Cassegrain v Gerard Cassegrain & Co Pty Ltd

Before: Barrett J File Number(s): 2008/280507

Judgment 1HER HONOUR: Before me for hearing in the referrals list on 10 December 2012 was a Notice of Motion filed on 19 November 2012 by Claude Cassegrain, seeking leave pursuant to s 471B of the Corporations Act 2001 (Cth) to proceed with an appeal against the respondent (Gerard Cassegrain & Co Pty Ltd (in liq)) as well as a stay of certain orders made by Davies J on 22 May 2012 in the proceedings below. 2The appeal for which leave to proceed is sought is an appeal from the making on 20 December 2011 of orders by Barrett J (as his Honour then was) consequent upon his Honour's principal reasons for judgment published on 29 September 2011 ([2011] NSWSC 1156) as to the liability of Claude Cassegrain for equitable compensation for breach of fiduciary duty owed by him as a director to the said company. His Honour's reasons for the orders made in December last year are published at [2011] NSWSC 1594. 3His Honour's judgment of 29 September 2011 is the subject of a separate appeal by the company (and Claude Cassegrain's siblings) against the dismissal of the claims that had been made in those proceedings against Claude Cassegrain's wife (Felicity Cassegrain). Without intending any disrespect, I will refer to the family members by their first names and to Gerard Cassegrain & Co Pty Ltd (in liq) as the company. Background 4The proceedings below, as described in his Honour's principal reasons for judgment, involved the bringing of a statutory derivative action by Claude's brother (Denis) on behalf of the company against both Claude and Felicity. Leave to bring the derivative action was granted under s 237 of the Corporations Act by Sackville AJ, as his Honour then was, in September 2008. 5In the proceedings, allegations of fraud and breach of fiduciary duty were made against Claude (a director of the company) in relation to the way in which part of a sum paid to the company in 1993 by CSIRO (in settlement of proceedings the company had brought against CSIRO) was dealt with in the books of the company (involving the creation of a loan account in the company's books in favour of Claude for the sum of $4.25 million) and the subsequent drawings by Claude upon the company's funds by reference to that loan account as well as the acquisition by Claude and his wife of real property and business assets of the company referred to as the Dairy Farm. As against Felicity, it was alleged that she had acquired her interest in the Dairy Farm with imputed knowledge of Claude's breaches of fiduciary duty and that she had taken her legal estate for nominal consideration subject to the company's equitable claim. Various other siblings of Claude joined in the proceedings against him. 6The company alleged, among other things, that Claude was bound by certain issue estoppels arising from earlier Federal Court proceedings (Cassegrain v Cassegrain (unreported, FCA, Davies J, 15 July 1998)) in which allegations of oppression in the conduct of the company's affairs were made against Claude. A declaration was made in those proceedings to the effect that Claude, in treating the relevant company loan account as his entitlement to be drawn down at will and in having taken certain steps in relation thereto, had engaged in conduct that was oppressive and unfairly prejudicial to the members of the company. 7Claude denied the allegations of fraud and breach of fiduciary duty and raised both Limitation Act 1969 (NSW) defences and laches in answer to the claims made against him. 8In summary, Barrett J found (at [64]) that Claude was bound (by application of the doctrine of issue estoppel) by particular matters that his Honour held were necessarily decided as the foundation of or justification for the declaration of oppression made against Claude in the Federal Court (those matters being set out in [58(a)-(d)] of his Honour's reasons). Relevantly (in light of one of the grounds of appeal now sought to be made), at [119] his Honour noted that those findings were in any event fully supported by the evidence in the case before him. 9His Honour found that the establishment of the $4.25m loan account in the books of the company did not represent the recording of genuine indebtedness of the company to Claude in that or any other amount and that the loan account was a false loan account ([121]). In reaching that conclusion, his Honour found that the basis on which Claude maintained an entitlement to the sum recorded in that loan account was an invention by Claude. His Honour found that Claude had no legal right to demand or receive from the company moneys by reference to the loan account and that the making and satisfaction of those demands entailed the misappropriation of company funds ([121], [123]). His Honour found that Claude was in breach of his fiduciary duties to the company and had acted dishonestly ([126]-[127], [129]). 10The substantive relief to which his Honour held the company was entitled as against Claude was equitable relief, by way of declaration and an order for the payment of equitable compensation. His Honour approached the question of delay on the basis that the operative delay was confined to the period from mid-1997 (when Claude's siblings were aware of all facts relevant to the institution of the proceedings) to 15 June 1999 (when his Honour said the practical ability of those persons to take steps to initiate a general law derivative action came to an end) and then from 21 December 2004 to the filing of the application for leave under s 237 to bring a statutory derivative action. The significance of the period from 15 June 1999 to 21 December 2004 is that in this period the company was in receivership and the decision-making with respect to any right of action against Claude was in the hands of the receivers. 