Gerard Cassegrain & Co Pty Ltd v Claude Cassegrain & Anor

Supreme Court of NSW|2009-05-29|Before: Barrett J, Mr J, Davies J

CITATION : Gerard Cassegrain & Co Pty Ltd v Claude Cassegrain & Anor [2009] NSWSC 466

JURISDICTION : Equity Division Corporations List

DECISION : Notice of motion dismissed with costs.

Corporations Act 2001 (Cth), ss 237, 1318 LEGISLATION CITED : Limitation Act 1969 Real Property Act 1900, s 118(1)(b) Uniform Civil Procedure Rules 2005, rule 28.2

Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976; (2008) 68 ACSR 132 Maelor Jones Investment (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285 CASES CITED : R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 Tepko Pty Ltd v Water Board [2001] HCA 9; (2001) 206 CLR 1 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

Gerald Cassegrain & Co Pty Limited - Plaintiff PARTIES : Claude Cassegrain - First Defendant Felicity Cassegrain - Second Defendant

Mr B W Collins QC/Mr G B Colyer - Plaintiff COUNSEL : Mr G C Lindsay SC/Ms T A Conway - First Defendant Mr J B Whittle SC - Second Defendant

McCabe Terrill Lawyers Pty Limited - Plaintiff SOLICITORS : Oliveri Lawyers - Second Defendant Peter Condon & Associates - Second Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4764/08 GERARD CASSEGRAIN & CO PTY LTD v CLAUDE CASSEGRAIN & ANOR JUDGMENT 1 This is a statutory derivative action. On 23 September 2008, Denis Cassegrain was granted leave under s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of the present plaintiff, Gerard Cassegrain & Co Pty Ltd ("GC&Co"), against the present defendants, Claude Cassegrain and Felicity Cassegrain: see Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976; (2008) 68 ACSR 132. 2 By its statement of claim, GC&Co, as plaintiff, alleges that Claude Cassegrain, a director of GC&Co, breached a fiduciary duty owed to it by asserting an entitlement to payment of $4.25 million by GC&Co, obtaining GC&Co's acknowledgment of the existence of a liability on its part to pay him $4.25 million and relying on that acknowledgment "to fraudulently obtain" a transfer of real property by GC&Co, of which Felicity Cassegrain is now the registered proprietor. GC&Co maintains, as against Felicity Cassegrain, an entitlement to the property. 3 I am dealing with a notice of motion filed on 23 March 2009 by which GC&Co seeks an order under rule 28.2 of the Uniform Civil Procedure Rules 2005 for the determination of several separate questions: 1. Whether the declaration of oppressive conduct made by Davies J in certain Federal Court proceedings determined in 1998 gives rise to an issue estoppel between GC&Co and Claude Cassegrain as alleged in specified paragraphs of GC&Co's reply. 2. Whether the conduct of those Federal Court proceedings by the applicants therein or the prior judgment of Davies J has any of the legal consequences alleged in specified paragraphs of Claude Cassegrain's defence. 3. Whether any of the GC&Co's claims fails because extinguished by the Limitation Act 1969 as alleged in Claude Cassegrain's defence. 4. Whether GC&Co's claims against Felicity Cassegrain (that is, claims to the real property in question) fail because of her defence based on the indefeasibility provisions of the Real Property Act 1900. 5. Whether s 1318 of the Corporations Act has any application to the circumstances of this case and, if it does, whether Claude Cassegrain ought fairly to be excused as alleged in a particular paragraph of his defence. 4 I shall deal at once with items 5 and 3 since I am of the opinion that they can be disposed of shortly. 5 In relation to item 5, it is relevant to note that s 1318 poses two questions: first, whether the person concerned acted "honestly" and, second, whether the person "ought fairly to be excused" having regard to enumerated matters. The first question is concerned with what is "morally wrong in the commercial sense" (R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 at 110). The second question is concerned with whether the person "has acted honourably, fairly, in good faith and in a common sense manner as judged by the standards of others of a similar professional background": Maelor Jones Investment (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285 at 295. 6 The court cannot begin to approach these matters except by reference to the facts as fully found. Any attempt to deal with them by way of determination of a separate question would necessitate a process of fact-finding on the separate question virtually certain to be largely co-extensive with that required for the trial of the action. There is accordingly no efficiency to be obtained through separate determination and no sound basis for embarking on that course. 7 In relation to item 3, I must pay heed to what was said by Mason CJ, Dawson J, Gaudron J and McHugh J in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 533: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." 8 Again, therefore, the particular question should be approached in light of the whole of the evidence adduced at trial. The matter raised is not apt for separate and preliminary determination. 9 The remainder of the items at paragraph [3] above (with the possible exception of item 4) concern the impact or significance of the 1998 Federal Court decision. It is necessary to say something about those proceedings. 10 Reasons were published by Davies J on 15 July 1998 after a hearing of 14 days. There were 23 parties, being four applicants and 19 respondents. The present plaintiff, GC&Co, was the seventh respondent. The present first defendant, Claude Cassegrain, was the first respondent. The present second defendant, Felicity Cassegrain, was not a party to the Federal Court proceedings. They were oppression proceedings concerning, in the main, the affairs of Expressway Spares Pty Ltd and Cassegrain Vineyards Pty Ltd. 11 The applicants in the Federal Court proceedings were some of the members of GC&Co. Upon their application, the court made a declaration and orders as follows: "THE COURT DECLARES THAT:

