In the matter of Gerard Cassegrain & Co Pty Ltd - Cassegrain v Gerard Cassegrain & Co Pty Ltd - [2011] NSWSC 241 - NSWSC 2011 case summary

Supreme Court of NSW|2011-03-23|Before: Ward J, Alan J

Claude Cassegrain (Second Defendant) Felicity Cassegrain (Third Defendant) Anthony Blake Sarks (Fourth Defendant) Representation: Counsel: M Ashhurst SC with G B Colyer (Plaintiff) Solicitors: McCabe Terrill Lawyers Pty Ltd (Plaintiff) Oliveri Lawyers (First Second and Fourth Defendants) Peter Condon & Associates (Third Defendant) File Number(s): 08/281625

Judgment 1HER HONOUR: Before me for hearing on 23 March 2011 was an application brought by way of a Notice of Motion filed on 17 November 2010 by the plaintiff, Denis Cassegrain, for orders pursuant to Part 22.1 of the Uniform Civil Procedure Rules 2005 (NSW) that various of the defendants in these proceedings answer interrogatories in the form of the respective draft interrogatories annexed to the affidavit of Andrew Joseph James Lacey sworn 18 November 2010. The substantive proceedings relate to a longstanding dispute between various members of the Cassegrain family. (For convenience, and without intending any disrespect, after identifying them I will refer to the various Cassegrain family and extended family members by their first name.) 2The background to the application presently before me is that proceedings were initially commenced by Denis in 2008 (pursuant to leave granted by Sackville AJ) by way of derivative suit against his brother, Claude Cassegrain (a director of Gerard Cassegrain & Co Pty Ltd, referred to as GC&Co) and Claude's wife, Felicity Cassegrain, alleging breach of fiduciary duty by Claude and liability as constructive trustee of Felicity in relation to the transfer of certain property formerly owned by GC&Co to Felicity. Shortly thereafter, (in November 2008) Denis, in his personal capacity, also commenced oppression proceedings against GC&Co and each of Claude and Felicity. (Denis and his other siblings had previously brought other oppression proceedings in the Federal Court against GC&Co and others, including Claude.) 3In late 2009, applications were brought by GC&Co and by Denis, respectively, for leave to amend the pleadings in both the derivative action and oppression proceedings (and in the case of the oppression proceedings for leave to bring derivative claims on behalf of the company, for leave under s 237 and for leave to join an additional defendant, Mr Anthony Sarks, Felicity's father and a co-director of GC&Co). Those applications were heard by Austin J ( Gerard Cassegrain and Co Pty Ltd v Cassegrain; Cassegrain v Gerard Cassegrain and Co [2010] NSWSC 91), who granted leave to amend the respective statements of claim (subject to some variations) and who granted leave (subject to certain undertakings and indemnities being given) to bring derivative claims in the oppression proceedings and to join Anthony as a defendant. 4In the context of that application, his Honour considered submissions made on behalf of Felicity to the effect that the amendments for which leave had been sought in relation to the knowing receipt allegations sought to be made against Felicity were embarrassing and meaningless. His Honour considered that certain of the particulars of knowledge there impugned, by reference to a 'willful shutting of her eyes to the obvious', were "reasonably clear in meaning" though expressing the view that further particulars seemed to be needed as to the alleged factual basis for that allegation and should be supplied if reasonably requested (and his Honour also made the comment that other particulars of knowledge, by reference to facts and circumstances that would be obvious to a reasonable person, would seem to be amenable to further particularisation (at [102]). I note this because part of Felicity's objection to the application for leave to administer interrogatories is that the pleaded allegations are themselves unclear and objectionable (though no application has been made to strike them out nor has there been any request for particulars thereof). 5A further application for leave to amend was heard in October last year by Windeyer AJ, the relevant amendments in the main relating to additional allegations of breach of fiduciary duty. Those allegations (for which leave was granted by Windeyer AJ) are now contained in paragraphs 34A and 49A of the Further Amended Statement of Claim (in respect of Claude) and paragraphs 40A and 56A (in respect of Anthony). Broadly, the content of those allegations is the same, namely that each of Claude and Anthony (to whom I refer collectively as the Cassegrain directors), in their capacity as the directors of GC&Co, caused it to sell at a significant undervalue the shares held by it in two other companies (Oceania Agriculture, referred to as OAL) and Cassegrain Ti-tree Oil (referred to as CaTTO). (Paragraphs 34A and 40A relate to the CaTTO shares and paragraphs 49A and 56A relate to the OAL shares). 6The interrogatories that are sought against the Cassegrain directors concern the allegations made against each of them that he caused GC&Co to sell assets of the company to Felicity without obtaining the fully informed consent of the company's shareholders (those being the Cassegrain family members including both Denis and Claude). It is alleged that each of Claude and Anthony breached his fiduciary duties to GC&Co by preferring his own (and his wife's/daughter's, as the case may be) interests to those of the company in relation to the transfer. As a consequence of the matters pleaded it is alleged that there has been a contravention by the Cassegrain directors of ss 181 and 182 of the Corporations Act are pleaded. 7The particular interrogatories sought to be administered against the Cassegrain directors are contained in Annexures "A" and "C" to Mr Lacey's affidavit. They seek to interrogate in relation to three topics - whether (and, if so, how) there has been notification to shareholders of the proposal to sell the shares; whether (and, if so, how) shareholders' approval of the sales was obtained; and whether (and, if so, how) shareholders advised of consent to the sales. The interrogatories are framed in clear and unambiguous terms and there was no suggestion that the Cassegrain directors (or their legal representatives) did not understand the questions proposed to be put to them. 8The interrogatories sought to be administered against Felicity Cassegrain (in Annexure "B" to Mr Lacey's affidavit) go to the issue of knowing receipt of the benefit of what is alleged to have been a breach of fiduciary duty by the Cassegrain directors. The relevant allegation (contained in paragraphs 46 and 62 of the Further Amended Statement of Claim) is that she received the benefit of the breaches of fiduciary duty by the Cassegrain directors with knowledge of those breaches of fiduciary duty. The particulars of knowledge provided are those which (with some modification to amend "actual" knowledge to "imputed knowledge" in particular (ii)) were contained in the draft amended pleading which Austin J granted leave to be filed in February 2010, namely (i) imputed knowledge by virtue of Claude being her agent; (ii) a willful shutting of her eyes to the obvious; and (iii) knowledge of circumstances which would indicate the facts to an honest and reasonable person. 