Gerard Cassegrain & Co Pty Ltd & Ors v Claude Cassegrain & Anor [2012] NSWSC 285

Supreme Court New South Wales

Medium Neutral Citation: Gerard Cassegrain & Co Pty Ltd & Ors v Claude Cassegrain & Anor [2012] NSWSC 285 Hearing dates: 12 March 2012 Decision date: 28 March 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Inquiry ordered by prior judgment of the Court ordered to proceed. Detailed orders made to prepare inquiry for hearing. Catchwords: PRACTICE AND PROCEDURE - Motion to proceed with inquiry under r 46.11 of Uniform Civil Procedure Rules 2005 (NSW) - Whether inquiry should proceed. Legislation Cited: - Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 58(2), 58(2)(b) - Uniform Civil Procedure Rules 2005 (NSW) r 46.11 Cases Cited: - Vartelas v Hamburg [2009] VSCA 196 Category: Principal judgment Parties: Gerard Cassegrain & Co Pty Ltd (First Plaintiff) Denis Cassegrain (Second Plaintiff) Catherine Dunn (Third Plaintiff) Patrick Cassegrain (Fourth Plaintiff) John Cassegrain (Fifth Plaintiff) Claude Cassegrain (First Defendant) Felicity Cassegrain (Second Defendant) Representation: Counsel: M. A. Ashhurst SC (Plaintiffs) G.C. Lindsay SC/P. Bolsper (Defendants) Solicitors: McCabe Terrill (Plaintiffs) Oliveri Lawyers (Defendants) File Number(s): 08/280507

Judgment 1The First Plaintiff in these proceedings, Gerard Cassegrain & Co Pty Limited ("GC & Co") seeks an order under r 46.11 of the Uniform Civil Procedure Rules 2005 (NSW) that the Court proceed, in accordance with orders made by Barrett J on 20 December 2011, to carry out an inquiry as to, broadly, the amounts obtained by the First Defendant, Mr Claude Cassegrain, from GC & Co by resort to and drawing upon a loan account created in his name in the books of GC & Co; the date that amount was obtained; and the interest payable on each such amount. 2By way of background, Barrett J delivered two judgments in the proceedings, the first reported at [2011] NSWSC 1156 and the second reported at [2011] NSWSC 1594. The first judgment in the proceedings related to a statutory derivative action brought by Mr Denis Cassegrain on behalf of GC & Co against Mr Claude Cassegrain (who was, at relevant times, a director of GC & Co) and his wife, Ms Felicity Cassegrain. GC & Co was successful in its claims against Mr Claude Cassegrain but unsuccessful in respect of its claims against his wife, Ms Felicity Cassegrain. Barrett J found that a loan account purporting to reflect an amount of $4.25 million owing by GC & Co to Mr Claude Cassegrain was false and that Mr Claude Cassegrain had acted in breach of fiduciary duty and also dishonestly in obtaining money or value from GC & Co reflected in a reduction of that loan account balance. 3In his second judgment, Barrett J held that the Court should order an inquiry to establish the amount of equitable compensation to be given and order payment of the sum determined upon inquiry. His Honour held that the inquiry should be as to all sums drawn from the relevant loan account and the order should be that equitable compensation be in the aggregate of the sums found to have been drawn, with interest on each component from the date of drawing to the date of the order, calculated in accordance with Practice Note SC Gen 16. 4GC & Co has appealed against the dismissal of its claim against Ms Felicity Cassegrain by Notice of Appeal filed on 10 February 2012. Mr Claude Cassegrain has also appealed against the judgment against him by Notice of Appeal filed on 8 March 2012. Whether the inquiry should proceed 5Rule 46.11 of the Uniform Civil Procedure Rules provides that, if a judgment contains directions as to, relevantly, an inquiry, any party may, after entry of the judgment, move the Court to proceed under the judgment. GC & Co's application for such an order is supported by the affidavit of GC & Co's solicitor, Mr Andrew Lacey, dated 21 February 2012. It appears that, by letter dated 7 October 2011, GC & Co's solicitors sent a letter to Mr Cassegrain's solicitors requesting a copy of the most recent ledger relating to his loan account with GC & Co and copies of ledgers for earlier periods. Mr Claude Cassegrain's solicitors provided GC & Co's solicitors with a copy of GC & Co's ledger account for relevant periods in response to that letter. Mr Lacey has in turn prepared a schedule recording amounts withdrawn from the relevant loan account, as shown in that ledger, after 5 March 1997, being the date referred to by Barrett J in paragraph [242] of his earlier judgment, including calculating interest alleged to be payable on that sum in accordance with Order 5 of Barrett J's orders dated 20 September 2011 and Supreme Court Practice Note Gen 16. GC & Co contends that that calculation would provide the basis for the relevant inquiry, which it estimates would take no longer than half a day. 6The application for an order under r 46.11 was resisted by