Kitay v Frigger - [2018] WASCA 100

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   KITAY -v- FRIGGER [2018] WASCA 100
CORAM:   MITCHELL JA
BEECH JA

HEARD:   21 JUNE 2018
DELIVERED          :   21 JUNE 2018
FILE NO/S:   CACV 3 of 2018
BETWEEN:   MERVYN JONATHON KITAY as liquidator of COMPUTER ACCOUNTING & TAX PTY LTD
First Appellant

COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
Second Appellant

AND

ANGELA CECILIA THERESA FRIGGER
First Respondent

HARTMUT HUBERT JOSEF FRIGGER
Second Respondent

ANGELA CECILIA THERESA FRIGGER as trustee for THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER as trustee for THE FRIGGER SUPERANNUATION FUND
Third Respondents

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   ALLANSON J
File Number            :   CIV 2765 of 2010

Catchwords:

Practice and procedure - Application for extension of time to file and serve respondent's answer - Security for costs in appeal - Application by respondents - Relevant principles where first appellant is a liquidator - Outstanding costs liability in primary proceedings - Application for security for costs refused - Application for extension of time to file and serve respondent's answer granted

Legislation:

Corporations Act 2001 (Cth), s 477(2B)

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Appellant	:	Mr D A Lenhoff
Second Appellant	:	Mr D A Lenhoff
First Respondent	:	In Person
Second Respondent	:	In Person
Third Respondents	:	In Person

Solicitors:

First Appellant	:	Lenhoff & Associates
Second Appellant	:	Lenhoff & Associates
First Respondent	:	In Person
Second Respondent	:	In Person
Third Respondents	:	In Person

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

Frigger v Kitay [2016] WASCA 204
George 218 Pty Ltd v Bank of Queensland [2016] WASCA 56
Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385

REASONS OF THE COURT:

