Cassegrain v Cassegrain

Federal Court of Australia|2015-11-17|Before: Robertson J

The application for a sequestration order filed 8 April 2015 be adjourned pending the determination of the proceedings in the Supreme Court of New South Wales, Court of Appeal in case numbers 2015/219321 and 2015/299594.
Liberty to apply on three days' notice.
Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 351 of 2015

JUDGE: ROBERTSON J DATE: 17 NOVEMBER 2015 PLACE: SYDNEY

Introduction 1 The applicants apply under s 43 of the Bankruptcy Act 1966 (Cth) for a sequestration order against the estate of Felicity Cassegrain, the respondent. The petition is dated 8 April 2015. 2 The petition states that the respondent debtor owes the applicant creditors the total amount of $1,440,293.47 comprising: (a) the judgment made against the respondent debtor in the Supreme Court of New South Wales in proceeding number 2008/281625 on 5 December 2014, in the sum of $1,399,870.71; and (b) post-judgment interest in the amount of $40,422.76 for the period 6 December 2014 to 8 April 2015, accruing at $325.99 per day at a rate of 8.5% per annum pursuant to s 101 of the Civil Procedure Act 2005 (NSW). 3 The petition identifies the act of bankruptcy as the respondent debtor's failure to comply, on or before 7 April 2015, with the requirements of a bankruptcy notice served on her on 22 December 2014: see s 40(1)(g) of the Bankruptcy Act. 4 On 7 April 2015, an application by the present respondent to set aside the bankruptcy notice issued on 22 December 2014 was dismissed. 5 The respondent has filed an interim application, dated 28 September 2015, for an order pursuant to s 33(1)(a) of the Bankruptcy Act that the proceedings be adjourned pending the outcome of Supreme Court of New South Wales proceedings 2015/127156 and the New South Wales Court of Appeal proceedings commenced by the respondent's notice of appeal filed 28 September 2015. 6 The respondent's grounds of opposition to the application for a sequestration order, as amended by leave, are as follows: 1. The respondent does not owe the debt claimed in the creditor's petition, and the respondent asks the court to look behind the judgment relied upon by the applicant to determine that in truth and reality no debt is owing and that the petition ought to be dismissed pursuant to s 52(2) of the Bankruptcy Act 1966 (Cth) (the Act). 2. The respondent debtor is able to pay her debts and the petition ought to be dismissed pursuant to s 52(2) of the Act. 3. For other sufficient cause a sequestration order ought not to be made the petition ought to be dismissed pursuant to s 52(2) of the Act.

The legislation 7 Sections 33, 40, 43 and 52 of the Bankruptcy Act provide as follows, so far as relevant: 33 Adjournment, amendment of process and extension and abridgment of times (1) The Court may: (a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally; (b) at any time allow the amendment of any written process, proceeding or notice under this Act; or (c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time. … 40 Acts of bankruptcy (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia - within the time specified in the notice; or (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; … 43 Jurisdiction to make sequestration orders (1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling-house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. (2) Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until: (a) he or she is discharged by force of subsection 149(1); or (b) his or her bankruptcy is annulled by force of subsection 74(5) or 153A(1) or under section 153B. … 52 Proceedings and order on creditor's petition (1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. (3) The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days. (4) A creditor's petition lapses at the expiration of: (a) subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or (b) if the Court makes an order under subsection (5) in relation to the petition - the period fixed by the order; unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn. (5) The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.

The facts 8 There was no issue as to the formal requirements in s 43 and I find them to have been satisfied. I am also satisfied as to the proof of the matters set out in s 52(1). 9 I turn to the issues raised by the respondent. 10 There is some complexity in the proceedings in the Supreme Court of New South Wales. 11 In chronological order, the following events occurred. 12 On 27 April 2012, in proceeding number 2008/281625, judgment was given by Bergin CJ in Eq against Felicity Cassegrain along with Claude Cassegrain and Anthony Sarks: Cassegrain v Gerard Cassegrain & Co Pty Ltd [2012] NSWSC 403; 88 ACSR 358. 13 On 24 July 2012, orders were made by Bergin CJ in Eq, including a costs order requiring Felicity Cassegrain, along with Claude Cassegrain and Anthony Sarks, to pay the costs of those proceedings on a party/party basis (Order 16): Cassegrain and Ors v Gerard Cassegrain & Co Pty Ltd [2012] NSWSC 834; 264 FLR 392. Those orders, as originally made, were: The Court declares that: 1. By authorising the sale and transfer of the share in Endwise Holdings Pty Limited (later known as Cassegrain Tea Tree Oil Pty Ltd) from Gerard Cassegrain & Co Pty Limited (the First Defendant) to Felicity Cassegrain (the Third Defendant), on 19 January 2005, for the consideration of $60,423, Claude Cassegrain (the Second Defendant) breached the fiduciary duties he owed to Gerard Cassegrain & Co Pty Limited. 2. By authorising the sale and transfer of the share in Endwise Holdings Pty Limited (later known as Cassegrain Tea Tree Oil Pty Ltd) from Gerard Cassegrain & Co Pty Limited (the First Defendant) to Felicity Cassegrain (the Third Defendant), on 19 January 2005, for the consideration of $60,423, Anthony Sarks (the Fourth Defendant) breached the fiduciary duties he owed to Gerard Cassegrain & Co Pty Limited. 3. By authorising the sale and transfer of 100,000 shares in Oceania Agriculture Pty Limited from Gerard Cassegrain & Co Pty Limited (the First Defendant) to Felicity Cassegrain (the Third Defendant), on 20 January 2005, for the consideration of $71,450, Claude Cassegrain (the Second Defendant) breached the fiduciary duties he owed to Gerard Cassegrain & Co Pty Limited. 4. By authorising the sale and transfer of 100,000 shares in Oceania Agriculture Pty Limited from Gerard Cassegrain & Co Pty Limited (the First Defendant) to Felicity Cassegrain (the Third Defendant), on 20 January 2005, for the consideration of $71,450, Anthony Sarks (the Fourth Defendant) breached the fiduciary duties he owed to Gerard Cassegrain & Co Pty Limited. … 7. On 19 January 2005 Felicity Cassegrain (the Third Defendant) acquired the shares in Endwise Holdings Pty Limited from Gerard Cassegrain & Co Pty Limited with knowledge of Claude Cassegrain's and Anthony Sarks' breaches of fiduciary duties as set out in declarations 1 and 2. 8. On 20 January 2005 Felicity Cassegrain (the Third Defendant) acquired the 100,000 shares in Oceania Agriculture Pty Ltd from Gerard Cassegrain & Co Pty Limited with knowledge of Claude Cassegrain's and Anthony Blake Sarks' breaches of fiduciary duties as set out in declarations 3 and 4. … 10. Claude Cassegrain, Anthony Sarks and Felicity Cassegrain are jointly and severally liable to compensate Gerard Cassegrain & Co Pty Limited for any loss to Gerard Cassegrain & Co Pty Limited arising from the transfer of Gerard Cassegrain & Co Pty Limited's shares in CaTTO [Cassegrain Tea Tree Oil Pty Ltd] and OAL [Oceania Agriculture Pty Ltd] to Felicity Cassegrain on 19 and 20 January 2005 respectively. The Court orders that: … 16. Claude Cassegrain, Anthony Sarks and Felicity Cassegrain pay the Plaintiffs' costs of the statutory derivative and oppression proceedings concerning Gerard Cassegrain & Co Pty Limited on a party/party basis. 17. An Inquiry be held as to the existence and quantum of any loss to Gerard Cassegrain & Co Pty Limited by reason of the transfer of Gerard Cassegrain & Co Pty Limited's shares in CaTTO and OAL to Felicity Cassegrain for the purpose of making orders for equitable compensation to be paid to Gerard Cassegrain & Co Pty Limited by Claude Cassegrain, Anthony Sarks and Felicity Cassegrain. … … 14 On 18 December 2013, a Certificate of Determination of Costs was issued in respect of those costs (Order 16), assessing them in the amount of $1,373,062.34. 