be relevant to the question of the capacity in which assets are owned
[582]
(a) Failure to follow up BOQ for HSBC bank cheque (no date provided in Schedule 3)
[584]
(b) Sends follow up letter to BOQ only after receiving notice of demand for loss from applicants (17 October 2018)
[591]
(c) Failure to check BWA [Bankwest] bank statements (September 2018)
[594]
(2) Failure to take steps required in the administration
[598]
(a) Fails to prove alleged creditors (31 August 2018 until present)
[598]
(b) Fails to offset applicants['] claims against alleged creditors (31 August 2018 until present)
[613]
(3) Inhibiting the applicants' dealings with assets
[615]
(a) Freezes BW1 account (September 2019)
[615]
(b) Fails to acknowledge that BOQ1 and BOQ2 are FSF assets paras 12, 13, 15-16 (31 August 2018 until present)
[626]
(c) Freezes [Main Portfolio] on the grounds listed in April 2019 [sic] above (September 2019)
[627]
(d) Notifies CommSec that the securities in the Main Portfolio were assets divisible among the creditors of the bankrupt estates and making related claims to the Australian Financial Complaints Authority paras 26, 27, 28, 29, 30, 31, 32 (31 August 2018 until present)
[627]
(e) Informs AFSA that the applicants failed to inform Commsec that they were acting on behalf of FSF and were trustees of FSF in 1998 in circumstances where: (a) the applicants were not trustees; (b) could not be trustees (August 2019)
[627]
(f) Informs AFSA that the applicants had acted suspiciously in the administration of their estates and had hampered the respondent's administration (August 2019)
[627]
(g) Freezes $6,500,000 of assets held by the applicants in their SMSF, without proving any alleged creditors, causing the applicants loss of more than $2,500,000 in lost earnings and capital gains (31 August 2018 until present)
[644]
(h) Places a caveat on the Residential Properties paras 38, 39, 40, 43 (31 August 2018 until present)
[646]
(4) Correspondence from first respondent to third parties of which the applicants complain
[649]
(a) Send a letter to ATO attaching five documents, in an attempt to persuade the regulator the FSF should be declared an unregulated super fund (April 2019)
[649]
(b) Sends an email on ATO business portal (which is for the exclusive use of FTI Consulting business with the ATO) to ATO attaching five documents, in an attempt to persuade the regulator the FSF should be declared an unregulated super fund (October 2019)
[649]
(c) Sends an email on ATO website (which website is for the exclusive use of persons connected with SMSFs reporting unrectified contraventions) to ATO attaching five documents, in an attempt to persuade the regulator the FSF should be declared an unregulated super fund. On 15 November 2019 the ATO informed the respondent she has no legal right to obtain information about the FSF (4 November 2019)
[649]
(d) Sends emails to share registry staff, disclosing the applicants['] tax file numbers (April 2020)
[667]
(e) Sends emails to share registry staff, informing hundreds of people the applicants have attempted to 'circumvent' the [B]ankruptcy [A]ct (April 2020)
[669]
(5) Giving false evidence
[670]
(a) States on oath in this action she does not have bank statements for cheques drawn on BW[1] and paid into HSBC (June 2019)
[670]
(b) States on oath in this action she does not have copy of HSBC bank cheque paid into BOQ3 in March 2018 (June 2019)
[679]
(c) States on oath she is unable to trace the BOQ funds to assets held by the FSF when the tracing exercise had already been completed by [Official Trustee] in August 2018 (May 2020)
[680]
(6) Signature of costs orders
[687]
(a) Signs consent orders for indemnity costs and dismissal against the applicants in WAD 607, without becoming a party (September 2018)
[687]
(b) Signs consent orders in CACV45/2016 without offsetting applicants claim against Kitay; applicants lose $25,000 (October 2018). See also paras 51 and 57 of applicants' written opening submissions
[701]
(c) Signs consent orders in CACV56 and 62/2015 without: (a) Becoming a party in the action; (b) without [sic] offsetting applicants claim against Kitay; and (c) applicants lose $62,500 (October 2018). See also para 58 of applicants' written opening submissions
[701]
(7) Collusion with Mr Kitay
[702]
(a) Receives letter from Kitay['s] lawyer; accepts offer of pro bono assistance from Stephenson (October 2018)
[702]
(8) Failure to interview the applicants
[708]
Conclusion on removal of the first respondent
[739]
Remuneration and costs
[747]
CONCLUSION
[750]
Schedule 1
Schedule 2
REASONS FOR JUDGMENT
JACKSON J:
INTRODUCTION
The applicants in this proceeding are Angela and Hartmut Frigger, a wife and husband who at the time of the making of the application were undischarged bankrupts. The first respondent is their trustee in bankruptcy, Kelly Anne Trenfield. The second respondent, H & A Frigger Pty Ltd (HAF), is a former trustee of the applicants' self-managed superannuation fund (SMSF), the Frigger Super Fund (FSF).
The issues in this case may be divided into three groups. The first concerns whether certain assets are property divisible amongst the creditors of the bankrupt estates. This turns on whether the applicants hold interests in the assets by way of their interests in the FSF. For some of the assets, the issue arises directly, because the applicants seek declarations that they do hold interests in those assets by way of the FSF. For other assets, while the applicants do not seek declarations to that effect, the issue still arises because they do seek orders that would be consequential on findings that the assets are part of the FSF. There is a related issue about whether the FSF is a regulated superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act). The assets in question, which I will call the disputed assets, are:
(1)two bank accounts with Bank of Queensland Limited, one of which holds more than $2.8 million (BOQ1), the other of which holds just over $50 (BOQ2);
(2)shares held in a share portfolio (Main Portfolio) administered by the share broker, Commonwealth Securities Limited (CommSec); and
(3)two parcels of residential land in suburbs of Perth, one in Bayswater (Bayswater Property) and the other in Como (Como Property, together the Residential Properties).
As will be seen, while not the subject of any of the declarations the applicants seek, it was also in issue whether a Bankwest Retirement Advantage account in Mrs Frigger's name (BW1) was an asset of the FSF.
The second group of issues concerns orders relating to costs that were made by the Court of Appeal of Western Australia. There are three relevant orders, each made in a different appeal. The first respondent consented to the orders in her capacity as trustee in bankruptcy of the applicants. The applicants seek declarations that the minutes of consent orders, and the orders that followed them, are 'incompetent', and claim losses they say they have suffered as a result of the orders.
The third group of issues concerns the first respondent's conduct of the administration of the bankrupt estate. The main question raised by the applicants is whether the first respondent should be removed as trustee of the applicants' bankrupt estates. There are also issues raised as to whether the court should order that the first respondent may not recover any costs or remuneration associated with the Bank of Queensland accounts, the Residential Properties and the costs orders in the Court of Appeal.
There is one other group of issues arising from the relief sought which I mention for completeness. It concerns whether the applicants are entitled to compensation in relation to losses said to have been caused by a hold placed on BOQ1 at the instigation of the first respondent and the applicant's inability to trade the shares in the Main Portfolio. For reasons published as Frigger v Trenfield (No 4) [2020] FCA 797, I ordered, in effect, that any hearing to establish and quantify those alleged losses would take place after delivery of this judgment, if the court determines that any of the relevant assets are indeed FSF assets.
The orders the applicants seek in this proceeding are sought under s 30 of the Bankruptcy Act 1966 (Cth) and s 90-15(3) of Schedule 2 to that Act, that is, the Insolvency Practice Schedule (Bankruptcy). Some of the orders are declarations which are sought in the alternative under s 21 of the Federal Court of Australia Act 1976 (Cth). In summary, the applicants seek:
(1)declarations that BOQ1, BOQ2 and the Residential Properties are held in the FSF on trust for the beneficiaries of that fund, and so pursuant to s 116(2)(d)(iii)(A) of the Bankruptcy Act are not assets divisible among creditors;
(2)compensation for losses the applicants say they have incurred as a result of the first respondent having placed holds or freezes on BOQ1;
(3)an order requiring the first respondent to remove caveats she has placed on the Residential Properties and to pay any losses caused by the caveats;
(4)declarations that the various consent orders and costs assessments in the Court of Appeal are 'incompetent' pursuant to s 58(3)(b) of the Bankruptcy Act;
(5)compensation for losses resulting from the Court of Appeal costs orders and orders effectively requiring the first respondent to apply to that court to have the orders set aside;
(6)orders disentitling the first respondent to remuneration and costs in relation to the above matters;
(7)orders requiring the first respondent to write to CommSec and the ASX to remove a trading suspension on the Main Portfolio which appears to have been placed following a previous letter from the first respondent to CommSec, and requiring her to say that the securities in that account have not vested in her pursuant to s 58 of the Bankruptcy Act;
(8)compensation for losses said to have been caused by the suspension of trading in the Main Portfolio;
(9)an order removing the first respondent as the trustee in bankruptcy of the applicants' estates; and
(10)costs.
The first respondent opposes all the orders sought.