11At [205], his Honour noted that the prospects of leave being granted for a member to bring a derivative action while the company was in receivership would be very remote on the basis that the "best interests" criterion in s 237(2)(c) would in those circumstances direct attention to the agency and decision-making role of the receivers "and treat as predominant their function of serving the interests of the secured creditor, with the normal decision-making organs superseded although not destroyed" (citing Hawkesbury Development Pty Ltd v Landmark Finance Pty Ltd (1969) 92 WN (NSW) 199 at 209). 12His Honour held that there was no basis (having regard to his conclusion that the passage of time had not had a deleterious effect on Claude so far as the proceedings were concerned) for the operation of the doctrine of laches to defeat the equitable claims of the company. His Honour then proceeded to consider the Limitation Act defence and was of the view that, by analogy with the position in relation to the tort of deceit or conspiracy to defraud, the six year limitation period in s 14(1) of the Limitation Act should be applied and that, in relation to the breach of duty involving the Dairy Farm transfer, the start of the limitation period was 30 June 1997 and the limitation period by analogy would be taken to have expired on 30 June 2003. However, his Honour went on to note that in an equity case in which no common law remedy was sought the principle was that the Court would follow the analogous limitation period at law "according to the justice of the case". 13In circumstances where his Honour considered that during the period of receivership there was no real ability for any shareholder to initiate a derivative action at general law (or to have resort to the statutory derivative action when that later became available) and that the state of the company at the time closely resembled a state of "disability" under s 11(3) of the Act, his Honour disregarded that period in applying the six year limitation period. (His Honour held that the claims in relation to the Dairy Farm transfer and drawings on the loan account from a particular date (being a date later than eleven years six months and six days before 11 September 2008) were not affected by any time bar that applied by analogy with the common law.) 14In his Honour's subsequent judgment, his Honour dealt with the form of the orders to be made as between the company and Claude so as to give effect to the decision of 29 September 2011. Those orders are the subject of the appeal for which Claude now seeks leave to proceed. His Honour there dealt with the submission for Claude that the amount of equitable compensation to be awarded to the company should take into account certain allowances in his favour. His Honour determined that it was not open to Claude to claim or receive reward for services to the company (in the absence of proof of a determination under article 82 of the company's constitution) and that recognition for the remaining claim for allowances was precluded by the findings made at [117]-[118] of his earlier reasons. 15An inquiry was ordered as to the amounts obtained by Claude by resort to and drawing upon the relevant loan account. His Honour ordered that Claude pay to the company as equitable compensation a sum equal to the aggregation of the several amounts found upon inquiry to have been so obtained by Claude together with interest (on the basis set out in order [5]). His Honour also permanently restrained Claude from resorting to or dealing with the loan account created in his name in the company's books on the basis of a personal entitlement to any part of the CSIRO settlement moneys (order [2]). 16The inquiry so ordered was ultimately resolved by consent between the parties and orders were made on 22 May 2012 by Davies J by consent. Relevantly, those orders included orders for the payment by Claude to the company (as equitable compensation) of the sum of $3,743,422.06 (being an amount including interest up to 20 December 2011 plus interest at specified daily rates from them to the date of payment). 17Meanwhile, both Claude and the company had commenced proceedings by way of appeal from Barrett J's decision in the proceedings (and there was an order made in March 2012 for those two sets of appeals to proceed together). 18On 16 May 2012 (thus apparently prior to the making of the consent orders by Davies J), the directors of the company (of whom Claude was one) resolved that it be placed in voluntary administration. Claude subsequently lodged a proof of debt in the administration in the sum of $28,078,101.57 (in part based on his assertion of an entitlement to moneys under the loan account that Barrett J had held was an invention). (The attachment to the proof of debt makes reference to an adjustment to the loan account by replacement of the figure of $4.25 million with a figure of $4.75 million.) 19On 20 June 2012 the ATO lodged a proof of debt for $4,567,085.25 with the administrator of the company. 