15 On 20 December 2013, the Court of Appeal delivered its decision on the appeal from the judgment of Bergin CJ in Eq in proceeding number 2008/281625. The appeals by Claude Cassegrain and Anthony Sarks were dismissed, the judgment against Felicity Cassegrain was set aside, and the proceedings were remitted to Bergin CJ in Eq to consider the question of an application to amend the statement of claim and to make other appropriate orders. The New South Wales Court of Appeal, Emmett JA with whom Meagher and Ward JJA agreed, said as follows and made the following orders: Gerard Cassegrain & Co Pty Ltd (in liq) v Cassegrain [2013] NSWCA 455; 305 ALR 687: [103] In the circumstances, I consider that the order for an enquiry as to the existence and quantum of any loss to the Company should be set aside, insofar as it is for the purposes of making orders for equitable damages or statutory compensation to be paid by Felicity. The matter should be remitted to the primary judge for the purpose of considering any application for leave to amend that may be made on behalf of the plaintiffs. If leave to amend be refused, it would follow that there should be no order against Felicity for the payment of damages or compensation. If leave to amend were to be granted, it would then be open to the primary judge to make a further order for Felicity to pay equitable damages or statutory compensation, following an enquiry. Any further question as to the costs of the proceedings at first instance would be a matter for her Honour. … [180] Felicity's appeal should be allowed with costs. The first to fifth respondents should pay Felicity's costs of that appeal. The orders made against Felicity should be set aside. The matter should be remitted to the primary judge for the purpose of considering any application on behalf of the plaintiffs for leave to amend the Statement of Claim in terms of the draft pleading provided to this Court and for the making of appropriate orders depending upon the outcome of any such amendment application. The orders would deal with the following: • any amendment application in relation to the relief claimed against Felicity; • if the plaintiffs so elect, the retransfer by Felicity to the Company of the Shares, subject to appropriate compensation being paid by the Company to her in respect of the consideration paid by her; • whether Felicity should pay damages or compensation; and • costs, as between Felicity and the plaintiffs, of the proceedings at first instance. Order (in Case number 2012/00253268) [Court Book volume 2 Tab 17 page 194] 1. The appeal by Felicity Cassegrain (CA 2012/253268) be allowed. 2. Order 17 of the orders made by the primary judge on 24 July 2012 in the proceedings at first instance (2008/281625) be set aside in relation to Felicity Cassegrain. [Note that this order was later set aside.] 3. The matter be remitted to the primary judge for the purpose of considering any application on behalf of the plaintiffs for leave to amend their second further amended further statement of claim filed on 20 June 2011 in terms of the draft pleading provided to this Court and for the making of appropriate orders, dealing with the matters indicated in [180] of these reasons, depending upon the outcome of any such amendment application. 4. The first to fifth respondents in appeal CA 2012/253268 pay the appellant's costs of that appeal. 16 On 10 April 2014, Bergin CJ in Eq granted leave to the plaintiffs to amend their statement of claim: Cassegrain and Ors v Gerard Cassegrain & Co Pty Limited (in liq) [2014] NSWSC 411. Her Honour noted that Order 16 as against Felicity Cassegrain had not been set aside by the Court of Appeal but proceeded on the basis that, insofar as it affected Felicity Cassegrain, that order was to be set aside: [7] The CA Orders as entered are only found in the Front Sheet of the CA Judgment in which there is no reference to the setting aside of Declaration 10 which declared Felicity jointly and severally liable with Claude and Mr Sarks to compensate GC & Co. Paragraph [180] of the CA Judgment includes the conclusion that the "orders made against Felicity should be set aside". Declaration 10 as entered on 24 July 2012 remains unaffected by the CA Orders. The only order made against Felicity that has been set aside is Order 17 for an inquiry to be held for the purpose of making orders for equitable compensation to be paid by Claude, Mr Sarks and Felicity to GC & Co. Order 16 in which Felicity was ordered to pay the plaintiffs' costs of the proceedings against her at first instance also remains in place notwithstanding the last bullet point of para [180] of the CA judgment. … [73] The other matter with which the Court of Appeal suggested this court should deal was the order as to costs of the proceedings at first instance as between the plaintiffs and Felicity. Although the Court of Appeal has not set aside Order 16 I will proceed on the basis that it was intended that, insofar as this order affected Felicity, it was to be set aside. I will hear the parties further on this aspect of the matter when they bring in Short Minutes of Order. It will also be necessary to clarify the position as to what is intended, if anything, by way of application to the Court of Appeal to adjust its orders before orders are made in these proceedings reflecting the leave granted to amend the pleading, for the inquiry referred to above, and orders in respect of the costs of the trial. Conclusion [74] Leave is to be granted to the plaintiffs to amend their pleading by the inclusion of paragraph 11A of the relief claimed in the draft pleading. I will hear the parties further, including on the costs of this application, when the matter is listed for the making of the orders and for clarification of whether the parties have approached the Court of Appeal in respect of the orders it made on 20 December 2013. The matter is listed at 9.45am on 29 April 2014 for any further applications and directions. 17 On 13 May 2014, the Court of Appeal, by consent, set aside Order 16 as against Felicity Cassegrain. Those orders were: By consent, the Court orders: 1. That Order 2 made by the Court on 20 December 2013 in the proceedings be corrected pursuant to UCPR 36.17 as follows: "2. Declaration 10 and Orders 16 and 17 of the orders made by the primary judge on 24 July 2012 in the proceedings at first instance (2008/281625) be set aside in relation to Felicity Cassegrain". 18 On 15 May 2014, Bergin CJ in Eq gave judgment in the proceedings remitted to her by the Court of Appeal. The orders were as follows, so far as relevant: CONSENT ORDERS The Court orders: Plaintiffs' motion to amend filed on 7 February 2014 1. Grant leave to the plaintiffs to amend their pleading by the inclusion of paragraph 11A of the relief claimed in the draft Third Further Amended Statement of Claim annexed to the affidavit of Andrew Joseph James Lacey sworn on 7 February 2014. 2. Order Felicity Cassegrain to pay 50% the (sic) costs of and incidental to the Notice of Motion filed in court on 7 February 2014. Consequential orders and declaration 3. Order that Felicity Cassegrain pay the plaintiffs' costs of the statutory derivative and oppression proceedings on the ordinary basis. 4. Declare that Felicity Cassegrain is liable to compensate the company in liquidation in an amount to be determined upon enquiry for any loss arising from the transfer of the shares in CaTTO and OAL. Direction in relation to the inquiry 6. Felicity Cassegrain to serve all evidence that she proposes to rely upon at the inquiry on or before 26 June 2014. 7. The matter be listed for further directions on 4 July 2014. 8. Liberty to apply on short notice. The Court orders in relation to the inquiry. 1. Orders made on 29 April 2014 in relation to the proceeding as against the second defendant and the fourth defendant be vacated. 2. Plaintiffs to serve all evidence that they propose to rely upon in chief at the inquiry on or before 29 May 2014. 3. Second defendant and fourth defendant to serve all evidence that they propose to rely upon at the inquiry on or before 26 June 2014. 4. Liberty to apply on 1 days' notice. 19 On 23 June 2014, the solicitors for the present appellants' wrote to the solicitors for the present respondent enclosing a copy of the judgment entered on 18 December 2013 in respect of the costs of the proceedings, assessed at $1,399,870.71, and seeking to persuade those solicitors that their client should consent to judgment in that amount in circumstances where their client was jointly and severally liable for the plaintiffs' costs of the proceeding; Felicity Cassegrain actively participated in the assessment of the plaintiffs' costs and filed objections in relation to the same; and where the outcome of the costs assessment process in which Felicity Cassegrain participated had been affirmed by a costs review panel. 