HAF was joined as second respondent for reasons given in Frigger v Trenfield (No 6) [2020] FCA 934 (Frigger (No 6)). It has filed a submitting notice which is qualified, in the sense that it does not submit to any order or finding on three specified issues said to have been raised by the first respondent, namely: (a) HAF's role as trustee or former trustee of the FSF; (b) mortgages registered on the properties in Como, Bayswater and Applecross; and (c) whether or not the second respondent is named as a secured party in the Personal Properties Securities Register (PPSR). It will be necessary to make findings about the identity of the trustees of the FSF over time, including HAF, although it is not clear that those findings are either the result of issues raised by the first respondent or opposed by or adverse to HAF. Save for that, it will not be necessary to deal with the issues specified in HAF's submitting notice or to refer to HAF's position in the litigation separately to the position of the applicants; it is common ground that HAF's interests are identical to those of the applicants.
As prolific self-represented litigants, the applicants made a large number of contentions in their many affidavits and submissions. That proliferation of contentions was compounded by the changing nature of the positions they took in the case over time. It is not possible to address every one of those contentions in terms in these reasons. Where I have not addressed a submission that the applicants have made, it is because I do not consider it sufficiently cogent to warrant express mention.
For the following reasons the application will be dismissed.
Background
Before describing the issues in more detail it is convenient to set out some relatively uncontentious background to the applicants, the respondents and the FSF.
The applicants are husband and wife. There was little direct evidence as to their respective backgrounds. But records show that the first applicant, Mrs Frigger, is 68 years old (ACTF 1 p 51 - I will use this format to refer to the 18 affidavits of Mrs Frigger which the applicants put into evidence, which will be numbered in the order in which they were sworn and filed as set out in Schedule 1 to this judgment). Mrs Frigger is now retired, although the volume of litigation in which she and Mr Frigger have been personally involved in the last 13 or so years makes that an incomplete description of her working status. Before her retirement she worked as an accountant. She has a Bachelor of Accounting from the Western Australian Institute of Technology (now Curtin University). She qualified as a Certified Practising Accountant and is a Fellow of the National Tax and Accountants Association.
Mr Frigger is 66 years old (ACTF 1 p 53). He too is retired. During his working life he was an engineer. It is clear that through investment, entrepreneurship or other means, he and Mrs Frigger had accumulated substantial assets by the time they were declared bankrupt. Much of this case concerns the capacity in which they held some of those assets.
The FSF was formed on about 1 July 1997 by the execution of a deed entitled 'Superannuation Trust Deed for a Self-Managed Fund for Frigger Super Fund' (FSF Deed). Its members, that is the beneficiaries of the trust, may have changed over time, but they have always included the applicants.
The first trustee of the FSF was a company called Serenity Holdings Pty Ltd, which subsequently changed its name to Computer and Accounting Tax Pty Ltd (so, while there will occasionally be a need to use the former name, I will define it as CAT). It appears that CAT was trustee of the FSF until about July 2010 (KAT 4 para 66 - I will adopt a similar naming convention for the first respondent's affidavits as I have for those of the applicants - see Schedule 1). An order for its winding up in insolvency was made on 6 May 2010 (KAT 4 para 27). Mervyn Kitay is its liquidator (KAT 4 para 26).
When other persons or entities were, and were not, trustees of the FSF proved to be in dispute and has implications for the main issues in the proceeding. I will consider that question later.
The applicants' bankruptcies occurred when this court made a sequestration order against their respective estates on 20 July 2018: Kitay, in the matter of Frigger (No 2) [2018] FCA 1032. It is not necessary to describe the events leading up to the bankruptcy in any detail. At one time the applicants claimed that they had an appeal or other proceedings on foot which would have resulted in the setting aside or annulment of their bankruptcies. However by force of an order made by Charlesworth J on 17 April 2020, an application for an extension of time to appeal from the sequestration order was dismissed: Frigger v Kitay (No 2) [2020] FCA 497; (2020) 143 ACSR 655. Therefore the court proceeds on the basis that the applicants' attempts to appeal from or otherwise overturn the sequestration orders have been unsuccessful. There was a fresh application to annul the bankruptcies made after judgment was reserved. I dismissed an attempt by the applicants, based on their application to annul, to have me stay judgment in this proceeding: Frigger v Trenfield (No 9) [2021] FCA 652. As at the date of this judgment, the annulment application had been neither granted nor dismissed.
The Official Trustee in Bankruptcy became the applicants' trustee in bankruptcy on the making of the sequestration order. On 31 August 2018 the applicant's creditors passed a special resolution appointing the first respondent and a partner in her firm, Paul Allen, as trustees in bankruptcy, in place of the Official Trustee, pursuant to s 157 of the Bankruptcy Act (KAT 1 paras 3‑4, p 30). Mr Allen has since retired from that position (KAT 4 para 21), so the first respondent, Mrs Trenfield, is the applicants' sole trustee in bankruptcy.
That is about all that can be said that is uncontentious in this proceeding. I will now describe the issues between the parties in more detail.
Description of the issues - disputed assets and the applicants' interests in the FSF
The first group of issues concerns whether, as at the relevant date, the disputed assets were held in the FSF. The significance of that question stems from s 116(1)(a) of the Bankruptcy Act, which provides that, subject to the Act:
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge
… is property divisible amongst the creditors of the bankrupt.
As this indicates, the relevant date is 'the commencement of the bankruptcy', a concept that will be explained below.
The applicants rely on s 116(2)(d)(iii)(A) of the Bankruptcy Act as an exception to this. It provides that s 116(1) does not extend to certain specified kinds of property, including 'the interest of the bankrupt in … a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993 [(Cth)])'. The applicants seek declarations that BOQ1, BOQ2 and the Residential Properties fall within this exception, and they also seem to rely on it in relation to the Main Portfolio (although a declaration under it is not sought in the originating application). So the central issue is whether the applicants hold beneficial interests in the disputed assets by way of their interests in the FSF. Since there is no question that between them they held substantial interests in the FSF, the key question is whether the disputed assets were assets of the FSF. Whether the FSF is a regulated superannuation fund within the meaning of the SIS Act is also in issue.
For completeness, I note that the applicants do not rely on s 116(2)(a) of the Bankruptcy Act. That section provides that s 116(1) does not extend to 'property held by the bankrupt in trust for another person'. The applicants seek no declaration that s 116(2)(a) applies in relation to any of the disputed assets. If they had, they would have faced the difficulty that the High Court has construed the provision to mean that if a bankrupt holds property on trust for herself along with other persons, that property will still vest in the trustee in bankruptcy under s 116(1), subject to the equities in favour of the other persons: Carter Holt Harvey Wood Products Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 at [94]; Boensch v Pascoe [2019] HCA 49; (2019) 268 CLR 593 at [4], [88], [91], [93].
Terminology
Before going further it is necessary to make clear how certain terms are used in this judgment.
It was effectively common ground that the FSF is an express trust, since the FSF Deed did establish a trust. What is not clear is which assets are held on the terms of that trust. Nevertheless, I will speak of the FSF as an extant trust, on the assumption that it applies to at least some existing assets.
In these reasons I will refer to assets as being 'held in the FSF', 'FSF assets', 'an asset of the FSF', 'part of the FSF' or 'FSF funds' as shorthand for saying that the asset is one which is owned at law by persons who hold office as trustees of the FSF pursuant to the FSF Deed, with those trustees accordingly having powers and duties in respect of the asset under the FSF Deed to hold, use, apply and dispose of the asset for the benefit of the beneficiaries, who are identified as such in, or in accordance with, the FSF Deed.
The key question in relation to the disputed assets, though, is whether they are part of the fund that is the FSF. That is because s 116(2)(d)(iii)(A) of the Bankruptcy Act speaks in terms of the interest of the bankrupt in a fund. Doubtless if an asset meets the description in the preceding paragraph, it will be part of the FSF. However it will be necessary in these reasons to consider whether circumstances that fall short of that also mean that certain assets are part of the fund.
I now describe the particular issues that arise in relation to each of the disputed assets.
BOQ1 and BOQ2
The Bank of Queensland accounts are the first of the disputed assets which the applicants claim are FSF assets. In their written opening submissions, the applicants put their case on a narrower basis than appeared from the evidence they filed. They simply allege that the money in those accounts was originally earned by the FSF as rental income from a commercial property in Edward Street, Perth, and a property leased to Officeworks in Hobart. They say that the Hobart property was purchased in their names as trustees, and that there was a declaration of trust over the Edward Street property in 2009 and a registrar's caveat recording the trust lodged on the title. So the rental income from those properties is said to be income of the FSF.
The first respondent denies that the money in the Bank of Queensland accounts is held on trust. She points to the fact that BOQ1 is in Mr Frigger's name only, and BOQ2 is in Mrs Frigger's name. She submits that the onus is on the applicants to establish that there was, at any relevant time, an objective manifestation of the intention to hold those accounts on trust on the terms of the FSF, and that they have failed to discharge that onus.
While the applicants seek to put their case on a narrower basis than the issue as stated by the first respondent, in my view the applicants' submission is simply the particular manner in which they seek to establish the necessary objective manifestation of intention (as to which see [104] and following below). The ultimate issue is whether there was any such manifestation, having the result that the applicants hold beneficial interests in the accounts as part of their interests in the FSF as a regulated superannuation fund.
The CommSec Main Portfolio
The Main Portfolio was opened in the name of both of the applicants in 1998. The applicants concede that it was not opened by them in their capacities as trustees, since they were not trustees of the FSF at the time. But they rely on a variety of surrounding circumstances to allege that the shares that are currently held in the Main Portfolio were purchased in their capacity as trustees of the FSF.
