Cassegrain v Cassegrain

Case [2015] FCA 1233

FEDERAL COURT OF AUSTRALIA

Cassegrain v Cassegrain [2015] FCA 1233

Citation: Cassegrain v Cassegrain [2015] FCA 1233
Parties: DENIS CASSEGRAIN, CATHERINE DUNN, PATRICK CASSEGRAIN and JOHN CASSEGRAIN v FELICITY CASSEGRAIN
File number: NSD 351 of 2015
Judge: ROBERTSON J
Date of judgment: 17 November 2015
Catchwords: BANKRUPTCY AND INSOLVENCY – application for a sequestration order based on judgment of the Supreme Court of New South Wales – whether bankruptcy court should “go behind” the judgment of the Supreme Court – hearing of proceedings directed to overturning the judgment relied on as the foundation for the bankruptcy proceedings pending in the Court of Appeal – whether those proceedings based on genuine and arguable grounds – Held: application for sequestration order adjourned until the determination of the proceedings in the Court of Appeal
Legislation: Bankruptcy Act 1966 (Cth) ss 33, 40, 43, 52
Civil Liability Act 2003 (NSW) s 34
Conveyancing Act 1919 (NSW) s 66G
Cases cited:

Adamopoulos v Olympic Airways SA (1990) 95 ALR 525
Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137
Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2; 316 ALR 111
Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2015] NSWSC 851
Cassegrain and Ors v Gerard Cassegrain & Co Pty Limited (in liq) [2014] NSWSC 411
Cassegrain and Ors v Gerard Cassegrain & Co Pty Ltd [2012] NSWSC 834; 264 FLR 392
Cassegrain v Gerard Cassegrain & Co Pty Ltd [2012] NSWSC 403; 88 ACSR 358
Corney v Brien [1972] HCA 5; 126 CLR 212
Council of the City of Sydney v Obeid [2013] FCA 149
Eykamp v Deputy Commissioner of Taxation [2010] FCA 797
Gerard Cassegrain & Co Pty Ltd (in liq) v Cassegrain [2013] NSWCA 455; 305 ALR 687

House v The King [1936] HCA 40; 55 CLR 499
ICM Agriculture Pty Ltd v Young [2009] FCA 1169; 260 ALR 515
Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494
Radich v Bank of New Zealand (1993) 45 FCR 101
Re Betts; Ex parte Betts [1897] 1 QB 50
Sarks v Cassegrain [2015] FCAFC 38; 321 ALR 28
Totev v Sfar [2006] FCA 470; 230 ALR 236
Xu v Wan Ze Property Development (Aust) Pty Ltd (in liq),
Ren v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014 FCA 461; 315 ALR 523
Date of hearing: 14 and 29 October 2015
Date of last submissions: 3 November 2015
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 96
Counsel for the Applicants: Mr ET Finnane
Solicitor for the Applicants: McCabes Lawyers
Counsel for the Respondent: Ms LM Jackson
Solicitor for the Respondent: Peter Condon & Associates

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 351 of 2015
BETWEEN:

DENIS CASSEGRAIN
First Applicant

CATHERINE DUNN
Second Applicant

PATRICK CASSEGRAIN
Third Applicant

JOHN CASSEGRAIN
Fourth Applicant
AND:

FELICITY CASSEGRAIN
Respondent

JUDGE:

ROBERTSON J

DATE OF ORDER:

17 NOVEMBER 2015

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Details
AGLC
Cassegrain v Cassegrain [2015] FCA 1233
Case
[2015] FCA 1233
Decision Date

CaseChat Overview and Summary

In the case of Cassegrain v Cassegrain, the applicants sought a sequestration order against Felicity Cassegrain based on a judgment debt. The dispute revolved around whether the bankruptcy court should review the underlying judgment or defer to the pending appeal proceedings in the Court of Appeal. The primary legal issue was whether the court should "go behind" the judgment of the Supreme Court of New South Wales or wait for the outcome of the appeal proceedings that contested the judgment on which the sequestration order was based.

The court considered the principle that it may review a judgment to determine if a debt is genuinely owed but found no substantial reason to question the validity of the costs judgment in this case. The court noted that Felicity Cassegrain was represented and had the opportunity to contest the judgment, and there were no circumstances that would warrant the court reviewing the judgment. However, the court decided not to proceed with the sequestration order as there were ongoing proceedings in the Court of Appeal that challenged the judgment on genuine and arguable grounds. The court concluded that it should defer to the appeal process, particularly since the proceedings seemed to be based on valid and substantial arguments.

The court's decision was to adjourn the application for a sequestration order until the determination of the proceedings in the Court of Appeal. The order allowed for liberty to apply on three days' notice and reserved costs. This decision ensured that the applicants' rights to seek sequestration were preserved but balanced against the need to await the outcome of the appeal, which could potentially invalidate the judgment debt upon which the sequestration was sought.

Orders

Orders of the court

1. The application for a sequestration order filed 8 April 2015 be adjourned pending the determination of the proceedings in the Supreme Court of New South Wales, Court of Appeal in case numbers 2015/219321 and 2015/299594.