20 By letter dated 7 July 2014, the solicitors for Felicity Cassegrain replied that the plaintiffs were not entitled to judgment and an order for costs in that particular amount except as against all three defendants and said: "We repeat that our client will consent to judgment and an order for costs in that particular amount against all three defendants." 21 By email dated 7 July 2014, the solicitors for the plaintiffs said to the solicitors for the respondent that they had taken on board the comments in the letter of 7 July 2014 and attached a further order "that I think ought resolve your concerns". That draft order included a note that the liability was joint and several. 22 In a further email dated 6 October 2014, the solicitors for the plaintiffs said: "We have amended the orders on your client's request to make clear that to (sic) extent Claude Cassegrain and/or Anthony Sarks make payment in reduction of the sum assessed your client's indebtedness to our clients is reduced. We do not understand the delay by your client." 23 On 28 November 2014, by notice of motion, the plaintiffs in proceeding number 2008/281625 sought a lump sum order in an amount equal to the assessed costs plus interest. The orders sought were as follows: 1. Judgment for the plaintiffs against the third defendant for the plaintiffs' costs of the statutory derivative and oppression proceedings concerning Gerard Cassegrain & Co Pty Limited, fixed in the sum of $1,399,870.71 pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW). 2. Costs 3. Orders be entered forthwith. 4. Any other order this Honourable Court deems appropriate. AND THE COURT NOTES that the liability of the Third Defendant, created by Order 1 above, is a joint and several liability with the liability of the Second and Fourth Defendants created by Order 16 of the Orders made on 24 July 2012 and Costs Certificate Order made on 18 December 2013 in the Supreme Court of New South Wales, Certificates List Case number 2013/00380025. 24 On 5 December 2014, Bergin CJ in Eq gave judgment against Felicity Cassegrain on that application of the plaintiffs in the sum of $1,399,870.71 (the Costs Judgment), as follows: TERMS OF JUDGMENT/ORDER MADE BY THE COURT 1. Judgment for the plaintiffs against the third defendant for the plaintiffs' costs of the statutory derivative and the oppression proceedings concerning Gerard Cassegrain & Co Pty Limited, fixed in the sum of $1,399,870.71, pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW). 2. Costs. 3. Orders to be entered forthwith. 4. AND THE COURT NOTES the concession by the Plaintiffs that the liability of the Third Defendant, created by Order 1 above, is a joint and several liability with the liability of the Second and Fourth Defendants created by Order 16 of the Orders made on 24 July 2012 and Cost Certificate Order made on 18 December 2013 in the Supreme Court of New South Wales, Certificates List Case number 2013/00380025. The plaintiffs were Denis Cassegrain, Catherine Dunn, Patrick Cassegrain and John Cassegrain. The first defendant was Gerard Cassegrain & Co Pty Ltd, the second defendant was Claude Cassegrain, the third defendant was Felicity Cassegrain and the fourth defendant was Anthony Sarks. 25 On 22 December 2014 the bankruptcy notice, relying on the Costs Judgment, was issued and served on Felicity Cassegrain. The amount claimed was $1,403,456.68, including post-judgment interest of $3,585.97. 26 On 19 March 2015, the Full Court of the Federal Court dismissed the appeal of Claude Cassegrain and Anthony Sarks in respect of the dismissal of their applications to set aside their bankruptcy notices on the basis that the orders in the Supreme Court were not final orders; the amounts claimed were not presently payable on the basis that there had been no conclusion of the proceedings before Bergin CJ in Eq; and the bankruptcy notices were not founded upon a final judgment: Sarks v Cassegrain [2015] FCAFC 38; 321 ALR 28. 27 On 7 April 2015, Felicity Cassegrain's application to set aside the bankruptcy notice was dismissed; time for compliance with the bankruptcy notice, as extended, expired; and the bankruptcy notice was not complied with. 28 On 14 April 2015, the creditor's petition was filed. 29 On 30 June 2015, in proceedings number 2008/281625, on the adoption of the referee's report there was judgment against Felicity Cassegrain in the principal sum of $2,596,039: Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2015] NSWSC 851. Bergin CJ in Eq said: [121] I make the following orders: (1) The report of the Referee, Mr RH Macready, dated 30 January 2015, is adopted. (2) The second, third and fourth defendants, jointly and severally, are to pay equitable compensation in the amount of $2,596,039 to the first defendant, comprising: (a) Compensation payable in respect of the one CaTTO share in the amount of $784,923; and (b) Compensation payable in respect of the OAL shares in the amount of $1,811,116. (3) The interest as ordered by the Referee is to be agreed by the parties and included in a Short Minute of Order to be filed with my Associate by no later than 23 July 2015. Orders in respect of interest will be made in Chambers. (4) The parties are to endeavour to reach agreement on costs orders associated with the reference and with the hearing of the application for the adoption of the Report. The agreed costs orders are to be included in a Short Minute of Order to be filed with my Associate by no later than 23 July 2015. Orders in respect of costs will be made in Chambers. (5) If the parties are unable to agree on orders in respect of interest and/or costs I will hear argument on a date to be fixed, such date to be arranged with my Associate by no later than 23 July 2015. (6) These orders are to be taken out forthwith. 30 On 5 August 2015, Bergin CJ in Eq ordered as follows: Interest up to the date of judgment 1. The second, third and fourth defendants, jointly and severally, are to pay interest on the amount of $2,302,302.40 as at 30 June 2015 to the first defendant, comprising: (a) Interest on the sum described in order 2(a) made 30 June 2015 in the amount of $696,254.56 as at 30 June 2015; and (b) Interest on the sum described in order 2(b) made 30 June 2015 in the amount of $1,606.056.83 as at 30 June 2015. Post judgment Interest 2. Post judgment interest is to accrue on the sums specified in orders 2(a) and 2(b) made 30 June 2015 at the post judgment rate applicable from time to time pursuant to section 101 of the Civil Procedure Act 2005 (NSW) to the date of payment. Costs 3. The second, third and fourth defendants, jointly and severally, are to pay the first defendant's costs of and associated with the reference, including the costs of the adoption of the referee's report, on the ordinary basis as agreed or assessed. These costs are to be payable forthwith. Interest on any unpaid costs 4. The second, third and fourth defendants, jointly and severally, are to pay interest on the amount of any unpaid costs described in order 3 at the post judgment rate applicable from time to time pursuant to section 101 of the Civil Procedure Act 2005 (NSW), calculated from the date these orders are made to the date of payment. 5. These orders are to be entered forthwith. 31 On 28 September 2015, Felicity Cassegrain filed an appeal against the judgment of 30 June 2015 in proceeding number 2008/281625. By the notice of appeal, case number 2015/219321 in the Court of Appeal, the appellant appealed from orders 1, 2 and 3 in the Supreme Court made on 5 December 2014 and from so much of orders 1 and 2 in the Supreme Court made on 30 June 2015 as held that Felicity Cassegrain was jointly and severally liable with Claude Cassegrain and Anthony Sarks to pay equitable compensation with interest to Gerard Cassegrain & Co Pty Ltd (in liquidation). The notice of appeal also stated, under Orders sought: "To the extent necessary, leave is granted to the appellant to appeal the costs orders made by the primary judge on 5 December 2014 in the substantive proceedings." In relation to the costs order, the notice of appeal appeared to seek an order that Claude Cassegrain and Anthony Sarks, jointly and severally, would pay 90% of the costs of Gerard Cassegrain & Co Pty Ltd (in liquidation) of, and associated with, the reference. 32 On 13 October 2015, the respondent filed in the Court of the Appeal a summons seeking leave to appeal, which summons is listed for directions at 2.30 pm on 23 November 2015. By that summons the respondent sought leave to appeal from orders 1, 2, 3 and the notation in paragraph 4 in the court below made on 5 December 2014. On the same date, the respondent filed a summary of argument for leave to appeal, the summary being of some 49 paragraphs. 