9The particular interrogatories therefore go to Felicity's awareness of the existence of other shareholders of the company (para [1]), her awareness of matters relating to the CaTTO shares and as to whether particular enquiries had been made by her in relation to matters such as the proposal to sell the shares to her, how the price to be paid for the shares was to be determined, and the consent of any of the shareholders to the sale of the shares to her (para [2]); and corresponding enquiries in para [3] to those in para [2] but in relation to the OAL shares. Again, it seems to me that those interrogatories are framed in clear and unambiguous terms, though complaint was made as to the form of para 1 (which I address below). 10Annexure "D" to the affidavit of Mr Lacey is a copy of the ex tempore reasons for judgment of Windeyer AJ (those reasons being in draft form) of 11 October 2010. On that occasion there was not only before his Honour the Notice of Motion for leave to file a Further Amended Statement of Claim but there was also an application for an order in relation to the administration of the same interrogatories as are now sought to be administered. Windeyer AJ was of the view that the amendment ought to be allowed (provided particulars were given of the shareholders whose consent it was alleged had not been obtained) but considered that it was premature to consider the grant of leave to administer interrogatories. In the draft reasons, his Honour said, in this regard: While I understand the argument of counsel for the plaintiff that the lack of informed consent of his own client, the plaintiff, would be sufficient, nevertheless even that has not been clearly set forward and I think that the defendant is entitled to such particulars as are available to the plaintiff of the parties with whom it is alleged did not give their fully informed consent. and continued: So far as the interrogatories are concerned, in my view that is premature. It may be that the first defendant and second defendant may admit that allegation or it may be that it will be denied. So that there is no subsequent hearing on this matter, I state in my view any defence denying the claim, once the particular persons are identified, would have to allege consent of the particular people involved. It may be after the pleadings have concluded that interrogatories might be appropriate but in my view that is not the position at the present time. The only question is whether or not the application for the motion for interrogatories should be stood over. (my emphasis) 11In relation to the application for an order concerning the administration of interrogatories, his Honour made it clear that the standing over of that application was without prejudice to the rights of the plaintiff to bring a further application for interrogatories after finalisation of the pleadings. 12The pleadings seem now to have been finalised. Relevantly, in the Cassegrain directors' Defence to the Further Amended Statement of Claim, their response to paragraph 34A and the corresponding allegations of breach of fiduciary duty does not (as it had been anticipated by Windeyer AJ it would do) contain a denial of the allegation of lack of consent. Rather, there is a non-admission of that issue, coupled with various other assertions, and otherwise a blanket denial of the overall allegations in the paragraph. There is, therefore, no denial that the sale of the shares was without the fully informed consent of all the shareholders of the company. Thus, for example, the response to the allegation in paragraph 34A (mirrored in the response by Claude to 49A and the response by Anthony to both 40A and 56A) is as follows: 34 In answer to paragraph 34A of the Statement of Claim the second defendant [Claude]: (a) says that the allegations contained therein have a tendency to cause prejudice, embarrassment and delay in the proceedings because (i) they assert a breach of duty unaccompanied by any precise definition of either a particular fiduciary duty or a particular breach of that duty (ii) they assert a conflict between "duty and interest" unarticulated except by reference to an undefined concept of "related entity", particularised by reference only to the third defendant [Felicity]; (iii) they implicitly assert an unarticulated obligation on [Claude] to obtain "the fully informed consent" of all shareholders of GC&Co; (iv) they assert an absence of "fully informed consent" without articulation of the knowledge or state of mind of each shareholder referable to the "disposition" to which the paragraph refers ; (b) makes no admissions as to whether the shareholders of GC&Co jointly or severally gave their "fully informed consent" to the "disposition" referred to in the paragraph ; (c) otherwise denies the allegations and each of the allegations contained in the paragraph (my emphasis) and then the paragraph goes on to make other assertions in paragraphs (d) to (f). 13The substantive allegations in relation to breach of fiduciary duty are said by Senior Counsel for Denis (Mr Ashhurst SC) to be made by reference to what was said in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [118]-[136] by Spigelman CJ in particular at [120] to the effect that the Court approaches conduct of this type by focusing on whether the shareholders' consent was in fact obtained. (Reference was also made to Papadopoulos & anor v Hristoforidis [2001] NSWCA 368 per Hodgson JA at [31].) Hence, it is not surprising that the interrogatories (at least those addressed to the Cassegrain defendants) focus on what was told to the shareholders, and what consent or approval was given by them, in relation to the sales. Similarly, it is not surprising that these are matters said to be within the knowledge of the parties sought to be interrogated (albeit that some of those matters would also be within the knowledge of Denis or shareholders other than those who are also defendants). 14The interrogatories sought to be administered to the Cassegrain directors are said to be relevant to the following issues: (i) whether the shareholders of GC&Co received prior notice of the proposal to sell the company's shares to Felicity; (ii) whether the directors of GC&Co ever sought shareholder approval of the sale of the company's shares to Felicity; and (iii) whether the shareholders of GC&Co ever in fact consented to the sale of the company's shares to Felicity. 