Gerard Cassegrain & Co Pty Ltd v Cassegrain
[2011] NSWSC 1156
•29 September 2011
Supreme Court
New South Wales
Medium Neutral Citation: Gerard Cassegrain & Co Pty Limited v Cassegrain [2011] NSWSC 1156 Hearing dates: 12, 13, 15 April 2011 Decision date: 29 September 2011 Jurisdiction: Equity Division - Corporations List Before: Barrett J Decision: Declaratory relief, injunctive relief and equitable compensation to be awarded against first defendant.
Catchwords: CORPORATIONS - management and administration - directors - fiduciary duties of directors - where loan account in director's favour established in company's books - where to director's knowledge there was no entitlement of the director to funds represented by the loan account - drawings by director against loan account - whether breach of fiduciary duty - whether fraudulent breach - CORPORATIONS - informed consent of company to breach of fiduciary duty - where one shareholder given by constitution power to pass any resolution at a general meeting - assent by that shareholder apart from general meeting - whether effective - ESTOPPEL - prior adjudication - where creation of loan account and drawings on it had been the subject of findings in earlier oppression proceedings - whether res judicata - whether issue estoppel - whether existence of issue estoppel precludes reception of further evidence - ESTOPPEL - prior adjudication - effect on non-party - whether non-party privy or agent of party - EVIDENCE - judicial discretion to limit use - relevance of inability to cross-examine because witness not called - REAL PROPERTY - co-ownership - joint tenants - whether fraud of one joint tenant in taking of title jointly affects other joint tenant - where first joint tenant later transferred his interest to second joint tenant - nature of the sole registered proprietor's title under Real Property Act - TORRENS SYSTEM - fraud exception to indefeasibility of registered estates - nature of relevant fraud - EQUITY - equitable defences - laches - elements of defence - LIMITATION OF ACTIONS - proceedings for equitable relief - equity seeks analogy with the law - fraudulent breach of fiduciary duty - analogy with tort of deceit or conspiracy to defraud - no analogy with trusteeship if trust property not held - relevance of incapacity Legislation Cited: Corporate Law Economic Reform Program Act 1999 (Cth)
Corporations Act 2001 (Cth), Part 2F.1, ss 232, 237
Evidence Act 1995, ss 69, 91,136
Limitation Act 1969, ss 11, 14, 16, 17, 18, 20, 21, 23, 47, 52
Real Property Act 1900, ss 42, 118(1)(d)Cases Cited: Assets Co Ltd v Mere Roihi [1905] AC 176
Attorney-General v Cockle [1988] Ch 414
Aussie Ideas Pty Ltd v Tunwind Pty Ltd [2006] NSWCA 286
Bahr v Nicolay (No 2) [1988] HCA 16; (1988); 164 CLR 604
Bamford v Bamford [1968] 3 WLR 317
Barnes v Addy (1874) LR 9 Ch App 244
Bell Group Ltd v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1
Big River Timbers Pty Ltd v Stewart (1998) 9 BPR 16,599
Blair v Curran [1939] HCA 23; (1939) 62 CLR 464
Bogdanovic v Koteff (1988) 12 NSWLR 472
Cassegrain v Cassegrain (15 July 1998, unreported, FCA, BC9803240).
Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976; (2008) 68 ACSR 132
Cohen v Cohen [1929] HCA 15; (1929) 42 CLR 91
Companhia de Seguros Imperio v Heath (REBX) Ltd [2000] EWCA Civ 219; [2001] 1 WLR 112
Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707
Daniels v Anderson (1995) 37 NSWLR 438
Davis v Williams [2003] NSWCA 371; (2003) 11 BPR 21,313
Epeabaka v Minister for Immigration and Multicultural Affairs (1997) 150 ALR 397
Ferrari v Ferrari Investments (Townsville) Pty Ltd [2000] 2 Qd R 359; [1999] QCA 230
Foss v Harbottle (1843) 2 Hare 461; 67 ER 189
Frazer v Walker [1967] 1 AC 569
Freeman v Laing [1899] 2 Ch 355
Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2007] FCA 415; (2007) 66 ATR 198
Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2010] AATA 12; (2010) 78 ATR 328
Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1048; [2004] 1 BCLC 131
Hawkesbury Development Pty Ltd v Landmark Finance Pty Ltd (1969) 92 WN (NSW) 199
Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] NSWSC 851; (2003) 59 NSWLR 312
Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230
Hogg v Cramphorn Ltd [1967] Ch 254
JJ Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467; [2002] BCLC 162
Jones v Badley (1868) LR 3 Ch App 362
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722
Lombardo v Stuart Bros Pty Ltd (1967) 68 SR(NSW) 159
Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297
Paragon Finance PLC v D B Thakerar & Co [1998] EWCA Civ 1249; [1999] 1 All ER 400
Peldan v Anderson [2007] HCA 48; (2006) 227 CLR 471
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271
Re George Newman & Co [1895] 1 Ch 674
Re Gerard Cassegrain & Co Pty Ltd and Commissioner of Taxation [2005] AATA 72
Re Stead; Witham v Andrew [1900] 1 Ch 237
Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309
Stuart v Kingston; (1924) 34 CLR 394
The Duke Group Ltd v Alamain Investments Ltd [2003] SASC 415
Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282
Wayde v New South Wales Rugby League Ltd (1985) HCA 68; (1985) 180 CLR 459
Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497
Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666Texts Cited: R P Austin and I M Ramsay, "Ford's Principles of Corporations Law", para 7.590 Category: Principal judgment Parties: Gerard Cassegrain & Co Pty Limited - Plaintiff
Claude Cassegrain - First Defendant
Felicity Cassegrain - Second DefendantRepresentation: Mr B W Walker SC/Mr G B Colyer - Plaintiff
Mr G C Lindsay SC/Mr P G Bolster - First Defendant
Mr F Gleeson SC/Ms P J Gormly - Second Defendant
McCabe Terrill Lawyers - Plaintiff
Oliveri Lawyers - First Defendant
Peter Condon & Associates - Second Defendant
File Number(s): 2008/280507
Judgment
The proceedings
This is a statutory derivative action brought by Denis Cassegrain on behalf of Gerard Cassegrain & Co Pty Ltd ("GC & Co") against two defendants: Claude Cassegrain (who was, at all material times, a director of GC & Co) and Felicity Cassegrain, who is Claude Cassegrain's wife. Leave to sue on behalf of GC & Co was granted to Denis Cassegrain under s 237 of the Corporations Act 2001 (Cth) on 23 September 2008: Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976; (2008) 68 ACSR 132 (Sackville AJ).
