Kitay v Frigger [No 3]
[2020] WASCA 55
•15 APRIL 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: KITAY -v- FRIGGER [No 3] [2020] WASCA 55
CORAM: BUSS P
MITCHELL JA
HEARD: 28 FEBRUARY 2020
DELIVERED : 15 APRIL 2020
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:
Civil procedure - Bankruptcy - Where respondents to the appeal are joined in their personal capacity and as trustees of their superannuation fund - Where respondents in their personal capacity are subject to sequestration order - Appeal from orders affecting costs liability of respondents in their personal capacity - Whether appeal proceedings are proceedings in respect of a provable debt - Whether an order joining current trustee of the respondents' superannuation fund involves taking a fresh step in the proceeding - Whether current trustee can be substituted as a respondent to the appeal without the leave of a court with bankruptcy jurisdiction
Legislation:
Bankruptcy Act 1966 (Cth), s 58(3)(b)
Result:
Application to substitute a new party adjourned until a court having bankruptcy jurisdiction grants leave under s 58(3)(b) of the Bankruptcy Act 1966 (Cth)
Category: B
Representation:
Counsel:
| First Appellant | : | D A Lenhoff |
| Second Appellant | : | 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):
Australian Competition and Consumer Commission v The Bio Enviro Plan Pty Ltd [2004] FCA 415
Coshott v Barry [2015] NSWCA 257; (2015) 91 NSWLR 1
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Fraser Property Developments Pty Ltd v Sommerfeld [No 2] [2005] QCA 242; [2005] 2 Qd R 404
Fraser v Commissioner of Taxation (1996) 69 FCR 99
Frigger v Kitay [2016] WASCA 204
Frigger v Kitay [No 15] [2019] WASC 384
Gertig v Davies [2003] SASC 86; (2003) 85 SASR 226
Hudson v Sigalla [2015] FCAFC 140; (2015) 235 FCR 122
Iron Mountain Mining Ltd v K & L Gates [2016] WASCA 166
Mackinnon v Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson [2019] NSWSC 103
Melnik v Melnik [2005] FCAFC 160; (2005) 144 FCR 141
Re McMaster; Ex parte McMaster (1991) 33 FCR 70
JUDGMENT OF THE COURT:
Summary
We are dealing with the appellants' application to substitute H & A Frigger Pty Ltd, the current trustee of the Frigger Superannuation Fund, as the third respondent in this appeal. The appeal is against an order of the primary judge extending the time for the respondents to comply with a 'springing order'. The order had previously 'sprung', with the consequence that the respondents were liable to pay the appellants' costs of the primary proceedings.
By s 58(3)(b) of the Bankruptcy Act 1966 (Cth), relevantly, after a debtor has become bankrupt, it is not competent for a creditor, except with the leave of a court having jurisdiction in bankruptcy and on such terms as the court thinks fit, to take any fresh step in any legal proceeding in respect of a provable debt. The second respondents, Mr and Mrs Frigger, became bankrupt for the purposes of s 58(3) of the Bankruptcy Act after this appeal had been instituted.
The pending appeal is a legal proceeding in respect of a provable debt in that the appeal may restore the operation of the springing order which created a provable debt, namely the liability created by the costs order which was made prior to Mr and Mrs Frigger's bankruptcy. The appellants' application in the appeal to substitute a new trustee of the Frigger Superannuation Fund as the third respondent in the appeal is a step which is necessary before the appeal, as presently constituted, can be heard and determined. The application to substitute the new trustee is a fresh step in a legal proceeding in respect of a provable debt.
Therefore, it is inappropriate for this court to determine the application to substitute the current trustee of the Frigger Superannuation Fund as the third respondent until a court having bankruptcy jurisdiction gives leave under s 58(3)(b) of the Bankruptcy Act. This court does not itself have bankruptcy jurisdiction.
Procedural history
Parties
Computer Accounting & Tax Pty Ltd (CAT) is the second appellant. Mr Kitay (as liquidator of CAT) is the first appellant. Mr Frigger in his personal capacity is the first respondent. Mrs Frigger in her personal capacity is the second respondent. Mr and Mrs Frigger in their capacity as trustee for the Frigger Superannuation Fund are the third respondents.
The primary proceedings
The nature of the claims advanced in the primary proceedings are summarised by the decision of this court in Frigger v Kitay:[1]
[1] Frigger v Kitay [2016] WASCA 204 [6] - [9].