15It is submitted that the answers to those interrogatories will almost certainly save time and costs ( SC Tours Pty Ltd v Singer [1997] NSWSC 541) and that they are necessary because Denis is seeking an admission that the Cassegrain directors did not obtain the fully informed consent from any of the shareholders to the said transfers. (The interrogatories themselves do not speak of "fully informed" consent, which might well have been objectionable insofar as it would require a view to be formed as to what that meant; rather, they speak of matters being notified to shareholders or the seeking of shareholder 'approval' or advice as to whether a shareholder 'consented' - all concepts that would seem to me to be readily understandable by someone in the position of a company director.) 16The interrogatories addressed to Felicity are said to be concerned with ascertaining the extent of: (i) her knowledge of the relevant circumstances at the time she acquired the company's property, that is, at the time the directors are alleged to have breached their fiduciary duty to the company; (ii) any enquiries she made about other shareholders having been notified of the proposal to sell the company's property to her; (iii) any enquiries she made about other shareholders having consented to the sale of the company's property to her; (iv) any notification she received that the other shareholders of GC&Co had in fact consented to the sale of GC&Co's property to her; and (v) any enquiries she made about how the price that she would be paying for the Company's property was going to be determined. 17Unlike the Cassegrain directors (who it is said intend to give evidence at the trial and, if so, will be able to be cross-examined), Felicity has apparently indicated that she will not be appearing as a witness in these proceedings. 18It is submitted that the interrogatories Denis wishes to address to Felicity relate to matters solely within her own knowledge and that, absent those interrogatories being ordered and answered, Denis (and the Court) will likely be deprived of any such insight into the circumstances in which Felicity came to acquire GC&Co's shares in CaTTO and OAL for a price that (in the case of CaTTO) it is said did not take into account among other things, the value of the tea tree farming business that CaTTO took over on the same day that the directors decided to sell the share to Felicity, and (in the case of OAL) for a price that it is said did not attribute any value to OAL's ability to recover a loan in excess of $10 million which OAL had made to Agricultural and Rural Finance Pty Ltd (which loan, is it said, is apparently in the process of being repaid as a consequence of the High Court's decision in Agricultural and Rural Finance Pty Ltd v Gardiner & anor [2008] HCA 57). (Without wishing to be pedantic, to the extent that some of the interrogatories pose questions as to enquiries made by Felicity of others or advice given to her by others, that could not be said to be solely within her own knowledge - assuming for the sake of argument that such an enquiry had been made or advice given. That said, whether Felicity asked such questions or was given that advice must be matters within her own knowledge and will not necessarily be matters within the knowledge of Denis - unless he was the person to whom or with whom that communication was made.) The interrogatories also seem to be framed in terms that would be readily understood - notification, consent, approval. What Felicity is to be asked is not the legal consequence of what was said or communicated but the communication itself (or her awareness of certain matters). 19It is submitted that the interrogatories that Denis wishes to address to Felicity (and the Cassegrain directors) are "reasonably necessary for the disposing fairly of the matter or necessary in the interests of a fair trial" ( Schutt v Queenan & Anor [2000] NSWCA 341 at [12] per Mason P; Boyle v Downs [1979] 1 NSWLR 192 at [205]; Jajaw v State of New South Wales [2007] NSWSC 725. For the reasons set out below, I agree.

Legal Principles 20Pursuant to Part 22.1(4) of the Uniform Civil Procedure Rules, an order for leave to administer interrogatories is not to be made unless the court is satisfied that the order is "necessary" at the time the order is made. 21The test of necessity is "what is reasonably necessary for the disposing fairly of the cause or matter" ( Boyle v Downs at [205] per Cross J) or "necessary in the interests of a fair trial" ( Percy v General Motors-Holden Pty Ltd [1975] 1 NSWLR 289 at 292 per Rath J). 22Necessary orders for interrogatories are those which are "reasonably required or legally ancillary" to the achievement of a fair trial (they need not be "essential" but are to be "subjected to the touchstone of reasonableness" ( Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 per Gaudron, Gummow and Callinan JJ, referring first to Attorney-General v Walker (1849) 3 Ex 242 and then State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447). 23Thus the term "necessary" in this context does not mean something that cannot be done without or dispensed with, as made clear in Schutt v Queenan . There, the New South Wales Court of Appeal allowed an appeal in circumstances where interrogatories had been refused at first instance (that refusal having been on the basis as it had not been established that they were "necessary" because the defendant had already given a statement to the police). Mason P said: In this area, the accepted test of necessity is what is reasonably necessary for the disposing fairly of the matter or necessary in the interests of a fair trial ( Boyle v Downs [1979] 1 NSWLR 192 at 205, Yamazaki v Mustaca [1999] NSWSC 1083). The answers which are sought are material in the sense that they may enable the claimant either to maintain her own case or to destroy the case put against her (see Griebart v Morris [1920] 1 KB 659 at 664). (my emphasis) The draft interrogatories relate to a matter in question in the proceedings, namely the critical issue of negligence. With very minor exceptions, they go beyond the matters covered in the police statement. The answers may or may not favour the claimant's case, but (without them) that case has significant evidentiary difficulties. The answers may provide bricks with which to construct a case whether or not the claimant calls the first opponent at trial and seeks leave to treat him as an unfavourable witness (cf Evidence Act 1995, s38). 