2. Liberty to apply on three days’ notice.

3. Costs be reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 10 April 2014, Bergin CJ in Eq granted leave to the plaintiffs to amend their statement of claim: Cassegrain and Ors v Gerard Cassegrain & Co Pty Limited (in liq) [2014] NSWSC 411. Her Honour noted that Order 16 as against Felicity Cassegrain had not been set aside by the Court of Appeal but proceeded on the basis that, insofar as it affected Felicity Cassegrain, that order was to be set aside:[7] The CA Orders as entered are only found in the Front Sheet of the CA Judgment in which there is no reference to the setting aside of Declaration 10 which declared Felicity jointly and severally liable with Claude and Mr Sarks to compensate GC & Co. Paragraph [180] of the CA Judgment includes the conclusion that the “orders made against Felicity should be set aside”. Declaration 10 as entered on 24 July 2012 remains unaffected by the CA Orders. The only order made against Felicity that has been set aside is Order 17 for an inquiry to be held for the purpose of making orders for equitable compensation to be paid by Claude, Mr Sarks and Felicity to GC & Co. Order 16 in which Felicity was ordered to pay the plaintiffs’ costs of the proceedings against her at first instance also remains in place notwithstanding the last bullet point of para [180] of the CA judgment.…[73]The other matter with which the Court of Appeal suggested this court should deal was the order as to costs of the proceedings at first instance as between the plaintiffs and Felicity. Although the Court of Appeal has not set aside Order 16 I will proceed on the basis that it was intended that, insofar as this order affected Felicity, it was to be set aside. I will hear the parties further on this aspect of the matter when they bring in Short Minutes of Order. It will also be necessary to clarify the position as to what is intended, if anything, by way of application to the Court of Appeal to adjust its orders before orders are made in these proceedings reflecting the leave granted to amend the pleading, for the inquiry referred to above, and orders in respect of the costs of the trial.Conclusion[74] Leave is to be granted to the plaintiffs to amend their pleading by the inclusion of paragraph 11A of the relief claimed in the draft pleading. I will hear the parties further, including on the costs of this application, when the matter is listed for the making of the orders and for clarification of whether the parties have approached the Court of Appeal in respect of the orders it made on 20 December 2013. The matter is listed at 9.45am on 29 April 2014 for any further applications and directions. On 13 May 2014, the Court of Appeal, by consent, set aside Order 16 as against Felicity Cassegrain. Those orders were: By consent, the Court orders:1.That Order 2 made by the Court on 20 December 2013 in the proceedings be corrected pursuant to UCPR 36.17 as follows:“2. Declaration 10 and Orders 16 and 17 of the orders made by the primary judge on 24 July 2012 in the proceedings at first instance (2008/281625) be set aside in relation to Felicity Cassegrain”.

Ratio Decidendi

Legal Principle Established

The applicants submitted that the case did not fall within the concept of futility outlined in Re Betts because the respondent did have assets. The respondent’s submission on the topic of futility amounted to a submission that the respondent was hopelessly insolvent. She should, therefore, be bankrupted without delay rather than being allowed to continue to dissipate her assets on hopeless and futile litigation. Consideration I considered some of the relevant principles in Xu v Wan Ze Property Development (Aust) Pty Ltd (in liq), Ren v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] FCA 461; 315 ALR 523. So far as presently relevant, I there said, at [55] and [57]:This court may, in an appropriate case, go behind a judgment to see whether in truth and reality a debt is due from the judgment debtor to the judgment creditor: Corney v Brien (1951) 84 CLR 343; Wren v Mahony (1972) 126 CLR 212. … Nevertheless, the power to go behind a judgment is not readily exercised if there has been a substantive hearing of the matter on its merits by the court in which the judgment was granted.…This court does not have the power to set aside the judgment on which the bankruptcy notices are based, even if it does go behind the judgment. Of course, this court is not hearing an appeal from the judgment on which the bankruptcy notices are based. Thus, as the Full Court pointed out in Emerson [v Wreckair Pty Ltd (1992) 33 FCR 581 at] 587–8, the court exercising jurisdiction in bankruptcy has no power to set aside a judgment but only to prevent the judgment creditor from having recourse to the provisions of the Bankruptcy Act. As between the parties, the judgment stands unimpeached until set aside by the court which gave it: Re Vitoria; Ex parte Vitoria [1894] 2 QB 387, and the judgment may be enforced accordingly by whatever means may otherwise be available. Because the court of bankruptcy does not set aside the judgment, the expressions “going behind the judgment” or “going round the judgment” are used. Despite the volumes of material to which I was taken, my conclusion may be expressed shortly. As to going behind the costs judgment, I am not persuaded by the respondent, Felicity Cassegrain, that the orders have been entered without her consent in any relevant sense so as to make the Court more ready to find there was a substantial reason for questioning whether the judgment was based on an actual debt. I find that the 5 December 2014 costs order was made at a time when Felicity Cassegrain was legally represented and that her solicitor appeared before Bergin CJ in Eq who made the relevant order. Although the circumstances in which the Court may and should “go behind” a judgment do not fall into tidy categories, I see no basis on which I should do so in the present case. However, although I am not persuaded that there is a basis on which I should “go behind” the costs judgment, I consider that I should not sequestrate the estate of Felicity Cassegrain where proceedings are pending in the Court of Appeal against or affecting the judgment relied on as the foundation for the bankruptcy proceedings, as it seems to me the proceedings in the Court of Appeal are now based on genuine and arguable grounds: Ahernv Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 per Davies, Lockhart and Neaves JJ; Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 at 532 per Burchett and Gummow JJ. I applied these decisions in Council of the City of Sydney v Obeid [2013] FCA 149 at [37] to [39].