At the conclusion of the hearing of the respondents' application in an appeal filed on 28 March 2018, we dismissed the application and indicated that we would give our reasons for doing so later. These are our reasons for dismissing the application.
The respondents have applied for the payment of security for costs in this appeal by the first appellant (the Liquidator) and the second appellant (CAT).
The nature of the claims advanced in the primary proceedings are summarised by the decision of this court in Frigger v Kitay.[1] In very short summary, the respondents' principal claim relates to certain property of which CAT holds legal title. The appellants claim a right of indemnity out of trust assets for costs and liabilities incurred by CAT as trustee.
[1] Frigger v Kitay [2016] WASCA 204 [6] - [9].
On 30 March 2016, the primary judge ordered the respondents to provide security for costs in the primary proceedings in the amount of $80,000 to be paid into court by 20 April 2016, and stayed the proceedings in the meantime. On 3 May 2016, the primary judge ordered that, unless the security was paid into court by 10 June 2016, the respondents' claim in the primary proceedings would be dismissed. The security was not paid by that date, with the consequence that the respondents' claim in the primary proceedings was dismissed by operation of the springing order.
On 27 May 2016, the respondents applied to extend the time to comply with the springing order. That application was withdrawn on 28 June 2016. An appeal from the orders made by the primary judge on 30 March 2016 and 3 May 2016 was dismissed by operation of a springing order made in this court.
A further application for an extension of time to comply with the springing order was heard by the primary judge on 19 December 2017. At that time, the primary judge extended the time for compliance with the springing order to 15 January 2018, subject to the condition that the respondents pay outstanding costs orders in the primary proceedings in respect of which costs had been taxed or fixed by 15 January 2018.
In this appeal, the appellants seek leave to appeal against the primary judge's orders of 19 December 2017. In that context, the respondents seek an order that the appellants provide security for the respondents' costs in the appeal.
The principles governing the grant of security for costs on appeal are well established and do not need to be restated here.[2]
[2] See George 218 Pty Ltd v Bank of Queensland [2016] WASCA 56 [41] - [48].
A number of the generally relevant considerations are either neutral to, or tend to support, the application for security for costs. Because CAT is in liquidation, there is an obvious concern about its capacity to satisfy a costs order if the appeal is unsuccessful. There is no evidence that the appellants would be shut out of the appeal if the application for security for costs is successful. There has been no significant delay in making the application for security for costs. Our preliminary and provisional assessment of the appellant's case is that the appeal is arguable, although we would not at this stage put it any higher than that.
However, in the circumstances of this case, there are three considerations which, both individually and collectively, count conclusively against the exercise of this court's discretion to order security for costs.
Firstly, while CAT is a company in liquidation, there is no evidence before us that the Liquidator may be unable to satisfy any costs order made in favour of the respondents, if an order for costs were made against the Liquidator in a manner not limited to the Liquidator's right of indemnity against the assets of CAT. The general approach of the courts was noted by Hodgson JA, with whom Ipp and Basten JJA agreed, in Silvia v Brodyn Pty Ltd:[3]
If proceedings are brought by a liquidator in relation to a company's affairs, generally an order for security for costs will not be made; but if those proceedings are unsuccessful, then an order for costs will generally be made against the liquidator personally.
…
The liquidator would generally be entitled to an indemnity from the assets of the company, although that may be denied if the liquidator has acted unreasonably. (citations omitted)
Counsel for the appellants accepted that, if the appeal was unsuccessful and an order for costs was made against the Liquidator, the general approach should apply and that the Liquidator would be personally responsible for satisfying that costs order.
[3] Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385 [50] - [51].
There would appear to be no practical prospect that the Liquidator will be successful and CAT unsuccessful in the appeal. Therefore, the respondents' interests should be protected by recourse to the responsibility of the Liquidator to pay any cost orders made in the respondents' favour if the appeal is dismissed.
Secondly, the unchallenged evidence of Mr David Abraham Lenhoff, by affidavit sworn 13 April 2018, is that the respondents have an extant liability to pay costs to the appellants which, although not fully quantified, well exceeds the costs which are liable to be incurred in the appeal. Those costs were incurred in the primary proceedings or appeals from the primary proceedings, to which both appellants were parties. If the respondents successfully oppose the appeal, any costs awarded in their favour will operate to reduce their outstanding liability to the appellants.
Thirdly, the respondents are not represented in the appeal, and therefore, as things stand, will not be able to recover costs other than disbursements. Mrs Frigger has deposed that she intends to brief counsel to appear in the appeal. However, it is evident that the draft respondent's answer attached to the affidavit has been prepared without the assistance of a legal practitioner. It would not be appropriate to order security for costs at a time when the respondents do not have solicitors or counsel on the record.
For these reasons, the application for security for costs should be dismissed.
The respondents initially sought an order extending the date for filing their respondent's answer in the appeal until the determination of the appellants' application in the Federal Court of Australia, file number WAD616/2017, for a sequestration order against their assets. That aspect of the application was abandoned at the hearing before us.
The respondents have also lodged an amended application and supplementary submissions which invite the court to exercise its 'inherent jurisdiction to review the liquidator's conduct under s 477(2B) Corporations Act 2001.' This relates to the respondents' contention that the Liquidator has acted in breach of that section by engaging legal representatives. In general terms, s 477(2B) of the Corporations Act relevantly provides that, except with the approval of the court or a resolution of the creditors, a liquidator must not enter into an agreement on the company's behalf if the term of the agreement may end more than 3 months after the agreement is entered into. The amended application seeks an order dismissing the appeal on the ground that the appellants 'have no valid and or approved legal representation'.
The respondents have not placed admissible evidence before us which shows that the Liquidator has entered into such an agreement on CAT's behalf. The supervisory jurisdiction to which the respondents refer is properly exercised by the general division of the court, rather than this court in the exercise of its appellate jurisdiction. Further, we are not satisfied that any breach of the Liquidator's obligations under s 477(2B) in relation to legal representation of the appellants, if established, would provide any proper basis for summarily dismissing the appellants' appeal.
For these reasons, we ordered that the respondents' application in an appeal filed on 28 March 2018, as amended on 14 June 2018, is dismissed. The time for the respondents to file and serve their respondent's answer was extended to 4.00 pm on 28 June 2018.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ET
RESEARCH ASSOCIATE/ORDERLY TO THE HONOURABLE JUSTICE MITCHELL
21 JUNE 2018