24It has historically been accepted that interrogatories may be sought by an interrogating party in order to prove its case ( Kennedy v Dodson [1895] 1 Ch 334, Osborne v Sparke (1907) 7 SR (NSW) 460). It is said that the answers which are sought by the interrogating party should be material in the sense that they may enable that party to maintain its case or to destroy the case put before it ( Strata Plan 39743 v Linknarf Management Services; Alan J Crowley v Linknarf Managements Services [2010] NSWSC 225 per Harrison AsJ at [21] referring to Griebart v Morris [1920] 1 KB 659 and Schutt v Queenan) . 25An interrogating party may inquire into all that is material to its case but may not inquire into what is exclusively the interrogated party's case. However, where an answer to interrogatories would disclose actions taken by the defendant and be material to its case, it may be that the answer will also be relevant to the plaintiff's case and so is permissible. An interrogatory that is sought for the purpose of advancing the plaintiff's case is not rendered unnecessary merely because it may also disclose the defendant's case ( Whateley v Crowter (1855) 5 El & Bl 709). 26One of the acknowledged objects of interrogatories (and hence the fundamental difficulty I have with the principal basis on which the Cassegrain directors' objection was put) is to diminish the burden of proof otherwise on the plaintiff. It is recognised that a legitimate purpose of interrogatories is that the answers will inform the plaintiff as to evidence to be obtained and may save the expense of proving part of its case ( Attorney-General v Gaskill (1882) LR 20 Ch D 519 at 527 per Jessel MR, applied in Taylor v Santos Ltd [2000] SASC 305 and Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd (No 2) [2008] WASC 204). Thus an interrogated party who declines to answer interrogatories cannot say (as the Cassegrain directors here seek to do) that the same information may be given at trial by cross-examination. Further, as made clear in Attorney-General v Gaskill (at 530-31 per Lindley LJ), the plaintiff is entitled not only to discover facts not in its knowledge but also to obtain admissions so as to render it unnecessary to adduce evidence, and thus the defendant cannot object to the interrogatories where the plaintiff seeks to exercise either of those entitlements. 27Where the interrogatories seek information "within the knowledge of the defendants", it might be expected that the test of necessity will be readily satisfied (as it was, for example, in Keating v South East Sydney Illawarra Area Health Service ). 28In Ritchie's commentary to Part 22.1 of the Uniform Civil Procedure Rules , the editors cite McBride v Sandland [1917] SALR 249 as authority for the proposition that interrogatories directed to material already admitted or that could be readily proved by a witness likely to be called at the trial are not "necessary". Mr Ashhurst submits (and I accept) that the decision stands rather as authority for the proposition that interrogatories directed to matters admitted in the pleadings are not necessary. (Here, there is no relevant admission or denial in the pleadings by the Cassegrain directors and it might be said that what the plaintiff is seeking to test is material presently cloaked by the respective non-admissions.) 29My attention was also drawn to the observations of the authors of "Discovery and Interrogatories" Simpson Bailey Evans (2 nd edn) to the effect that the list of occasions where interrogatories are "necessary" is clearly not closed, the authors there noting that the two commonly occurring examples where interrogatories are ordered are where this will assist the parties to resolve their conflict prior to trial and to enable a relevant issue to be proved where proof is otherwise difficult (there citing Duke of Sutherland v British Dominions Land Settlement Corporation Limited [1926] Ch. 746; (1928) Ch 746 ). In Duke , Tomlin J, citing Attorney-General v Gaskill, dismissed an argument that a plaintiff was not entitled to interrogate "when he already knows the fact" and held that a plaintiff was entitled to extract from the defendants admissions that are relevant to issues raised in the pleadings prior to trial. 30In Duke of Sutherland v British Dominions Land Settlement Corp Ltd Tomlin J said: The function of interrogatories was stated by Cotton L.J. in Attorney-General v. Gaskill , where, after referring to the order of the Supreme Court which relates to the matter and dealing with r. 2, he said: "The right to discovery remains the same, that is to say, a party has a right to interrogate with a view to obtaining an admission from his opponent of everything which is material and relevant to the issue raised on the pleadings. It was said in argument that it is not discovery where the plaintiff himself already knows the fact, but that is a mere play on the word 'discovery.' Discovery is not limited to giving the plaintiff a knowledge of that which he does not already know, but includes the getting an admission of anything which he has to prove on any issue which is raised between him and the defendant. To say that the pleadings have raised the issues, and that therefore the interrogatories should not be allowed, is an entire fallacy. The object of the pleadings is to ascertain what the issues are, the object of interrogatories is not to learn what the issues are, but to see whether the party who interrogates cannot obtain an admission from his opponent which will make the burden of proof easier than it otherwise would have been." Lindley L.J. in Kennedy v. Dodson cites the following passage from Wigram on Discovery, 2nd ed., p. 15: "It is the right, as a general rule, of a plaintiff in equity to exact from the defendant a discovery upon oath as to all matters of fact which, being well pleaded in the bill, are material to the plaintiff's case about to come on for trial, and which the defendant does not by his form of pleading admit." And later he quotes a further passage of the learned author, in which it is said: "In determining whether particular discovery is material or not, the Court will exercise a discretion in refusing to enforce it, where it is remote in its bearings upon the real point in issue, and would be an oppressive inquisition." 31In Spedley Securities Ltd (in liq) v Yuill (No 4) (1991) 5 ACSR 758 Cole J said, of the principles applicable regarding interrogatories, (at [762]):

The object of interrogatories is to discover the truth. It has also the advantage of saving expense. When inquiry is made as to a matter which is entirely within the knowledge of the defendant and not within the knowledge of the plaintiff, and is relevant to the case, I do not know of any rule why the defendant should not be interrogated about it": Potter's Sulphide Ore Treatment Ltd v Sulphide Corporation Ltd (1911) 13 CLR 101 at 111; Smith Kline & French Laboratories Ltd v Inter-Continental Pharmaceuticals (Australia) Pty Ltd (1969) 123 CLR 514 at 518.