Mr Cassegrain. Mr Claude Cassegrain contends that success by either party in the appeals brought in the Court of Appeal would impact upon the basis on which the inquiry takes place. Mr Claude Cassegrain also opposes the inquiry on the basis that other proceedings have been heard in the Equity Division of the Court that include, inter alia, the same parties as these proceedings and that judgment is reserved in those proceedings following further submissions on 7 December 2011. In those other proceedings, several of the plaintiffs in these proceedings make claims against Mr Claude Cassegrain, Ms Felicity Cassegrain and another person arising out of transactions by which Ms Felicity Cassegrain provided an amount of approximately $194,000 to GC & Co to pay out its indebtedness to the Commonwealth Bank of Australia and secure the retirement of receivers and managers in December 2004. The dispute in those proceedings concern whether the monies were paid by way of loan by Ms Felicity Cassegrain to GC & Co or for the purchase of shares in two other companies owned by GC & Co. There are also issues in those proceedings as to whether the share transfers to Ms Felicity Cassegrain involved an intent to defraud creditors, were at undervalue, were oppressive of Mr Claude Cassegrain's siblings or in breach of fiduciary or statutory duty owed by Mr Claude Cassegrain and that other person to GC & Co. It appears those proceedings also include a Cross-Claim brought by Mr Claude Cassegrain against another entity, Expressway Spares Pty Ltd and Mr Claude Cassegrain's siblings alleging oppressive conduct against Mr Claude Cassegrain in respect of the affairs of Expressway Spares. It is by no means clear to me that any order likely to be made in those proceedings would have an impact on the conduct of the inquiry in these proceedings, which relates to the discrete matter of withdrawals from the loan account over the relevant period. 7My attention was drawn to the decision in Vartelas v Hamburg [2009] VSCA 196 where the Court of Appeal of the Supreme Court of Victoria dealt with a somewhat similar question, albeit by reference to the different procedural rules of the Supreme Court of Victoria. In that case, the question was whether a stay of an appeal should be granted, which would only be granted in special or exceptional circumstances, where an inquiry had been ordered at first instance as to the amounts which should have been included in particular accounts. Bongiorno JA and Hansen AJA had to consider the potential overlap of the appeal and the inquiry and Counsel relied on similar arguments to those which were put by Mr Claude Cassegrain before me. Bongiorno JA, delivering the judgment of the Court, observed at [40] that: "There is every reason for the inquiries to be had, and no irremediable prejudice will be occasioned to the applicant if they are had. Indeed, there seems very good reason for the inquiries to proceed in view of the clarity that will thus be provided, apart from the fact that the first and second respondents and the other respondents should be able to have the benefit of the inquiries in the process of moving to finalisation concerning the surplus fund. In addition, permitting the inquiries to proceed in no way renders the appeal from the final orders nugatory. And, if the appeal succeeds and it turns out the inquiries were wasted, the Court of Appeal could make an appropriate order for costs. ... Nor, in the light of the amounts incurred thus far and the preparatory work already undertaken, is the further cost and time of the inquiries of enough significance, considered overall, to warrant a stay. All of this can be adjusted on costs. In the circumstances, it is not necessary to consider the prospects of success of the appeal on this particular issue of the grant or refusal of a stay. Finally, it is not to be overlooked that if and when the inquiries are concluded and orders made, which assumedly would be final, the applicant may appeal from such orders if so advised. This further demonstrates the lack of prejudice, and certainly irremediable prejudice, to the applicant if a stay is refused." 8The Court's discretion whether to order the inquiry which is sought is to be exercised having regard to s 58 of the Civil Procedure Act 2005 (NSW) which requires the Court, in determining whether to make an order for the management of proceedings, including any order of a procedural nature, to seek to act in accordance with the dictates of justice. Section 58(2) provides that the Court must have regard to the provisions of ss 56 and 57 of the Civil Procedure Act in determining the interests of justice in a particular case. Section 56 provides that the overriding purpose of the Act and the rules of Court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings. Section 57 requires that proceedings are to be managed having regard to the just determination of the proceedings, the efficient disposal of the Court's business, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable by the respective parties. Section 58(2)(b) specifies a number of other matters to which the Court may have regard in exercising that discretion. 