33 Also on 13 October 2015, a notice of motion was filed in the Supreme Court seeking leave to extend the time for appealing against the orders made by Bergin CJ in Eq on 5 December 2014. That notice of motion was supported by an affidavit of Mr Peter Martin Condon sworn 13 October 2015. 34 Mr Condon gave evidence that on 13 October 2015 he received instructions to file a notice of motion for a stay of orders made by Bergin CJ in Eq on 30 June 2015 and 5 August 2015. He did that by motion filed on 27 October 2015, seeking a stay of those orders until the determination of Felicity Cassegrain's summons seeking leave to appeal. That motion also sought a stay of the orders made by Bergin CJ in Eq on 30 June 2015 and 5 August 2015 until determination of that appeal of Felicity Cassegrain. 35 On 23 October 2015, the respondent filed in the Supreme Court a summons seeking leave to appeal from part of the determination of the costs assessor dated 2 December 2013 and, to the extent necessary, the determination of the costs review panel dated 5 May 2014. 36 In the New South Wales Court of Appeal, on 26 October 2015 Tobias AJA made orders to the effect that the filing on behalf of Felicity Cassegrain of an Amended Summons, and Amended Notice of Motion and White Folder had remedied the complaint by the respondents that appeal ground 1 of the appeal filed by Felicity Cassegrain on 28 September 2015 was incompetent. Tobias AJA also ordered that the Further Amended Notice of Motion by Felicity Cassegrain seeking an order for an extension of time in which to file a summons for leave to appeal be adjourned for hearing at the same time as the substantive appeal. Felicity Cassegrain was granted leave to file, and has filed, an amended notice of motion, to be listed at the hearing of the appeal, seeking an extension of time to file a summons seeking leave to appeal from the costs order of 5 December 2014. Mr Condon has also sought to have a notice of motion seeking leave under s 471B of the Corporations Act 2001 (Cth) to proceed against the respondent company, Gerard Cassegrain & Co Pty Ltd. 37 There are two "appeals" pending in the Court of Appeal relevant to the costs judgment on which the bankruptcy notice is based. The relationship between the two is that in 2015/299594 the amended draft notice of appeal is against only the costs orders whereas in 2015/219321 the appeal is against the substantive orders but with the claimed consequence that if the appellant succeeded the costs orders would be set aside. As pointed out by the applicants, for the respondent to have the costs judgment overturned she must be granted an extension of time, leave to appeal and succeed in the appeal. These are matters for the Court of Appeal to determine. 38 Relevant to the first proceeding is an amended summons filed on 23 October 2015 seeking leave to appeal from the orders of 5 December 2014 in Court of Appeal case number 2015/299594, the proceedings below being 2008/281625. The proposed amended summons seeking leave to appeal seeks the following orders, the appellant being Felicity Cassegrain and the respondents being Denis Cassegrain, Catherine Dunn, Patrick Cassegrain, John Cassegrain, Gerard Cassegrain & Co Pty Ltd (in liquidation), Christopher Chamberlain in his capacity as liquidator of Gerard Cassegrain & Co Pty Ltd, Claude Cassegrain's Official Trustee in Bankruptcy, and Anthony Sarks.: 1. An order pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rule 51.10(2) that the time for appealing against the orders of the primary judge made in the court below on 15 May 2014 and 5 December 2014 be extended. 2. Leave to appeal from Order 3 in the orders of the court below of 15 May 2014. 3. Leave to appeal from Orders 1, 2, 3 and to the extent necessary the notation in paragraph 4 in the Court below made on 5 December 2014. 4. An order that the application for leave to appeal the orders of the primary judge in the court below made on 15 May 2014 and 5 December 2014 be heard concurrently with … the argument on the appeal in Court of Appeal proceedings number 2015/219321. 5. The respondents pay the appellant's costs of the application for leave to appeal. 6. An order that the costs of the summons be the costs of the appeal. 7. Such further or other order as the Court deems fit. 39 Because the would-be appellant, Felicity Cassegrain, needs and seeks to leave to appeal, the first "appeal" is in the form of an amended draft notice of appeal. The grounds are as follows: 1. The Judge erred in ordering on 15 May 2014 that the appellant pay the plaintiff's costs of the statutory derivative and oppression proceedings on the ordinary basis because: a. earlier orders were made on 24 July 2012 that the appellant, Claude Cassegrain and Anthony Sarks pay those costs (Order 16); which, b. as against the appellant only, were set aside by the NSW Court of Appeal in Gerard Cassegrain & Co Pty Limited (in liquidation) v Cassegrain [2013] NSWCA 455; (2013) 305 ALR 687 at [180] (orders formally entered on 15 May 2014); and c. therefore Claude Cassegrain and Anthony Sarks remained liable to pay the costs of the proceeding; and d. the orders of 15 May 2014 erroneously made the appellant liable for the whole of the costs of the proceedings. 2. The Judge erred in ordering on 5 December 2014 pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) that the appellant pay, forthwith, the costs of the plaintiffs in the proceedings below fixed in the sum of $1,399,870.91 on the basis of a joint and several liability with Claude Cassegrain and Anthony Sarks that was created by Order 16 of the primary judge's Orders made on 24 July 2012 and a Costs Certificate Order made on 18 December 2013 in the Supreme Court of New South Wales, Certificates List Case number 2013/0038 0025. 3. The Judge erred in failing to hold that the appellant's liability with respect to the costs of the proceedings: a. was to be proportionate to the extent of her ultimate liability to pay equitable compensation to Gerard Cassegrain & Co Pty Limited; further or alternatively, b. that it did not extend to more than 10 percent of the costs so ordered; and c. that her liability was not joint and several with Claude Cassegrain and Anthony Sarks. 4. The errors in grounds 1 and 2 occurred because: a. The primary judge erred in law in not recognising that the claim was apportionable pursuant to Part 4 of the Civil Liability Act 2002 (NSW) because the appellant was a concurrent wrongdoer under the Civil Liability Act. b. The orders of 5 December 2014 were entered without the primary judge giving due consideration to whether the appellant's liability for the costs of the proceeding should be several and in proportion with the extent of her ultimate liability to pay equitable compensation to Gerard Cassegrain & Co Pty Limited, which at the time the set orders were entered, had not been finally determined. c. The primary judge should not have made any orders as to the appellant's liability with respect to the costs of the proceedings below until the quantum and extent of the appellant's liability to pay equitable compensation was decided. d. In the exercise of a discretion to make the orders of 5 December 2014, the primary judge took irrelevant considerations into account, namely: i. Order 16 of the Orders made of 24 July 2012, which, as against the appellant, was set aside by the NSW Court of Appeal in Gerard Cassegrain & Co Pty Limited (in liquidation) v Cassegrain [2013] NSWCA 455; (2013) 305 ALR 687 at [180] (orders formally entered on 15 May 2014); and ii. Even if it were the case that the reference to the Costs Certificate Order in the Supreme Court of New South Wales, Certificates List Case number 2013/00380025 issued on 18 December 2013, was in fact a reference to two Costs Certificate Orders filed in the Supreme Court of New South Wales, Certificates List Case number 2013/24723 on 18 December 2013 in the amounts of $1,373,062.34 (fair and reasonable amount of costs to be paid by the applicant) and $26,724.37 (costs of the costs assessment), by reason of the Court of Appeal's orders described in subparagraph (i) above, the certificate for the amount of $1,373,062.34 was unenforceable, or a nullity, as against the appellant. 