The derivative action was heard by me on 12, 13 and 15 April 2011. While I was considering my decision and preparing draft reasons before departing on long leave, the parties sought an order referring this dispute to mediation in conjunction with disputes in certain other proceedings. That order was made by consent on 8 June 2011 and I proceeded on leave. The mediation did not produce a resolution of the parties' differences. The task of preparing a judgment was taken up again when I returned on 5 September 2011.
Parties and background
Denis Cassegrain and Claude Cassegrain are two of the children of the late Gerard Cassegrain and his wife Francoise. John Cassegrain, Patrice Cassegrain (known as Patrick), Anne-Marie Cameron (nee Cassegrain) and Catherine Dunn (nee Cassegrain) are siblings of Denis Cassegrain and Claude Cassegrain.
For ease of reference, I shall refer to members of the family by their first names only.
The earliest of the events to which the proceedings relate happened in 1993. It is relevant to record the following:
Gerard was a director of GC & Co until 29 December 1989
Patrick was a director of GC & Co until 29 December 1989
Francoise was a director of GC & Co until 25 September 1991
John was a director of GC & Co until 12 April 1995
Anne-Marie was a director of GC & Co until 25 September 1991 and then from 12 April 1995 to 25 June 1998
Anthony Sarks was a director of GC & Co from 22 October 1998 to 13 July 2005
Thomas Gerard Cassegrain has been a director of GC & Co since 13 July 2005
Claude has been a director (and secretary) of GC & Co continuously since 1987.
In each case in which no commencement date is stated, the person's tenure as a director began before 1990.
The members of GC & Co are Claude, Patrick, Catherine, Anne-Marie, John, Denis and Felicity (who holds shares as a joint holder with Claude). All of those persons were members at the time of the events that gave rise to these proceedings, as were Gerard and Francoise (the former only until his death on 29 October 1993).
The case in outline
The case brought against Claude by GC & Co at the instigation of Denis concerns moneys paid by Commonwealth Scientific and Industrial Research Organisation ("CSIRO") in 1993 upon settlement of certain proceedings brought against CSIRO by GC & Co. CSIRO paid $9.5 million pursuant to a deed dated 27 September 1993 which, with certain other deeds, documented the settlement. Following receipt of this money, entries were made in the books of account of GC & Co to recognise a loan account of $4.25 million established on the footing that the settlement moneys received by GC & Co were, to that extent, received in such a way as to represent a debt owed by GC & Co to Claude.
GC & Co contends that the division of the $9.5 million in such a way that $4.25 million was attributed to Claude was engineered by Claude and Gerard to bring about an apparent reduction in the proceeds accruing to GC & Co, since moneys received by the company would attract a liability to capital gains tax. GC & Co further says that Claude never had any legitimate claim to the $4.25 million and that he knew this.
Claude later drew upon the funds of GC & Co and sums were debited to the loan account. It is the contention of GC & Co that Claude did so knowing that the $4.25 million was not in truth his but was the property of GC & Co.
In 1996, Claude and Felicity acquired real property and business assets (referred to as "the Dairy Farm") from GC & Co. They took as joint tenants. The consideration for the transfer of the land was expressed to be $1 million (this was part of a larger total of $1.3 million for the totality of the assets). The asset was paid for by means of debit to Claude's loan account. Subsequently, in 2000, Claude transferred his interest in the Dairy Farm land to Felicity for an expressed consideration of $1.00.
GC & Co, at the instigation of Denis, alleges fraud on the part of Claude. Paragraph 14 of the further amended statement of claim pleads:
"Claude Cassegrain's assertion against the company that he was personally entitled to $4.25m of the CSIRO settlement moneys amounted to a fraudulent act entirely against the interests of the company. ('The first fraudulent act')
Particulars
i. Claude Cassegrain was aware at all times after 6 July 1993 that the $5.25m/$4.25m split had been devised for the sole purpose of seeking to minimise the company's capital gains tax liability.
ii. Claude Cassegrain was aware at all times after 6 July 1993 that the $5.25m/$4.25m split did not impose any obligation on the company to pay him any part of the $4.25m.
iii. Claude Cassegrain subsequently acquired the company's property and money by dishonestly asserting that the $5.25m/$4.25m split created an obligation on the part of the company to pay him $4.25m."
Paragraph 15 of the further amended statement of claim pleads:
"Claude Cassegrain's use of his position of control within the company, including his position as a director, to cause the company to acknowledge that it had an actual liability to him of $4.25m amounted to a fraudulent act entirely against the interests of the company. ('The second fraudulent act')
Particulars
i. The plaintiff repeats particulars i and ii in the preceding paragraph.
ii. Following Gerard's death, Claude caused the company to acknowledge that it owed him the $4.25m;
iii. Claude caused the company to acknowledge its liability to him in circumstances where he well knew that the only other company officer, Anne-Marie Cameron, was not privy to the deal he had made with Gerard in 1993; and
iv. There was no intervening honest reason to depart from the position that the company did not owe Claude the $4.25."
GC & Co then pleads in the alternative that Claude committed these acts "in circumstances where any belief that he had that GC & Co and/or his father had agreed that GC & Co would pay him $4.25m of the CSIRO settlement moneys was reckless as to the truth". Particulars are pleaded to which it is not necessary to refer.
The further amended statement of claim goes on to deal with the Dairy Farm. It is alleged that, on or about 14 September 1996, Claude caused the common seal of GC & Co to be affixed to a transfer (under the Real Property Act 1900) of the Dairy Farm land by GC & Co as transferor to Claude and Felicity as transferees. They were expressed to take as joint tenants. It is then alleged in paragraph 18 (omitting particulars):
"At all material times prior to and on 14 September 1996, Claude Cassegrain relied on the first and second fraudulent acts to create the false impression that, in exchange for transferring its legal interest in the real property, the company would receive the benefit of a reduction in an existing liability to Claude Cassegrain."
By paragraph 18A, it is pleaded in the alternative the Claude committed the acts in paragraph 18 "in circumstances where any belief that he had that GC & Co and/or his father had agreed that GC & Co would pay him $4.25m of the CSIRO settlement moneys was reckless as to the truth".
In the circumstances thus pleaded, it is alleged that Claude "fraudulently obtained" the Real Property Act transfer from the previous registered proprietor; also that Claude and Felicity were subsequently registered as proprietors of the Dairy Farm land through fraud and that Claude was Felicity's agent for the purpose of registering Felicity as joint tenant of the Dairy Farm pursuant to that transfer.
The further amended statement of claim then directs attention to a Real Property Act transfer dated 24 March 2000 by which Claude transferred his interest in the Dairy Farm to Felicity. It is alleged that Felicity derived the remaining interest in the land from a person registered as proprietor through fraud and otherwise than as a transferee bona fide for valuable consideration, and that Claude was Felicity's agent for the purpose of registering Felicity as the sole registered proprietor. It is alleged in the alternative that Felicity derived her remaining interest in the land through the fraud of her agent, Claude.
Breach of fiduciary duty claims are pleaded against Claude. It is said that he owed a fiduciary duty to GC & Co because he was a director and the secretary and that he breached that duty by:
(a) dishonestly (or with recklessness as to the truth) asserting against GC & Co that he was personally entitled to repayment of the $4.25 million or some of it;
(b) engaging in a dishonest course (or one that was reckless as to the truth) amounting to a conscious misuse of power, to ensure that GC & Co acknowledged the existence of a current liability to pay him $4.25 million; and
(c) relying on his non-existent entitlement to receive $4.25 million from GC & Co to obtain a transfer of the legal title to the Dairy Farm from GC & Co.
Point (c) has regard to the fact that Claude effectively drew down part of the "loan account" of $4.25 million to satisfy the consideration for the purchase of the Dairy Farm.
Felicity is said to have acquired her interest in the Dairy Farm with imputed knowledge of Claude's breaches of fiduciary duty and to have taken her legal estate for nominal consideration subject to GC & Co's equitable claim.
The relief sought
GC & Co claims an order that Felicity execute a transfer of the Dairy Farm to GC & Co or, alternatively, a declaration that Felicity holds the Dairy Farm on trust for GC & Co absolutely.
There is a claim for declaratory relief against Claude - specifically, that he beached his fiduciary duty to GC & Co:
(a) by asserting against GC & Co that he was personally entitled to repayment of the $4.25 million or any part of it;
(b) by ensuring that GC & Co acknowledged the existence of a corresponding current liability to pay him $4.25 million; and
(c) by relying on that acknowledgement by GC & Co to obtain legal title to the Dairy Farm and otherwise to draw against the loan account.
Also sought against Claude are:
(a) a permanent injunction restraining him from "repeating" any of these breaches of duty;
(b) an inquiry to determine the extent of his drawings against the loan account; and
(c) an order that he pay equitable compensation (including interest) to GC & Co.
The allegations of fraud
Each of paragraphs 14 and 15 of the further amended statement of claim pleads a "fraudulent act" on the part of Claude. But fraud, of itself, does not constitute a cause of action. It is actionable only by reference to its effects.
Thus, for example, a party induced by fraudulent misstatement to enter into a contract may rescind or, if he or she has suffered damage, sue for damages. More generally, a person induced by fraudulent misstatement to act to his or her detriment who thereby suffers damage has a cause of action in tort for deceit. On the other side of the coin, an action brought on a supposed contract shown to have arisen from fraud can be successfully resisted.
GC & Co, by alleging fraudulent acts against Claude, therefore does not, merely by that pleading, seek to set up any right of recovery. Its aim seems to be threefold: first, to accentuate the seriousness of the breaches of fiduciary duty it pleads in relation to the creation of and resort to the loan account by Claude; second, to supply an element of critical importance to its claim to recover the Dairy Farm (the need to attract the "fraud exception" to the rule of indefeasibility of registered interests under the Real Property Act ); and, third, to cause any analogy with cases dealt with by the Limitation Act 1969 to be with a case attracting a twelve year limitation period.
The Federal Court decision
Certain of the factual matters pleaded against Claude received attention in a judgment of the Federal Court of Australia (Davies J) delivered on 15 July 1998: Cassegrain v Cassegrain (unreported, FCA, BC9803240). GC & Co argues that estoppels arose against Claude by reason of the Federal Court judgment. Claude disputes this. He says that the only order of the Federal Court that could be regarded as being, in a relevant way, adverse to Claude was in terms that, first, were too uncertain to sustain any relevant issue estoppel, second, acknowledged expressly or by implication that Claude had an entitlement to the $4.25 million and, third, were qualified by dismissal of all other claims made by the applicants in the Federal Court proceedings.
There is no dispute that the Federal Court made a declaration as follows:
"The actions of the first respondent, Claude George Rene Cassegrain, in treating the $4.25m loan account with Gerard Cassegrain and Co Pty Ltd as his entitlement to be drawn down at his will, in drawing upon the loan account as he saw fit and in causing the passing of a resolution of directors allowing for the payment of retrospective interest thereon were actions which were oppressive and unfairly prejudicial to the members of the company."
GC & Co says that the judgment of Davies J "necessarily decided" certain facts in a way that is adverse to Claude in relation to issues in the present case. Claude says, in response, that all that was decided by Davies J is what is embodied in the orders made, being the declaration set out above and, as to the balance of the proceedings, an order of dismissal.
Beyond his reliance on the prior adjudication, Claude denies the allegations concerning misapplication of the $4.25 million and says that he was entitled to rely (and did rely) on the agreement of his father, Gerard, (the person who, with the acquiescence of all members, exercised control over the affairs of GC & Co) that he was personally entitled to the $4.25 million.
Claude also contends that GC & Co has been guilty of laches. He and Felicity both invoke limitation defences and Felicity, as regards her present title to the Dairy Farm, relies on the indefeasibility provisions of the Real Property Act (GC & Co, as I have said, maintains that the "fraud exception" to indefeasibility applies).
Issues
The issues for decision affecting Claude are, in essence, the following:
1. Is Claude bound by issue estoppels alleged by GC & Co?
2. More generally, what are the effects, for present purposes, of the prior determination?
3. If the prior determination does not operate, as between GC & Co and Claude, so as to preclude the present claims, did Claude fraudulently breach his fiduciary duty to GC & Co?
4. Has delay in bringing these proceedings worked to the detriment of GC & Co either by reference to the Limitation Act 1969 or having regard to equitable principles?
Additional issues arise in relation to Felicity and her acquisition of the Dairy Farm. The convenient course is to consider the case against Claude before addressing the separate issues concerning Felicity.
Evidence
The case is unusual in that no witness was called in either the plaintiff's case or the cases of the respective defendants. The evidence was wholly documentary. At the conclusion of the hearing, certain matters concerning evidence were outstanding. It is desirable that I digress to deal with them briefly.
In relation to each of several documents tendered by Claude, my ruling was that the document is a "business record" within s 69 of the Evidence Act 1995, so that previous representations in the document are not excluded by the hearsay rule; but I reserved my decision on GC & Co's application for an order under s 136 limiting the use of the material so that it could be used only as evidence of the terms of representations made by one person to another and not as evidence of the truth of the representations. Such an order is said to be warranted because Claude did not give evidence or make himself available for cross-examination.
That, to my mind, is not, in the particular circumstances of this case, a source of unfair prejudice within s 136(a) (I did not understand it to be contended that s 136(b) might apply). It is true that Claude was not a witness and could not be cross-examined. But no one gave evidence in GC & Co's case either and the denial of opportunity to cross-examine worked both ways. In those circumstances, I do not see any good reason to cut down, by reference to the notion of unfair prejudice, the force the evidence is given by s 69: see Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297 at [93] per McHugh J.
On that basis, I regard the previous representations in each of the following as not excluded by the hearsay rule and as not meriting any s 136 order, so that the representations stand as evidence of not only the terms in which they were made but also the truth of their content:
Tender bundle 157: letter of 6 July 1993 from Claude to Garrett and Walmsley
Tender bundle 191: letter of 5 August 1993 to Garrett & Walmsley
Tender bundle 195: fax of 5 August 1993 from Griffith & Sallaway to Garrett and Castle
Tender bundle 202: letter of 6 August 1993 from Garrett & Walmsley
Tender bundle 203: letter of 6 August 1993 from Claude
Tender bundle 204: letter of 6 August 1993 from Garrett & Walmsley
Tender bundle 214: letter of 22 September 1993 from Claude
Tender bundle 215: letter of 23 September 1993 from Dickson/State Bank
Tender bundle 621: GC & Co annual ledger for year ended 30 June 1994
Tender bundle 633: corresponding document for year ended 30 June 1995
Tender bundle 634: GC & Co balance sheet for the year ended 30 June 1995
Tender bundle 637: GC & Co annual ledger for year ended 30 June 1996
There are also undetermined applications under s 136 in respect of other documents, being written submissions of GC & Co in tax proceedings (tender bundle 1382), decisions of the Administrative Appeals Tribunal and Federal Court in relation to tax (tender bundle 1486, 1569, 1618), an application for review lodged with the AAT (tender bundle 1595), and a statement of findings of fact by the AAT (tender bundle 1607).
As to the court decisions, the evidentiary value is fixed by s 91 of the Evidence Act : the content is not admissible to prove the existence of a fact that was in issue in the proceeding. There is accordingly no need for any order under s 136. The position in relation to the AAT decision is the same, given that it is within the definition of "Australian court": Epeabaka v Minister for Immigration and Multicultural Affairs (1997) 150 ALR 397. As for the statement of findings of fact by the AAT, the document contains, in s 91 terms, "evidence of ... a finding of fact" in the AAT proceedings so that s 91 applies and there is again no need for any order under s 136. The document containing submissions made in the tax litigation cannot, of its nature, be evidence of the truth of any facts stated and there will be an order under s 136 limiting its use so that it is evidence only of the terms of submissions made and not of the truth of those submissions.
The prior proceedings
I proceed now to an important matter requiring attention at the outset. It concerns the effect on these present proceedings of the Federal Court determination of 15 July 1998.
The applicants in the Federal Court proceedings were Patrick, Catherine, John and Denis. They sued Claude (first respondent), Anne-Marie, Francoise, Felicity (twentieth respondent), fifteen companies, including GC & Co (seventh respondent), and Catherine and Anne-Marie as trustees of a family trust.
The relief sought by those applicants (as ultimately formulated in a further amended application dated February 1998) was as follows:
"1. A Declaration that the affairs of ES [Expressway Spares Pty Ltd, the fourth respondent], GC & Co [Gerard Cassegrain & Co Pty Ltd, the seventh respondent], their subsidiaries and CTK [CTK Engineering Pty Ltd, the seventeenth respondent] are being conducted
(a) in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, the Applicants, or
(b) in a manner that is contrary to the interests of the members as a whole of those companies.
2.A Declaration that the acts or omissions, or the proposed acts or omissions which have been particularised by the Applicants, by or on behalf of ES, GC & Co, and their subsidiaries
(a) have been or would be oppressive or unfairly prejudicial to, or unfairly discriminate against the Applicants, or
(b) have been or would be contrary to the interests of the members as a whole.
3. An order requiring Claude Cassegrain to sell of his shares in ES Pty Limited to the Applicants.
4. An order authorising and requiring ES to institute proceedings against Mrs F Cassegrain (including making any application it might be advised to lodge under Section 45D of the Real property Act 1900) in connection with and limited to, the company's occupation and tenure of part of the land described in Folio Identifiers 1/591340 and 2/591340 upon such terms and conditions as the Court may direct including
(a) the proceedings may be heard before an arbitrator,
(b) any participation by either John Cassegrain or Claude Cassegrain in the institution and conduct of the proceedings shall be limited to their roles as witnesses; and
(c) upon any such further terms and conditions as the Court directs.
5. An order pursuant to Section 260(2)(d) [of the Corporations Law , as then in force] that the following directions be given for the further conduct of the affairs of ES and its subsidiaries -
(a) ES be directed to enter into an employment contract with Patrick Cassegrain in his capacity as Managing Director of the company and the Expressway Spares' business for a term of not less than 5 years,
(b) Claude Cassegrain to cease to hold office as a director of ES and CV [Cassegrain Vineyards Pty Ltd, the fifth respondent],
(c) Claude Cassegrain be restrained from directly or indirectly participating in the management or the conduct of the affairs of ES and CV, whether in his own right, on behalf of any other person, or through a nominee who acts on his behalf, other than with the prior consent in writing of all of the shareholders in the company.
6. An order that GC & Co Pty Limited, its subsidiaries and Endwise Holdings Pty Limited be wound up.
7. In the alternative to Order 6, an order restraining Claude Cassegrain from directly or indirectly participating in the management or the conduct of the affairs of GC & Co other than with the prior consent in writing of all the other shareholders in the company.
8. An order authorising and requiring GC & Co to institute proceedings against Claude Cassegrain in connection with GC & Co's alleged indebtedness to Claude Cassegrain in the amount of $4.25 Million, or any other sum, as a consequence of the treatment of the settlement monies from the Cassiro litigation (including any transfer of property from GC & Co to Claude Cassegrain or his nominee) upon terms
(a) that the Applicants have the conduct of the proceedings, and
(b) upon such other terms as the Court may direct.
9. An order restraining GC & Co from paying any monies to Claude Cassegrain or any other person in purported satisfaction of the alleged indebtedness of GC & Co to Claude Cassegrain.
10. A declaration that the purported allotment of 40 'A' Class shares to Claude and Felicity Cassegrain by a resolution of the directors of GC & Co made on 3 September 1987 was not made for any valid or proper purpose and is accordingly invalid.
11. Orders that the allotment referred to in the previous declaration be set aside and for rectification of the register in accordance with that declaration.
12. An order that CTK Engineering Pty Limited be wound up.
13. Such order as to costs, and the assets that shall bear the burden of costs, as the Court thinks fit.
14. Such further or other Orders as the Court thinks fit."
It can thus be seen that there was no claim for a declaration in respect of Claude of the kind that the court ultimately made (see paragraph [29] above). The matter of the moneys received from CSIRO and the establishment of Claude's $4.25 million loan account in the books of GC & Co were the subject of the claims in paragraphs 8 and 9 for an order authorising and compelling some form of derivative action by GC & Co against Claude and an order restraining GC & CO from making any payment in purported satisfaction of GC & Co's alleged indebtedness to Claude in respect of the loan account. Both those claims were dismissed.
As for Felicity, the only claim in the Federal Court proceedings concerning her was the claim in paragraph 10 concerning the purported allotment of shares in GC & Co. That claim was also dismissed.
Matters concerning GC & Co and the $9.5 million played only a small part in the Federal Court proceedings. The decision of the court in relation to them, as ultimately reflected in the declaration (see paragraph [29] above), emerges sufficiently from the following passage in the judgment of Davies J appearing after a reference to the litigation commenced by GC & Co against CSIRO (the paragraphs that follow are identified by numbers to assist future reference to them):
"[1] On 5 May 1993, Claude wrote a "Without Prejudice" letter to the Chairman of CSIRO outlining the monetary value of the claims made, totalling a little over $56m. The claims included the following:
'5 Damage to the name, reputation and standing of GC & Co, Cassegrain Family name, Cassegrain Group of companies, and Claude Cassegrain and his family as a result of being publicly associated with a failed venture involving bitter litigation and disruption to the family and their associated companies' business activities. $5,000,000' (emphasis added)
[2] In the middle of June 1993, a further amended statement of claim was drafted which, inter alia, would have added claims for damages for the loss of reputation of GC & Co by reason of false statements and abuse. However, the draft did not refer to Claude.
[3] Claude was not a party to the litigation. According to his evidence, at about that time he instructed GC & Co's solicitors, Messrs Garrett & Walmsley, to add him as a party. However, there is nothing in the documents before the Court which supports that allegation. Late in June 1993, there were settlement conferences. On 2 July 1993, it was agreed in principle that the proceedings and all other claims would be settled on the basis of a payment by CSIRO of $9.5m, an amount which was just a little less than the amount which GC & Co had invested in the project and its legal costs in the proceedings, which amounted to more than $2m. The mediator noted a settlement as follows:
'The mediation discussions culminated in a proposed settlement involving a payment of $9,500,000 by CSIRO to Gerard Cassegrain & Co Pty Ltd. The proposal is subject to approval on both sides. Such approval will be recommended by the legal advisers of both sides.'
[4] The lengthy and complex terms of settlement which were formally executed included Claude, who gave a release, as one of the parties. They provided for payment by CSIRO to GC & Co or at its direction of $9.5m. The cheque when paid was paid into the State Bank in reduction of the indebtedness of GC & Co to that bank.
[5] At the time when the settlement was reached, the Income Tax Assessment Act 1936 (Cth) had been amended so as to bring capital gains to tax as assessable income but at a reduced rate of tax. There were, however, some exemptions. S160ZB of the Act provided:
'160ZB(1) A capital gain shall not be taken to have accrued to a taxpayer by reason of the taxpayer having obtained a sum by way of compensation or damages for any wrong or injury suffered by the taxpayer to his or her person or in his or her profession or vocation and no such wrong or injury, or proceeding instituted or other act done or transaction entered into by the taxpayer in respect of such a wrong or injury, shall be taken to have resulted in the taxpayer having incurred a capital loss.'
[6] Once settlement had been agreed, it was appreciated by GC & Co's advisers that the sum to be received from CSIRO would be likely to be an assessable capital gain in the hands of the company. Mr Claude Griffith, the accountant, considered there might be value if the sum was divided so that some of it was received by Claude in the nature of a payment for defamation. The possibility of the amount being divided to avoid capital gains tax was noted in a memorandum by an officer of the State Bank on 5 July 1993. On 6 July, Mr Griffith wrote to Deloitte Touche Tohmatsu, Chartered Accountants, seeking advice:
'The compensation has two components to it -
· Compensation to the company for loss sustained by it on account of the defendants failure to discharge its duty of care to the company.
· An amount payable to the person (director) for defaming the good name of the person.
Would you advise me of the CGT implications on each of the amounts agreed to. The transactions which give rise to the receipt of the compensation are all post September 1985.'
[7] No sums were mentioned. On 9 July 1993, Deloitte Touche Tohmatsu advised that the payment would be taxable in the hands of GC & Co but that compensation or damages received by a person in respect of defamation was exempt under s160ZB(1).
[8] In the meantime, Claude had apportioned the sum to his own satisfaction and had obtained Gerard's agreement. On 6 July 1993, Claude wrote to GC & Co's solicitors, Garrett & Walmsley, to say:
'This is to advise you that I am prepared to accept in settlement of the proceedings $4.25m as personal damage. This has been discussed with the company at an extraordinary meeting held by the shareholders on Saturday 3 July 1993.
The company and myself will agree on the apportionment of the legal expenses.'
[9] On the same day, a letter signed by Gerard and Patrick on 6 July 1993 to Garrett & Walmsley stated:
'It was resolved at an extraordinary meeting held by the shareholders on Saturday 3 July 1993 that the following offer in settlement of the dispute would be accepted by Gerard Cassegrain & Co Pty Ltd -
· $5.25m to Gerard Cassegrain & Co Pty Ltd ($4.32 in respect of damages $.930m sale of GC & Co's share in Cassiro Pty Ltd).
· $4.25m personal damages payable to Claude Cassegrain.
The legal costs will be apportioned in a manner that is yet to be discussed between the company and Claude Cassegrain.'
[10] Both Gerard and Claude had a keen eye to the reduction of tax. It is probable that Gerard looked upon this split between the company and Claude as a tax reduction device. As the rate of capital gains tax was 30% or thereabouts, one can see that the split, if it was effective, would save GC & Co almost $1.5m in tax.
[11] When Mr Griffith wrote to Deloitte Touche Tohmatsu on 6 July 1993, he was unaware of the split which Claude had arranged. It was not arranged with Mr Griffith's approval. Subsequently, CSIRO refused to divide the payment as requested but it was ultimately agreed that payment of the $9.5m should be made to GC & Co or at its direction. After the $9.5m had been paid to the State Bank, a loan account was created in the books of GC & Co which showed $4.25m of the settlement moneys as having been received on behalf of and lent to the company by Claude.
[12] Claude has given evidence that he considered the $4.25m to be his fair share of the settlement and that he could not recall discussing any issue of capital gains tax with Claude Griffith or with his father. I reject Claude's evidence on these matters and also that of Mrs Cassegrain. I am satisfied that the split was agreed to between Claude and his father with a view to reducing the capital gains tax otherwise payable on the $9.5m. I am satisfied that Gerard and Claude did not at the time regard the sum of $4.25m as Claude's money. In Gerard's lifetime, expenditure from loan accounts did not occur without his approval. Claude could not have drawn down the $4.25m unless his father had agreed to that course. And except as to legal expenses and perhaps other like matters, he did not do so during his father's lifetime. I am satisfied that the $9.5m was paid to GC & Co and received by it in settlement of its claim against CSIRO and that no attempt was ever made genuinely to estimate a sum for any personal claim by Claude including any claim falling within the terms of s160ZB(1).
[13] Since Gerard's death, Claude has drawn upon the funds of GC & Co both by way of regular living expenses of $3,000 per month and for other personal expenses such as school fees. These sums have been debited to the loan account. These actions were wrong. The appropriate course for Claude to have taken was to arrange for a fair remuneration, not to apply the funds of the company as he chose. I should add in fairness to Claude, that it was originally at least an allegation of the applicants in these proceedings that the manager of a company was entitled to have access to the assets and income of the business when personal need arose. I assume that the family expected Claude to provide for his living expenses from GC & Co's funds. The purchase of the home and dairy farm would have fallen into a different category where consultation was expected.
[14] In like vein, Claude purchased a property from GC & Co which was a dairy farm and residence. The purchase price, which amounted to a total of $1.3m approx, was paid by debiting the $4.25m. This was not a transaction of which the approval of the shareholders was sought, Claude taking the view that the $4.25m was his and, furthermore, that he was entitled to receive a home as he has had to sell a home to support GC & Co during the time of its worst financial difficulties. More recently, Claude has had a swimming pool constructed at his home and has debited the cost to the loan account.
[15] Furthermore, during the interregnum between two hearings of these proceedings, the directors of GC & Co, Claude and Anne-Marie, resolved in a minute, which I cannot presently locate among the voluminous evidence, that the $4.25m had been lent in 1993 on terms as to reasonable interest which Claude was entitled to claim should he choose to do so. This resolution, of course, had no justification whatever. I am satisfied that there was never any agreement between Claude and GC & Co with respect to the payment of interest on the $4.25m. I am satisfied that neither Gerard nor Patrick, who signed the letter to Garrett & Walmsley of 6 July 1993, looked upon the $4.25m as Claude's money, nor had any conversation with Patrick with respect to interest.
[16] Claude's actions in arranging for the purported division of the $9.5 into $5.25m for GC & Co and $4.25m for Claude, his drawing upon that sum at his will as if it were his entitlement to do so and his arranging for the passing of the resolution which made provision for the payment of retrospective interest was exemplary of oppressive behaviour. It is a very plain illustration of conduct by a person who, in practical control over the affairs of a company, has acted to benefit himself to the detriment of the other persons who are interested in the company. The mere purported division of the $9.5m may not, of itself, have amounted to oppressive conduct for it was a step taken to reduce the tax liability of the company. It was the subsequent use of the money by Claude as if it were his own and the pretence that there had been some agreement for the payment of interest thereon which constituted oppression of the other shareholders.
[17] I do not say that, on a taking of accounts, a generous allowance should not be made to Claude for the time and effort spent by him on the CASSIRO project, on achieving the settlement and for participating in the settlement by giving his personal release. I assume that such an allowance would be made. However, I do not consider it to be the function of the Court in these proceedings to enter into the taking of accounts as between Claude and GC & Co.
[18] Counsel for Claude has submitted that I should not enter into the issue as to whether Claude's actions in relation to the $4.25m loan account amounted to oppressive conduct. Counsel submitted that the matter was not raised in any formal application which had been filed and that, if it had been raised, other witnesses such as the mediator and counsel may have been called. In my opinion, all counsel in these proceedings were ultimately content to proceed without arguing about amendments to the formal application and this particular issue was clearly raised and litigated. In my view, all appropriate witnesses were called and all relevant documents are before the Court.
[19] In my opinion, the events which occurred in relation to the settlement moneys provide a clear instance of oppressive conduct and I shall make a declaration accordingly. However, I do not think that I should make any other order with respect to GC & Co. These proceedings were not instituted because of anything that was happening in GC & Co. It was Claude's conduct in relation to Expressway Spares and Cassegrain Vineyards which caused the applicants to institute these proceedings. If the applicants wish to claim that Claude should repay moneys to GC & Co, those proceedings can be taken and an order for the taking of accounts as between Claude and GC & Co can be sought. I do not think that these present proceedings are concerned with that. Indeed, shareholders' rights have never loomed large in family discussions or thought. That is probably why the applicants at one stage sought a declaration that Claude held his interest in the $4.25m loan account on trust for all the members of the family equally. There was, of course, no basis for that claim."
Res judicata
It can be said at once that the Federal Court proceedings did not produce any res judicata precluding these proceedings. Given the outcome and the fact that the only relief granted was the declaration set out at paragraph [29] above, this is not a case where "the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence": Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at CLR 532 per Dixon J.
Neither the Federal Court declaration nor the reasons of Davies J I have quoted referred in terms to any fraud or misappropriation by Claude or to any duty owed by Claude to GC & Co or to any breach of any such duty. Merely to classify a director's conduct as "oppressive" is to say nothing about its consistency with the due discharge of directors' duties. As Davies J of the Supreme Court of Victoria said in Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282 at [62], the real question in an oppression suit is whether "the conduct complained of imposed a disadvantage or burden on a member that, according to the ordinary standards of reasonableness and fair dealing, was unfair". This is a reflection of what was said by Brennan J in Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 at CLR 472:
""[I]f the directors exercise a power - albeit in good faith and for a purpose within the power - so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing is unfair, the court may intervene under s. 320."
This passage emphasises a point of particular significance for this case: oppression may occur despite the absence of any transgression of the fiduciary requirements of good faith, proper purpose and subordination of personal interest. A director may act oppressively in the sense relevant to the operation of s 232 of the Corporations Act and its statutory predecessors yet not breach any fiduciary or other duty owed as a director.
The distinction is, on my assessment, clearly reflected in the 15 July 1998 judgment of Davies J. He said that the proceedings before him were not instituted because of anything that was happening in GC & Co; and that, if the applicants before him (Patrick, Catherine, John and Denis) wished to claim that Claude should repay money to GC & Co, such proceedings could be taken - one infers that Davies J had in mind proceedings brought by GC & Co, whether or not by way of derivative action, since any claim for repayment could only be a claim of GC & Co. Davies J obviously did not intend to decide whether Claude had breached duties owed by him as a director of GC & Co. He proceeded only on the basis that Claude had "acted to benefit himself to the detriment of the other persons who are interested in the company". Those other persons, not the company itself, were identified as the victims of Claude's conduct held to be "oppressive".