Ms Frigger commenced the primary proceedings on 4 November 2010 as the sole plaintiff against Mr Kitay, as the sole defendant. Mr Kitay was the liquidator of [CAT], of which Mr and Ms Frigger were the shareholders. CAT was the registered proprietor of two properties, 'the Armadale property' and 'the Perth property'. The other parties to the proceedings were added later.
The plaintiffs originally sought:
1.an order pursuant to s 78 of the Trustees Act 1962 (WA) that the Perth property and the Armadale property, vest in Mr and Ms Frigger in their capacity as trustees of the Frigger Super Fund;
2.a declaration pursuant to s 1321 of the Corporations Act 2001 (Cth) regarding interests in a term deposit at St George Bank; and
3.orders pursuant to s 1321 of the Corporations Act regarding the plaintiffs' entitlement to repayment of a taxing fee paid in other proceedings.
In the primary proceedings, the plaintiffs initially alleged that CAT and Mr and Ms Frigger were parties to an enforceable agreement under which Mr and Ms Frigger advanced funds, for the purchase of the Armadale Property and the Perth Property, as loans, subject to an agreement that the properties would later become assets of a trust. In subsequent amendments to their pleadings, the plaintiffs alleged that CAT holds the beneficial interest in each property on an express trust, and that the facts relied upon give rise to a Quistclose trust.
The defendants then brought a counterclaim, asserting a right of indemnity out of trust assets for any costs and liabilities incurred by CAT in its capacity as trustee.
Application for security for costs and the springing order
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 made the following relevant order (springing order):
Unless by 10 June 2016 the [respondents] do give security for the [appellants'] costs of the action in the sum of $80,000 by payment of that amount into Court, the [respondents'] claims be dismissed and the [respondents] be ordered to pay the [appellants'] costs of opposition to the [respondents'] claims, including reserved costs, if any, in any event.
Security for costs was not paid by 10 June 2016, 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.
Appeal against the springing order
The respondents instituted an appeal against the orders made by the primary judge on 30 March 2016 and 3 May 2016. That appeal was dismissed by operation of a springing order made in this court.
Extension of time to comply with the springing order
Following the dismissal of the appeal against the springing order, 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 (extension order).
It appears that the respondents complied with the extension order.[2]
[2] Appeal ts 20.
The primary judge gave ex tempore reasons for his decision to extend the time for complying with the springing order. After reciting the procedural history, the primary judge said:[3]
But it does appear essentially to be that the reason for the [respondents'] claim to have fallen are solely to procedural decisions for failure to comply with time limits. Were I to extend time for the [respondents] to comply with my order for security for costs, I believe that I would be within power. It also, in the circumstances of this case, is in my opinion, one which ought be made in the exercise of my discretion. For the reason for non-compliance with the springing order, the [appellants take] the position… that the [respondents] in one sense [have] failed to substantiate their claim that they were not then financially in a position to comply.
That simply has been an assertion, and it has not been a matter of evidence. But I do take into account, and I'm most concerned by the fact that the [respondents appear], as I said, to have taken the misguided position that appeal against the springing order, or appeal against the order for security for costs, was a sufficient basis upon which they need no longer comply with the order that had been made. The effect of it is that a matter which involves a substantial amount, the liquidation of a company, is now continuing to be mired in interlocutory skirmishes, both in this court and in the Federal Court of Australia.
The proceedings in this court, having commenced in 2010 - and I don't think at any stage have orders ever been made towards a trial date. It's not, in my opinion, in the interests of justice for a matter of this nature to be resolved by a failure by an unrepresented litigant, however sophisticated in court for over-experience, if not sophisticated in court processes, to comply with a procedural order.
What I propose to do is to allow the application to extend time for the plaintiffs to comply with the order for security of costs. That indulgence will be subject to a further condition: that the [respondents] pay outstanding costs orders. It may be necessary for the [appellants] to bring in a minute or a list, preferably by agreement with the [respondents], as to what those outstanding costs order are. But it should be clear that I am not going to allow an extension of time for the payment of security for costs without the [respondents] proving their good faith by complying with those existing orders.
The current appeal
[3] Primary ts 698 - 699.