Generally speaking, a party may interrogate his opponent as to every relevant matter on which he could examine him, if he thought fit to call him as a witness at the trial: Lyell v Kennedy (1883) 8 App Cas 217 at 234; Hawkes v Schubach [1953] VLR 468 at 471; Coal Cliff Collieries Pty Ltd v C E Heath Insurance Broking (Australia) Pty Ltd (1986) 5 NSWLR 703 at 709 . 32In SC Tours Pty Ltd v Singer [1997] NSWSC 541 Young J (as his Honour then was) said The basic measuring rod for interrogatories is whether they are necessary and will save time or costs of the trial. 33When the court is considering whether a trial is fair for the purpose of necessity of interrogatories, it has been said that it should determine 'what justice to all parties might reasonably be thought to require' ( Yamazaki v Mustaca [1999] NSWSC 1083 per Sully J at [14]). That must surely be understood in the context of what have been well recognised to be the twofold legitimate purpose of interrogatories (set out above). 34Relevantly, for the purpose of considering some of the objections made the present application, whether the interrogating party can prove the matter in question by some other means has been said not to be a ground for refusing the interrogatory ( Lyell v Kennedy (1883) 8 App Cas 217 at 228; James v Davies (1883) 9 VLR (L) 140). In Lyell , in the House of Lords, the Lord Chancellor at 228 said: It is no sufficient objection that the plaintiff may have, and to some extent (on his own shewing) has, other means of proving the facts inquired after. Admissions of facts by the defendant might simplify the proof and materially diminish the expense of trial. 35Mr Ashhurst submits that there would seem to be no authority to support the proposition that an interrogatory is not necessary either because the party who is being interrogated intends to give evidence or alternatively that there are other witnesses than the interrogated party who could give evidence regarding the fact in issue. I have similarly been unable to find any. Indeed, the opposite seems to be the case. In James v Davies , where the interrogatories sought to be administered related to an action for seduction and the objection was that the court would not exercise its discretion to allow interrogatories in favour of a party who already has the information (especially when the answers might affect the moral character of the other party), Williams J (with whom Holroyd J and Stawell CJ concurred) said: The principal objection raised is that the plaintiff has already the knowledge or means of knowledge of which he seeks. That was a good objection at one time, but it is no longer so. Though the plaintiff may have that information, he may wish to have it corroborated; and he cannot have that better than out of the defendant's own mouth; it might relieve him from the necessity of calling several witnesses (my emphasis) 36I turn then to the respective objections taken by the Cassegrain directors and by Felicity to the particular interrogatories sought to be administered to each.

Cassegrain directors 37I have noted above the ambit of the interrogatories sought to be administered to the Cassegrain directors. There is no objection to the making of the order for those interrogatories on the grounds of relevance or form. Rather, the objection is that the interrogatories are not reasonably necessary for the disposing fairly of the matter or necessary in the interests of a fair trial. 38As to the question of necessity, it is said by Mr Lindsay SC, for the Cassegrain directors, that: (a) each of the Cassegrain directors intends to give evidence at the hearing and can be cross-examined about the matters the subject of the interrogatories; (b) Denis is himself one of the shareholders whose consent is the subject of the interrogatories and he can say whether the consent was or was not given; and (c) all but one of the other shareholders (as to whose consent is the subject of the interrogatories) is a person supporting Denis in these proceedings; and 39As to the question of fairness, it is submitted by Mr Lindsay, for the Cassegrain directors, that it should be inferred that Denis' purpose in seeking interrogatories is to shield himself and those who stand behind him from having to give evidence in these proceedings. Thus, it was submitted that if, contrary to the Cassegrain directors' submissions, the court was satisfied that the interrogatories were necessary then that purpose would be a reason why the court's discretion under rule 22.1(1) should not be exercised in Denis' favour. 40I have referred above to the authorities that support the proposition that an order for interrogatories can be said to be reasonably necessary where what is sought is to obtain an admission as to a matter that will enable the plaintiff to prove its case (or an element in its cause of action) and to the fact that the ability of the plaintiff to prove that fact by other means does not constitute a basis for a contrary finding. Therefore, the fact that this evidence might be adduced in cross-examination or that other evidence going to the same issue might be able to be adduced by Denis himself (or those in his 'camp', so to speak) is not to the point. 41As to the fairness of the trial itself, in any proceeding there will be forensic decisions to be taken as to the evidence to be adduced and the witnesses to be called. I was taken to no authority to suggest that the defendant can insist upon proof of the case against it in a particular way (though obviously there are cases where adverse inferences may be drawn from a failure of the plaintiff to tender particular evidence, which might as a practical matter have the effect of compelling the plaintiff to adduce certain evidence). However, other than any submissions that might properly be made, if Denis chooses to run a documentary case and to rely upon admissions obtained in interrogatories, that is a matter for him. 42This is a case where the relevant allegation (to which the interrogatories against the Cassegrain directors are squarely directed) is that without the fully informed consent of an identified group of people there was a breach of fiduciary duty. True it is that if that consent was not obtained from Denis (or one or more of the shareholders supporting him) then an admission from the Cassegrain directors would not necessarily be required to prove that allegation (since whether or not there was consent from any other shareholder there could then not have been no consent of all). However, it may well be that evidence from the defendants' camp as to the lack of consent from one or more shareholders would be considered to be likely to be more compelling than evidence from the very person making the allegation. It is not a matter for me to second-guess the reasons that Denis and his legal advisers may choose to present his case and certainly not in the context of the present application. 