The first respondent denies this and alleges that the applicants own the shares in the Main Portfolio in their personal capacities, with no division between legal and beneficial ownership. She relies on a number of circumstances to submit that at no time has there been any objective manifestation of an intention that the securities in the Main Portfolio were to be held by the applicants in their capacities as trustees of the FSF.
On 28 August 2019 the first respondent wrote to CommSec claiming that the securities in the Main Portfolio vested in her as trustee in bankruptcy of each of the applicants and were considered property divisible among the bankrupt estates' creditors (ACTF 5 p 5). The first respondent asked for a freeze on transactions in the portfolio. This has resulted in the account being locked (ACTF 5 p 7). The applicants thus frame the issue as whether they are prevented as trustees of the FSF from trading shares listed on ASX because of the sequestration order. However that merely describes a practical consequence for them if they fail to establish that the securities were assets of the FSF. The applicants accept that they must establish this in order to obtain the orders they seek in relation to the Main Portfolio.
The Residential Properties
Each of the Residential Properties have houses that are leased to tenants for rental income. For each of them, the name of the owner shown on the certificate of title is Angela Frigger. Mrs Frigger acquired the Bayswater Property before the establishment of the FSF. While she became the registered proprietor of the Como Property after the FSF was established, she did so at a time when CAT, and not either of the applicants, was trustee of the FSF.
The applicants say that Mrs Frigger contributed both properties to the FSF by means of written declarations of trust made on 1 July 2014 (2014 Declarations). I will examine the terms of those declarations when I resolve this issue below. The first respondent nevertheless disputes that the Residential Properties are assets of the FSF. She says that on the proper construction of the 2014 Declarations they do not have the result that the properties were held by the applicants in their capacities as trustees of the FSF. She also submits that there would be contraventions of the SIS Act arising from any contribution of the Residential Properties to the FSF which would make them invalid.
So the issue to be determined by the court is whether, having regard to those matters, the applicants have established that the Residential Properties are assets of the FSF.
The applicants, once again, describe the issue in a narrower way, as whether the first respondent has a caveatable interest in the Residential Properties. That is because the first respondent lodged an absolute caveat on each property on around 11 October 2018, claiming an interest as trustee in bankruptcy (KAT 4 p 295). The interest claimed is the 'vesting in equity' in the first respondent (and Mr Allen) 'as joint and several trustees of the bankrupt estate of the registered proprietor in accordance with section 68 [sic 58] of the Bankruptcy Act 1966 (Cth)'.
As has been said, the applicants seek orders for the removal of these caveats, so the existence of caveatable interests is in dispute. But it is not a complete description of the issues. In any event, the first respondent submits that even if the properties are assets of the FSF, she still has a caveatable interest in them by reason of the vesting of those properties in her under s 58(1) of the Bankruptcy Act.
Whether the FSF is a regulated superannuation fund
The first respondent puts the applicants to proof of the status of the FSF as a regulated superannuation fund within the meaning of the SIS Act. As has been explained, that must be resolved in the applicants' favour for their interests in the FSF to fall outside the pool of property divisible among creditors of their bankrupt estates.
Description of the issues - the orders concerning costs in the Court of Appeal
The Court of Appeal orders sought to be impugned were made in three appeals. The first was an appeal which the applicants brought to which Mr Kitay was the respondent. The applicants were ordered to pay $25,000 into court as security for Mr Kitay's costs of the appeal, which they did. The appeal was unsuccessful and before they became bankrupts, the applicants were ordered to pay Mr Kitay's costs of the appeal on an indemnity basis (ACTF 1 p 134). A certificate for the taxation of costs was issued on 18 September 2018 (ACTF1 p 138), after the sequestration order and a little over two weeks after the first respondent's appointment as the applicants' trustee in bankruptcy. The first respondent took no part in that taxation. The Court of Appeal taxed the costs in the sum of $85,363.90 (ACTF 1 p 138). After that, at Mr Kitay's request, Mrs Trenfield signed a minute of consent orders for the payment of the $25,000 out of court to Mr Kitay. The Court of Appeal ordered accordingly.
The other two appeals can be dealt with together. The applicants brought them against a law firm, Clavey Legal. The applicants had paid sums into court as security for the costs of those appeals, totalling $62,500. The appeals were unsuccessful and in each, the applicants were ordered to pay Clavey Legal's costs. This occurred before the sequestration order. After the sequestration order, Mrs Trenfield signed minutes of consent orders fixing Clavey Legal's costs in the amount of the security that had been paid in, and authorising payment out. The Court of Appeal made those orders.
It was difficult to make out the basis for the applicants' claims about these events from their written submissions. But in oral opening it became clear that they have two complaints. The first is that they say that the costs liabilities were debts provable in the bankruptcy, which should have been dealt with in the course of the process of proving such debts. But instead of calling for proofs and adjudicating on them, the first respondent signed consent orders which led to the payment out of the amounts that had been paid in as security for costs. The applicants' second complaint is that the first respondent should not have consented to that payment out because the applicants had substantial counterclaims against Mr Kitay and Clavey Legal which more than offset the costs liabilities.
In oral submissions the applicants also made it clear that, while they seek declarations that the orders are 'incompetent', they do not ask this court to somehow reverse or override the orders made by the Court of Appeal. The reference to lack of competency is a reference to the wording of s 58(3) of the Bankruptcy Act, which provides that after a debtor has become a bankrupt, it is not 'competent' for a creditor to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt. The applicants' principal claim is for a declaration that the first respondent acted contrary to her duties as trustee in bankruptcy and for compensation from the first respondent for losses they say they suffered as a result of the first respondent's signing of the consent orders.
The first respondent disputes the applicants' claims about the costs orders on several bases (many of which will not need to be addressed). She says that the claims are untenable.
Description of the issues - removal of the first respondent as the trustee in bankruptcy
The conduct of the first respondent on which the applicants rely in order to argue that she should be removed as their trustee in bankruptcy is, to some extent, her conduct in asserting control over the assets which the applicants say are assets of the FSF, or conduct which (broadly speaking) indicates a lack of acceptance of the applicants' claims in that regard.
There is also conduct associated with those issues, such as an asserted failure to follow up the Bank of Queensland to obtain a copy of an HSBC bank cheque which would have helped in the process of tracing funds back to BW1, and statements made in affidavits about those things which the applicants say are false. The applicants repeat their complaints about the first respondent signing consent orders in the Court of Appeal. In addition, the applicants rely on what they say were attempts by the first respondent to persuade the Australian Taxation Office (ATO) to treat the FSF as an 'unregulated super fund', incorrect statements made to the Australian Financial Security Authority (AFSA), and emails to share registries which they say disclosed their tax file numbers (TFN) and claimed that they had tried to circumvent the bankruptcy.
The applicants also rely on what they say are the first respondent's failures to interview them, to accept proofs of debt and to recognise offsetting claims that they had against certain creditors. There is also an allegation about collusion with Mr Kitay and his lawyers.
The first respondent disputes all of these allegations. For the most part she does so by reference to her position in relation to the issues about the ownership of the disputed assets and the Court of Appeal orders: if the applicants cannot establish their case in relation to those issues, then they will not establish that the first respondent's conduct in relation to those assets fell short of the standard to be expected of a trustee in bankruptcy. But the first respondent says that even if the applicants succeed in relation to those claims, her position was still reasonable, especially given what she says were constant difficulties in obtaining information about the matters in question, largely caused by an uncooperative and aggressive stance taken by the applicants themselves, as well as the unreliability of the information they did provide. The first respondent denies that she had any obligation to interview the applicants and says that, given their attitude, an interview would not have been useful. She says that there is no point in calling for proofs of debt unless and until it appears that a dividend will be paid out of the bankrupt estates.
THE WITNESSES
Before turning to determine the issues, I will make some observations about the witnesses. There were only two: Mrs Frigger and Mrs Trenfield. Each was cross-examined for some time. My general views about the reliability of their evidence are as follows.
Angela Frigger
I have already described Mrs Frigger's background and qualifications. It is necessary to say at the outset that I have concluded that she knowingly altered documents which she put into evidence, in order to create a false impression that the documents supported the applicants' case. I should explain at once why I have reached that conclusion, conscious of its gravity and the need for clear and cogent proof.
The altered St George Bank statement
The question of whether certain assets were held in trust on the terms of the FSF is central to this proceeding. Any matter tending to support a finding that the applicants intended that an asset be held on trust would support their case. Cases on trusts which I discuss below illustrate how simple steps such as referring to a trust in the name of a bank account can help establish that the account is held in trust.
Mrs Frigger's affidavit sworn 6 March 2019 (ACTF 1, filed with the originating application in this proceeding) annexed (at p 108) a bank statement from St George Bank. This was for an account with a number ending 718 (STG1). The statement is for the period 26 February 2017 to 7 July 2017 and shows an opening balance of $2,172,753.47, and withdrawals leaving a closing balance of nil. In this version of the bank statement, near the top of the first page, where one normally sees an account name, the following appears (I have redacted the street address):
The evidence in the body of affidavit ACTF 1 said nothing specifically about the bank statement. It was annexed as evidence of bank accounts from which money was withdrawn to open accounts with HSBC, which money then was said to have flowed into BOQ2 and then BOQ1.