40 The Further Amended Notice of Appeal in the Court of Appeal in Case number 2015/219321 raises the following grounds: 1. The Judge erred in deciding that the appellant's liability to Gerard Cassegrain & Co Pty Ltd was joint and several with Claude Cassegrain and Anthony Sarks for: a. the full compensation of $784,923 in respect of the one CaTTO share with interest up to the date of judgment on 30 June 2015 in the amount of $696,254.56; and b. the full compensation of $1,811,116 in respect of the OAL shares with interest up to the date of judgment on 30 June 2015 in the amount of $1,606,056.83; and c. the costs of and associated with the reference, including the costs of the adoption of the referee's report, on the ordinary basis as agreed or assessed, with interest from 30 June 2015. 2. The Judge erred in her reasoning at [107]-[115] and [119]-[120] in failing to hold that the appellant's liability to pay equitable compensation to Gerard Cassegrain & Co Pty Limited: a. did not extend beyond an amount that was proportionate with her liability as an accessory under the first limb of Barnes v Addy (1874) 9 Ch App 244 at 251-252, further or alternatively; b. that it did not extend to more than 10 percent of the equitable compensation so ordered; c. and that her liability was not joint and several with Claude Cassegrain and Anthony Sarks; 3. The Judge erred in failing to apply Part 4 of the Civil Liability Act 2002 (NSW) to the liability of the appellant in relation to such compensation so that the appellant's liability or such compensation was several and did not exceed 10 per cent of such compensation because Felicity Cassegrain was a concurrent wrongdoer under the Civil Liability Act. 41 There were also other judgments in the Supreme Court of New South Wales against Felicity Cassegrain. In proceeding number 2015/132138, on 4 May 2015 there was judgment against her in the sum of $34,781.07. In proceeding number 2015/133067, on 5 May 2015 there was judgment against her in the sum of $38,859.63. In proceeding number 2015/195033, on 3 July 2015 there was judgment against her in the sum of $12,495.17. 42 In the Federal Court of Australia, in SYG54/2015 on 23 June 2015 there was judgment against Felicity Cassegrain in the sum of $17,265.02. 43 In proceedings in the Supreme Court 2015/311633, on 23 October 2015 a sealed judgment issued against Felicity Cassegrain in the amount of $108,793.81. In proceedings in the Supreme Court 2015/311154, on 23 October 2015 a sealed judgment issued against Felicity Cassegrain in the amount of $145,311.32. The total of these two amounts is $254,105.13.

Going behind the costs judgment 44 The applicants submitted that the debt relied on by the petitioning creditors was still owing and a sequestration order could and should be made, unless the Court was satisfied that one of the grounds of opposition was made out. The 5 December 2014 costs order was made at a time when the respondent was legally represented and the solicitor for the respondent appeared before Bergin CJ in Eq who made the relevant order. The costs order was not opposed, or consented to, by the respondent's solicitor at the time it was made. 45 The respondent's ground for challenging her liability under the costs order was articulated in paragraphs 5 to 20 of the affidavit of Mr Condon sworn 28 September 2015. Insofar as the respondent's ground was concerned with paragraph 4 of the costs order made on 5 December 2014, the applicant submitted that the notation was inserted with a view to preventing double recovery in circumstances where costs orders had also been made against the second and fourth defendants. The concession noted in paragraph 4 proceeded, correctly, on the basis that Order 16 of the 24 July 2012 orders was in force as against the second and fourth defendants. In any event, the applicants submitted, the costs order was self-contained and its validity did not depend on the appropriateness of the notation in paragraph 4. 46 The respondent, Felicity Cassegrain, submitted that orders had been entered without her consent and in those circumstances a Court would be more ready to find there was a substantial reason for questioning whether the judgment was based on an actual debt: Corney v Brien [1972] HCA 5; 126 CLR 212. 47 The respondent submitted there was a problem with the costs order: at the time the order was made, there was no proper foundation for it. Reference was made to the affidavit of Mr Condon sworn 28 September 2015 at [6]-[20] and to Annexure or exhibit AJL18 forming part of the affidavit of Mr Andrew Joseph James Lacey sworn 1 October 2015. 48 The respondent submitted that the 15 May 2014 orders appeared to have been superseded by the costs order made on 5 December 2014 which, she submitted, was made without her consent and with some opposition on her part. The basis of Felicity Cassegrain's opposition was that the referee had not finally determined the extent of her liability as a knowing recipient. That question was now on appeal to the New South Wales Court of Appeal. 49 The respondent submitted that, looking at the matter objectively, it could not be the case that the costs order was self-contained and its validity did not depend on the appropriateness of the notation in paragraph 4 as contended by the applicants. If that were so, Felicity Cassegrain would be severally liable for the whole of the costs order and Claude Cassegrain and Anthony Sarks would also be jointly and severally liable for the same costs, meaning the applicants would be entitled to double recovery for their costs. This appeared to have been the problem with the costs order made on 15 May 2014. This conclusion also ignored, the respondent submitted, the general principle that a party seeking leave to amend their own pleading should generally bear his or her own costs. Even if order 1 of the costs order was to be read with the notation in paragraph 4, at a minimum, the costs certificate order could not provide a basis for liability for Felicity Cassegrain because it was a nullity following the judgment of the Court of Appeal. The notation in paragraph 4 was indicative of general confusion between the parties as to the effect of earlier decisions and Bergin CJ in Eq's directions to the parties. The respondent submitted the costs order was not only irregular or wrong in form but it constituted a prima facie miscarriage of justice. It was significant, the respondent submitted, that the order was made before the extent of Felicity Cassegrain's liability was determined, and without her consent. The costs order was not satisfactory proof of a debt owed by Felicity Cassegrain to the applicants and therefore the Court in its discretion should not accept that in truth and reality there was a debt owed. 50 In oral submissions, the respondent accepted that the mere fact that an appeal was pending from a judgment did not give a debtor an absolute right to have the petition dismissed, but it provided an absolute discretion to the court to decide what was the best thing to do in the circumstances, so long as the conclusion could reasonably be drawn that there was a reasonable ground of appeal. 51 The respondent submitted that the exercise of the discretion to award costs on a joint and several basis was tied up with the determination as to Felicity Cassegrain's liability which had not been finally determined until the equitable compensation judgment had been handed down and that until that time, no appropriate costs order could have been made against Felicity Cassegrain. The ground of appeal was that Bergin CJ in Eq erred in the exercise of the discretion to award costs and that was related to the same discretion she exercised in making her orders in the equitable compensation judgment. This was because the costs orders were orders based on Felicity Cassegrain's liability and her liability had not been determined until the equitable compensation judgment had been handed down. The respondent submitted there was no suggestion that she, Felicity Cassegrain, sought to re-agitate any questions as to her liability: the question now was a legal question of proportionality based on the facts as found. 52 The respondent submitted there was a reasonable ground of appeal in relation to the costs orders made on 5 December 2014 because the discretion could not have been properly exercised without proper regard to the principles to do with proportionality and the application of the Civil Liability Act 2002 (NSW). Felicity Cassegrain's position at the time was that her liability had not been completely determined so the order for costs should not have been made until the referee's report had been provided and until the equitable compensation judgment had been delivered: the costs order should not have been made forthwith, that is, until Bergin CJ in Eq had determined the extent of Felicity Cassegrain's liability. The determination of her liability necessarily brought into play the question of proportionality. 