43One purpose of interrogatories is to identify the real issues (and what evidence is necessary to establish them). If, for example, answers were given by the Cassegrain directors to the effect that consent was given by one or more of the persons in respect of which the questions are directed, then Denis would know that it is incumbent on him to adduce his own or other evidence going to the issue of consent. If, on the other hand, the answers given by the Cassegrain directors were to the effect that one or more persons did not give, or were not asked to give, consent (and the answers to the other interrogatories established what information has been provided to them in relation to the issues on which consent was sought), then this may shorten the hearing by making it unnecessary to call other evidence on the topic (and may alert the defendants in advance to any weaknesses in their case as a result of those answers). In either case, there must be the potential for the answers to interrogatories to prompt an early resolution of the proceedings). 44The authorities referred to earlier support the conclusion that an interrogatory may be administered in order to obtain an admission in advance of the hearing that may destroy the opponent's case. That must be particularly apposite here. 45As to the discretionary matter raised by the Cassegrain directors, I think there is force in the submission made by Mr Ashhurst in response that the interrogatories are necessary because the Cassegrain directors chose to adopt the course of a non-admission on the issue of consent rather than a denial to the allegation of lack of consent (thus putting Denis to proof of an issue that might be said to be within the knowledge of the Cassegrain directors). I do not, by saying this, express any criticism of the manner in which the defence has been pleaded in this regard. It may well be due to the alleged defects in the pleading, in that the Cassegrain directors contend that there is uncertainty as to what is meant by 'fully informed consent' and hence have formed the view that it is proper neither to admit nor deny the allegation. Nevertheless, the result is that the non-admission squarely puts the issue to proof by the plaintiff and hence it seems to me not unreasonable for the plaintiff to seek by way of interrogatories to obtain the admissions that have eluded him on the defendants' pleadings. (As noted earlier, despite the criticism of the pleadings, no steps have been taken either to strike out the pleading or to seek particulars of the matters of which complaint is made.) 46Finally, as to the fairness point, Mr Lindsay submitted that if an order for interrogatories were to be made then it should be conditional on the plaintiff being ordered to file affidavits in relation to this issue. I consider that later.

Objections to interrogatories by Felicity 47For Felicity, Ms Gormly objects to the interrogatories sought to be administered on a number of bases (some of which are repeated in their application to various of the particular interrogatories). Mr Ashhurst has helpfully sought to summarise the complaints made by Felicity and, as there was no suggestion by Ms Gormly that this was inaccurate (and nor does it appear to me to be), I have adopted that summary as a useful template in considering the objections as follows:

General objections 48The following general objections were made: (i) that the pleadings that raise the issue on which Denis now seeks to interrogate are objectionable (insofar as the submissions state that the interrogatories do not relate to any matter 'properly pleaded'.) (ii) that Denis cannot interrogate on these issues because the case based on imputed knowledge remains "weak if not hopeless"; and (iii) that as a matter of discretion leave should be refused because the interrogatories are sought for the purpose of shielding Denis and those that stand behind him (that being the objection raised by the Cassegrain directors); 49In response to those general objections, Mr Ashhurst submits as follows: (i) if there is available a proper objection to the form of the pleading then Felicity ought to apply to have the offending paragraph struck out rather than raising the form of the paragraphs as a reason for not granting leave to interrogate. Mr Ashhurst notes that no request for particulars to the impugned paragraphs was made and no strike out application has been made. Mr Ashhurst further submits that Felicity raised objections very similar to those when the matter was before Austin J on the plaintiff's application for leave to bring this aspect of the derivative proceedings and his Honour at [101] - [102] considered and dismissed those arguments. (On this issue, the fact that Austin J permitted the pleading amendment does not prevent a subsequent challenge to the adequacy of particularisation of the pleadings, since his Honour expressly left open the possibility of such a challenge. However, no such challenge has been made). The relevance of interrogatories is to be tested by reference to the issues on the pleadings. In my view it cannot be said that the issues are so unclear as to deprive the interrogatories of relevance (and, insofar as there is criticism of the particulars of knowledge, the questions sought to be posed of Felicity seem to me to be admirably to the point so as not to give rise to any misunderstanding). (ii) as to the submission that the case based on imputed knowledge is weak, the response from Mr Ashhurst is that (if that be the case) it is due to the fact that all of the relevant information resides with Felicity, the interrogated party. It is submitted that this is not an objection to interrogatories known to law (and that the fact that the relevant information resides with the interrogated party is said usually to be a reason for the grant of interrogatories not for refusing them) (citing Spedley Securities Ltd (in liq) v B R Yuill (No 4) (1990) 5 ACSR 758 at 762; Potter's Sulphide Ore Treatment Ltd v Sulphide Corporation Ltd (1911) 13 CLR 101 at 111). I agree; (iii) as to the "shielding" allegation, I have considered this above but, in any event, Mr Ashhurst submits that the issues on which Felicity is sought to be interrogated are matters of which neither Denis nor those allegedly standing behind him could have any knowledge (again, that may not be the case if the relevant communication about which Felicity is interrogated is said to have been mad e with Denis or those others; however, to the extent that Felicity is interrogated as to her awareness of matters that must clearly be the case). In any event, I do not accept that the shielding allegation (assuming that this is in fact the purpose of the interrogatories) is a ground to refuse leave to interrogate (having regard to the cases which permit interrogatories in order to obtain admissions and to relieve the need for the adducing of evidence).