20On 27 April 2012, Bergin CJ in Eq handed down judgment in separate proceedings commenced by Denis and his siblings, in which orders were sought as to oppression in relation to the transfer in January 2005 to Felicity of shares held by the company in two other companies (Cassegrain Tea Tree Oil Pty Ltd and Oceania Agriculture Limited). Her Honour's reasons for judgment (Denis Cassegrain v Gerard Cassegrain & Co. Pty Ltd & Ors [2012] NSWSC 403) noted that the transfer of the company's shares had taken place following the dismissal by the Administrative Appeals Tribunal of the company's objections to amended tax assessments for the years 1994 and 1996. 21Her Honour was satisfied (at [154]) that the reason that Claude decided to transfer the company's shares in January 2005 was to take them out of the reach of any potential liquidator appointed to the company; that (at [192]) the company's shares in the respective companies were transferrefd at a price well under their true value; and (at [206]) that Claude intended to keep the plan to transfer the shares to Felicity secret from the plaintiffs so that the business of the Tea Tree Oil company could be conducted free from Claude's siblings and without an obligation to share the profits thereof. (I was informed that that there are separate appeal proceedings on foot in relation to that decision.) 22On 24 July 2012, a liquidator was appointed to the company by order of Bergin CJ in Eq in the Denis Cassegrain proceedings. (The liquidator's present concern is that Claude will try to prevent his assets becoming available to the liquidator, just as he acted to transfer the company's shares out of the reach of a potential liquidator in 2005.) Liquidator's position on the present applications 23At the outset, it is relevant to note the liquidator's position on the respective applications (which was advised to Claude's solicitors in correspondence on 21 August 2012 and explained further in later correspondence and the submissions on the present application), the nub of which is that the liquidator is prepared to consent to the grant of leave for Claude to proceed with his appeal but only on terms that Claude provide security for the judgment in a form acceptable to the liquidator pending the outcome of the appeal. 24The liquidator does not contend that this is a matter in which leave would be refused outright (his Counsel noting that leave would be appropriate given the stage at which the appeal proceedings have been reached, the fact that the appeal was commenced well before the appointment of the liquidator, and that Claude had obviously incurred costs in preparing the appeal). However, the liquidator's concern is that if an unconditional grant of leave is made this will enable Claude to take steps to prevent his assets becoming available to meet the judgment below and hence will expose the assets of the company and its creditors to unnecessary risk. 25Counsel for the liquidator (Mr Colyer) submits that there are exceptional aspects of the case that warrant the exercise of the discretion to impose terms on the grant of leave, those being that Barrett J made findings that Claude had acted dishonestly over a sustained period of time in relation to his management of the company which is now in liquidation; that Bergin CJ in Eq also made serious findings of dishonesty against Claude (in relation to attempts by him to place assets beyond the reach of creditors including the ATO and beyond the reach of any liquidator appointed to the company); and that, in the face of the restraint contained in order [2] of Barrett J's orders (the text of which has been noted earlier), Claude has nevertheless asserted an entitlement to an amount under the very loan account that Barrett J had held to be an invention by lodging his proof of debt in the administration. Reference is also made to the absence of any mention (in the response by Claude's solicitors to the suggestion that security be provided for the judgment debt) to the shares that Claude had formerly acknowledged holding in Cassegrain Tea Tree Oil Pty Ltd. 26The liquidator maintains that the provision of security for the judgment debt should be a term imposed on any grant of leave to proceed with the appeal (rather than it being imposed as a condition of the stay that is being sought by Claude in relation to the judgment debt) because of a concern that Claude may choose not to satisfy a condition of that kind imposed on any stay (on the assumption that he might feel secure in the knowledge that if there were no stay and bankruptcy proceedings came before a court having jurisdiction in bankruptcy the practice would be not to hear those proceedings pending the determination of the appeal). 27It was submitted by Mr Colyer that the appropriate way to deal with the respective applications in Claude's Notice of Motion was to grant leave to proceed pursuant to s 471B, subject to terms of the kind sought on behalf of the company, and then simply to adjourn the stay application to a later date. 28Senior Counsel for Claude (Mr Grieve QC) maintains that there is no legitimate basis upon which the liquidator can contend that the grant of leave should be so restricted, particularly in circumstances where the liquidator is already prosecuting an appeal against the judgment in question. 