The present appeal is against the extension orders made by the primary judge on 19 December 2017. The appellants appeal against the extension orders on the grounds that the primary judge erred in:
(1)determining that he had jurisdiction or power to extend the time for compliance with the springing order following the dismissal of an appeal against that order by this court;
(2)finding that the respondents lacked legal training or sufficient knowledge of the practice, procedure and obligation to comply with orders of the court, and by taking that irrelevant fact into account in the exercise of his discretion;
(3)exercising his discretion to extend time for compliance with the springing order in the absence of evidence that the respondents were not at the relevant time in a financial position to pay the security for costs as ordered.
The orders wanted on appeal include that the appeal be upheld, and the respondents' application for an extension of time to comply with the springing order be dismissed. The last order could only be made if the extension order were set aside.
The sequestration order
On 20 July 2018, Mr and Mrs Frigger, in their personal capacity, became subject to a sequestration order made under the Bankruptcy Act. Since 31 August 2018, their estate has been administered by Ms Trenfield and Mr Allen as trustees-in-bankruptcy.
Substitution of H & A Frigger Pty as trustee of the Frigger Superannuation Fund
There is evidence before the court, emanating from Mr and Mrs Frigger, that, on 21 July 2018, H & A Frigger Pty Ltd (a company controlled by Mr and Mrs Frigger and their family members) was substituted as trustee of the Frigger Superannuation Fund.
On 21 October 2019, the Federal Court (Jackson J) made orders that:
1.Pursuant to s 206G(1)(c) of the Corporations Act 2001 (Cth), and subject to the condition in paragraph 2 of these orders, Hartmut Hubert Josef Frigger and Angela Cecilia Theresa Frigger (the Applicants) have leave to manage H & A Frigger Pty Ltd (ACN 156 617 864) (the Company).
2.Until such time as both of the Applicants are no longer disqualified from managing corporations under Part 2D.6 of the Corporations Act, the Company must not engage in any activity other than to act as trustee of the Frigger Super Fund and to do things that are reasonably incidental to so acting.
3.Pursuant to s 126J(1)(b) of the Superannuation Industry (Supervision) Act 1993 (Cth), each of the Applicants is not a disqualified person in relation to the Company and the Frigger Super Fund.
Application to substitute H & A Frigger Pty Ltd as plaintiff in the primary proceedings
Also on 21 October 2019, Mr and Mrs Frigger made an application in the primary proceedings for the following orders:
1.An order dispensing with the requirement under RSC O 4 r 3(2) that [H & A Frigger Pty Ltd] be represented by a solicitor.
2.An order that [H & A Frigger Pty Ltd] may appear through its directors [Mr and Mrs Frigger].
3.[H & A Frigger Pty Ltd] in its capacity as trustee of the Frigger Super Fund be and is hereby substituted as the second plaintiff.
On 24 October 2019, the primary judge dismissed the application for an order that H & A Frigger Pty Ltd in its capacity as trustee of the Frigger Superannuation Fund be substituted as the second plaintiff in the primary proceedings. His Honour gave ex tempore reasons for that decision which were subsequently converted to written reasons.[4] The primary judge's reasons for dismissing the application to substitute H & A Frigger Pty Ltd as plaintiff were materially as follows:[5]
The proceedings commenced by Mr and Mrs Frigger in this court are stayed by operation of s 60(2) of the Bankruptcy Act 1966 (Cth), as a result of their subsequent bankruptcy. The effect of s 60(2) is that if one plaintiff becomes bankrupt, even if another does not, the entire action is stayed, and control of the action passes to the trustee in bankruptcy until the trustee makes an election in writing to prosecute or discontinue the action.
Section 60(2) also operates to stay proceedings commenced by Mr and Mrs Frigger in their capacity as trustee, not only the action in their personal capacities.
As the action is currently stayed, the application to substitute the second plaintiff will be dismissed. (citations omitted)
The current application
[4] Frigger v Kitay [No 15] [2019] WASC 384.
[5] Frigger v Kitay [No 15] [9] - [11].
By application in an appeal filed on 28 October 2019, the appellants apply for an order substituting H & A Frigger Pty Ltd as the third respondent in the appeal.
The appellants' purpose in bringing this application is to facilitate bringing this appeal to a determination by the court.
Provisions of the Bankruptcy Act
The following provisions of the Bankruptcy Act impact on the primary proceedings and this appeal:
Section 58 of the Bankruptcy Act relevantly provides:
(1)Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee;
…
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
The purposes of s 58(3) of the Bankruptcy Act have been described by the Full Court of the Federal Court of Australia in the following terms:[6]
The purposes are to assist in the orderly administration of the insolvent estate by protecting a bankrupt, and the property of the erstwhile debtor (as now vested in the trustee), against the enforcement of remedies. This is done by enabling the court to supervise the handling of claims through the procedure of proof of debt (administered by the trustee or liquidator), by ensuring that the assets of the estate are not expended on costs in a multiplicity of litigation, and by ensuring that no one creditor gets an advantage over the others. (citations omitted)
[6] Hudson v Sigalla [2015] FCAFC 140; (2015) 235 FCR 122 [25].
The reference in s 58(3)(b) to 'the Court' is to a Court having jurisdiction in bankruptcy under the Bankruptcy Act.[7] Those courts are generally the Federal Court of Australia and the Federal Circuit Court of Australia.[8] This court does not have bankruptcy jurisdiction, and so may not grant leave under s 58(3)(b) of the Bankruptcy Act.
[7] Bankruptcy Act, s 5(1) (definition of 'the Court').
[8] Bankruptcy Act, s 27.
A 'provable debt' is defined in s 5(1) of the Bankruptcy Act to mean a debt or liability that is, under this Act, provable in bankruptcy. Under s 82(1) of the Bankruptcy Act:
Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
Section 60 of the Bankruptcy Act relevantly provides:
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
…
(5) In this section, action means any civil proceeding, whether at law or in equity.
Is this appeal a 'proceeding in respect of a provable debt' for the purposes of s 58(3)(b) of the Bankruptcy Act?
If Mr and Mrs Frigger's trustees in bankruptcy have not made an election to prosecute the primary proceedings within the required time, they will be deemed to have abandoned the primary proceedings. However, it is not necessary for us to address that question or the question of whether the primary proceedings remained stayed more than 28 days after notice had been given to the trustees in bankruptcy.
Section 60 does not apply to the current appeal, which is not a proceeding commenced by a person who has become bankrupt. However, s 58(3)(b) may apply if the appeal is properly characterised as being 'in respect of a provable debt' for the purposes of that provision.
As this court noted in Iron Mountain Mining Ltd v K & L Gates,[9] the phrase 'in respect of' in s 58(3)(b) has been given a wide meaning which promotes the purposes of the Act, denoting a nexus or connection between a provable debt and the proceedings.[10]
[9] Iron Mountain Mining Ltd v K & L Gates [2016] WASCA 166 [45].
[10] Re McMaster; Ex parte McMaster (1991) 33 FCR 70, 72, approved in Fraser v Commissioner of Taxation (1996) 69 FCR 99, 112 ‑ 114; see also the discussion of authority in Melnik v Melnik [2005] FCAFC 160; (2005) 144 FCR 141 [28] ‑ [47].
It has been held that a potential or contingent liability for costs is not a provable debt unless an order for payment of those costs has been made before the bankruptcy intervenes.[11] However, in the present case, the costs liability arises from the springing order, which was made before Mr and Mrs Frigger's bankruptcy. Once sprung, the springing order required the respondents to pay the appellants' costs of opposition to the respondents' claim in the primary proceedings. That costs liability by Mr and Mrs Frigger, in their personal capacity, to the appellants was a provable debt, even though the quantum of the debt was subject to agreement between the parties as to, or assessment by the court of, the amount payable.
[11] Fraser Property Developments Pty Ltd v Sommerfeld [No 2] [2005] QCA 242; [2005] 2 Qd R 404 [12].
The effect of the extension order was that the springing order did not spring and the order that the respondents pay the appellants' costs ceased to operate. In the appeal, the appellants in effect seek orders setting aside the extension order. The legal effect of allowing the appeal and setting aside the extension order would be to restore the operation of the springing order. The springing order would once again provide for the respondents, including Mr and Mrs Frigger in their personal capacity, to pay the appellants' costs of opposing the respondents' claims in the primary proceedings.
It is true that, by virtue of the making of the extension order, the springing order did not create a costs liability at the time the sequestration order was made. However, if the extension order were set aside, then there would be a costs liability arising from the springing order which was made before Mr and Mrs Frigger's bankruptcy. In that event, the costs liability under the springing order would be a liability to which they may become subject before the discharge of their bankruptcy by reason of an obligation incurred before the date of the bankruptcy.[12] It would be a provable debt within the meaning of s 82 of the Bankruptcy Act.
[12] Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 [67].