53 The respondent also submitted that the costs certificate, handed down two days before the orders of the Court of Appeal, was a nullity and the costs order, in the note in order 4, referred to that costs certificate order made on 18 December 2013. 54 The respondent also submitted that the costs order of 5 December 2014 fell if the respondent succeeded on her appeal against the substantive judgment. The appeal from the orders in the substantive proceedings involved the ground that, in wholly adopting the report of the referee that determined that Felicity Cassegrain was jointly and severally liable with Claude Cassegrain and Anthony Sarks, her Honour erred in failing to apply the principles of apportionment, either at law or under the Civil Liability Act, to the damages that she ordered. The issues in the leave application and the prospective appeal were necessarily intertwined because it was an appeal where the whole discretion in respect of costs was bound up with the question of apportionment. The respondent submitted that if she succeeded on her appeal, having first obtained leave to argue the new proportionality point, then the costs orders of 5 December 2014 would be set aside or varied. In that respect Counsel took the Court to the written submissions that accompanied the application for leave to appeal in the Court of Appeal. The respondent accepted that she needed leave to advance the issues of proportionality in the substantive appeal because that issue was not argued at first instance. 55 In relation to s 34 of the Civil Liability Act the respondent submitted that because there was a finding that Felicity Cassegrain failed to enquire, she had constructive knowledge and that should be characterised as a claim for economic loss arising from a failure to take reasonable care. The respondent accepted that the applicants' case in the Supreme Court was not a negligence case but it was accepted that Felicity Cassegrain caused or was a cause of the loss and that was because she had constructive knowledge which may be construed to be a failure to take reasonable care which brought her under the first limb of Barnes v Addy (1874) 9 Ch App 244. 56 In reply submissions, the applicants submitted there was no basis in principle for equating default judgments with judgments that were opposed. The costs order in the present case was made on an inter partes application at which the respondent was represented. Unless the respondent could show a prima facie case of fraud, collusion or miscarriage of justice, the Court should not go behind the judgment. She had not done so. 57 As to the question of double recovery, the applicants submitted that the respondent's submission failed to take into account the universal rule against double satisfaction. 58 As to the reference that a party seeking leave to amend their own pleading should generally bear his or her own costs, the costs which were the subject of the costs order were the costs of the trial, not the costs of the amendment. 59 The setting aside of the costs order as it related to the respondent was, in the circumstances, uncontroversial and was the normal order to make in circumstances where the appeal was upheld and the matter remitted to the trial judge. The trial judge could then, and did in fact, re-exercise that discretion on costs when she redetermined the substantive cause.

Felicity Cassegrain's ability to pay her debts 60 The applicant submitted that whilst a debtor is entitled to point to realisable assets, and not just cash, to demonstrate an ability to pay his or her debt, the assets need to be realisable within a relatively short period, and referred to Eykamp v Deputy Commissioner of Taxation [2010] FCA 797 at [7], which I set out at [64] below. 61 In the present case, the applicants submitted, the respondent had debts that well exceeded her assets. Moreover, the assets that she relied on to discharge debts included her home. 62 The applicants submitted that there were some disputes affecting the value to be attributed to certain of the respondent's assets. However, as demonstrated in the table at paragraph 34 of Mr Lacey's affidavit sworn 14 August 2015, the respondent had a substantial deficiency on any view. In the affidavit of Mr Condon sworn 28 September 2015 there was a table of assets and liabilities at paragraph 35, showing a surplus of assets over liabilities. This calculation, the applicants submitted, was only reached on the basis of an assumption that the respondent's largest single liability, being a judgment debt of approximately $4.9 million, was reduced by 90% on appeal. This did not assist the respondent in relation to the ability to pay her debts as at the time of the hearing, at which time a judgment debt of approximately $4.9 million was one of the respondent's liabilities. Most importantly, no stay had been sought in respect of the judgment debt and the lodging of an appeal did not operate as a stay in the New South Wales Supreme Court. 63 The respondent submitted that her only debtors apart from the applicants and Gerard Cassegrain & Co Pty Ltd were the Commonwealth Bank of Australia and the Westpac Banking Corporation. Those banks had mortgages over property she held in co-ownership with Gerard Cassegrain & Co Pty Ltd, which property (the Dairy Farm) was the subject of proceedings under s 66G of the Conveyancing Act 1919 (NSW) for sale or partition (proceedings number 2015/127156). The respondent submitted she had assets which were realisable within a relatively short period: (a) she had received an offer of $700,000 for 70% of her shareholding in CaTTO. It was intended that money from the sale would be applied to reduce the debt the subject of the costs order. (b) The applicants owed her $82,393.11 pursuant to a certificate of determination of costs. The funds from the sale of the CaTTO shares plus that amount would reduce the alleged debt to about $600,000. (c) An auction of part of the Dairy Farm pursuant to orders made in the s 66G proceedings was to be conducted on 17 October 2015. It was expected that the sale of the farm lots (part of the Dairy Farm) could achieve up to about $2 million. The funds from the sale would be held pending the outcome of the s 66G proceedings, which were listed for a one-day hearing on 16 November 2015. If the farm lots had sold at auction, by 17 October 2015, her realisable assets would have increased by about $1 million, granted that that amount was contingent on the completion of the sale and the outcome of the s 66G proceedings. (d) She may not necessarily have to sell the remainder of the Dairy Farm to pay her debts. (e) She had accepted an offer to sell property in Port Macquarie which was expected to net approximately $100,000 which would pay her ongoing legal fees. (f) She was entitled to $57,885 (plus interest) pursuant to a charge on the property of Gerard Cassegrain & Co Pty Ltd. 64 In summary, the respondent submitted she had sufficient assets to pay her debts which were capable of realisation in a realistic timeframe. Any outstanding liabilities were subject to determination in the next few months by the New South Wales Supreme Court and the New South Wales Court of Appeal. The respondent referred to Eykamp at [5] and [7] as follows: … the authorities show that establishing solvency involves more than a mechanical comparison between the extent of the liability upon which a creditor relies and the apparent value of assets possessed by a debtor, should they be able to be realised (see, for example, Quick v Stoland Pty Ltd (1998) 87 FCR 371 per Emmett J at 380; Whitton (as Trustee of Estate of Rose) v Ris Towers Real Estate Pty Ltd (in admin) (2007) 161 FCR 20 at [27]). … … it would not be impermissible to pay regard to the fact that Mrs Eykamp could raise sufficient money to pay the debt, whether or not that was the direct result of sale, mortgage or pledge of her assets. However, whatever mechanism is employed to secure the necessary funds, and satisfy the Court that it provides adequate evidence of solvency, it remains necessary that it produce results within a realistic time frame (Sandell v Porter [[1966] HCA 28; 115 CLR 666] at 670, Hall v Poolman [2007] NSWSC 1330; 65 ACSR 123 at [187]). 65 In reply the applicants submitted that there were difficulties with a number of the values that were put forward by the respondent, but even if they could be accepted at face value, they came nowhere near the total of the respondent's debts.