29I turn to the respective applications. (In circumstances where argument, albeit briefly, was heard on the stay, I do not consider that the matter should be dealt with solely as to the leave application and for an adjournment of the stay application, as the liquidator has suggested. It does not seem to me that this would be consistent with the statutory objectives mandated by s 56 of the Civil Procedure Act 2005 (NSW))). Application for leave 30Section 471B of the Corporations Act 2001 (Cth) provides that a person cannot bring or proceed with "a proceedings in a court against the company or in relation to the company without the leave of the court "and in accordance with such terms (if any) as the Court imposes". 31The parties accept that the bringing of an appeal is the commencement of a proceeding for which leave is required pursuant to s 471B (as so held in Distinctive FX 9 Pty Limited v Statewide Developments Pty Limited [2012] NSWCA 393 per Beazley JA) and that such leave is required in order to proceed with an appeal instituted prior to the appointment of a liquidator. 32The test for the grant of leave under s 471B requires the applicant to satisfy the court that there is a serious question to be tried (see Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 per Wilcox, Burchett and Beazley JJ, their Honours referring to the requirement that the Court be "affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute"; and Castlemaine Tooheys Ltd v South Australia (1986) 1611 CLR 148 at 153 per Mason ACJ ). This test was applied by Einstein J in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2003] NSWSC 307. 33The relevant factors to be taken into consideration include the amount and seriousness of the claims; the degree and complexity of the legal and factual issues involved; the stage to which the proceedings, if commenced, have progressed; the risk that the same issues would be relitigated if the claims were to be the subject of a proof of debt; whether the claim has arguable merit; whether proceedings are already in motion at the time of liquidation; whether the proceedings will result in prejudice to creditors; whether the claim is in the nature of a test case for the interest of a large class of potential claimants; whether the grant of leave will unleash an "avalanche of litigation"; whether the cost of the hearing will be disproportionate to the company's resources; delay and whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial (Austin and Black's Annotations to the Corporations Act at [5.471B]). 34It is not necessary that the applicant for leave show "exceptional circumstances" which warrant the grant of leave (Re Gordon Grant and Grant Pty Ltd (in liq) (1982) 6 ACLR 727 at 730 per William AJ). 35Claude relies on the submissions filed on his behalf in May 2012 in support of his appeal as indicating that there are reasonable grounds of appeal. In summary, the grounds of appeal raised by Claude, as explained in those submissions, go to the issue whether his Honour erred in: (i) failing to take into account the (claimed) entitlement of Claude to a half share of the CSIRO settlement (this being said by Mr Grieve to be the critical factual issue, he pointing to the significance said to attach to the fact that Claude was a party to that deed - at, it is alleged, CSIRO's insistence); (ii) relying on the orders of Davies J in the Federal Court as establishing issue estoppels (including in particular in failing to hold that the respondents had or should be taken to have waived or abandoned any entitlement to rely thereon) (I interpose to note that, as adverted to above, it is clear from his Honour's reasons that his Honour considered that the matters the subject of the issue estoppels were in any event fully supported by the evidence before him); (iii) granting discretionary relief without making provision for the just allowance claimed by Claude or certain other matters; (iv) finding fraud and ordering equitable compensation without enquiring as to whether the company had suffered damage as a result of the conduct and to the adequacy of the company's remedies at law; (v) having regard to certain findings of Sackville AJ in relation to the delay in commencement of the proceedings (the appellant here invoking s 91 of the Evidence Act) and failing to uphold the defences of laches, acquiescence and delay; (vi) failing to find that any entitlement to relief was extinguished by operation of the Limitations Act; (vii) the application of the principles in Jones v Dunkel (1959) 101 CLR 928 (having regard to the failure of Claude's siblings to give evidence as to their knowledge of the CSIRO settlement deed and that their pleaded case proceeded on the basis of issue estoppels); (viii) not addressing defences raised of estoppel by conduct and Anshun estoppel; and (ix) not excusing Claude from liability under s 1318 of the Corporations Act. 36Particular emphasis was placed by Mr Grieve on the grounds of appeal raising issues as to the effect of the CSIRO Settlement Deed and the operation of the Limitation Act defences. 37In that regard, Mr Colyer emphasises that (as noted in the liquidators' solicitors' letter of 24 September 2012) insofar as Claude is seeking to overturn the finding of fraud by relying on the terms and effect of the CSIRO deed (Grounds 1-5), that was not pleaded as a defence to the allegation of fraud at first instance; that Claude did not give evidence before Barrett J to say that he relied upon it; and that his defence at that time was a different justification for the acquisition of the money and property (that being his father's agreement thereto). 