In our view, the fact that this appeal may restore the operation of the springing order which creates a provable debt provides a clear and direct nexus between the provable debt and the current appeal. Therefore, this appeal is a 'proceeding in respect of a provable debt' for the purposes of s 58(3)(b) of the Bankruptcy Act.
In written submissions filed in relation to the operation of s 58 of the Bankruptcy Act, the appellants do not take issue with the characterisation of the appeal as a legal proceeding in respect of a provable debt.
Is the substitution of a party a fresh step in the proceeding?
The appellants submit that leave under s 58(3)(b) of the Bankruptcy Act is not required because the substitution of H & A Frigger Pty Ltd as the third respondent in the appeal is not a 'fresh step' in the proceeding. The appellants accept that the application to substitute the new trustee may be a fresh step in the appeal in relation to the Frigger Superannuation Fund and its representation before this court. However, the appellants submit that it is not a fresh step in the appeal by the appellants against the impugned orders so far as they apply to Mr and Mrs Frigger in their personal capacity.
The appellants submit that the granting of their application will merely give effect to the fact that, because of their bankruptcy, Mr and Mrs Frigger are no longer capable of being trustees of the Frigger Superannuation Fund and representing it in the proceedings. On the application being granted, the Frigger Superannuation Fund will then be properly represented in the appeal by H & A Frigger Pty Ltd. The appellants submit that the process of substituting H & A Frigger Pty Ltd for the previous, now bankrupt, former trustees is not a fresh step in the proceedings in relation to Mr and Mrs Frigger personally, so that leave pursuant to s 58(3)(b) is unnecessary.
The reference to a fresh step in a proceeding has been taken to refer to the interlocutory steps in a proceeding, including any step that advances the proceeding toward judgment.[13] The making of an application to join a necessary party to the appeal meets that description, and the appellants' submissions do not contend to the contrary. The purport of the appellants' submissions is that the fresh step is not taken against the bankrupt respondents and so s 58(3)(b) does not prevent that step from being taken without leave.
[13] McQuade and Gronow, Australian Bankruptcy Law and Practice (6th edition) [58.3.65].
As noted above, the pending appeal is a legal proceeding in respect of a provable debt in that the appeal may restore the operation of the springing order which created a provable debt. The provable debt would be the costs liability of the respondents. The costs liability would be a joint and several liability of Mr and Mrs Frigger in their personal capacity and of the trustee of the Frigger Superannuation Fund.
In the appeal, as presently constituted, the appellants' purpose is to progress the appeal against all of the respondents to a hearing so that the appellants' case in the appeal against all of the respondents can be heard and determined. The appellants' application in the appeal to substitute a new trustee of the Frigger Superannuation Fund (by substituting H & A Frigger Pty Ltd for Mr and Mrs Frigger) as the third respondent in the appeal is a step which is necessary before the appellants' case in the appeal, as presently constituted, can be heard and determined.
In our view, the substitution of H & A Frigger Pty Ltd facilitates the prosecution of the appellants' case in the appeal, as presently constituted. The appellants are taking a step in the proceedings (namely, filing and serving their application and making submissions in respect of the application) and seek to have the court make the orders sought in the application. The making of the application and the making of the orders sought in the application are necessary before the appeal, as presently constituted, can be heard and determined. The orders sought would remove a barrier to the hearing and determination of the appeal, which may restore the operation of the springing order which created a provable debt against Mr and Mrs Frigger. To that extent, the substitution of H & A Frigger Pty Ltd as the third respondent advances the appellants' case against Mr and Mrs Frigger in their personal capacity, by enabling that case to be heard and determined. The appellants' application is therefore a fresh step in a legal proceeding that is in respect of a provable debt.
We note that some support for the appellants' submission that s 58 does not preclude the prosecution of proceedings against persons other than the bankrupt might be found in the decision of the New South Wales Court of Appeal in Coshott v Barry.[14] In that case, solicitors' costs were assessed against two clients, one of whom became bankrupt between the certificate of assessment being filed in court (which gave it the effect of a judgment for the unpaid costs). The court held that, even if the filing of certificates and entry of judgment was a step in the proceeding against the bankrupt client, s 58(3) did not prevent steps being taken against the other client. In doing so, the court observed:[15]
So long as the object of the bankruptcy legislation, of ensuring that all of the property of the bankrupt comes under the control of the trustee in bankruptcy and that all creditors are treated pari passu, is maintained, and so long as the resolution of disputes as to whether an asserted obligation of the bankrupt is a provable debt can only be determined within the regime laid down by the Bankruptcy Act, there is no reason to construe s 58 as impinging in any way on the right of a creditor of a person other than the bankrupt to take whatever steps are open to that creditor against that other debtor.