Other sufficient cause 66 The applicants submitted there was no genuine or arguable appeal in respect of the judgment debt relied on as the foundation for the bankruptcy proceedings. There was no arguable appeal in respect of the costs order. The order arose from the remitter liability judgment of 10 April 2014 and the subsequent orders arising from those proceedings made on 15 May 2014 that were not the subject of any appeal and no sensible argument could be made as to why the lump sum costs order should be set aside. Moreover, the appeal so far as it related to the costs order was out of time and was concerned with costs only. The appeal was incompetent. 67 This was not an application to go behind the judgment debt to see if the debt that founded the creditor's petition was in fact due, but instead it was either an application for an adjournment by the respondent for the purpose of running a s 52(2)(a) defence after the appeal and the s 66G proceedings had been determined, or a dismissal under s 52(2)(b). 68 The applicants referred to Totev v Sfar [2006] FCA 470; 230 ALR 236 at [40]-[44] and to ICM Agriculture Pty Ltd v Young [2009] FCA 1169; 260 ALR 515 at [85], [86] and [114]. They submitted that the appeal in the present case did not meet the standard of "a real claim that is likely to succeed". This was because: (a) The judgment appealed from was an adoption of a referee's report and it was necessary for the appellant to establish that the judge's discretion miscarried; (b) Even if the respondent did amend her proposed grounds of appeal to contend that the discretion of Bergin CJ in Eq miscarried, the respondent would need to be able to enunciate a coherent argument as to how her Honour's discretion miscarried; (c) The difficulty with the argument that her Honour should have held that the respondent's liability did not extend to more than 10% of the equitable compensation was that there was before the referee no empirical evidence to support the 10% figure or for that matter any juridical basis for this reduced liability argument. The respondent did not even argue for 10% before the referee or the trial judge; (d) Her Honour found the reasoning of the referee conventional and could not find any reason for rejecting it. 69 That being the case, it should be unnecessary for the Court to consider, in addition, the s 66G application. It was to be noted, however, that there were contentious issues in that proceeding, as to which the respondent had not established a real claim that was likely to succeed. 70 The respondent submitted that the Court should either wholly dismiss the petition or adjourn it until at least the result in the s 66G proceedings were known and, more properly, until after the appeal was determined. 71 As to the s 66G proceedings, in oral submissions the respondent put that there was other sufficient cause which was that if Felicity Cassegrain was successful in the s 66G proceedings it would have a substantial effect on her overall assets. The Dairy Farm was conveniently divisible into home lots and farm lots. The parties agreed that the farm lots be auctioned and the proceeds of the sale held in trust pending the outcome of the proceedings. There was a valuation of the farm lots of $2 million. The auction was on 17 October 2015. 72 The respondent provided a number of calculations on the basis that she was successful in those proceedings. I do not need to set them out. The respondent accepted that that amount was contingent on the completion of the sale and the outcome of the s 66G proceedings. The respondent submitted that she may not necessarily have to sell the remainder of the Dairy Farm (the house lots) to pay her debts. Mr Hood had valued the house lots at $1.7 million and the value of the improvements to those lots at $875,000. The balance of the CBA mortgage on the house lots was about $980,000. If the house lots were not sold and the Supreme Court accepted Mr Hood's valuation, a successful outcome for her in the s 66G proceedings would mean she was entitled to equality monies in an amount of up to $664,000. I do not need to set out the calculation. 73 The respondent also put that the s 66G proceedings were relevant to her ability to pay her debts. 74 The farm lots were put to auction on 17 October 2015 and the property was passed in with no bids from any of the registered bidders. There was one vendor bid for $1,400,000. To 28 October 2015, the farm lots had not been sold. 75 The respondent submitted that the appeal was not futile but based on arguable grounds that questioned the application of legal principles to the facts as determined in the Supreme Court. The respondent submitted the relevant threshold of an arguable point was relatively low: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 at [29]. The respondent submitted that the appeal was not only with respect to costs so that leave to appeal should not be necessary. The respondent submitted that the appeal in respect of the costs order arose from and was interconnected with the grounds of the appeal from the equitable compensation judgment which would determine Felicity Cassegrain's substantive rights in the matter. In the substantive appeal the asserted errors of law lay with the approach of Bergin CJ in Eq to the referee's report. It would be necessary to establish there was a House v The King [1936] HCA 40; 55 CLR 499 at 505 error in the decision to wholly adopt the report. The appeal would require determination of whether Bergin CJ in Eq was in error in deciding that Felicity Cassegrain's liability to pay equitable compensation to Gerard Cassegrain & Co Pty Ltd (in liquidation) was joint and several with Claude Cassegrain's and Anthony Sarks' primary liabilities for breach of fiduciary duty, that is, should Felicity Cassegrain's liability be viewed as a secondary, or lesser, liability because she was found to have only constructive knowledge of the breach. Felicity Cassegrain would be required to persuade the New South Wales Court of Appeal that the principle of unequal contribution can be extended to a claim for equitable compensation arising out of a breach of fiduciary duty. The argument would be that Felicity Cassegrain should be liable for something less than an equal portion of the equitable compensation payable, but not for the whole amount. The respondent suggested that liability in the order of 10% was appropriate on the facts. A further ground of appeal was that Bergin CJ in Eq erred in law in not recognising that the claim was apportionable on the basis that s 34 of the Civil Liability Act was broad enough to include Gerard Cassegrain & Co Pty Ltd's claim for equitable compensation. It would be argued that Felicity Cassegrain should be considered a "concurrent wrongdoer" under that Act. 76 Section 34 provided, so far as relevant: 34 Application of Part (1) This Part applies to the following claims (apportionable claims): (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, … (3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). … 77 Apportionment was not raised before Bergin CJ in Eq but leave was sought to raise the issue in the appeal on the basis that it was an important question of law that did not require fresh evidence to be admitted. 78 In submissions in reply, the applicants referred to the terms of the final judgment in the proceedings, following the remitter, delivered on 15 May 2014. Those orders included a declaration that Felicity Cassegrain was liable to compensate the company in liquidation in an amount to be determined upon the inquiry for any loss arising from the transfer of the shares in CaTTO and OAL. That final judgment also included a costs order, recorded as a consent order at order 3 of the short minutes. The costs order simply fixed the amount of the costs to which the plaintiffs were already entitled, having been awarded the costs by order of 15 May 2014. This was apparent from its terms as well as the correspondence that was in evidence in support of the notice of motion. 79 The applicants submitted the costs order related to costs of the hearing of the substantive matter which was disposed of on 15 May 2014. There was no appeal against the judgment of 15 May 2014. The rest of the notice of appeal was concerned with the post-judgment phase of the matter, namely, the determination of the amount of Felicity Cassegrain's liability for compensation. That matter was determined by the adoption of a referee's report. The balance of the appeal related only to that issue. That issue was in no way "interconnected" with the determination of the amount of the liability of Felicity Cassegrain for the costs of the substantive proceedings. A successful appeal would not involve disturbing the judgment of 15 May 2014. 80 It was clear, the applicants submitted, from the respondent's submissions that the "apportionment" arguments that she sought to raise were not raised below. The novel concept of apportionment of equitable compensation that the respondent sought to raise had no precedent. However, it was reasonable to think that, if there were such a concept, its application would depend on facts justifying it, and moreover, it would have to be pleaded. The party against whom this putative defence was raised would then be in a position to respond with relevant evidence. 81 As regards apportionment under the Civil Liability Act, the applicants submitted that there must be a failure to take reasonable care, or misleading or deceptive conduct, in order for statutory apportionment to apply. The respondent's liability was not for failure to take reasonable care. 82 As to the s 66G proceedings, the applicant submitted that the respondent had not discharged her onus in relation to the contentious aspects of that claim, but in any event, she could not establish solvency on any view of the s 66G claim without also showing that her appeal was likely to succeed.