38I do not propose to set out the contentions raised by Claude on those grounds of appeal. I have reviewed those contentions. Having regard to the legal and factual issues raised on those contentions, It cannot in my view be said that there are no reasonably arguable grounds of appeal such as to support the grant of leave to proceed with the appeal (even though there may be difficulties in now raising a defence not proffered at first instance), in light of the appeal raised on the limitations defences. I, of course, express no view as to the prospects of overturning the findings of dishonesty or the merits of the appeal as such. 39Factors going to the degree and complexity of the legal and factual issues (and the amount and seriousness of the claims in the proceedings) support the grant of leave, as does the timing at which the application for leave is brought (the liquidator having been appointed after the commencement of the appeal). 40As to the imposition of terms on a grant of leave under s 471B, I have been unable to find examples of cases where a condition of the kind sought by the liquidator in the present proceedings has been imposed. A common condition imposed on such a grant of leave s 471B is that the leave extends to only obtaining the judgment, and not to its enforcement. In Ex Parte Walker (1982) 6 ACLR 423 at 426, Master Lee QC summed up relevant principles application to leave to proceed a company in liquidation and noted that "A condition is often imposed that the plaintiff will not enforce any judgment against the company without the leave of the court. This ensures that the court retains ultimate control". This principle was applied in Lawrence v Brighton Hall Securities Pty Ltd (in liq) [2009] FCA 1425, where McKerracher granted leave subject to the condition that the applicant was prohibited from enforcing any judgment against the company without leave, and again in La Trobe Wholesale Finance pty Ltd v Silkwav Pty Ltd t/as Acval Turner Valuers (in liq) [2011] FCA 1102, where Dodds-Streeton J observed at [39] that such a condition was "not uncommonly imposed". No such condition is sought in the present case, no doubt since Claude is not seeking a monetary judgment against the company but simply to overturn the judgment against himself. 41In Najjar v Alfayhaa Cheese Pty Ltd (in liq) [2011] NSWSC 791, Black J granted leave to proceed under s 471B nunc pro tunc in the District Court of New South Wales to obtain a judgment. The liquidator there submitted that any grant of leave should be subject to three conditions: first, that the liquidator be indemnified against the future costs of the District Court proceedings; second, that the applicant pay the company's costs of the District Court proceedings to date as agreed or assessed; and third, that the applicant pay the costs of the application. His Honour declined to impose any of the conditions sought upon the grant of leave, but it was not suggested that such conditions would be inappropriately imposed on leave granted under s 471B in an appropriate case. Again, the present is not such a case. 42Insofar as the condition sought to be imposed in the present case is therefore not a common one to be imposed, it is said to be warranted having regard to the concerns that Claude may seek to frustrate the ability of the company recovering the fruits of its judgment (concerns based on the various findings of dishonesty and other reprehensible conduct on the part of Claude to be found in the respective judgments of Barrett J and Bergin CJ in Eq). I consider this further after outlining the position in relation to the claim for a stay of the judgment. Stay 43In TCN Channel 9 Pty Limited v Antoniadis (No 2) (1999) 48 NSWLR 381 at 385 it was noted that the court regularly stays execution on judgments pending an appeal where there is a risk that the judgment creditor will be unable to repay the money without difficulty or delay if the appeal were to succeed. 44The relevant test to be applied in determining whether a stay ought to be granted is that set out in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694G as applied in Adeels Palace Pty Limited v Moubarak [2009] NSWCA 130. Prima facie a successful party is entitled to the benefit of a judgment but it is recognised that a stay may be granted where an applicant demonstrates an appropriate case to warrant the exercise of discretion in its favour. 45In Adeels Palace, Hodgson JA noted that very often an appropriate case (for a stay) is demonstrated by showing that there are arguable grounds of appeal and that there is a significant risk that if money is paid to the judgment creditor this money or a substantial part of it will be irrecoverable if the appeal succeeds. It was also noted by his Honour that the onus is on an applicant to demonstrate a proper basis for a stay that will be fair to all the parties. 46By letter dated 18 September 2012, Claude's solicitors explained the principal basis on which a stay was sought of the judgment debt as being that execution of the judgment debt (or its enforcement by the bankruptcy of Claude) would render the appeal useless. It was submitted that delay caused by the stay would not cause any prejudice in that it would not involve "any significant risk that Claude will be less able than now to meet the judgment". Relevantly (in a passage relied upon by the liquidator as indicating that there may already have been a further disposal of Claude's assets), the letter went on to say: We do not see the need for our client to give security for the judgment debt, given that his only assets of any real significance comprise his shares in Expressway Spares Pty Limited. [the significance attached to this by the liquidator is that there is no reference to the shares Claude held in Cassegrain Tea Tree Oil Pty Ltd]. We are instructed that the value of those shares exceeds the amount of the judgment debt in these proceedings despite their illiquid nature and the lack of a ready market for them. [my emphasis]. On a hypothetical bankruptcy of our client they would have to be sold and that gives rise to a risk that their true value may not be capable of being realised by a trustee in bankruptcy. Viewed in those terms enforcement prior to the hearing of the appeal could thwart our client's appeal. 