[14] Coshott v Barry [2015] NSWCA 257; (2015) 91 NSWLR 1.
[15] Coshott [88].
However, Coshott v Barry dealt with a situation in which two debtors were jointly liable for a debt. The rights and liabilities of the creditor and the two debtors in respect of the debt had been finally determined in the legal proceeding. The Court of Appeal held that s 58(3) of the Bankruptcy Act did not prevent the creditor from taking steps to enforce the judgment relating to the joint debt against a debtor other than the bankrupt. The enforcement of the judgment against the debtor other than the bankrupt was not in respect of the bankrupt's liability for the debt but in respect of the other debtor's liability for the debt. At that stage of the proceeding s 58(3) was only concerned with a fresh step in relation to the bankrupt's liability under the judgment relating to the joint debt. In our view, Coshott v Barry is distinguishable from the present case.
We note that, even if we were wrong in reaching the above conclusions, it would still seem necessary for the appellants to obtain the leave of a court with bankruptcy jurisdiction before the appeal itself can be determined. There may be room for debate as to whether the mere argument before the court on an appeal or application constitutes a fresh step for these purposes.[16] But it is difficult to see how the appellants could bring the appeal, which involves Mr and Mrs Frigger in their personal capacities, to a hearing without taking a fresh step in the proceeding.
[16] Compare Fraser Property [7] with Gertig v Davies [2003] SASC 86; (2003) 85 SASR 226 [63] - [64]. The latter case was followed in Mackinnon v Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson [2019] NSWSC 103 [77] - [79] and Australian Competition and Consumer Commission v The Bio Enviro Plan Pty Ltd [2004] FCA 415 [6] - [9].
Procedural matters
The application in an appeal seeking joinder of H & A Frigger Pty Ltd and the supporting affidavit was served by the appellants on the company on 28 October 2019.[17] The application was listed for determination on 21 November 2019. There was no appearance by the respondents or H & A Frigger Pty Ltd at that hearing. At the hearing, the court (Murphy and Mitchell JJA) raised with the appellants the question of whether s 58 of the Bankruptcy Act precluded the making of the application without leave. The court made orders adjourning the application to 28 February 2020, and gave the appellants liberty to file and serve written submissions on that question on or before 21 February 2020.
[17] Affidavit of David Abraham Lenhoff sworn 29 October 2019.
Submissions were filed by 20 February 2020, but were not served until 26 February 2020. At the hearing before us on 28 February 2020, there was again no appearance by H & A Frigger Pty Ltd but Mr and Mrs Frigger appeared in their personal capacity. Mr and Mrs Frigger contended that the application should be dismissed by reason of failure to comply with the court's order to serve submissions on or before 21 February 2020.
The late service of the submissions should not have occurred, but in our view did not justify dismissal of the application. In our view, there was no prejudice to Mr and Mrs Frigger in their personal capacity, as the order for substitution of the trustee of the Frigger Superannuation Fund did not directly affect their interests so as to entitle them to be heard on that question. Nor did Mr and Mrs Frigger in their capacity as third respondent contend that they continued as trustee of the Fund. H & A Frigger Pty Ltd has been aware of the application since October 2019, and has not appeared in opposition to it or sought to advance any submissions through a solicitor. In these circumstances, the late service of the appellants' submissions did not justify an order dismissing the application for non-compliance with the court's orders.
Therefore, we decided that it was in the interests of justice to extend time for service of the appellants' submissions. As the appellants did not seek to make any additional oral submissions in support of the application, we ordered that the application be determined on the papers. We made an order allowing H & A Frigger Pty Ltd, by its solicitor, to file any written submissions in response to the appellants' submissions on s 58(3)(b) of the Bankruptcy Act by 13 March 2020. H & A Frigger Pty Ltd did not file any submissions within the specified time.
Orders
For the above reasons, we would order that the determination of the appellants' application in an appeal filed on 28 October 2019, for an order substituting H & A Frigger Pty Ltd as the third respondent in the appeal, be adjourned until such time as the appellants obtain the leave of a court having bankruptcy jurisdiction under s 58(3)(b) of the Bankruptcy Act.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZMM
Associate to the Honourable Justice Mitchell15 APRIL 2020
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