Mervyn Jonathon Kitay as liquidator of Computer Accounting & Tax Pty Ltd (ACN 009 470 491) v Frigger - [2021] WASCA 78

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   MERVYN JONATHON KITAY as liquidator of COMPUTER ACCOUNTING & TAX PTY LTD (ACN 009 470 491) -v- FRIGGER [2021] WASCA 78
CORAM:   BUSS P
MITCHELL JA

HEARD:   11 FEBRUARY 2021
DELIVERED          :   11 FEBRUARY 2021
PUBLISHED           :   3 MAY 2021
FILE NO/S:   CACV 3 of 2018
BETWEEN:   MERVYN JONATHON KITAY as liquidator of COMPUTER ACCOUNTING & TAX PTY LTD (ACN 009 470 491)
First Appellant

COMPUTER ACCOUNTING & TAX PTY LTD (ACN 009 470 491) (IN LIQUIDATION)
Second Appellant

AND

ANGELA CECELIA THERESA FRIGGER
First Respondent

HARTMUT HUBERT JOSEF FRIGGER
Second Respondent

ANGELA CECILIA THERESA FRIGGER as trustee for THE FRIGGER SUPERANNUATION FUND
First-named Third Respondent

HARTMUT HUBERT JOSEF FRIGGER as trustee for THE FRIGGER SUPERANNUATION FUND
Second-named Third Respondent

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

Catchwords:

Appeal - Civil proceeding - Appellants filed and served a discontinuance notice - Costs

Legislation:

Supreme Court Act 1935 (WA), s 37(1)
Supreme Court (Court of Appeal) Rules 2005 (WA), r 59

Result:

Order as to costs made on conditions

Category: B

Representation:

Counsel:

First Appellant	:	Mr D A Lenhoff
Second Appellant	:	No appearance
First Respondent	:	No appearance
Second Respondent	:	No appearance
First-named Third Respondent	:	In person
Second-named Third Respondent	:	No appearance

Solicitors:

First Appellant	:	Lenhoff & Associates
Second Appellant	:	Lenhoff & Associates
First Respondent	:	In person
Second Respondent	:	In person
First-named Third Respondent	:	In person
Second-named Third Respondent	:	In person

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

Frigger v Kitay [2016] WASCA 204
Kitay v Frigger [No 3] [2020] WASCA 55
One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622

REASONS OF THE COURT:

On 30 November 2020, the appellants filed a discontinuance notice in this appeal.
By an application in an appeal dated 18 December 2020, the first‑named third respondent applied for orders as follows:
(a)the first appellant pay the first-named third respondent the sum of $117.17 being costs of the appeal;
(b)a declaration that the first appellant is not entitled to indemnity or exoneration from the second appellant's assets for costs of the appeal; and
(c)the first appellant pay the first-named third respondent the costs of the application fixed in the sum of $100.
The parties to the first-named third respondent's application in an appeal conferred about the issues giving rise to the application but did not resolve them. The failure of the parties to resolve the issues relating to the costs claimed by the first-named respondent from the first appellant is remarkable having regard to the amounts claimed.
On 11 February 2021, the first-named third respondent's application in an appeal was heard.
At the conclusion of the hearing, the court made orders as follows:
(1)Subject to order 2, the first appellant pay the costs of the third respondents fixed in the sum of $117.17.
(2)The first appellant may discharge his obligation to pay that sum of $117.17 by setting off that amount against any unpaid costs which the third respondents, jointly or severally, owe to the appellants, jointly or severally, under any previous orders made by this court in this appeal.
(3)Otherwise, the application is dismissed.
(4)Each party is to bear his or her own costs of the application.
After making those orders the court stated that it would publish reasons for decision at a later date. These are the reasons.

The nature of the primary proceedings

The nature of the claims advanced in the primary proceedings are summarised in Frigger v Kitay.[1] It is unnecessary to repeat the summary.
[1] Frigger v Kitay [2016] WASCA 204 [6] ‑ [9].