47As to the assertion that the Expressway shares exceeded the value of the judgment, the liquidator's solicitors responded (on 24 September 2012) that on the most recent sales of shares in Expressway (during April 2011) each share was valued at $120,000 (on which basis Claude's shareholding would be worth $1.8 million - ie, less than the judgment debt) and noting that there was no reference in that letter to the shares in Cassegrain Tea Tree Oil. (Of the forms of security the liquidator has suggested, one is the provision of a mortgage over the shares in both of these companies.) The absence of a reference in the correspondence leading up to the present application to the shares in Cassegrain Tea Tree Oil was relied upon as suggesting that Claude may have already dealt with his assets post judgment in a way designed to frustrate his, and the company's, creditors. (Although the basis for that inference is not particularly strong, there was no attempt by Claude to correct the liquidator's apprehensions in this regard.) Reference was made by the liquidator as to the evidence of Claude in the proceedings before Bergin CJ in Eq in respect of the relief he was seeking by way of cross-claim as to a buy-out of his shares and reference was made to a sum of $6.8 million to acquire the shares in Expressway. 48As to the stay application, Mr Colyer points to the lack of any evidence (on information and belief or otherwise) as to the ability of Claude to meet the judgment debt and hence as to what the effect of enforcing the judgment debt on him would be. 49On the evidence before me, Claude's assets are limited to his shares in two companies (only one of which was referred to in his solicitors' letter). There is little evidence as to the worth of those shares (save for the reference to the value placed on them in his evidence before Bergin CJ in Eq and the statement that the sales in 2011 were based on a value of $120,000 per share). There is nothing from which I can determine whether those shares would be readily marketable or (as Claude's lawyers say) relatively illiquid. If the correct position is the latter, then one could infer that there would be likely to be difficulty or delaying in enforcing the judgment debt against those assets alone. In any event, it seems likely that if steps are ultimately required to be taken by the liquidator to enforce the judgment there may be a need for bankruptcy proceedings. 50On the one hand, a stay of the judgment debt might be unlikely to render the appeal nugatory if, as submitted by Mr Colyer, bankruptcy proceedings are unlikely to be heard while such an appeal on foot. Nevertheless, if there is a prospect of bankruptcy proceedings being commenced, that is a factor that tends towards the grant of a stay. (I have already concluded that there have been reasonably arguable grounds of appeal established and there is nothing to suggest that Claude is not bringing that appeal on a bona fide basis). 51I consider it appropriate to grant a stay (noting that it will be operative for only a limited time). The question is whether in the interests of fairness between the parties terms should be imposed on the grant of a stay. This brings me back to the question posed earlier as to whether there should be terms imposed on the grant of leave. Terms on which leave/stay should be granted 52I have noted already the basis on which the liquidator seeks the imposition of terms requiring security for payment of the judgment debt. There is nothing to suggest that the liquidator is not acting properly in the interests of preserving the company's assets (namely its right to recover the judgment debt in the event that Claude's appeal is unsuccessful). There is, however, nothing other than whatever inference can be drawn from the lodgement of the proof of debt and the failure to refer to shares in Cassegrain Tea Tree and Oil in the correspondence leading up to this motion to suggest that Claude is presently seeking to dispose of his assets so as to frustrate creditors. (As to the proof of debt, while it is suggested that this amounts to a breach of the injunction imposed by Barrett J, that turns on what in encompassed by the restriction on "resorting to" or "dealing with". It is not immediately apparent that lodgement of a proof of debt claiming an interest based on that loan account, contentious as that claim is, would be in contempt of that injunction - and it is not appropriate that I come to any conclusion on that in the present application.) 53True it is that Claude has been the subject of serious findings of dishonesty and misconduct. However, I am not persuaded that I should conclude that there is an immediate risk of such conduct being perpetuated (particularly in circumstances where Claude must by now be aware of the consequences that similar conduct may have for him). 