Mrs Frigger annexed the same bank statement to an affidavit she swore on 20 April 2020 (ACTF 14 p 371). I say it is the same because the account number and transactions are all identical. But in this affidavit, the statement has the following as the account name (once again with street address redacted):
The person described as 'Miss J Frigger' above is Jessica Frigger, who is the applicants' adult daughter. A third version of the bank statement came into evidence via Mrs Trenfield (Exhibit (Ex) 36). She gave evidence that she obtained that version from St George Bank, along with a statement for the same account for a prior period (transcript (ts) 513). It is effectively identical to the second version I have described. It shows Jessica Frigger as the account name, not Angela Frigger, and it does not mention the Frigger Super Fund.
In Mrs Frigger's affidavit ACTF 14 sworn on 20 April 2020, the second version of the St George bank statement is part of annexure AF11. The affidavit contains the following evidence about that annexure (the Michael Frigger mentioned in the quote is the applicants' adult son):
21.Attached and marked AF11 are copies of bank statements of other websaver accounts held by Jessica Frigger and Michael Frigger, the other trustees/directors/members of the FSF. None of the short-term websaver bonus interest accounts allowed the inclusion of the words 'as trustee for the Frigger Super Fund' when it was first opened.
22.Attached and marked AF12 are copies of other investments of the FSF. Each of these investments allowed me to include the words 'as trustee for the Frigger Super Fund' when it was first opened.
23.In order to overcome the above problem, when each websaver account was opened, and I obtained internet access to the account, I logged in and checked if there was an additional 'name' field. I then input the words 'Frigger Super Fund' in the additional name field, sometimes called a 'Nickname' by some banks. This was in compliance with the regulator's direction that the trustees do all that is possible to properly identify an asset as belonging to the SMSF.
Then, in an affidavit which Mrs Trenfield swore on 22 May 2020 (KAT 4), she annexes some emails between her staff and Westpac Banking Corporation, of which St George Bank is a division. In the emails, which were sent in late September 2019 (KAT 4 p 868ff), a staff member of FTI asked the bank for bank statements for STG1, giving the account number and saying that it was 'in the name of Angela Frigger'. To this the bank responded that the account was 'not held under Hartmut Hubert Josef Frigger and Angela Cecilia Therese Frigger'. This correspondence was referred to in paras 140‑141 of KAT 4.
It appears that this prompted Mrs Frigger to change her evidence about the St George statement. In an affidavit sworn on 17 June 2020 (ACTF 18), she sought to explain a transaction listed in a spreadsheet she had sent to her first trustee in bankruptcy, the Official Trustee. This was a withdrawal of $1,800,000 from a Bank of Melbourne account. Mrs Frigger noted that St George Bank and Bank of Melbourne were both divisions of Westpac Banking Corporation. She said she had found a cheque butt showing that the $1,800,000 had been paid into a St George account. The cheque butt shows 'J Frigger ATF FSF' as the recipient. Mrs Frigger then said:
7.I now remember I logged on to Bank of Melbourne website to obtain a copy of bank statements for the auditor. I obtained the bank statement that is in my affidavit of 6 March 2019 page 108 when I had logged on to the Bank of Melbourne. I believed the bank statement was for an account in my name. I filled in my details, without realizing that the statement in fact belonged to the account in Jessica Frigger's name.
8.It was not until I prepared my affidavit of April 2020 that I found the hard copy of the St George Bank statement in Jessica Frigger's name. I still did not connect the two statements until I read the respondent's evidence in [140] ‑ [141].
9.I confirm that the two BankWest cheques totaling $2,150,000 were paid into the St George Bank account in Jessica Frigger's name. I confirm I do not have page 1 of that account and am unable to obtain it from any source.
The 'bank statement that is in my affidavit of 6 March 2019 page 108' is the first version of the St George statement in ACTF 1, which shows Mrs Frigger as the account holder and refers to the FSF.
Mrs Frigger expanded on this explanation when she was cross-examined on the different versions of the St George bank statement (ts 431ff). She accepted that STG1, the account for the statement in ACTF 1, was not an account in her name. She said she put the words 'Frigger Super Fund' in the document. She was asked whether she 'logged on to this account'. At that point, she acknowledged that since the account was in Jessica Frigger's name, she would not have been able to log onto it. But she then said she 'accessed' (ts 432) it via the Bank of Melbourne's internet banking site. On questioning from the court, she said she logged on using her (Angela Frigger's) customer number. She claimed that when she logged on to the site, she saw three or four account numbers without any names. She said she 'got it [the statement] without any names on it'. She said 'I put my name on it and I put the Frigger Super Fund [sic] because I knew it was Frigger Super Fund funds … And I had completely forgotten that it was in - actually in Jessica's name'. She admitted to typing those details in herself.
On further questioning from the court, Mrs Frigger confirmed that she clicked on links for the account which downloaded the statement as a .pdf file. Her evidence was that there was no account name on that pdf. According to her, the place where the account name appears on all three versions of the statement in evidence was, when she downloaded it on this occasion, blank. She said she assumed that it was a statement in her name, because she had forgotten that it was in Jessica's name and she did not know that by logging in using her (Angela Frigger's) customer number she could get access to an account of Jessica's.
Mrs Frigger went on to say that she altered the document on her computer, that is, she did not print it out first and change the printed version, rather she used a pdf editor. She claimed that she did this when she was preparing documents for the audit for the FSF for the year ended 30 June 2017. The 'date audit completed' for that financial year as recorded by the auditor of the FSF was 16 March 2019 (KAT 4 p 381), so if that is when the bank statement was downloaded and altered, that is likely to have occurred in early 2019, at around the same time that this proceeding was commenced and her affidavit ACTF 1 was sworn. The auditors of SMSFs are required to prepare their audit report within 28 days after the trustee of the fund has provided all documents relevant to the preparation of the report: Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations) reg 8.03. Mrs Trenfield has put into evidence screen shots of metadata for documents submitted to the auditors which also indicate it is probable that the audit took place in early 2019 (KAT 4 annexures 111, 113).
In affidavit KAT 4, Mrs Trenfield says in relation to STG1 that the 'same extract of the SG1 account was in the bundle of documents provided to me by Just SMSF Audits' (KAT 4 para 140). It is not abundantly clear whether she means the extract as doctored by Mrs Frigger, but I will proceed on the basis that she does.
Questions from cross-examining counsel confirmed that the second version of the statement, which is annexed to affidavit ACTF 14, was probably in Mrs Frigger's house at the time of the audit (in early 2019), because Jessica had given it to her. But Mrs Frigger said she did not find it until she came to prepare affidavit ACTF 14 in April 2020. Counsel put to Mrs Frigger that in fact, rather than obtain the first version of the bank statement from the Bank of Melbourne website, she photocopied the second version, which was in her possession, and cut and pasted her name and 'Frigger Super Fund' on top of it. She denied this. She sought to explain differences in the print resolution (see images above) by saying that she may have changed printers or perhaps printer cartridges (ts 437). She denied that she changed the statement and put it in affidavit ACTF 1 in order to convince the court that it was an account held in the FSF.
I do not accept Mrs Frigger's evidence that the St George bank statement she downloaded had no account name on it, and she mistakenly put her name on it, along with the reference to the FSF. It is an explanation proffered in an attempt to dispel the obvious inference arising from the different versions of the statement in evidence, that Mrs Frigger altered the document so that it no longer showed Jessica Frigger as the account holder, and then put it into evidence in an attempt to persuade the court that it was an asset of the FSF. The case of the applicants, apparent from ACTF 1, was that the flow of funds from STG1 and other accounts to BOQ1 indicated that the funds in BOQ1 were FSF funds (paras 17‑19). Establishing that STG1 was an FSF asset was part of that case. That gave Mrs Frigger motive to present the bank statement of STG1 as if the account were an asset of the FSF.
It may be, as I have noted, that the same doctored version of the statement was given to the auditor of the FSF at the time of the audit of the 2017 accounts. If Mrs Frigger's initial motivation for altering the bank statement was for the purpose of giving it to the auditor, rather than the court, that would hardly excuse the behaviour. And timing is important here too: Mrs Frigger's evidence was that she altered the bank statement during the audit of the financial year ended 30 June 2017, which audit was completed on 16 March 2019. That means that she probably altered the statement at around the time she swore affidavit ACTF 1 on 6 March 2019. So when swearing that affidavit she cannot have overlooked the fact that she was putting a doctored bank statement into evidence.
For Mrs Frigger's explanation to be even remotely plausible, the court would need to accept that the version of the statement which, on her own evidence, she altered, did not have an account name on it. But bank statements issued by Australian banks to ordinary retail or commercial customers always have the name of the account holder on them. The court does not need to draw on common experience to reach that view. It is evident from the very large number of (apparently undoctored) bank statements adduced into evidence in this proceeding. They are issued by a range of different, well-known Australian banks. Having reviewed a large number of them, the court has not identified a single one that does not bear the account name.
More specifically, the version of the bank statement which the first respondent obtained directly from St George has the account name on it, as do numerous other bank statements that St George provided (KAT 4 p 793ff). If the account name was missing, one of the basic functions of a bank statement for a bank account would not be fulfilled, namely to identify whose account it is. A reason why, in this one case, a downloaded bank statement might not have any account name on it, does not even occur to one, and no reason was proffered. In closing submissions, Mrs Frigger said that she could prove that downloading a bank statement which does not show an account name is something that can happen when a person is doing online banking (ts 935), and that she would return to that subject. But she never did.
It might also be thought to be unlikely that Mrs Frigger could access St George statements through the Bank of Melbourne website, but since the two banks apparently have the same BSB (Bank State Branch) numbers (ACTF 1 p 108; ACTF 18 p 9), I am prepared to accept that is possible. I do not accept, however, that Mrs Frigger could gain access to accounts of Jessica by using her (Angela Frigger's) login.
There are other reasons to find that Mrs Frigger's evidence on this point lacked credibility. During cross-examination on this subject she gave the evidence in the manner of someone piecing together past events. But her demeanour at those times was that of a person pretending to only just then remember the events. Throughout almost all of the rest of the proceeding, Mrs Frigger presented as a person of mental acuity who had a detailed recollection of everything to do with her and her husband's financial affairs. Her occasional lapses into vagueness appeared intended to obscure the fact that she had no good explanation for what she was being asked about.
Even if I were disposed to accept Mrs Frigger's evidence that she downloaded a bank account statement with no account name, that would not exculpate her. Even if she did not know that it was an account in Jessica Frigger's name, when she swore ACTF 1 she did know that the statement had no name on it (on her version of events), and she did know that it said nothing about the FSF. She knew that she had added a name and FSF notation to it, and she did not tell the court about any of that until she was forced to admit it in response to evidence adduced by the first respondent.
But, for the reasons given above, I find that the original bank statement which Mrs Frigger altered did have 'Miss J Frigger' as the account name. It follows, not only that Mrs Frigger deliberately altered the statement before she put it into evidence, but that the evidence she gave about the matter in (at least) her affidavit ACTF 18 and in cross-examination on the point was false.
The altered CommSec statement
The bank statement for STG1 is not the only altered document which Mrs Frigger put into evidence. She also annexed to affidavit ACTF 1 a 'Financial Year Summary' from CommSec showing the value of the Main Portfolio as at 30 June 2018 (annexure AF10). The portfolio is in the names of Mr and Mrs Frigger. The part of the document that is presently relevant appears as follows (ACTF 1 p 80):
It can be seen that under the account name is a line labelled 'Total Portfolio Value' and under that appears 'FRIGGER SUPER FUND'. In the body of the affidavit Mrs Frigger said that this annexure was an annual statement for a CommSec share portfolio from which dividends were paid which, the affidavit asserts, ultimately found their way to BOQ1.
In affidavits KAT 3 sworn on 11 September 2019 at paras 10-11 and KAT 4 sworn on 22 May 2020 at para 162, Mrs Trenfield deposed to having obtained documents from Just SMSF Audits which included the same CommSec statement for the financial year ending 30 June 2018. She annexed that version of the statement, which is indeed the same as the one annexed to ACTF 1, save that the words 'FRIGGER SUPER FUND' are missing from it. Mrs Trenfield also annexed copies of the equivalent documents for the financial years ending 30 June 2016 and 30 June 2017, neither of which had that notation on them (KAT 4 pp 923‑962).
Mrs Frigger's initial response to that, in affidavit ACTF 8 sworn on 16 September 2019 (para 2), was to say: 'The reason why I added the words "Frigger Super Fund" (FSF) to the statement from Commonwealth Securities is because the regulator of that Fund, ATO, requires me to identify all documents that relate to the Fund'.
In affidavit ACTF 14 sworn on 20 April 2020, Mrs Frigger gave the following evidence (ACTF 14 para 10):
I refer to the notation 'Frigger Super Fund' on statements which I download from the Commsec website each year for the purposes of the external audit. Pursuant to directions of the regulator, the ATO, I inserted those words on the statements in order to identify the list of shares and its market value for the purposes of satisfying the external audit. By making such a notation, I did not intend to mislead anyone in relation to the beneficial ownership of the shares. I have long been aware from studying the Companies Act at university (1980) and being a registered agent with ASIC (1985) that beneficial ownership of shares is noted on the share scrip held by the company in its member share register.
One immediate difficulty with accepting this evidence is that the version of the statement obtained from the auditor does not have the notation 'Frigger Super Fund' on it.
Mrs Frigger was cross‑examined about the CommSec statement (ts 423‑426). She confirmed that she typed the words into the statement. Her evidence about how and when she did this was unsatisfactory. At first she appeared to be saying she edited the pdf in the same way as she edited the St George statement. But then her evidence changed to be that there was a way of inputting the words into CommSec's online platform. Again, she gave this later evidence with an unconvincing air of someone only then just recalling added detail.
Also, there are in evidence financial year summaries for a different CommSec account, in the name of Serenity Holdings Pty Ltd (i.e. CAT), which do refer to the FSF (Ex 28, Ex 44). In the financial year summaries for Serenity Holdings, that reference appears as follows:
In this financial year summary, the reference to the FSF appears where one would expect it to appear, as part of the account name. In the first extract provided above it appears in an odd unexplained spot under the line for 'Total Portfolio Value'.
It was put to Mrs Frigger that she had added the words 'Frigger Super Fund' to the Financial Year Summary for the Main Portfolio just before signing affidavit ACTF 1 of 6 March 2019. She said she could not remember. When questioned about why, if it was a regulatory requirement to add the words, they were not on the versions she gave to the auditors, she had no explanation (ts 423-426).
The first respondent submitted that I should infer that Mrs Frigger altered the CommSec statement attached to affidavit ACTF 1 so as to convince this court that it was an asset of the FSF from which dividends were earned that went into BW1. While this allegation was not squarely put to Mrs Frigger in those terms, it was put to her that she altered the statement just before swearing that affidavit and I am satisfied that it must have been obvious to her during cross‑examination that it was being suggested that she did not alter it for the purpose of the external audit, but for the purposes of this proceeding. I am therefore satisfied that she was on notice that her evidence on the point was in contest, and that she had a proper opportunity to give any explanation she wished to give (ts 423‑426).
But she had no plausible explanation. In closing submissions (ts 936) she sought to retract her evidence that she had inserted 'Frigger Super Fund' on the financial year summary for 2018 in order to identify the list of shares and its market value for the purposes of satisfying the external audit. She said 'what I was really meaning was I download documents for the purposes of the external audit'. This was a transparent attempt to revoke a previous explanation which, I infer, Mrs Frigger later realised would not help the applicants because, as I have said, the version of the document given to the auditor did not have 'Frigger Super Fund' written on it. This is an example of how Mrs Frigger changed her story so many times that it was impossible to believe anything she said unless it had sound independent corroboration.
I draw the inference the first respondent puts, namely that Mrs Frigger altered the CommSec statement shortly before annexing it to affidavit ACTF 1 with the intention of convincing the court that it was an asset of the Frigger Super Fund. The inference follows from the incentive that Mrs Frigger had to do so - to establish that a valuable portfolio of shares was held in the FSF - and the fact that the explanation she gave, that she added the words for the purpose of the external audit of the FSF, is belied by the fact that the version of the statement provided to the auditor did not have the notation on it. It follows that the evidence in Mrs Frigger's affidavit ACTF 14 which I quote at [77] above was false.
But once again, even if I did not draw the inference that Mrs Frigger did doctor the document with the purpose of misleading the court in her mind, that would not exculpate her. The fact would remain that she put a document into evidence which she had altered so as to say something which the original version of it, issued by an independent third party, did not say. She gave no evidence to the effect that she forgot or overlooked the fact that she had altered the document. Even if the stronger finding above is wrong, the alteration of the CommSec statement seriously impacts on Mrs Frigger's credibility.
Other matters concerning Mrs Frigger's credibility
Counsel for the first respondent referred in his closing submissions (supported by a written aide memoire) to many other reasons why Mrs Frigger should not be accepted as a credible witness. For example, she was cross‑examined on evidence she gave in the hearing of the bankruptcy petition against her and Mr Frigger (ts 379‑381). In the judgment of Colvin J after that hearing, Kitay, in the matter of Frigger (No 2) [2018] FCA 1032 at [184]‑[185], his Honour referred to a statement Mrs Frigger made in an affidavit that approximately $80,000 in a St George account was an asset of the FSF (Ex 41; ts 379). At the hearing before Colvin J, she sought to resile from that, and said that in fact it was an asset she owned in her personal capacity. If so, that could permit it to be used to 'set‑off' the debt that was the subject of the bankruptcy petition.
But in cross‑examination in this proceeding, Mrs Frigger said that the statement she made to Colvin J was a mistake and the $80,000 was indeed an FSF asset (ts 380‑381). She admitted that she had told Colvin J that it was a personal asset 'from the bar table and I was doing it in my desperation not to be put into bankruptcy' (ts 381 ln 25). She then tried to resile from that evidence, or at least qualify it, in re-examination in this proceeding (ts 469). She then attempted to give a further explanation in closing submissions which was, with respect, incomprehensible (ts 960‑961). All this displays a readiness on Mrs Frigger's part to change what she tells the court in order to suit what she perceives to be her interests on the particular occasion. Whether prompted by desperation or not, this is by itself damaging to her credibility.
It is hardly necessary to multiply further examples here, although further problems with the credibility of Mrs Frigger's evidence will be described when the content of the evidence is assessed below. I need only comment on Mrs Frigger's demeanour in the witness box briefly, as it does not play a large part in my assessment of her credibility. I have already mentioned certain points at which she appeared unconvincing. But for the most part she gave her evidence with a forthright manner and with an appearance of having a sure grasp of specifics. On some occasions where she said she could not remember things, she was being asked about financial details which one would not ordinarily expect a witness to remember. On many occasions where she was challenged in cross‑examination she became truculent and obstructive, but allowances need to be made for the fact that she had the mixed roles of witness, litigant and advocate for her own case.