The background to the application in an appeal dated 18 December 2020

On 30 March 2016 the primary judge, Allanson J, 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.
The respondents began 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.
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.
The present appeal was against the extension order made by the primary judge on 19 December 2017. The appellants appealed against the extension order on the grounds that the primary judge erred in:
(a)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;
(b)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; and
(c)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 in the present appeal included that the appeal be allowed, and the respondents' application for an extension of time to comply with the springing order be dismissed. The last order could only have been made if the extension order was set aside.
After the present appeal was commenced, the first and second respondents (who are also the first‑named and the second‑named third respondents) became bankrupt for the purposes of s 58(3) of the Bankruptcy Act 1966 (Cth). See Kitay v Frigger [No 3].[2]
[2] Kitay v Frigger [No 3] [2020] WASCA 55.
By an application in an appeal filed on 28 October 2018, the appellants applied for an order substituting H & A Frigger Pty Ltd as the third respondent in the present appeal.
On 15 April 2020, this court ordered that the determination of the appellants' application in an appeal filed on 28 October 2019 be adjourned until such time as the appellants obtained the leave of a court having bankruptcy jurisdiction under s 58(3)(b) of the Bankruptcy Act.
On 30 November 2020, the appellants filed a discontinuance notice in respect of the present appeal.

The submissions of the first-named third respondent in support of the orders sought in the application in an appeal dated 18 December 2020

The costs in the sum of $117.17 claimed by the first-named third respondent comprise disbursements, being transcript charges of $52.65 and photocopying charges of $64.52. The incurring of those charges is verified in the first-named third respondent's affidavit sworn 18 December 2020.
The first-named third respondent's affidavit also verifies, in effect, that the disbursements were paid on behalf of The Frigger Superannuation Fund, being the fund in respect of which the first‑named and the second‑named third respondents act as trustees.
The first‑named third respondent submitted that the first appellant should be personally responsible for satisfying any costs of the appeal and should not be entitled to indemnity or exoneration from the second appellant's assets.
It was also submitted, in effect, that the first appellant should be ordered to pay her costs of the application fixed in the sum of $100 because the first respondent had acted unreasonably in refusing to pay to the first-named third respondent the $117.17.

The submissions of the appellant in opposition to the orders sought in the application in an appeal dated 18 December 2020