54That said, I accept that the liquidator's concerns are not unreasonable in the circumstances. I consider that those concerns could be adequately met by an order that, pending the determination of the appeal, Claude not dispose of or deal with or encumber in any way (or take any step in relation to the disposal, dealing with or encumbrance of) the shares in the two companies referred to above, without first having given the liquidator 7 days notice in writing of his intention to do so. This would give the liquidator the opportunity at that stage to seek any relief in relation thereto and would expose Claude to sanctions for contempt if he were to disregard such an injunction. Conclusion 55I am satisfied that there are reasonably arguable grounds of appeal so as to warrant the grant of leave under s 471B of the Corporations Act for Claude to proceed with the appeal. Such an order is appropriate where the company is already exposed to the costs of litigating an appeal of its own motion in relation to the decision and where the appeal was instituted before the company was placed in litigation (and is being funded, it would seem, by those supporting Claude's appeal without reference to company assets). As noted, the liquidator, in effect, does not cavil with the grant of leave; he simply cavils as to whether it should be granted on an unconditional basis. 56I am not satisfied that such leave should be on terms of the kind sought by the liquidator (provision of security or a mortgage over the shares Claude owns in the two companies identified). Conditions ordinarily imposed on the grant of leave under s 471B relate to the minimisation of unnecessary risk or expense to the company of the litigation (or control of the later enforcement of any judgment obtained against the company). 57Here, I accept that the effect of a grant of leave to appeal will make it more likely from a practical view (irrespective of whether a stay of the judgment is also granted) that the liquidator will be unable to enforce the judgment below by means of bankrupting Claude. However, other than increasing the amount of the judgment debt by reference to the interest accruing thereon and the risk that costs incurred in the appeal will not ultimately be recoverable (at least the second of which being something that might be have been the subject of a security for costs application but no such application has been made), there seems to be no basis for the contention that the fact of the appeal (or the way it is likely to be run) is likely to cause the liquidator to incur unnecessary costs in the appeal. (The fact that the liquidator is already incurring costs in the prosecution of the appeal against Felicity means that that will be incurred as a result of leave are the incremental costs of dealing with Claude's appeal, much of which will turn on the same or similar issues.) 58The unnecessary risk relied upon by the liquidator is solely the risk of dissipation of Claude's assets pending the determination of the appeal. That concern is largely based on Claude's previous conduct. As noted, the imposition of terms on the grant of leave is said to be justified by the concern that, if there is an unconditional grant of leave, Claude will be able to dispose of assets so as to frustrate creditors (or, perhaps more accurately, that there will be nothing to stop him attempting to do so). 59As to the stay, I am satisfied that there is a sufficient risk that the appeal will be rendered nugatory if a stay is not granted to warrant the imposition of the stay. However, such a stay must be fair in the interests of all the parties. I accept that there is a basis for the liquidator's concern as to the potential dissipation of assets even though there is no evidence that this is actually occurring or is proposed to occur at the present. 60In all the circumstances, I consider that the appropriate way to meet the liquidator's not unreasonable concerns as to conduct by Claude that would be prejudicial to the enforcement of the judgment below (but in circumstances where there is no evidence that Claude is actually proposing to engage in such conduct or has already done so, other than perhaps a weak inference to be drawn from the omission of reference to shares in one of the companies when referring to his own assets of real significance) is to grant both the leave to appeal and the stay sought by Claude but to impose at the same time, in the interests of fairness as between the parties, as a term on which both the leave and the stay are granted (but not expressed as a condition of the stay with which Claude might choose not to comply) a regime whereby Claude is obliged (before dealing in any way with the shares that he says are his only assets) to notify the liquidator in writing in advance of any intention or proposal to dispose of, deal with or encumber his shares in the two companies (over which the liquidator had sought a mortgage as a condition of the grant of leave). The concept of "dealing with" is intended to be very broad and should be understood by Claude in that light. 61As to costs of the application, there has been a mixture of success on both sides. I consider that it would be appropriate to order that costs of the motion be costs in the appeal. I will hear any brief oral submissions when I publish these reasons as to whether there should be any different order but otherwise I will so order. Orders 62For the reasons set out above, and subject to any submissions that may be made as to costs, I will make the following orders: