Cassegrain v Gerard Cassegrain & Co Pty Ltd and Ors; Cassegrain v Gerard Cassegrain & Co Pty Ltd
[2014] HCATrans 138
[2014] HCATrans 138
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S9 of 2014
B e t w e e n -
CLAUDE CASSEGRAIN
Applicant
and
GERARD CASSEGRAIN & CO PTY LTD
First Respondent
JOHN BAPTISTE CASSEGRAIN
Second Respondent
PATRICK ANTHONY CASSEGRAIN
Third Respondent
DENIS CASSEGRAIN
Fourth Respondent
CATHERINE DUNN
Fifth Respondent
Office of the Registry
Sydney No S10 of 2014
B e t w e e n -
FELICITY CASSEGRAIN
Applicant
and
GERARD CASSEGRAIN & CO PTY LTD
First Respondent
Applications for special leave to appeal
HAYNE J
BELL J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON FRIDAY, 20 JUNE 2014, AT 10.32 AM
Copyright in the High Court of Australia
____________________
MR M.L.D. EINFELD, QC: May it please the Court, I appear with my learned friend, MR P.G. BOLSTER, for the applicant in the first of the Cassegrain matters. (instructed by Oliveri Lawyers)
MR D.F. JACKSON, QC: If the Court please, I appear with my learned friend, MS P.J. GORMLY, for the applicant in S10. (instructed by Peter Condon & Associates)
MR B.W. WALKER, SC: May it please, your Honours, I appear with my learned friend, MR G.B. COLYER, for all the respondents. (instructed by McCabes Lawyers Pty Limited)
HAYNE J: Now, do counsel have a view about how better to hear these applications? Are we better to hear them sequentially or are we better to hear the applicants followed by one address by Mr Walker? Do counsel have a submission or view to put?
MR WALKER: If it helps your Honour, we would favour the latter.
MR EINFELD: We would have no objection to the latter, your Honour.
MR JACKSON: My suggestion would be applicants first.
HAYNE J: Very well. Yes, Mr Einfeld.
MR EINFELD: May it please the Court. Your Honours will have gleaned that we do not wish to pursue the ground of appeal relating to the issue estoppel question. Upon a finding of fraudulent breach of duty by a company director, there are a number of possibilities which emerge. The view espoused by the primary judge and the President below was that a six‑year limitation period was to be applied in equity by analogy with a limitation period imposed by section 14 of the New South Wales Act. The view that 12 years was the more appropriate period on a trust property basis, broadly speaking, was adopted, as your Honours know, by Justice Basten with whom Justice Macfarlan agreed, applying section 47 of the Act.
The respondents in their written argument propound a third possibility, or appear to do so, dependent upon a broad assessment of what might be thought to be just or unjust in the circumstances. Although the evidence as to dishonesty might have been somewhat tenuous, there are concurrent findings to that effect and they, of course, are accepted and indeed form the premise upon which the present application proceeds.
Your Honours, the six‑year period would have applied had the claim been one at law, either in deceit or for perhaps moneys had and received or perhaps some other tortious action where dishonesty was found on a claim of such a kind of course six years would apply, whereas in this case the claim was brought in equity for equitable compensation for breach of duty. In our submission, the President was correct in concluding that by analogy the six‑year limitation period ought be applied by equity as section 23 of the Act permitted and authorised equity to do.
The principles were summarised effectively, in our submission, in the decision of the Court of Appeal in England to which reference was made below. May we just trouble your Honours to go briefly to the volume of materials and at tab 4 of which is the Court of Appeal’s decision in Cia de Seguros Imperio v Heath at page 120 of which, under the italicised heading “Would a court of equity have applied statutes of limitation by analogy?” reference is made to Knox v Gye which is commonly cited in this area.
We would invite your Honours to bring to account the extracted passage and, in particular, the last sentence of it. In this particular case there were no express words applying limitation periods in an equitable context and equity by analogy will apply the statutory provision most apposite in the circumstances, in this case for deceit, for the tort of deceit as the primary judge and the President concluded.
The following page at about point 3 in Lord Justice Waller’s analysis addressing the submission that equity would have taken the view that it should apply the statute to a claim for damages of compensation for “dishonest breach of fiduciary duty”, the point is made a little further down the paragraph that the prayer for relief was for “equitable compensation” and that was the precise circumstance in this case, as we will demonstrate. While we have the decision open, reference is made by our friends and by us, I think, to the passages at page 125 and 126 of the judgment of Lord Justice Clarke. May we draw the Court’s attention to the first ‑ ‑ ‑
HAYNE J: Just before you depart from page 121, I would have thought that what appears after the word “but” is open to some controversy perhaps:
but the reality of the claim is that it is one for damages ‑ ‑ ‑
MR EINFELD: Yes.
HAYNE J: Right. So where am I going to next?
MR EINFELD: Just very briefly in the judgment of Lord Justice Clarke, at the top of page 125, the first full sentence starting “Detailed analysis”:
the basis of the claim is equitable and that the claim is one for compensation.
As here, this was an equitable claim for equitable compensation and as was put:
the reality of the claim is that it is a claim for damages which would be assessed in the same way as a claim for damages at common law.
That is the case here as well. At the penultimate paragraph, again reference to “the essential nature of the pleaded case”. Finally, at page 126, his Lordship adopts the expression in Spry where:
there is a sufficiently close similarity between the exclusive equitable right in question, namely the claim for compensation for breach of fiduciary duty –
as here –
and the legal rights to which the statute applies‑namely the claim for damages –
We would say the claim in tort here analogously for deceit –
that a court of equity would (and will) ordinarily act on the statute of limitation by analogy . . . the relevant equitable rules should accord with the comparable legal rules.
Those passages, in our respectful submission, ought to have governed the outcome of this case in the Court of Appeal.
BELL J: Mr Einfeld, in the reasons of Justice Basten at application book 177, paragraphs 193 and 194, his Honour analyses the proceeding to conclude that it did not come “outside the terms of s 47” and, indeed, if he be wrong in that, that section 47 remained the provision closest in kind to the circumstances of the case and for that reason should apply by analogy ‑ ‑ ‑
MR EINFELD: He did.
BELL J: ‑ ‑ ‑ and his Honour noted that no adequate submission had been addressed to explain why that line of reasoning was erroneous. Now, it is that approach that is relied upon by the respondent on this application and I do not discern where you really deal with that.
MR EINFELD: May we do that exactly now, which was the next point we were turning to. I was seeking to deal with section 14 first, and then may we now turn to section 47. Firstly, the director was not a – a company director is not a trustee of the company’s property. So much is made clear by this Court’s decision in Clay v Clay to the extent that it might be said that the company director became a constructive trustee of the property. Once it was removed from the company’s custody there is a paramount answer. There was good reason why no explanation may have been given below. The explanation is, may we say, self‑evident.
This was not a claim brought upon a trust at all, and I will take your Honour to the pleading in just a moment. This case was not brought as a claim in trust. There was no claim for a declaration that the defendant below was a constructive trustee or a trustee of any kind, nor, to take up the words that appear within but at the end of the passage to which your Honour was referring, nor was it brought or presented as a claim in conversion, nor as a claim for the taking of accounts and for moneys payable on account.
We have included, for that very reason, in the materials volume at tab 5 at the end of the volume, the pleading upon which the case was brought from which your Honours will see at the page numbered at the foot, 83 of the volume, an identification of the prayers for relief. The first of them was referable to Mr Jackson’s client but not to ours; the second was for a declaration that there was a breach of fiduciary duty in the manners indicated. An injunction was sought but then further declarations in relation to a property holder, not us, and finally, an order to determine the drawings and 6, most critically, an order that Mr Cassegrain:
pay equitable compensation, including interest –
Now, the pleading itself, after a fairly lengthy introduction, picks up at paragraph 14 what the claims are. That is to be found at page 91 of the volume and the claims are absolutely and squarely put in fraud. I will not take valuable time now to go through them, but if your Honours look at paragraphs 14 and 15, they are expressed to be allegations of fraudulent conduct. There is no allegation of trust, nor conversion, nor an entitlement to an account. The alternative paragraph is in 15A ‑ ‑ ‑
HAYNE J: In the context, the allegation of fraud is an allegation of a deliberate and knowing breach of duty is it not?
MR EINFELD: Correct.
HAYNE J: What is the duty that has been breached?
MR EINFELD: The duty that is said to be breached is that of the director as a company owed to act in the interests of the company and not in the personal interests of the director.
HAYNE J: It is the “not in personal interests” which is the sting, is it not?
MR EINFELD: Well, it is, but nevertheless – it is, and we will address that point in a moment. But the whole of the claim was presented, no doubt by way of deliberate election, not as a claim in trust, nor conversion, nor for the taking of accounts, and his Honour Justice Basten in his analysis in paragraph 193 appears to have entirely, with respect, overlooked the fact that this was a claim squarely based in fraudulent conduct. Indeed, the thrust of the pleading and the concurrent findings are all of fraudulent conduct, true it is in the context of a breach of fiduciary duty but no doubt any ‑ ‑ ‑
HAYNE J: Knowing and deliberate breach of fiduciary obligation.
MR EINFELD: That is the allegation, your Honour. Well, it is pleaded as knowing and deliberate breach of the fiduciary obligation, yes.
HAYNE J: Yes.
MR EINFELD: Now, that said, that places the allegation of fraud squarely, we would respectfully submit, squarely as a matter by analogy – squarely as one analogous to a claim in deceit at common law. What was sought – the only relief that was sought as against Mr Cassegrain relevantly was a claim for equitable compensation which was the appropriate relief in equity.
Had the claim been brought at common law for deceit it would have been supported by a prayer for relief by way of damages, the calculation of which would have been identical with that appropriate to the assessment of equitable compensation. For those reasons, in our submission, it was inapposite for his Honour, with whom Justice Macfarlan agreed, to conclude that the appropriate analysis was as on a finding of trust or other causes of action which were not – and no doubt deliberately not – presented as a basis for the claim.
That then brings us to the third possibility, not adopted by any of the members of the courts below but raised it would seem, on our friend’s written argument. In the context of discussing the receivership issue to which we will turn in just a moment, the respondent suggests that it was open to the Court of Equity to decline to apply a limitation period in the exercise of its discretion on what would seem to be a general basis as to whether it was just or unjust to do so or not do so.
We could perhaps address that more fully in reply but may we, at this stage, make two short points. The very passages to which we took your Honours in Knox v Gye and the Cia de Seguros Case make plain that where the analogy is good, that is where there is a finding of fraudulent conduct where there is an analogy with one of the areas of disputation identified in the limitation statute giving rise to the imposition of a six‑year period, namely a claim in tort, then the equitable rules should accord with the comparable legal rules and equity should follow the law.
In particular in this case, where the claim expressly founds on allegations of fraudulent conduct, it would be entirely anomalous if instead of applying the analogous provisions relating to the tort of deceit the court were instead to say because the claim was brought in equity and because the conduct was fraudulent, be it as a breach of fiduciary duty or otherwise, we should as a matter of discretion because we think it would be unjust, decline to apply the statutory period. In our submission, there is no such principle. None has been cited in support of it, and it would be inappropriate, we would submit, for equity to take such a stance.
The proposition that the provisions of section 14 ought be applied as authorised by section 23 is a matter of general importance. All States and Territories have provisions comparable to – corresponding with section 14, and all but South Australia and the Australian Capital Territory have provisions corresponding in broad terms with section 23.
If there is to be some analysis other than the section 47 one which we simply say was just not available because no such claim was presented for the court’s determination, then that raises a very significant and important point of general application in the area of corporate governance and general application of the principles of inequity of the prescribed limitation periods and that too is a matter of broad significance.
May we deal lastly with the receivership issue? As your Honours know, the statutes in Australia generally extend or suspend periods of limitation in the case of disability but, contrary to the submissions in the written argument of our friends, only will equity do so, or any court do so, if there is a disability of the kind specified in the statute.
The relevant subsection – it is 11(3) - is extracted in the material but in broad terms addresses itself, as it does in the other States, to personal circumstances of personal litigants not yet attaining the age of majority, physical or mental impairment disability of a kind that we would submit is generally inapposite to corporate defendants but, in our submission, there is no warrant, as has been suggested, for equity to say because the common law will extend or suspend the limitation period in the case of personal litigants on account of a physiological or psychological disability or a failure yet to attain the age of majority, that there is any warrant at law, none at all at law and none at equity, then to say equity applies in some analogous way what it considers to be appropriate, such as to apply to a period of receivership of a corporate entity.
HAYNE J: Well, the application may be said to depend upon a view of the role of a receiver manager which may not be consistent with the way in which that role has developed in the ordinary application of company law. The receiver manager is there with duties perhaps of a rather broader kind than may be assumed by the suspension.
MR EINFELD: That is so, your Honour, but there are two points really. The first is that the extension provisions – the disability provisions simply have no application to an administration or receivership.
HAYNE J: You have made that point, we understand that.
MR EINFELD: Yes, your Honour. The second point is that the basis upon which the suspension was applied in this case was said to be a conclusion that it would be unlikely that the company would obtain – or the personal shareholders would be unlikely to obtain leave to bring a derivative suit. Now, in our submission, assuming that conclusion was open and Justice Basten doubted it, the fact, if it be so, that it would be unlikely that a company would be able to proceed by way of derivative suit or that a grant of leave would be afforded to bring a suit by way of derivative action has no analogy with any of the specified grounds for extending time that is set out in the statute. Both matters are matters of genuine importance ‑ ‑ ‑
HAYNE J: Yes. Well, I see the time, Mr Einfeld.
MR EINFELD: May it please the Court.
HAYNE J: Yes, Mr Jackson.
MR JACKSON: Your Honours, as appears from paragraph 37B of our submissions at page 285, we adopt the arguments in the application that has just been made and, if accepted, those arguments would undermine the findings against us in relation to both transfers, but could I deal with the application that we make more specifically.
There were, as your Honours will have seen, two transfers - the first by the company to, if I could use their names, Claude and Felicity as joint tenants, and, secondly, Claude’s interest as joint tenant to Felicity. Your Honours will see those referred to at page 280, paragraphs 7 and 11. Your Honours, there was no suggestion that Felicity was aware of Claude’s conduct which has been held to have been fraudulent - your Honours will see that referred to in the Court of Appeal’s reasons at page 200, paragraph 9 - and she relied on section 42 of the Real Property Act and the title she acquired by registration.
Your Honours, section 42 is set out at various places but your Honours will see it, for example, at the top of page 202 where you will see the relevant part of it and then the words “except in case of fraud” emphasised. Your Honours, there was, as I said, no suggestion that she was in any way implicated in the fraud, yet the respondent was held to have established that the exception was applicable. That was on the basis that her husband was her agent in effecting the registration.
Could I in that regard take your Honours first to Justice Beazley in the Court of Appeal at page 202. You will see in paragraphs 12 through to 14 that her Honour sets out what are the principles and your Honours will see in particular in paragraphs 13 and 14 the reference “the nature of personal dishonesty or moral turpitude”. Then your Honours will see where the case starts to move away, in our submission, is in paragraph 14 where her Honour quotes the passage:
The fraud “must be brought home to the person whose registered title is impeached or to his agents” –
Then, your Honours, quoting from Registrar of Titles (WA) v Franzon:
the fraud must be “fraud for which the person becoming registered is responsible” –
Now, your Honours, if I could pause at that point. The approach taken by her Honour in this regard appears to be one of saying that the fraud can be a fraud in which the person who obtains the title is not themselves a participant but the person whose agent to, in effect, effect registration was themselves acting fraudulently. Our submission would be, first in relation to that, that that is going too far, that there needs to be an involvement of the person who obtains the title in the fraud, and I will come to that in just a moment if I may. The second aspect we would say is that in a case where the respondent bore the burden of proof of fraud, the reliance on the Blatch v Archer principle, to which I will come in a moment, to fill the absence of evidence of agency was inappropriate.
HAYNE J: It will commonly be the case, will it not, Mr Jackson, where a fraudster effects a change in the register that even if there is some third party engaged the fraudster will keep control of the process of lodging to ensure that it goes through? In what sense is the fraudster the agent of the other party, in what sense is it said in these reasons that he was the agent of her?
MR JACKSON: Well, your Honours, it seems to be and what your Honour is putting to me is a matter that does really lie, in a sense, at the heart of things. You will see, for example, if I could go first to paragraph 155 at page 250, this is in the judgment of Justice Macfarlan who concurred on the agency point and then said - your Honours will see halfway through that paragraph the sentence commencing:
Although, to constitute an exception to indefeasibility, fraud must be that of the registered proprietor, the fraud of an agent acting within the ambit –
your Honour will see. His Honour then referred to Breskvar v Wall as being such a case but, your Honours, if one does go to Breskvar v Wall, and your Honours will see it in the materials, 126 CLR 376, what you see – it is the last one in the bundle of our materials, your Honours – I am sorry, second last. What one sees in that decision, your Honours, in the judgment of Justice Menzies is at page 395 first of all – I am sorry – page 395 about point 3 on the page, it is said:
the second is that it was obtained by his own fraud -
speaking of Wall, the person whose agent was said to have done it. Then your Honours will see on the previous page, 394, halfway down the page, the learned trial judge found the fraud and found that Wall was a party to it. So the point that I am making about that, your Honour, is that his Honour is, with respect, incorrect in saying that Breskvar v Wall which is the leading case in the area, indicates that it is purely sufficient to be a person to effect the registration.
Could I also say, your Honours, if I could go back then to paragraph 14 of Justice Beazley in that regard at page 202, you will see that her Honour referred in part to Registrar of Titles (WA) v Franzon, Justice Mason’s judgment and reasons in that case. A curious feature of it, your Honours, is that a little further in the reasons at page 229 at paragraph 97, her Honour appears to cite that case in a way which does not seem entirely consistent with the conclusion at which she arrived ultimately. In that regard, what her Honour says is:
The defeasibility of the title of a person who took from or through . . . is in apparent conflict with the principle that the fraud must be “fraud for which the person becoming registered is responsible” –
That seems to involve, your Honours, that the person who obtained the titled by registration was in some way implicated in the fraud by the agent. Your Honours, could I just say then that if one looks at what took place in relation to the way in which the question of agency was approached - it commences at page 204, paragraphs 19 and following - you will see, and this is in a sense in answer to your Honour Justice Hayne’s question, the title of the section used on the page “Was Claude Felicity’s agent” et cetera.
Your Honours, in that regard what appears – if one goes to paragraphs 19 to 22 and, your Honours, they are relatively long passages I have to deal with in blocks, if I may, paragraphs 19 to 22, there was no evidence to establish that Claude had exercised actual or apparent authority on behalf of Felicity. Of course, this was a transfer by the company, the first transfer. The second thing was, your Honours, at paragraph 23, page 205, the contention, in effect, was being advanced that it must have been Claude who was giving the various instructions.
There is then, your Honours, paragraphs 24 to 36. Her Honour sets out various contentions relied upon by the respondent and she arrived in the end at the conclusions that are set out in paragraphs 37 to 38. If I could go then to paragraph 37 at page 211, her Honour said in the second sentence:
I consider that it was a direction by Claude –
That is the letter from the company –
on behalf of himself and Felicity as transferees to Mr McCarron –
as solicitor –
to register the transfer. Notwithstanding that the evidence of agency to which I have referred was not determinative, I am of the opinion that there was sufficient evidence from which an inference may be drawn that Claude was Felicity’s agent for the purposes of directing Mr McCarron to register the first transfer.
HAYNE J: What, because he as the fraudster gave the instruction he is to be taken to have acted on behalf of the person who has been found not to have been fraudulent?
MR JACKSON: Yes, your Honour. If anyone has bootstraps still these days that is an argument based on the bootstraps, in our submission. Your Honours will see then the result in paragraph 38. Your Honours, if one looks at what the evidence was, it really amounts to a direction by the transferor to register the transfer and no matter how one dresses it up, it is, in our submission, no more than that. Could I take your Honours to what the primary judge said? That is at page 58 in paragraphs 154 to 158, and your Honours, that expresses shortly, in our submission, what the position was.
BELL J: On that aspect, I think, Justice Basten supported the primary judge.
MR JACKSON: Yes, that is so, your Honour. Now, your Honours, I took your Honours to paragraph 34, I think, earlier, page 210. In effect, the President acknowledged that the evidence of agency was not good enough by itself but she said there were the other matters she referred to at paragraphs 34 and 37. Your Honours, we would say this was an unorthodox application of the Blatch v Archer principle. We have referred to that, your Honours, at page 282 in paragraph 23 of our written submissions.
This was a case, we would submit, where there was a burden of proof that lay in establishing that there was agency because it was part of the element of fraud relied upon, and in dealing with that there was no, as we say in paragraph 23(b), if there were to be an inference drawn, then at least it should not have been drawn against us. There was no reason why the respondent could not have called Mr McCarron as easily as we could and, your Honours, in paragraph 23(c) most of the persons who signed the transfer were not – the persons signing the transfer were Mr Claude Cassegrain and also Anne Marie Cassegrain and there was no reason why she could not have been called by them as well. Why should we have to call her when the burden of proof of fraud lay on them? That is what I wanted to say about the first transfer.
May I deal with the second transfer which is of the joint tenancy, in effect, held by Claude – that was between himself and to Felicity. Now, Justice Beazley, if I could deal with her position first, relied on two bases: firstly, agency. You will see that referred to at page 221, paragraph 71. Now, her Honour took the view that if fraud was established – I am sorry, I will start again. She took the view that agency was established but she also went on to say:
If fraud is established on Claude’s part –
then, in any event, she would apply section 118(1)(d)(ii). That provision, your Honours, is set out in paragraph 65 at page 219, and you will see that it referred to - 118(1)(d):
Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows:
. . .
(d)proceedings brought by a person deprived of land by fraud against . . .
(ii)a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud . . . ”
Now, your Honours, the fraud of Claude that was found to exist was not in any way in the manner of procuring registration but in the finding that the money utilised as consideration was not money he was entitled to allocate to that end. Your Honours, I use those sort of slightly neutral terms because in the end there were some book entries in relation to loans and so on.
Your Honours, we would submit in relation to that, if I could go to page 64, and to Justice Barrett in paragraphs 175 through to 180, his Honour referred at the last sentence of paragraph 176 to the possibility of the application of 118(1)(d)(ii) and then went on to deal with the possible application again of the fact that she was not a:
“a transferee . . . for valuable consideration” –
paragraph 177, and then said in 178 that:
one important thing is lacking. Claude . . . was not “registered as proprietor of the land through fraud”. These are the operative words of the section.
He referred to the process by which registration was achieved and your Honours will see then that he sets that out in paragraph 179 and the conclusion at paragraph 180. Your Honours, we would submit that that is the better view of the provisions and the contrary view which was expressed at page 229, paragraph 98, by Justice Beazley and by Justice Macfarlan at page 251, paragraph 158 is not the better view of the provisions. Your Honours, those are our submissions.
HAYNE J: Thank you, Mr Jackson. Yes, Mr Walker. Mr Walker, do you expect that you will require longer than 20 minutes to complete your submissions in both applications?
MR WALKER: No, I do not think so.
HAYNE J: Yes, very well.
MR WALKER: Your Honours, starting first with what I will call the limitations question and in this respect comparing it as similar with the agency and Real Property Act, the indefeasibility questions, of course, all points, except for the particular decision about agency, all points raise matters concerning general important statutes. That much is plain to demonstration, and so long as litigation continues as long as one happily hopes, then limitations will have an obvious importance, we would accept that, and indefeasibility need hardly be - cannot be overemphasised as central to land title. So that as a special leave matter can be put aside as satisfied in both cases.
Why then should there not be special leave, first of all, in the frauds case, the case brought by the fraud on the limitations question, the whole thesis of which is to say, “I was a fraud. Deceit is fraud. Fraud is section 14, six years. You didn’t sue me in time”. Now, the first and obvious answer to that is section 14 is not peculiarly or uniquely or exclusively the repository of limitation periods for fraud. Most importantly, section 47 is the rival to be examined. Much of what my learned friend, Mr Einfeld, said depended upon what we might have done had we sued in common law. We did not. We sued in equity.
That then raised the question of trust, which was the next point, which is said to demonstrate that there was a special leave question to examine the proposition that section 14, six years, should have governed rather than section 47, 12 years. But your Honours have already seen, and we, with great respect, embrace as a sufficient demonstration of the point, the way in which in the Court of Appeal the analysis was properly understood that equitable compensation was claimed as the appropriate relief, because this was a man not merely a director but, by his fraud, a constructive trustee who had then, one may say, taken some pains to remove that trust property from his hands.
This was never a recovery of trust property case in that sense, that is, “I am the cestui que trust, you are the trustee either de son tort or constructively. Give it back to me”. It was not that case because the second transfer about which you are here in the indefeasibility case, that of course had been the means by which there had been an expatriation, so to speak, of the proceeds.
Well, now, that leaves only the question as to whether, given how section 11 defines “trust” which, to put it mildly is expansive, is such as to render section 47 in terms, as we put it in our written submission, that is, directly of its own force, applicable to the claim, to which the short answer is, yes, of course, that is what section 47 is about, or whether it does not by reason of that definition.
Now, one knows from section 11’s definition that it is no objection to a relation attracting the statutory term of trust that it arises out of the impeached transaction. My learned friend, Mr Einfeld, may not have in terms embraced it, but in substance he accepts that it was not merely as a director that his client held or managed the company’s property. It is of course trite law that if that is what one is doing - holding or managing a company’s property – you are not thereby under modern company law – I stress under modern company law – you are no longer to be treated as a trustee as you may once have been perhaps 180 years ago.
But rather it is by reason of not holding and managing the company’s property as director, but flagrantly and dishonestly breaching those duties and no longer serving that function in breach of the fiduciary obligation not to favour oneself at the expense of the entity to whom the duty is owed, that he came to hold the advantage of a fraudulent loan account and thereafter to derive, generated from that advantage, the advantage of registered title which he could not only enjoy, but also transfer on.
Now, in our submission, it is in that proper context that the first two points which really are one point – 14 or 47 – falls to be considered. This of course by seeking equitable compensation from the person who had constituted himself a constructive trustee and taken pains to get rid of the trust property, that, in our submission, is the paradigm of the case for which the opening provisions of paragraph 47(1)(a) are devised. It is for those reasons that there are insufficient prospects on that dual point to warrant a grant of special leave to consider what are of course very publicly, generally important provisions.
We then come to a point which is unnecessary to be considered because of what we propose in that regard but which for completeness and prudence I should address. This is the position which also combines two points that my friend kept separate. There is the application by analogy question and there is the – I will call it postponement. My friend called it receivership; I will call it postponement.
Now, the point there that we wish to make is this. Application by analogy is a tool of equity. It is of course fundamentally different in kind from applying the statute. It is where the statute does not apply and the question then is, is there analogy and how does application follow by analogy? We know the statute is not being simply applied because recourse to the equitable technique of application by analogy follows because there are elements in a claim not caught by the statutory words being elements of an equitable claim, relevantly, which sufficiently resemble at some principal level the elements which are caught by the statute in, say, the statutory or common law count covered by the statute.
It is for those reasons, in our submission, that one returns again to 14 and 47 and as an alternative would observe that the fiduciary leading to constructive trust leading to equitable compensation nature of the claim made against the fraud in this case obviously presents section 47 as a far superior fit by analogy if one has to resort to that than section 14 would be.
One could also say this about the better fit analogy point, that section 14, which of course covers a number of common law claims, in its application to tort and to the particulars sought of deceit, on the facts of this case and the way the claim was framed, lacks something that in deceit one would ordinarily see. I do not think I can say universally, but one would ordinarily see that the plaintiff has been misled, that is, has suffered loss by reason of a lie going abroad and a lie being acted upon.
Fraud, as used in describing Mr Cassegrain’s conduct, is somewhat broader, more robust. He dishonestly took property. He did not spread any lie to deceive people. He simply took property and dealt with it as if it were his own. It was done so openly as to be not only in accounts, but in public registers and, in our submission, that is another way of showing how 47 is an obviously superior analogy and again, on that second pair of points, there are insufficient prospects, in our submission, for the case to warrant a grant of special leave.
It need hardly be said, bearing in mind the nature of the findings upon which any such appeal would be argued, that this could not possibly be seen for those points to be a case in which the interests of justice in the particular case require a third court to be looking at the conduct, or perhaps a fourth court, given Justice Davies in the Federal Court, to be looking at the conduct of Mr Cassegrain and the consequences. I will come to the last point in his application, and that is the postponement point. It is, in our submission, an aspect of analogy which is recognised in the Court of Appeal of England and Wales ‑ ‑ ‑
HAYNE J: Well, what is the analogy that is to be drawn, an analogy with the notion of incapacity?
MR WALKER: Yes.
HAYNE J: Why is the company incapable simply because receivers are in? Does that not have a rather large ‑ ‑ ‑
MR WALKER: Yes, is the answer. I am going to concede this. I can only get to near enough being good enough. I cannot get to completeness.
HAYNE J: Well, and also that you are cutting down the obligations of receiver managers, are you not?
MR WALKER: I could not and will not, and would not either here or anywhere else, endeavour to do that as a general proposition. On the facts of this particular case, by reason of the way in which recourse was being had and the sufficiency of assets, et cetera, it would not be necessary to go into those very shallow waters indeed. I cannot say that this was a regime by dint of calling in the powers granted by the security which paralyse the company in the same way as a person in a coma is paralysed or the same way that a person who has become mentally incapable of handling his or her affairs is not capable of acting.
HAYNE J: But it would be a very large proposition for your side of the record to assert that receivership is tantamount to incapacity of the company to pursue a company claim.
MR WALKER: As a general principle I would not either enunciate it in that fashion or regard that as sufficient. We cannot do that.
HAYNE J: No.
MR WALKER: That is why I say it is about the equitable recourse to analogy that we develop ‑ ‑ ‑
HAYNE J: But if that is so, you have cut the argument off at the earlier pass, have you not?
MR WALKER: Perhaps, perhaps, but this is an aspect, if you like, of a more ample, multilayered application of the analogy in this sense, that it is not the case, as my learned friend rather suggested, that once one gets a tick in the box of best fit for analogy that then everything flows as if Parliament had legislated differently from the way it had. In particular, in the Court of Appeal of England and Wales, the Companhia de Seguros Imperio v Heath decision, to which my learned friend took you, (2001) 1 WLR at 126 just above letter D, one sees, as one would expect in a discussion of an equitable approach, a reference to “the particular circumstances of the case” and the possibility, there recognised, of them as they had not done in that case, making a particular application “unjust”.
That comes then, to the last point I want to make about Mr Cassegrain’s case. This postponement, and what has been, perhaps, incompletely called a receivership, was, in fact, a period of time when he remained in control of the company, subject to the receivership, and he actively resisted – actively resisted, not merely failed to co‑operate with – but actively resisted any of his depredations being ventilated or vindicated, either at the suit of the company – obviously he was controlling it subject to the receivership and, more to the point, derivatively, at the suit of my clients.
In our submission, in any proper equitable approach to an application by analogy of a period which at law would be subject to postponement, an appropriate analogy to fit those circumstances of the case in light of the justice of the case would have recognised the responsibility he had for the delay in that manner. Can I then move to the quite different case in relation to indefeasibility?
HAYNE J: Do you accept that success in resisting the first application says nothing about whether the second application should be granted?
MR WALKER: Yes, that is the burden of my saying it is quite different.
HAYNE J: Yes.
MR WALKER: Indeed, we go this far, that it is not entirely obvious why what my learned friend, Mr Jackson, said about adoption of and success in the other application either assists the application or an appeal, but leave that to one side. At the heart of that is, of course, the agency question.
HAYNE J: In what sense do you say the Court of Appeal was using the term “agent” when it finds that Claude was relevantly an agent for Felicity?
MR WALKER: In this sense. He had the implied authority of his wife and intended co‑owner and to the conveyancing steps to accomplish the transaction and with adjustments ‑ ‑ ‑
HAYNE J: That is the second point, is it not?
MR WALKER: Then that leads me to this. This point comes down simply to this. Is the reasoning of the majority for the two stages – because the three judges divide differently as your Honours know – does the reasoning which may be dubbed a robust approach of Blatch v Archer rise anything above the application of well‑known principles or approaches to particular facts? In our submission, of course it does not.
HAYNE J: The attribution of fraud to an innocent person is to be worked through the doctrine of agency by inference?
MR WALKER: No, that is a serious matter. But then so is any fraud case a serious matter. It will still only involve the application of well‑known principles. In our submission, this Court would not grant special leave because of the seriousness to a person, either in property or reputation, of allegations. That would not be enough. That is true of a large number of cases and, of course, most crime.
So, in our submission, the proper way to see this in terms of special leave is that no one doubts the approach to fact‑finding. There is a request, in effect, for it to be reconsidered as to the sufficiency of the material to provide that – I will call it – foundation upon which then Jones v Dunkel reasoning can produce the result reached by the respective majorities on this point. That, we simply submit – it does not bear elaboration – is not in itself a special leave point. No point of principle is involved. Justice Hayne asks me about the gravity of attributing fraud to a person ‑ ‑ ‑
HAYNE J: No, I asked you, really, I think, about the process of doing so. Can you do it by inference?
MR WALKER: I was about to say, of course, that means, as everyone appreciates in this case, attributing fraud to a person’s agent and therefore makes the agency the critical question because my friend, Mr Jackson, put it utterly, completely in saying there is an absence of any allegation of fraud against his client. It is an allegation of fraud, a successful allegation, comprehensively upheld, against someone that we then had to make good was her agent.
In our submission, it would not be a question of general principle to explore what Justice Hayne has just raised with me, namely, can that ever be done by inference - inference is fact‑finding - though, of course, Briginshaw puts an epithet in front of certain inferences and frowns on any such outcome. Of course, that is right and that is established principle. So no uncertain or dubious inferences ought to be regarded as sufficient because Briginshaw will be the admonition under which fact‑finding proceeds.
In our submission, there are really then questions about the certainty of the inference and one comes to the plain logic that presents in relation to conduct involved in the dual registrations on both occasions, which – and this is why we are all here – obviously benefited Mrs Cassegrain. The first is that that registration in each case was accomplished with her as a passive, or even unwilling recipient of something contrary to her will and without her authority.
Now, we can comfortably dismiss that factually as a possibility, unless of course she is the kind of person who wakes up and decides to enjoy a windfall, even though she deplores the circumstances in which it came to pass. That is one logical possibility. That is the “no authority” and the unauthorised act repudiated. That is not the case.
We then come to the possibilities between actual authority, express or implied, and ostensible authority. This plainly is an implied authority case because there is not the holding out to be attributed to Mrs Cassegrain, which would be necessary for the apparent or ostensible authority. Neither do we have express authority. So by reduction of the possibilities logically that was the issue.
In our submission, it is very important, bearing in mind who was undoubtedly acting for whom – that is, we know Mr McCarron was dealing for at least one entity and probably one natural person on any view of it - that is the company and the company’s controller. One then raises the question, well, what were these transactions? What was the involvement of Mrs Cassegrain? What is revealed in relation to the way in which they were carried out?
The answer came back in the majorities in the Court of Appeal, in both cases things have been done that require the will of the transferee. This is not a willy‑nilly or entirely passive exercise. That is analysed in a way that is not susceptible to any factual doubt and it was in each case done by an officer of the court, a solicitor.
Why one would leave, as it were, equally available the possibility that he was acting on a frolic of his own, that is, without the authority that a solicitor needs to do such things, is never answered because none of the persons who would assuredly know, Blatch v Archer, exposed themselves to cross‑examination by giving evidence.
It is for those reasons that when one adds our, if we may put it this way, respectful demur at the idea my friend raised this morning that we should have called Mr McCarron, who on any view of it was formerly Mr Cassegrain’s solicitor, in our submission, there is enough there simply to see that this is a particular application of a well‑accepted approach to fact‑finding, albeit of course in the grave circumstance of finding an agency of a fraud which would have an effect.
That then brings me to the final point, which has to do with the indefeasibility provisions. This does not really recommend itself as being broken up by a reference to different provisions. They all operate together and we, with great respect, urge the approach taken in the Court of Appeal majority on that question. The main point of difference seems to be perhaps by the same kind of reasoning as informs the Crichton‑Brown decisions in electoral law, the difference there between the actual voting and the lies told to get votes, the latter not being embraced within the statutory fraud.
Perhaps by some kind of division of that kind, the now unquestioned fraud which led to the conveyance occurring is said to be severed in 118 from what is quite difficult to describe in terms of when does it start, is it when someone arrives at the counter of the Land Titles Office, however these things are done nowadays.
In our submission, none of that was sufficiently expounded by Justice Barrett as to excite doubt in this Court as to the correctness of the reversal of that approach. From beginning to end, Mr Cassegrain was dishonest in everything he did and commissioned to be done in rigging the loan account, rigging the sale and in ensuring that it was accomplished by registration of title.
In our submission, it makes no sense purposively for the very clear fraud exception to indefeasibility for the distinction that was drawn at first instance to be redebated in this Court. Your Honours, it is for those reasons that although of course these are important provisions, this case is not a vehicle to throw up those questions of interpretation. May it please your Honours.
HAYNE J: Thank you, Mr Walker. Yes, Mr Einfeld.
MR EINFELD: Your Honours, may we respond firstly to our learned friend’s emphasis again upon section 47? For the purposes of identifying an applicable limitation period it is, in our submission, not open to a court of equity to substitute its own view as to the existence of a trust with the consequence that the limitation period referable to trusts would apply in a case which was not brought upon any such basis.
This is not merely a case of the manner of expression of the prayer for relief, as our learned friends would have it. We took your Honours to the pleadings, and the pleadings simply do not disclose any claim by way of trust, be it express or implied trust or constructive trust, be it at the point of time of acquisition of a company’s property or beyond. If equity can, in a case in which the question of trust and the consequent application of the limitation period applicable in a case of trust or even fraudulent trust, substitute its view for the case presented to it for determination on the basis that in some way that is the just and appropriate thing to do, that would involve a very dramatic extension of the principles of application in equity of statutory limitation periods and clearly raises a question of significance that would require to be determined in this Court.
On the receivership point, it was suggested that Mr Cassegrain himself remained in control of the company notwithstanding the receivership. If that be so, it is a remarkable feature of this case that indeed during the period of the receivership the company commenced its proceedings in the Administrative Appeals Tribunal by way of appeal against the Commissioner’s refusal to uphold its objection to the capital gains tax that was imposed on the transaction. The company did in fact do so during the period of receivership.
In our submission, the facts fall extraordinarily short of demonstrating a kind of disability imposed by the statutory provisions which equity has sought, but unsuccessfully, in our submission, below to apply in the present case. Those matters, in our submission, warrant a grant of special leave. May it please the Court.
HAYNE J: Yes, thank you, Mr Einfeld. Yes, Mr Jackson. Before you begin, Mr Jackson, may I ask you what you say about the connection between the two applications?
MR JACKSON: Just this, your Honour. If our learned friend’s application were to succeed and an appeal were to succeed that would be the end of a finding of fraud, in our submission. Now, there may be an argument about whether it has that effect, but the action would have been dismissed and there would be questions arising as to whether there had been a fraud which could be a fraud of Claude which carried over into, for example, section 42. Your Honour, that is where it would go.
Your Honours, could I deal with two points in relation to the application we have made. Our learned friend’s argument in response to your Honour the presiding Judge said that the authority in question was implied authority to attend to the conveyancing steps to effect the transaction, to put it shortly.
Now, your Honours, one is looking at a question of agency, but agency for what? Your Honours, if one goes to the passage extracted shortly at page 229, paragraph 97, what you will see is the quotation from Justice Mason in Franzon’s Case:
the fraud must be “fraud for which the person becoming registered is responsible -
Your Honours will also see, if one goes, for example, to the passage we have referred to in our reply, paragraph 4 at page 293, the further extract from Assets Co v Mere Roihi:
“A person who presents for registration –
et cetera, and, your Honours, thirdly, one sees in the passage at paragraph 14, I think it is, at page 202, statements which suggest a fraud, again:
for which the person becoming registered is responsible –
If one goes to the test actually applied by the majority in the Court of Appeal, what your Honours will see at page 250, paragraph 155, is this, your Honours, that his Honour Justice Macfarlan says:
Although . . . fraud must be that of the registered proprietor, the fraud of an agent acting within the ambit of his or her engagement is imputed to the registered proprietor.
Now, that seems to mean in the context, particularly bearing in mind, if I may say so, with respect, the erroneous conclusion drawn from Breskvar v Wall seems to be saying if the agent has the authority to register that is good enough, there does not need to be any involvement, any further involvement in the fraud by the principal. In our submission, that approach is incorrect.
Your Honours, the second feature I wanted to mention was this. Our learned friend said in relation to the first transfer, well, it is a case in which the whole thing is affected by fraud, well – I am sorry, I should have said in relation to the second transfer, I think, the whole thing is affected by fraud, but if you look at the – by the fraud. If you look at what took place what the fraud is constituted by is a situation where the company and two directors signed the first transfer, the company transfers the property away for an express consideration. Where the fraud arises is in using company money that should not have been used to be allocated to satisfy that consideration. There is a clear distinction, in my submission, your Honours.
HAYNE J: Thank you, Mr Jackson. We will adjourn for a time to consider the course we take in this matter.
AT 11.45 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.47 PM:
HAYNE J: In application S9 of 2014 we are of opinion that there are insufficient prospects of disturbing the actual orders which the applicant seeks to challenge in this Court to warrant the grant of special leave. In application S10 of 2014, there will be a grant of special leave to appeal. Mr Jackson, I see in your draft notice of appeal ground 7A was a ground which sought to hitch your star to the other application. That, I think, therefore falls away.
MR JACKSON: Yes, your Honour, that is catch a falling star, I think.
HAYNE J: Exactly, Mr Jackson. What estimate would you give of time?
MR JACKSON: Your Honour, I think it is case that would go under a day, but more than half a day.
HAYNE J: Yes. Mr Walker?
MR WALKER: So do I, your Honour.
HAYNE J: Yes. There will be a grant then in S10 and I need hardly say to counsel that their solicitors will be given the directions about filing of the submissions.
AT 11.48 AM THE MATTER WAS CONCLUDED
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