9In the present case, I must balance the advantages of proceeding with an inquiry against its disadvantages. The advantages include securing an earlier resolution of the proceedings if the appeals brought by the respective parties are unsuccessful and Barrett J's judgment stands and the prospect that any appeal from the result of an inquiry could be joined with the existing appeals in the Court of Appeal, avoiding the potential duplication of appeals. The disadvantages include the possibility that the costs incurred in an inquiry conducted on the basis ordered by Barrett J may be wasted, if Mr Claude Cassegrain is successful in his appeal and the orders for an inquiry made by Barrett J are overturned, or GC & Co is successful in its appeal and obtains wider relief either in place of, or in a manner which alters the scope of, the inquiry. 10It seems to me that the advantages of finality and of avoiding the possible duplication of appeals are significant in this matter. On the other hand, the waste of time of the parties and of available judicial resources involved in proceeding with an inquiry is limited where the scope of the inquiry ordered by Barrett J is relatively narrow; GC & Co estimates that it can be completed in a half day and that estimate is not unreasonable on its face; and Mr Claude Cassegrain has not offered any alternative estimate of the time which would be taken for the inquiry, although he does not accept GC & Co's estimate. I consider that I should therefore order that the inquiry proceed and make directions for its conduct, so that it will be ready for hearing on the date on which it is listed before an Associate Justice of the Court. Form of orders and directions 11I invited the parties to make submissions as to the form of orders which should be made to prepare the inquiry for hearing, if the Court considered that the inquiry should proceed. Several directions were agreed between the parties and seemed to me to be appropriate and I will make those directions to that effect below. 12Mr Claude Cassegrain also submitted that there should be directions as to the filing of Points of Claim by GC & Co; Points of Defence by Mr Claude Cassegrain and Points of Reply by GC & Co. GC & Co submitted that those directions were unnecessary given the specific terms of the orders made by Barrett J on 20 December 2011. In my view, Barrett J has clearly identified the task which needs to be undertaken in the inquiry and there is no cause for further identification of claims or defences by the parties in respect of that task. 13Mr Claude Cassegrain also contends that, on the issue of a certificate or determination by the Associate Justice conducting the inquiry, that certificate should be returned to a Judge for the purpose of considering whether enforcement of any sum found to be due ought to be stayed pending the hearing and determination of the respective appeals from the judgment and orders of Barrett J. GC & Co responds that such an order is not necessary, since it is open to Mr Claude Cassegrain to seek a stay of the orders reflecting the outcome of the inquiry in the ordinary course in the appropriate jurisdiction. I accept that submission. If Mr Claude Cassegrain considers that he has a proper basis to seek a stay of a certificate or determination by the Associate Justice, then he is free to make an appropriate application at the appropriate time. 14Accordingly, I make the following orders: 1. The Court notes that the Plaintiffs have already filed and served all evidence that they intend to rely upon in chief at the inquiry. 2. The First Defendant is to serve by 4pm on 10 April 2012 any evidence that he proposes to rely upon at the inquiry. 3. The Plaintiffs are to serve by 4pm on 24 April 2012 any evidence in reply that they intend to rely upon at the inquiry. 4. The Plaintiffs are to file and serve by 4pm on 24 April 2012 an outline of submissions that they intend to rely upon at the inquiry. 5. The First Defendant is to serve by 4pm on 1 May 2012 an outline of submissions that he intends to rely upon at the inquiry. 6. Order that the matter be listed before the Registrar on 2 April 2012 for allocation of the earliest suitable hearing date before an Associate Justice. 7. Reserve liberty to apply on 2 days notice. 15I direct the parties to serve on each other, and send to my Associate, by 4pm on 4 April 2012 their respective submissions as to the costs of this application. Unless either party requests an oral hearing, I propose that the question of costs should be determined in Chambers and without the need for further oral submissions.