The appellants' lawyer, David Abraham Lenhoff, swore an affidavit on 15 January 2021 in opposition to the first‑named third respondent's application.
In his affidavit, Mr Lenhoff deposed, relevantly, as follows:
(a)At a meeting on 19 November 2020, the first appellant instructed Mr Lenhoff to do what was necessary to discontinue the present appeal.
(b)The present appeal was discontinued because 'the fact that the first and second respondents had been bankrupted and, coupled with the requirement for the appeal to be continued only after leave of a court having bankruptcy jurisdiction under s 58(3) of the Bankruptcy Act 1966 (Cth) had been obtained, made any potential benefit to be gained from continuing the appeal marginal at best'.
(c)Consequently, on 30 November 2020, Mr Lenhoff prepared the discontinuance notice which was then filed and served.
(d)On 21 June 2018, this court ordered the respondents to pay the appellants' costs of an application in an appeal filed on 28 March 2018, fixed in the sum of $2,000.
(e)In an email of 1 December 2020, Mr Lenhoff reminded the first‑named third respondent that the respondents were indebted to the appellants for costs orders made against them which were far in excess of the amount claimed by the first‑named third respondent consequent upon the discontinuance of the present appeal. Mr Lenhoff suggested that the amount claimed by the first‑named third respondent in the present appeal could be set‑off against the costs owed by the respondents to the appellants pursuant to the costs orders made against them, which included the amount of $2,000 referred to at [26(d)] above.
(f)Without conceding that the claim for costs was 'legitimate', had the first‑named third respondent 'agreed to resolve the claim for costs by setting them off against the costs owing to the appellants', Mr Lenhoff would 'for the sake of peace' have advised his client to accept that proposal.
Counsel for the first appellant submitted that:
(a)A perusal of the invoices attached to the first-named third respondent's affidavit indicates that the costs in question were paid by the first-named third respondent. The invoices do not establish that those costs 'were incurred by [The Frigger Superannuation Fund]'.
(b)The application for costs was brought solely by the first‑named third respondent. The trustees of The Frigger Superannuation Fund are the first‑named third respondent and her husband, the second-named third respondent. The application for costs must fail because it was not brought by both of the third respondents.
(c)The appeal has never been determined on the merits. It was the appellants' intention, at all times, to prosecute the appeal 'right to the end, but then in the cold light of day [the appellants] looked at the matter and decided that … a full-blown application to the Federal Court' for leave under s 58(3)(b) of the Bankruptcy Act '[was not] worth pursuing' (appeal ts 40). Hence, the discontinuance notice was filed and served.
Counsel referred to Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin.[3] According to counsel, on the authority of Lai Qin, in the absence of a determination by this court that the appellants acted unreasonably in bringing the appeal, the appropriate order on the first-named third respondent's application is that there be no order as to the costs of the appeal.
[3] Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622.
It was submitted that at least part of the claim for the costs of the transcript, being an amount of $17.70, was incurred on 15 March 2018 and, consequently, that claim 'vests in [the first and second respondents' trustee in bankruptcy] because the amount of $17.70 was incurred prior to their bankruptcy in July 2018. It was also submitted that the same conclusion applies to any photocopies made prior to their bankruptcy.
Further, it was submitted that any order for costs should be made in favour of all of the respondents.