Nevertheless, for the above reasons, and for others which will appear in the course of discussion of evidence below, I do not accept Mrs Frigger as a witness of truth. That conclusion has a serious impact on the applicants' case, as it was based entirely on her evidence. I cannot accept her evidence as true unless it is supported by independent evidence or the inherent probabilities of the situation. And the fact that Mrs Frigger is not above altering documents she provides to the court impacts on what can be treated as independent evidence. If a document came from the applicants, it must be treated with caution.
Kelly-Anne Trenfield
The first respondent, Mrs Trenfield, has a Bachelor of Business (Accounting) from the Queensland University of Technology and is a Chartered Accountant. She became a registered trustee in bankruptcy in 2006, a registered liquidator in 2007 and an official liquidator in 2008. She has been the trustee in bankruptcy of more than 200 estates (KAT 4 paras 11‑18).
Mrs Trenfield appeared as a witness by video link from a courtroom in Brisbane. Mrs Frigger cross-examined Mrs Trenfield for some time.
There were occasions on which I considered that Mrs Trenfield could have been more forthcoming in her answers. For example, there was a line of questioning about when Mrs Trenfield could have obtained a copy of a cheque from an HSBC account paid into BOQ2, which helped with tracing the flow of funds to BOQ2. A letter from Bank of Queensland dated 17 October 2018 was put to Mrs Trenfield which said that the bank was unable to give her a copy of the cheque due to privacy reasons (ts 588; ACTF 3 annexure 1). It was put to her that this could have been overcome by asking Mrs Frigger to waive privacy with the bank (ts 590). But rather than accept this fairly straightforward proposition, Mrs Trenfield became argumentative with the cross-examiner (that is, Mrs Frigger) and would only concede that 'you can draw that conclusion from the documents' (ts 591). I will discuss the substance of her evidence on this matter below when I come to deal with the application to remove her as trustee in bankruptcy. The point for present purposes is that it was unhelpful of Mrs Trenfield not to accede to the simple proposition that she could have asked Mrs Frigger to waive the privacy concerns.
Mrs Frigger's aim in cross‑examination appeared to be to convince the court that Mrs Trenfield is a thoroughgoing liar. But isolated examples of instances where Mrs Trenfield's evidence was unhelpful do not establish such a strong conclusion. They are equally explicable by an unwillingness to concede any point to a cross-examiner with whom she evidently has an antagonistic relationship.
The reality is that Mrs Trenfield's credibility was not central to the proceeding. She was not the party with the onus of proof and most of the contentious evidence concerned things the applicants did (or did not do) before her appointment. For the most part Mrs Trenfield relied on documentary evidence and, in contrast to Mrs Frigger, there was no reason to doubt that the documents she presented were what they appeared to be. To the extent that the applicants sought to impugn Mrs Trenfield's conduct as a basis for removing her as their trustee in bankruptcy, the outcome depended more on an objective assessment of that conduct than on any finding about the credibility of her evidence.
So while I had concerns that some of Mrs Trenfield's answers in cross‑examination were unhelpful, that did not affect my overall view about her evidence. I will need to refer below to further specific allegations of giving false evidence which the applicants made against Mrs Trenfield. They are not made out. Generally she presented in the witness box as an experienced professional who gave straightforward and forthright answers to a large number of questions which were not always very relevant.
FIRST GROUP OF ISSUES - ARE THE DISPUTED ASSETS PART OF THE FSF?
Principles
When a court will find that assets are held subject to a trust
The first issue in the present case concerns whether the disputed assets are subject to an express trust. That term can be a misnomer, as an express trust can arise by implication from language used or other conduct. In Korda v Australian Executor Trustees (SA) Limited [2015] HCA 6; (2015) 255 CLR 62 at [5], French CJ said (some footnotes omitted):
It has rightly been observed that 'many express trusts are not express at all. They are implied, or inferred, or perhaps imputed to people on the basis of their assumed intent'. The American Law Institute's Restatement Third, Trusts uses the term 'trust' to refer to an express trust as distinct from a resulting or constructive trust and defines it as [§2]:
'a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.'
The seventh edition of Jacobs' Law of Trusts in Australia [(2006), p 44 [306]] offers the usefully succinct observation that the creator of an express or declared trust will have used language which expresses an intention to create a trust:
'The author of the trust has meant to create a trust, and has used language which explicitly or impliedly expresses that intention, either orally or in writing. The fact that a trust was intended may even be deduced from the conduct of the parties concerned but if there is any uncertainty as to intention, there will be no trust.'
On the subject of certainty, it is orthodox to refer to three certainties which are necessary before an express trust will be found to exist: certainty of intention to create a trust, certainty of the property that is its subject matter, and certainty of objects, that is, the beneficiaries: see Kauter v Hilton (1953) 90 CLR 86 at 97; and Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (in liquidation) [2000] HCA 25; (2005) 202 CLR 588 at [29] and more generally the discussion in Jacobs' Law of Trusts in Australia (8th ed, 2016) Chapter 5.
The fiduciary obligations which arise from the trust relationship can be described as being annexed to or impressed upon the property the subject of the trust: Re Lauer; Corby v Lyttleton [2017] VSC 728 at [90] (McMillan J). The question here therefore concerns whether the evidence establishes that the obligations on trustees set out in and arising from the FSF Deed are annexed to any of the disputed assets.
The second qualification is that due attention needs to be paid to the words of the rule which contemplate that the interview will be for the purpose of clarifying any matters in the statement of affairs (if necessary). It is not a requirement to interview the bankrupts about matters at large. And the third qualification is that it is not a requirement to interview the bankrupts at any time throughout the bankruptcy. The rule is directed to initial and early steps that must be taken. So if, for good reason, they are not taken at the outset, the requirements of the rule are not ongoing.
As for whether it was necessary in this case for the first respondent to interview the applicants about their statements of affairs, on the competing contentions of the parties described above, that depends on whether Mrs Trenfield had a reasonable basis to think that the applicants would be uncooperative and belligerent, and would not provide reliable information. For the avoidance of doubt, I do not consider that the cross‑examination of Mrs Trenfield established that she did not genuinely hold these views, and the applicants made no submission to that effect. The question is whether the views had a reasonable basis. For if they did, Mrs Trenfield was acting within the acceptable range of professional judgements in deciding not to interview the applicants.
The question must be determined on the basis of Mrs Trenfield's state of mind in the early stages of the administration, up to, say, the end of October 2018 (some three and a half months after the bankruptcies began and two months after the first respondent became trustee in bankruptcy). The evidence about this period is set out in some detail at affidavit KAT 4 at paras 31‑73. An account of that evidence follows.
Prior to her appointment, Mrs Trenfield had had no dealings with the applicants, and only heard of them in discussions with the Official Trustee and Mr Kitay just prior to her appointment (KAT 4 para 31).
On the day of her appointment, she sent a letter to the applicants advising of her appointment and seeking documents and information (KAT 4 para 32, p 78). The applicants dispute receiving this letter, so I will pay it no regard.
Mrs Trenfield had received documents from the Official Trustee including file notes of telephone conversations with Mrs Frigger and emails from her. Some of these reveal nothing untoward in her approach to officers of the Official Trustee (see file note at KAT 4 pp 149 and emails at pp 151, 172), although by 27 July 2018 there may have been some friction because Mrs Frigger had filed a complaint seeking the release of funds in BW1.
However there is a file note dated 27 July 2018 of a conversation between Mrs Frigger and Michelle Tilke of the Official Trustee which records the following (KAT 4 p 176):
Ms Frigger was raising her voice and yelling throughout the whole conversation. I asked her numerous times to stop yelling at me and to listen as she would not let me speak after asking a question. She made statements of what you have done is illegal, you can't freeze bank account without my permission and a Supreme Court order, that she wants access to her bank accounts and she can't live without money and what right do we have to freeze her accounts.
I explained that the Bankruptcy Act allows that all assets owned by the bankrupt vest in the bankrupt estate that the trustee controls - and the trustee can seize, freeze, take control of the assets. Ms Frigger appeared quite upset by this and continued yelling at me - I continued to ask her to stop yelling at me and that I was trying to work with her.
… Ms Frigger continued to yell at me and I continued to ask her to stop yelling. I said I was trying to work with her and she said that I was the only one who was trying to listen to her but she wanted her account unfrozen.
This appears to be the file note Mrs Frigger mentioned in closing submissions (see above).
On the same day, Mrs Frigger emailed Ms Tilke with attachments including a printout of the details of BOQ1 with the notation 'Frigger Super Fund'. This was evidently the result of use of the account nickname capability which is described at [338] above, although that was not disclosed to Ms Tilke at the time.
On 27 July 2018 the Official Trustee then wrote to Bankwest and Bank of Queensland requesting the removal of the freezes on BW1 and BOQ1 respectively which had resulted from its earlier letters to the banks (KAT 4 pp 180, 182). But on 30 July 2018 Bank of Queensland wrote to the Official Trustee informing it that BOQ1 was in Mr Frigger's name and enclosing a transaction listing which made no reference to the FSF (KAT 4 pp 184‑185). On 30 July 2018, Ty Maher of the Official Trustee wrote to Bank of Queensland asking for the freezes on BOQ1 and BOQ2 to remain in place because 'the trustee has received further information which brings the facts on which that decisions [sic, to unfreeze the accounts] was made, into question' (KAT 4 p 190). On 31 July 2018 Mr Maher emailed the applicants advising them that the freeze would not be lifted.