Specific Objections 50The following specific objections were made: (i) a form objection to interrogatories asking Felicity about her knowledge of the existence of other shareholders to GC&Co at the relevant time (1(i) to (iii)); (ii) an objection to interrogatories 2(i) to (xxvi); and 3(i) - (xxiv) on the basis that they are fishing; (iii) an objection to interrogatories 2(vi) to (viii) and 3(iv) to (vi) on the basis that the claim of breach of fiduciary duty is not sustainable because the duty is owed to GC&Co and not the shareholders (see also 2(ix) to (xvi) and 3(vii) to (xiv); (iv) an objection to interrogatories 2(xxii) to (xxvi) and 3(xv) to (xxiv) on the basis that Felicity was not an officer of GC&Co and was therefore under no obligation to have obtained such advice. 51As to those, Mr Ashhurst responds as follows: (i) as to the form objection - it is said that the touchstone for form objections to interrogatories is whether they could be asked in chief of the witness in that form ( Spedley at 762 and Ritchies Part 22.1.65). In that regard it seems to me that the interrogatories are unobjectionable. Insofar as objection was taken to the introduction to the interrogatory (which refers to paragraph 8 of the Further Amended Statement of Claim and paragraph 8(b) of the Third Defendant's Defence) it is said by Mr Ashhurst that this is only to introduce the subject matter of share ownership in GC&Co to the question and that the actual question is relevant to the issues raised in paragraphs 46 and 62 of the Further Amended Statement of Claim - that seems to me to be the case and (although Mr Ashhurst was prepared not to press those introductory words) with that explanation it seems to me any cause for objection is removed; (ii) as to the fishing objection - it is said that the interrogatories about which complaint is made on this aspect go to Felicity's knowledge of the proposed sale of GC&Co's shares in CaTTO and OAL; her knowledge of any of any enquiries that have been made with the shareholders of GC&Co regarding the shares, and her knowledge of an valuation that may have been obtained in respect of the shares. It is contended by Mr Ashhurst that those issues are relevant to paragraphs 13, 14, 20 and 27 of the Further Amended Statement of Claim, paragraphs 15 to 16 and 28-29, 34, 38, 40, 44, 49, 54, 56 and 60, 34A, 40A, 49A and 56A, 35, 41, 50 and 57, 46 and 62, those being allegations as to the resolution to sell the CaTTO shares and the OAL shares for stated amounts, the failure to obtain a recent market valuation of the OAL shares knowledge by the Cassegrain directors of the undervalue sales, the failure by the Cassegrain directors to obtain the informed consent from the shareholders of the sale of the shares, the alleged breach of fiduciary duty by the Cassegrain directors based on the earlier paragraphs, and the knowledge of Felicity of the breaches of the fiduciary duty by the Cassegrain directors described in the earlier paragraphs. Mr Ashhurst submits that "fishing" is an objection to evidence that is not relevant to a matter in issue or not relevant to a matter which if established would lead to a train of enquiry which would advance the parties' case or damage the opponents' case ( Mulley & Marney v Manifold (1959) 103 CLR 341 at 345). In considering what amounts to a fishing expedition, in the context of subpoenas, in Cosco Holdings Pty Limited v Commissioner of Taxation (1997) 37 ATR 432, Spender J discussed Beaumont J's statement in Trade Practices Commission v Arnotts Limited (No 2) (1989) 21 FCR 306, that the "test of adjectival relevance" (as distinct from substantive relevance) is satisfied where the documents called for "could possibly throw light on the issues in the main case". Spender J noted that the word "possibly" is "not used in any speculative sense" (and so held that a subpoena may be set aside if the issuing party cannot, on reasonable grounds, show that there is a reasonable possibility that the documents sought will assist in resolving a matter in dispute in the proceedings). In Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Limited (1952) 72 WN (NSW) 250 at 254 it was said: But whether a particular expedition is a mere "fishing expedition" depends upon the meaning of that phrase. A "fishing expedition", in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not. If, however, there is material before the Court pointing to the probability that a party to litigation has in his possession documents tending to destroy his case or to support the case of his opponent and that privilege from inspection of such documents has been wrongly claimed, an application by that opponent to be allowed to inspect them cannot properly be described as a mere "fishing expedition". I accept that if the answers sought on interrogation are of sufficient potential assistance to the plaintiff's claim, and they are posed with reasonable particularity, then they are not "fishing" (or otherwise objectionable) for the purposes of the legitimate exercise of obtaining admissions on interrogation. The knowledge or awareness of Felicity is a central issue in the knowing receipt claims made. To the extent that there might be speculation as to what Felicity is or is not aware of, it seems to me that the plaintiff must be able to seek admissions as to that knowledge - interrogatories as to matters within a party's knowledge are a classic example of the use of this interlocutory procedure. It is submitted by Mr Ashhurst that the questions sought are relevant to a matter directly in issue, namely the issues raised by paragraphs 46(ii) and (iii), and 62(ii) and (iii) of the Further Amended Statement of Claim and that no evidence has been filed to support the claim that they are vexatious or oppressive. Both aspects of that submission seem to me to be well founded. (iii) as to the objections to interrogatories 2(vi)-(viii) and 3(iv)-(vi), it is submitted by Mr Ashhurst that this reveals a misunderstanding as to the pleaded allegation: that the allegation being that the Cassegrain directors breached their fiduciary obligation to GC&Co by failing to obtain the fully informed consent of the shareholders to the sale and that Felicity had knowledge of the relevant circumstances. It seems to me that on the allegation as made, these interrogatories are of relevance. (iv) as to the objections to interrogatories (xxiv) - (xxvi) and 3(xv) - (xxiv), again it is said that this misunderstands Denis' case, which is that Felicity's knowledge of whether any such valuation existed was relevant to her knowledge of the circumstances that established breach of fiduciary duty by the Cassegrain directors. I accept that the interrogatories are relevant to that issue. 