The merits of the application in an appeal dated 18 December 2020

Section 37(1) of the Supreme Court Act 1935 (WA) confers on this court or a judge a broad discretionary power in relation to awarding costs in any proceeding. The power is expressly made subject, relevantly, to other provisions of the Supreme Court Act and the rules of court.
By r 59(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (the Court of Appeal Rules), an appellant may discontinue an appeal by filing and serving a form 16. By r 59(4), unless, relevantly, the court orders otherwise, an appellant who discontinues an appeal must pay the respondent's costs in respect of the appeal which must be taxed if they are not agreed. The costs referred to in r 59(4) include disbursements.
In Lai Qin, an applicant for a protection visa under the Migration Act 1958 (Cth), whose application had been refused by the Minister and who had failed in review proceedings before the Refugee Review Tribunal, commenced a proceeding in the High Court for prerogative writs directed to the Minister and the Tribunal. Before the proceeding was heard, the Minister exercised his discretion under the Migration Act and granted a protection visa to the applicant. The applicant did not pursue the proceeding, but applied under O 71 r 39 of the High Court Rules 1952 (Cth) for an order for costs up to the time the visa was granted.
Order 71 r 39 provided:
When for any reason the further prosecution of a proceeding becomes unnecessary, except for the purpose of determining by whom the costs of the proceeding should be paid, any party may apply to the Court or a Justice to determine the question, and thereupon the Court or Justice may make such order as is just.
McHugh J held in Lai Qin that there should be no order for costs in the proceedings. His Honour observed (625):
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
In One.Tel Ltd v Commissioner of Taxation,[4] Burchett J said:
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
[4] One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 [6].
In the present case, the observations of McHugh J in Lai Qin are not in point. First, r 59(4) of the Court of Appeal Rules is materially different from O 71 r 39 of the High Court Rules. By r 59(4), unlike O 71 r 39, the respondent is entitled to the costs of the appeal unless the court orders otherwise. Secondly, the appeal by the appellants in the present case was not settled and the further prosecution of the appeal did not, relevantly, become futile. Rather, the appellants made a decision, in effect, that the time and expense involved in making an application for leave under s 58(3)(b) of the Bankruptcy Act outweighed the likely benefits of any success they might have on the appeal. That does not constitute futility in the relevant sense. By contrast, in Lai Qin the applicant was granted a protection visa by the Minister after she had commenced the proceeding in the High Court for prerogative relief consequent upon a previous refusal by the Minister to grant her a protection visa and the decision of the Tribunal to dismiss her review proceedings.
We are not satisfied that, on the information before the court, it would be just to displace the ordinary result as to costs embodied in r 59(4) of the Court of Appeal Rules.
We accept that the appellants acted reasonably in commencing the appeal. However, it does not follow that the first appellant should not be liable for disbursements incurred on behalf of The Frigger Superannuation Fund. The appellants' decision to file and serve the discontinuance notice was made as a result of the necessity for the appellants to make an application for leave under s 58(3)(b) of the Bankruptcy Act. That necessity had existed since 20 July 2018, when the first and second respondents became subject to a sequestration order. The appellants, after pursuing the appeal for some time, effectively surrendered. It is not apparent that the appeal had obvious merit and it therefore cannot be concluded that the respondents acted unreasonably in defending the appeal. As we have mentioned, the appeal was not settled and the appeal did not relevantly become futile. The amount of the disbursements claimed is modest.
Although the invoices attached to the first-named third respondent's affidavit indicate that the costs in question were paid by the first-named third respondent and do not refer to The Frigger Superannuation Fund, the first-named third respondent's affidavit does verify, in effect, that the disbursements were paid on behalf of The Frigger Superannuation Fund. The fact that the application for costs was brought solely by the first-named third respondent as a trustee, and not by both trustees, is not an impediment to the court ordering the first appellant to pay the costs of the third respondents. That is the ordinary result as to costs embodied in r 59(4) of the Court of Appeal Rules. The first appellant has not established that justice requires the displacement of the ordinary result.
If it be the case that the costs paid by the first-named third respondent were incurred for the benefit of all of the respondents, that fact does not militate against the ordinary result that the first appellant should pay the costs of the third respondents. The evidence establishes that the first-named third respondent paid the costs on behalf of The Frigger Superannuation Fund and, accordingly, the first appellant is liable for those costs under r 59(4). Any claims for contribution which might exist as between the respondents do not preclude or diminish the appellants' liability.

Further, if it be the case that the first and second respondents' trustee in bankruptcy has a claim in respect of any part of the cost of the transcript paid by the first-named third respondent on behalf of The Frigger Superannuation Fund, that fact does not militate against the ordinary result that the first appellant should pay the costs of the third respondents. If the trustee in bankruptcy has a claim it would appear to be for an amount of about $17.70 and, if thought fit, the trustee in bankruptcy may seek to recover that amount from the trustees of The Frigger Superannuation Fund.
We are satisfied that the disbursements claimed were reasonably incurred and are reasonable in amount.
It is appropriate, in the circumstances, that the first appellant be ordered to pay the costs of the third respondents fixed in the sum of $117.17, subject to the first appellant being entitled to discharge his obligation to pay the $117.17 by setting off that amount against any unpaid costs which the third respondents, jointly or severally, owe to the appellants, jointly or severally, under any previous orders made by the court in the appeal.
We would not make a declaration that the first appellant is not entitled to indemnity or exoneration from the second appellant's assets for costs of the appeal. It is not appropriate to consider whether a declaration in those terms should be made or not in the context of the application in an appeal dated 18 December 2020. All relevant issues in relation to the possible making of the declaration have not been canvassed.
Finally, it must be stated that this dispute concerning an amount of $117.17 involved a lack of proportionality for both parties. The dispute has wasted the resources of the court in addition to those of the first appellant and the third respondents.
In the circumstances, each of the parties should bear his or her own costs of the application in an appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TW
Associate to the Honourable President Buss
3 MAY 2021