The actions of the first respondent, Claude George Rene Cassegrain, in treating the $4.25m loan account with Gerard Cassegrain & Co Pty Ltd as his entitlement to be drawn down at his will, in drawing upon the loan account as he saw fit and in causing the passing of a resolution of directors allowing for the payment of retrospective interest thereon were actions which were oppressive of and unfairly prejudicial to the members of the company. THE COURT ORDERS THAT:

That each party abide his, her or its own costs of the proceedings."

12 The actions of Claude Cassegrain referred to in the declaration made by the Federal Court are actions which lie at the heart of the present proceedings. Davies J made certain findings or, at least, observations about those actions. His Honour also made it clear, however, that those matters, being the matters about which he ultimately granted declaratory relief, were somehow incidental to the proceedings before him. It is relevant to quote the following part of the judgment: "In my opinion, the events which occurred in relation to the settlement moneys provide a clear instance of oppressive conduct and I shall make a declaration accordingly. However, I do not think that I should make any other order with respect to GC & Co. These proceedings were not instituted because of anything that was happening in GC & Co. It was Claude's conduct in relation to Expressway Spares and Cassegrain Vineyards which caused the applicants to institute these proceedings. If the applicants wish to claim that Claude should repay moneys to GC & Co, those proceedings can be taken and an order for the taking of accounts as between Claude and GC & Co can be sought. I do not think that these present proceedings are concerned with that. Indeed, shareholders' rights have never loomed large in family discussions or thought. That is probably why the applicants at one stage sought a declaration that Claude held his interest in the $4.25m loan account on trust for all the members of the family equally. There was, of course, no basis for that claim." 13 I should add that it is clear from a transcript extract put into evidence that the trial before Davies J moved outside the pleadings. 14 The contention of GC&Co is that separate and preliminary determination of the several questions about the effect of the 1998 decision will potentially resolve "the vast majority of the disputed facts" in the present proceedings and thereby substantially shorten the trial. GC&Co also says that those questions can be determined simply by reference to the judgment and the pleadings in the Federal Court. 15 Counsel for Claude Cassegrain submitted that these perceived benefits are illusory. Determination of the separate questions related to the 1998 decision would, it is said, raise questions about what remained for trial in the long run. Counsel also made the telling point that the separate question approach appears to be designed to relieve GC&Co (and Denis Cassegrain, who sues for it) of the need to make a choice whether to confine the evidence to documents of record as a foundation for the alleged estoppel or to enter into evidence as to primary facts which might place in jeopardy any entitlement to an estoppel. 16 I accept these submissions. There are, in any event, other reasons for thinking that it is undesirable to embark upon any determination of the separate questions about the 1998 decision. 17 First, it does appear that it would be necessary to go beyond the judgment and the pleadings. The transcript extract to which I have referred indicates this. Potentially, the whole of the transcript of the 14 hearing days - and even the evidence - would have to be examined and debated. 18 Second, it should be for GC&Co as plaintiff to run its case once and for all without the ability to obtain a preliminary ruling on questions of estoppel and then, if it does not like that ruling, adopt a different approach at trial. 19 Third, it seems quite likely that the process of separate determination would be lengthy and complex, with the result that the prospects of efficiencies are, in all likelihood, illusory. 20 Fourth, it is of particular significance that Felicity Cassegrain was not a party to the proceedings that culminated in the 1998 judgment. Any estoppel that might arise will not affect or bind her. This is so, it seems to me, even if the estoppel concerns conduct of Claude Cassegrain. Central to the case against Felicity Cassegrain will be a question posed by s 118(1)(b) of the Real Property Act, namely, whether GC&Co was "deprived of land by fraud". The potential perpetrator of fraud is Claude Cassegrain but the person to whose detriment the fraud, if proved, might operate is Felicity Cassegrain as registered proprietor of the land. 21 This last matter represents a powerful reason for adopting a procedure under which the court's decision is made once and for all, after a full trial, and on the basis of the evidence as a whole, taking into account, of course, any estoppels that may be seen at that point to arise. 22 What I have just said militates strongly against separate determination of not only the questions concerning the effect of the 1998 decision but also the question in item 4 at paragraph [3] above concerning the operation of the Real Property Act. 23 In Tepko Pty Ltd v Water Board [2001] HCA 9; (2001) 206 CLR 1, Kirby J and Callinan J said (at [168] - [170]: "[168] … The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.

[169] The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests.

[ 170] Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question. " 24 These warnings are apposite to this case. The utility, economy and fairness to the parties of the regime of separate determination for which GC&Co contends are by no means at all established. The very real danger is that any of the proposed orders for separate determination - and certainly all of them together - would have the undesirable consequences to which Kirby J and Callinan J referred. 25 GC&Co's notice of motion filed on 23 March 2009 is dismissed with costs. **********

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