52Ms Gormly's submissions broadly accepted that interrogatories can be asked in relation to issues raised in the proceedings but what Ms Gormly submits is that where Felicity is unable clearly to determine what the issues are, then leave should not be granted. It is submitted that it should not be up to the plaintiff, in submissions in reply, to delineate what is interrogated above because that in itself makes the interrogatories oppressive (since it indicates that Felicity was expected to work out what exactly the pleadings are after or what the real issues are). Again, that seems to me to be a pleading complaint (that Felicity has not to date chosen to bring). The interrogatories, in my view, do go directly to the issues as they appear in the pleadings and are not rendered objectionable by any deficiency as asserted in the pleadings. 53The authorities relied upon by Mr Ashhurst and referred to above support the conclusion that an order for interrogatories may be reasonably seen as "necessary" if it seeks to obtain an admission of fact from the other party that is relevant to a matter raised by the pleadings (even if the interrogating party already has some knowledge of that fact from other sources) or if the answer to that interrogatory is likely to reduce or remove the need for the calling of additional evidence. 54I accept that the interrogatories sought in this case are necessary because an admission is sought (before the hearing takes place) that the Cassegrain directors did not obtain the fully informed consent from any of the shareholders to the transfer of GC&Co's shares in CaTTO and OAL to Felicity and as to Felicity's knowledge of the circumstances surrounding the transfer of shares to her. Mr Ashhurst submits, and I accept, that the fact that the Cassegrain directors currently intend to give evidence at the trial is irrelevant since it would be open to them to exercise their right not to read the affidavits currently served in due course and because an interrogating party is not required to wait until the trial for an admission of fact that is relevant to its case. 55Mr Lindsay's submission was that the Cassegrain defendants want to have a fair trial, and that this could not be obtained if what was proposed was simply that Denis would rely upon documentary evidence, including answers to interrogatories (where there would be no testing of the evidence), suggests that it is open to a defendant to require that the case brought against him or her be conducted in a particular way. No authority was cited for that proposition. The only perceived unfairness (it seems) is that there may not be an opportunity for Denis to be cross-examined. I do not see how this is relevantly unfair. It is equally a matter for the defendants to determine whether they wish to give evidence of the facts and matters in question (as it seems Felicity has already done). If, having chosen to serve affidavits, they later choose not to read them then (other than as to costs perhaps) that would, as Mr Ashhurst suggests be open for them to do. I do not accept the suggestion that to order interrogatories would amount to procedural unfairness. 56It was submitted by Mr Lindsay that if interrogatories were to be ordered, then the court should make this subject to a condition that Denis (and those siblings who 'stand behind' Denis) should file, serve and read an affidavit from which they can be cross-examined as to the state of knowledge and that without that form of protection it is said that there would ultimately be a denial of a fair trial and procedural fairness. For the reasons above, I do not accept that this is the case and I do not consider that such an order should be made. 57Mr Ashhurst submitted that the proposition that a plaintiff has to go into evidence before being able to administer interrogatories is contrary to the principle in Duke of Sutherland v British Dominions Land Settlement Corporation Ltd . It is further submitted that all of the relevant events took place in the absence of Denis, that he was not present for those matters and that he relies entirely upon documents obtained in part from the defendants and in large part from third parties to put together a documentary trail of what took place. Thus it is said that if the fact that Denis is not intending to adduce evidence is relevant at all there is a reasonable explanation for that. It seems to me that the complaint by Mr Lindsay is really a complaint that the Cassegrain directors have not themselves sought interrogatories. That is a matter for them. I do not consider it appropriate to make the order for interrogatories conditional on the filing of any such affidavit.

Conclusion 58I am of the view that the interrogatories sought to be admitted in this case are reasonably necessary for the purposes of trial and (for the fair disposal of issues at the trial) and will save time and cost. I consider the interrogatories to be unobjectionable in form and I do not consider that they are likely to produce any uncertainty or difficulty for the defendants in answering them (whatever may be the criticisms of the pleadings in this regard). I do not accept that to order the interrogatories (or to do so without a condition of the kind suggested by Mr Lindsay) will be to deny procedural fairness or a fair trial to any of the defendants. 59Accordingly, I make the following orders: (1)I order pursuant to Part 22.1 of the Uniform Civil Procedure Rules 2005 (NSW) that the second defendant answer interrogatories in the form of the draft interrogatories annexed and marked "A" to the affidavit sworn 18 November 2010 of Andrew Joseph James Lacey, within 14 days and that those answers be verified by affidavit. (2)I order pursuant to Part 22.1 of the Uniform Civil Procedure Rules 2005 (NSW) that the third defendant answer interrogatories in the form of the draft interrogatories annexed and marked "B" to the affidavit sworn 18 November 2010 of Andrew Joseph James Lacey, within 14 days and that those answers be verified by affidavit. (3)I order pursuant to Part 22.1 of the Uniform Civil Procedure Rules 2005 (NSW) that the fourth defendant answer interrogatories in the form of the draft interrogatories annexed and marked "C" to the affidavit sworn 18 November 2010 of Andrew Joseph James Lacey, within 14 days and that those answers be verified by affidavit. 60I will hear any submissions as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 March 2011

Uniform Civil Procedure Rules 2001(NSW)

Corporations Act 2001(NSW)

In the matter of Gerard Cassegrain & Co Pty Ltd - Cassegrain v Gerard Cassegrain & Co Pty Ltd

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