The affidavit of Mr Maher which was filed in the Federal Circuit Court proceedings deposes to a conversation with Mrs Frigger on 3 August 2018 (KAT 1 pp 19-20) in which, according to Mr Maher, Mrs Frigger was aggressive and belligerent, said she would seek an injunction against the Official Trustee, accused Mr Maher of colluding with her creditors and working for Mr Kitay, and 'again threatened legal action called me a "fucking arsehole", and hung up'. Mr Maher did not give evidence in this proceeding and Mrs Frigger was not cross‑examined on this conversation, so I make no finding about whether it actually occurred as he said it did. But Mr Maher's account of it in his affidavit is still relevant as contributing to Mrs Trenfield's state of mind, specifically her view as to whether there was likely to be any utility in interviewing the applicants. This appears to be the 'file note' which Mrs Trenfield said in evidence particularly influenced her state of mind (ts 542).
There was correspondence between the Official Trustee and the applicants between 6 August 2018 and 28 August 2018 in which the Official Trustee sought information, including bank statements, from the applicants. On 12 August 2018 the applicants put the Official Trustee 'on notice that we consider you are unnecessarily incurring costs' in view of their applications to stay and annul the sequestration order and threatened that 'your inappropriate and extensive demands for information' would be 'provided to the court' (KAT 1 p 81). On 14 August 2018 the Official Trustee referred to certain findings in Western Australian courts including adverse credibility findings about Mrs Frigger and findings that the applicants had used the mortgage to HAF to put assets out of the reach of creditors (KAT 1 pp 85‑86). Also on 14 August, Mrs Frigger then accused Mr Maher of 'acting beyond power' (KAT 1 p 87). On 17 August 2018 the applicants sent Mr Maher a letter which among other things referred to his 'unnecessary and inflammatory investigations' and said (KAT 1 p 90):
You are simply a liar. In your telephone conversations with me, you clearly stated that your conduct in illegally freezing a superannuation asset was as a result of information/email provided by a creditor. Your email of 31 July 2018 confirms the conversations. You are now trying to cover up your conduct. However, the documents you provided in your email of 14 August 2018 clearly show that Kitay/John provided you with those extracts from various judgments. In fact, you acted on information from an alleged creditor, and not from publicly available judgments.
Also on 17 August 2018 Mrs Frigger put Mr Maher and others 'on notice that we intend to claim losses from you personally for your conduct in freezing Bank of Queensland web savings account (attached) which is preventing us from settling and or paying transactions and expenses in the Frigger Super Fund …' (KAT 1 p 91).
On 17 August 2018 Mr Maher replied saying that Mrs Frigger's 'continued delay' in providing requested information and documentation was 'hindering the Official Trustee's efficient administration of your estate …' (KAT 1 p 94).
On 27 August 2018, however, Mr Maher emailed Bank of Queensland saying 'Mrs Frigger phoned me not long after your email was received and that generated what I hope was a more fruitful discussion on what the Official Trustee requires to complete its investigations' (KAT 1 p 180).
Mrs Trenfield was correct to describe that email as 'one commentary out of a number' (see above). There is a file note of a conversation between Rahil Kalra of the Official Trustee and Mrs Frigger on 30 August 2018 (KAT 4 p 192) in which Ms Kalra sought contact details of the directors of HAF and Mrs Frigger was reluctant to provide them. Mrs Frigger is recorded as saying 'if the debt is not admitted by the [Official Trustee] to its full value "then that is it"'. Presumably this refers to the debt claimed by HAF. The file note ends: 'I persistently asked her to provide the contact detail for the Directors which she did not respond to'. A subsequent phone call on the same date occurred in which Mrs Frigger, according to Ms Kalra's file note (p 193), 'started raising her voice on which I advise her [sic] not to shout. She hung up and did not provide any requested information'.
On 28 September 2018 Mrs Frigger sent an email to the first respondent making various allegations that the first respondent had made false statements and was 'colluding' with other parties to litigation involving the applicants (KAT 4 pp 217‑218).
It appears from Mrs Trenfield's evidence that by this time she had formed the view that the applicants would not cooperate with her in the administration of their estates (KAT 4 para 72). Mrs Trenfield also gave evidence (KAT 4 para 63) that as at the end of September 2018:
… based on my review of the documents, the matters deposed in Mr Maher's affidavit and [redacted due to ruling on evidence] I had concerns that information provided by Mr and Mrs Frigger may not be complete or accurate and that I would have to independently investigate and verify all of the information provided by Mr and Mrs Frigger. My concerns were based on:
(a)the statement of affairs of the applicants which disclosed that Mr and Ms Frigger had $3,000 in cash but no bank account details were provided despite the Official Trustee's investigations revealing several bank accounts in the bankrupt's names. Also, there were two properties, one in Bayswater and the other in Como that were not listed in either statement of affairs;
(b)the file notes prepared of conversations between representatives of the Official Trustee and Mrs Frigger referred to in paragraph 46 above [i.e. Ms Kalra's file notes of 30 August 2018]; and
(c)several decisions which I had read containing adverse findings made against Mr and Mrs Frigger in some of the numerous proceedings in which they were involved including in:
(i)proceedings in the District Court commenced by Mrs Frigger against Clavey Legal Pty Ltd, set out in Frigger v Clavey Legal Pty Ltd [2015] WADC 21 at [169] and Frigger v Clavey Legal Pty Ltd (No 3) [2015 WADC 21 at [90], [92], [94], [101], [105], [113] and [115]; and
(ii)proceedings in the Court of Appeal in Western Australia against Professional Services of Australia in Frigger v Professional Services Australia Pty Ltd (no 3) [2014] WASCA 69 at [103] and [109].
On 9 October 2018 the first respondent wrote to the applicants seeking a range of information about their assets and about the FSF (KAT 4 pp 221‑222). On the same day Mrs Frigger sent an argumentative response answering some of the questions but not others (KAT 4 p 224). The response said, 'It would seem you are simply making work for yourself', and that, 'There is nothing more you need to investigate'. It said that if the first respondent did not give the Bank of Queensland notice to lift the freeze on BOQ1 by 16 October 2018, the applicants would issue proceedings. The response listed various assets including the Edward Street and Hobart properties which, Mrs Trenfield says, led her to believe that they were assets of the FSF (KAT 4 para 103).
Mr Allen wrote to the applicants on 18 October 2018 seeking further information (KAT 4 pp 246‑259). Mrs Frigger sent the first respondent an email dated 24 October 2018 giving brief, peremptory responses (KAT 4 p 261). On 25 October 2018 Mrs Frigger sent an email to the first respondent complaining about the freeze on BOQ1 and saying that it would occasion 'substantial losses' which the applicants would claim from each of Mrs Trenfield and Mr Allen 'personally' (KAT 4 p 264). The email also claimed that the first respondent's appointment as trustee in bankruptcy was 'procured by a false claim made by Mervyn Jonathan Kitay'. According to Mrs Trenfield, these emails led her to form the view that the applicants would not cooperate with her in the administration of their estates (KAT 4 para 72).
The above review of the matters of which Mrs Trenfield was aware by the end of October 2018 shows that she had a reasonable basis to conclude that there would be no utility in interviewing the applicants. From the outset, the applicants, largely represented by Mrs Frigger, had taken an adversarial stance towards the Official Trustee and then the first respondent. To Mrs Trenfield's knowledge, the tone and content of the applicants' correspondence and telephone interactions with those responsible for administering their bankrupt estates ranged from uncooperative to aggressive to obscene. Also, Mrs Trenfield's attention had been drawn to adverse credibility findings against Mrs Frigger in court proceedings and she was aware of the apparent discrepancy between the representations, based on the account nickname, that BOQ1 was an FSF asset, and the subsequent revelation that it was in Mr Frigger's name only.
Because there was a reasonable basis for Mrs Trenfield to conclude that there would be no utility in interviewing the applicants, their complaint that she should have interviewed them, but did not, is not made out. That is so even though, subjectively, Mrs Trenfield seems to have been unaware of the need for her to consider whether interviewing the applicants was 'necessary' within the meaning of r 42-30(c) of the Bankruptcy Practice Rules. Her view about whether she should interview the applicants was still consistent with the requirements of the rule, because to conclude that interviews would have no utility brings with it the view that they are not necessary.
This complaint has been made out only to the extent that the applicants have established that Mrs Trenfield misunderstood r 42-30(c) of the Bankruptcy Practice Rules.
Conclusion on removal of the first respondent
The applicants have made out the following aspects of their complaints about the conduct of the first respondent:
(1)In her letter to CommSec dated 28 August 2019, which resulted in a stop on transactions in the Main Portfolio, the first respondent asserted her position - that the securities in the Main Portfolio had vested in her - too categorically, so as not to admit of the possibility that it was subject to doubt or dispute.
(2)In her letter to AFCA dated 27 September 2019 the first respondent relied specifically on the account opening form and CHESS sponsorship form for the Main Portfolio, both dating from 1998, as evidence that the Main Portfolio was not an FSF asset in 2018. In circumstances where the applicants were not trustees of the FSF at that time, the fact that they did not open the account in that capacity said little about their intentions after they became trustees. The first respondent's reliance on those forms was misplaced.
(3)The same letter to AFCA said, in effect, that the applicants had asserted their claim over the securities in the Main Portfolio merely to attempt to hamper the administration of the estates, when it was clear that the applicants, however unmeritoriously, were asserting the claim for the purpose of establishing that the securities had not vested in the first respondent and were not property divisible among their creditors.
(4)The first respondent's subjective purpose in sending the letter of 9 April 2019 to the ATO was, when considered objectively, not a purpose which could advance the legitimate objectives of the first respondent's administration of the bankrupt estates, because it could not have resulted in any change to the status of the FSF as a regulated superannuation fund.
(5)The first respondent considered that she had an unfettered discretion as to whether to interview the applicants when, under r 42-30(c) of the Bankruptcy Practice Rules she was, at the start of the administration, required to interview them to clarify any matters in their statements of affairs, if necessary.
Considered together and in the context of the administration as a whole, these shortcomings in the first respondent's conduct do not warrant her removal as trustee in bankruptcy. It is plain from nearly every page of this judgment that the administration has been a difficult and adversarial one. At the time of all three of the letters referred to, the first respondent was embroiled in complex and hard fought litigation with the applicants in which the applicants did not hesitate to attack her honesty and impugn her motives. Understood in that light, the deficiencies in the first two of the letters can be ascribed to an excess of zeal, prompted by the adversarial situation in which the first respondent found herself. The first respondent's reliance on the account opening forms is revealed to be misplaced in hindsight, after due consideration of a messy and shifting body of evidence. It has not been established that the letters were misleading. They do not reflect any ethical failing, bias or lack of independence or a failure to meet the necessary minimum standard of competence to be expected of trustees in bankruptcy.
The first respondent's subjective purpose in sending the third letter, as is evident from the letter, was consistent with the legitimate objectives of the administration, as it appeared to be designed to test whether the FSF was a regulated superannuation fund or perhaps to establish that it was not. The question of whether substantial assets were or were not divisible among creditors turned on that issue. The fact that this subjective purpose was misconceived in the circumstances can be ascribed to a misunderstanding of a complex area of the law. Once again, it does not bespeak any ethical failing, bias or lack of independence or failure to meet the necessary minimum standard of competence.
The final shortcoming I have identified is a misunderstanding of the effect of one out of very many express obligations imposed on trustees in bankruptcy by the Bankruptcy Act, the Insolvency Practice Schedule and Bankruptcy Practice Rules and the general law. The rule in question related to the very confined issue of whether bankrupts should be interviewed about their statements of affairs at the beginning of the administration. The misunderstanding does not reflect a lack of competence.
None of the shortcomings I have identified had any consequence. There is no reason to think that, if the first two letters had not been expressed in such strong terms, the securities in the Main Portfolio would not have been frozen, and would not have stayed frozen. And for the reasons I have given, the freeze was justified. In relation to the third letter, the ATO simply refused to give the first respondent any information. And the first respondent's misunderstanding of the rule about interviews had no consequence because, as I have explained, it did not result in her breaching r 42-30(c) of the Bankruptcy Practice Rules.
None of this comes close to damaging or jeopardising the interests of the creditors of the bankrupt estates. Viewed objectively, it did not encroach on the interests of the applicants in their capacities as the bankrupts further than was necessary and warranted by the legitimate objects of the administration. The primary consideration that must be observed in deciding whether to remove a trustee in bankruptcy, namely the proper interests of those who are concerned in the bankruptcies, does not require the removal of the first respondent.
It will be recalled that s 90‑15(4) of the Insolvency Practice Schedule sets out a number of matters which the court may take into account when making orders under s 90‑15, including any order for removal of the trustee in bankruptcy: see [551] above. Judged by reference to those matters:
(a)it has not been established that the first respondent had not faithfully performed her duties;
(b)no contravention of the Bankruptcy Act or the Bankruptcy Practice Rules has been established;
(c)there is no suggestion of any failure to comply with an order of the court;
(d)it has not been established that the bankrupt estates or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the first respondent; and
(e)the shortcomings I have identified have had no significant consequence, and could have no impact on public confidence in registered trustees as a group.
In my view, while the first respondent's conduct of the administration has fallen short of the ideal, it has not fallen short nearly so far as to warrant her removal. It can be expected that close scrutiny of any insolvency administration of the complexity and difficulty of this one is likely to reveal shortcomings of at least similar magnitude and importance; a magnitude and importance which is insufficient to warrant the drastic step of removing the trustee in bankruptcy.
Remuneration and costs
The originating application seeks orders which would have the effect of denying to the first respondent any remuneration or out of pocket costs attributable to her conduct in relation to the disputed assets or the Court of Appeal costs orders. The applicants addressed no submissions specific to those orders, beyond a reference to them in passing in the course of submissions as to why the first respondent should be removed as their trustee in bankruptcy.
Since the applicants have not made out any of their allegations as to the disputed assets or the Court of Appeal costs orders, there is no apparent basis to make an order denying the first respondent her remuneration. The shortcomings in the conduct of the administration which I have identified do not provide any such basis. As far as remuneration goes, the question is whether the work for which the first respondent will claim remuneration was reasonably and bona fide undertaken for the purpose of administering the estates or performing any public duty imposed by the Bankruptcy Act, conformably with the trustee's duty to perform the work with reasonable care and skill and in an efficient and economical way: Adsett at 212. As far as out of pocket costs go, the question is whether they were reasonably and honestly incurred: ibid. In both cases, those questions go to whether work was done or costs incurred properly: Adsett at 211‑212. Although I have found that the first respondent's conduct of the administration fell short of the ideal in certain isolated respects, the applicants have not established that it fell short of the standards as to proper work and costs just outlined. Of course, that is a broad conclusion expressed here in response to a broad contention. It does not relieve the first respondent of the need to establish that her remuneration and costs were fair and reasonable when the time comes for her to obtain the court's specific approval for amounts claimed.
The orders sought to deny the first respondent her remuneration and costs are refused.
CONCLUSION
The application will be dismissed.
There is no apparent reason why costs should not follow the event. But the fact that the costs will be claimed by a trustee in bankruptcy where the unsuccessful litigants are the bankrupts themselves may give rise to issues which have not yet been canvassed. There may also be reserved costs of interlocutory hearings where submissions need to be made. There will be directions as to written submissions on costs so that the parties can make their respective positions known.
I certify that the preceding seven hundred and fifty-one (751) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson. Associate:
Dated: 1 December 2021
Schedule 1
Tab Description Filed Exhibit No Reference Applicants' Affidavits 7. Affidavit of Angela Frigger sworn 6 March 2019 12 March 2019 1 ACTF 1 8. Affidavit of Angela Frigger sworn 8 May 2019 10 May 2019 2 ACTF 2 9. Affidavit of Angela Frigger sworn 12 July 2019 12 July 2019 3 ACTF 3 10. Affidavit of Angela Frigger sworn 24 July 2019 25 July 2019 4 ACTF 4 11. Affidavit of Angela Frigger sworn 6 September 2019 6 September 2019 5 ACTF 5 12. Affidavit of Angela Frigger sworn 6 September 2019 11 September 2019 6 ACTF 6 13. Affidavit of Angela Frigger sworn 13 September 2019 13 September 2019 7 ACTF 7 14. Affidavit of Angela Frigger sworn 16 September 2019 23 September 2019 8 ACTF 8 15. Affidavit of Angela Frigger sworn 18 September 2019 23 September 2019 9 ACTF 9* 16. Affidavit of Angela Frigger sworn 29 October 2019 29 October 2019 10 ACTF 10 17. Affidavit of Angela Frigger sworn 3 January 2020 6 January 2020 11 ACTF 11 18. Affidavit of Angela Frigger sworn 30 January 2020 30 January 2020 12 ACTF 12* 19. Affidavit of Angela Frigger sworn 1 April 2020 10 April 2020 13 ACTF 13 20. Affidavit of Angela Frigger sworn 20 April 2020 21 April 2020 14 ACTF 14 22. Affidavit of Angela Frigger sworn 5 May 2020 6 May 2020 15 ACTF 15* 23. Affidavit of Angela Frigger sworn 11 June 2020 12 June 2020 16 ACTF 16* 24. Affidavit of Angela Frigger sworn 15 June 2020 15 June 2020 17 ACTF 17* 25. Affidavit of Angela Frigger sworn 17 June 2020 17 June 2020 18 ACTF 18 First Respondent's Affidavits 26. Affidavit of Kelly-Anne Trenfield sworn 12 June 2019 12 June 2019 21 KAT 1 27. Affidavit of Kelly-Anne Trenfield sworn 13 August 2019 14 August 2019 22 KAT 2 28. Affidavit of Kelly-Anne Trenfield sworn 11 September 2019 11 September 2019 23 KAT 3 29. Affidavit of Kelly-Anne Trenfield sworn 22 May 2020 22 May 2020 24 KAT 4 30. Affidavit of Kelly-Anne Trenfield sworn 27 May 2020 27 May 2020 25 KAT 5* 31. Affidavit of Kelly-Anne Trenfield sworn 1 June 2020 2 June 2020 26 KAT 6* 32. Affidavit of Kelly-Anne Trenfield sworn 22 June 2020 22 June 2020 27 KAT 7* Affidavits marked with an asterix (*) not referred to in judgment Schedule 2
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15
18