Futility 83 The respondent submitted that if the Court declined to accept any of her contentions with respect to her solvency, it was submitted that a sequestration order would be an exercise in futility, due to the level of her contingent liability to the applicants and the fact that her only unsecured debtors were the applicants. The respondent referred to Radich v Bank of New Zealand (1993) 45 FCR 101, applying Re Betts; Ex parte Betts [1897] 1 QB 50 at 52: If the court is clearly convinced, not merely by the statement of the debtor, but from all the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence, and that, if a receiving order is made, the only effect will be a mere waste of money in costs, then in such a case the court has a discretion in the matter, and will be justified in exercising that discretion by refusing to make the order. 84 The applicants submitted that the case did not fall within the concept of futility outlined in Re Betts because the respondent did have assets. The respondent's submission on the topic of futility amounted to a submission that the respondent was hopelessly insolvent. She should, therefore, be bankrupted without delay rather than being allowed to continue to dissipate her assets on hopeless and futile litigation.

Consideration 85 I considered some of the relevant principles in Xu v Wan Ze Property Development (Aust) Pty Ltd (in liq), Ren v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] FCA 461; 315 ALR 523. So far as presently relevant, I there said, at [55] and [57]: This court may, in an appropriate case, go behind a judgment to see whether in truth and reality a debt is due from the judgment debtor to the judgment creditor: Corney v Brien (1951) 84 CLR 343; Wren v Mahony (1972) 126 CLR 212. … Nevertheless, the power to go behind a judgment is not readily exercised if there has been a substantive hearing of the matter on its merits by the court in which the judgment was granted. … This court does not have the power to set aside the judgment on which the bankruptcy notices are based, even if it does go behind the judgment. Of course, this court is not hearing an appeal from the judgment on which the bankruptcy notices are based. Thus, as the Full Court pointed out in Emerson [v Wreckair Pty Ltd (1992) 33 FCR 581 at] 587-8, the court exercising jurisdiction in bankruptcy has no power to set aside a judgment but only to prevent the judgment creditor from having recourse to the provisions of the Bankruptcy Act. As between the parties, the judgment stands unimpeached until set aside by the court which gave it: Re Vitoria; Ex parte Vitoria [1894] 2 QB 387, and the judgment may be enforced accordingly by whatever means may otherwise be available. Because the court of bankruptcy does not set aside the judgment, the expressions "going behind the judgment" or "going round the judgment" are used. 86 Despite the volumes of material to which I was taken, my conclusion may be expressed shortly. 87 As to going behind the costs judgment, I am not persuaded by the respondent, Felicity Cassegrain, that the orders have been entered without her consent in any relevant sense so as to make the Court more ready to find there was a substantial reason for questioning whether the judgment was based on an actual debt. I find that the 5 December 2014 costs order was made at a time when Felicity Cassegrain was legally represented and that her solicitor appeared before Bergin CJ in Eq who made the relevant order. 88 Although the circumstances in which the Court may and should "go behind" a judgment do not fall into tidy categories, I see no basis on which I should do so in the present case. 89 However, although I am not persuaded that there is a basis on which I should "go behind" the costs judgment, I consider that I should not sequestrate the estate of Felicity Cassegrain where proceedings are pending in the Court of Appeal against or affecting the judgment relied on as the foundation for the bankruptcy proceedings, as it seems to me the proceedings in the Court of Appeal are now based on genuine and arguable grounds: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 per Davies, Lockhart and Neaves JJ; Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 at 532 per Burchett and Gummow JJ. I applied these decisions in Council of the City of Sydney v Obeid [2013] FCA 149 at [37] to [39]. 90 I was told by counsel that the proceedings in the Court of Appeal were likely to be listed for hearing in March 2016, for one day. For that reason, I am also satisfied that the proceedings are now being diligently pursued. 91 I reject the submission I understood to be put on behalf of the applicants that Felicity Cassegrain had to show that the proceedings in the Court of Appeal were more than genuine and arguable. 92 It would not be appropriate to consider those grounds in detail given the pendency of the hearing of the proceedings in the Court of Appeal. Indeed the arguments in relation to the grounds were not fully developed before me. However, what seems to me to be arguable, in particular, are the grounds which relate to the point in time in the litigation at which the costs orders were made and the related general law question as to whether Felicity Cassegrain's liability for costs may be affected by any notion of apportionment, as raised in her grounds of appeal from the substantive orders. The relevant threshold of an arguable point is relatively low: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 at [29]. On the former aspect, I take into account the applicants' submission that Sarks v Cassegrain [2015] FCAFC 38 shows that, in equity, a judgment on liability with a reference for an enquiry is regarded as a final order but, arguably, the point sought to be taken in the Court of Appeal is a different one, having as its concern an exercise of discretion by Bergin CJ in Eq. 93 In assessing whether or not the proceedings in the Court of Appeal are arguable, I also take into account that I was not taken to any application in the Court of Appeal that Felicity Cassegrain's appeals be summarily dismissed. 94 Relevant to the discretion to adjourn the petition I take into account that there is presently a freezing order or freezing orders made in the Supreme Court in respect of Felicity Cassegrain's assets. I also take into account the creditors' contention that the costs of the proceedings in the Court of Appeal are being and will be wasted in a hopeless cause. 95 In light of my conclusion, it is not necessary for me to consider, at this time, the remainder of Felicity Cassegrain's grounds of opposition.

Conclusion and orders 96 In my opinion, the appropriate order is to adjourn the applicants' application for a sequestration order against the estate of Felicity Cassegrain until the determination of the proceedings in the New South Wales Court of Appeal. There will be liberty to apply on three days' notice. Costs are reserved. I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Civil Liability Act 2003(NSW)s 34

Bankruptcy Act 1966(Cth)ss 33, 40, 43, 52

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