That those other persons should have been so identified is not surprising when regard is had to the way in which the Federal Court proceedings were framed. The further amended statement of claim, after pleading matters concerning the CSIRO litigation and the decision to settle it, continued:
"43C The First Respondent herein [Claude] agreed to accept $4.25 million of the settlement proceeds as being damages for personal injury suffered by himself and further declared himself to hold that proportion of the sum which exceeded his entitlement to an equal share in the monies on trust, in equal shares, for all family members, including Gerard, the First to Fourth Applicants [Patrice, Catherine, John and Denis] and the Second and Third Respondents [Anne-Marie and Francoise].
43D The First Respondent [Claude] has retained and/or applied the whole of the sum of $4.25 million for his own benefit in breach of the trust relationship between himself and the named beneficiaries referred to in paragraph 43C above and, in doing so, the First Respondent has acted unconscionably."
There was no suggestion of wrong done to GC & Co.
I have referred at paragraph [43] above to the claim in the Federal Court proceedings for orders concerning the bringing of proceedings by GC & Co against Claude in relation to the alleged $4.25 million debt owed to Clause and the treatment of the CSIRO settlement moneys "(including any transfer of property from GC & Co to Claude Cassegrain or his nominee)". No such order was made and the question of GC & Co's right to recover moneys from Claude on the basis propounded in these proceedings was not addressed at all.
Issue estoppel
The next question concerning the 1998 Federal Court proceedings is whether those proceedings gave rise to issue estoppels binding as between GC & Co and Claude in such a way as to preclude re-litigation of the same matters in these proceedings.
In that respect, the starting point must again be the judgment of Dixon J in Blair v Curran (above) and, in particular the passage at CLR 531-532:
"A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order."
Dixon J went on (at 532) to say that only that which is "legally indispensable to the conclusion" is precluded; and that, in matters of fact, the issue estoppel is "confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established".
Reference was also made in submissions to the formulation by Barwick CJ in Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 at 276:
"Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case. Of its nature such an estoppel must be available to and operative in respect of each party; or, as it is said, estoppels must be mutual."
GC & Co maintains that certain matters were "necessarily decided" as the foundation of or justification for the declaration against Claude ultimately made by the Federal Court (see paragraph [29] above). The matters "necessarily decided" are said to be:
(a) that the division of the $9.5 million settlement proceeds between Claude and GC & Co was agreed by Claude and Gerard for the sole purpose of reducing capital gains tax liability of GC & Co on those moneys;
(b) the $9.5 million was paid to GC & Co and received by it in settlement of its claim against CSIRO and no attempt was ever made genuinely to estimate a sum for any personal claim by Claude;
(c) when the purported division was agreed in July 1993, neither Gerard nor Claude regarded the $4.25 million as Claude's money; and
(d) the purported division did not impose on GC & Co any obligation to pay Claude any part of the $4.25 million.
The reasons for judgment published by Davies J may be examined in the search for what was "necessarily decided" by the Federal Court. This is made plain in the judgment of Walsh JA in Lombardo v Stuart Bros Pty Ltd (1967) 68 SR(NSW) 159 at 162:
"One can look at the reasons given by the Commission to elucidate what was decided and to ascertain what findings were indispensable bases of the decision."
The starting point, however, must always be "what was decided". Resort can be had to accompanying reasons only for the purpose of elucidation. In the present case, "what was decided" is contained within the four corners of the declaration (see paragraph [29] above). The terms of that declaration, looked at in isolation, make it clear that the court decided:
(a) that Claude treated the $4.25 million loan account with GC & Co as his entitlement to be drawn down at his will;
(b) that Claude drew upon the loan account as he saw fit;
(c) that Claude caused the passing of a resolution of directors of GC & Co allowing for the payment of retrospective interest on the loan account; and
(d) that the actions in the foregoing (a), (b) and (c) were "oppressive and unfairly prejudicial" to the members of" GC & Co.
The preoccupation here is with the loan account. The main elucidating parts of the reasons for judgment are paragraphs [12], [13] and [15] as set out at paragraph [46] above. Relevant findings in those paragraphs are that Claude and his father Gerard did not, at the time of the receipt of the CSIRO settlement proceeds, regard the sum of $4.25 million as Claude's money; that, in Gerard's lifetime, expenditure from loan accounts did not occur without his approval; that Claude could not have drawn down the $4.25 million without Gerard's agreement; that, except as to legal expenses and perhaps other like matters, Claude did not draw down on the loan account during Gerard's lifetime; that, after Gerard's death, Claude resorted to the GC & Co loan account for regular living expenses and other personal expenses; that the appropriate course for Claude to have taken was to arrange for a fair remuneration, not to apply the funds of the company as he chose; that Claude drew $1.3 million from the loan account for the purchase of the Dairy Farm and did so without seeking or obtaining the approval of the other shareholders of GC & Co; that Claude took the view at that time that the funds in the loan account were his and, in addition, that he had a moral claim to have GC & Co provide him with a home; and that the action of Claude and Anne-Marie, as directors of GC & Co, in resolving that the $4.25 million had been lent on terms as to reasonable interest that he could claim should he choose to do so had no justification.
The oppression of which Claude was held guilty was, in effect, treating the loan account as his own to resort to as and when he saw fit, instead of maintaining, after Gerard's death, the practice of not drawing on the account without agreement - although with the requirement for agreement having become, after Gerard's death, a requirement for the agreement of the other GC & Co shareholders, instead of the agreement of Gerard.
Necessarily implicit in these findings, however, is a further finding, namely, that the $4.25 million was not Claude's to deal with as he wished and, therefore, that the so-called loan account was not a loan account at all, in the ordinary sense of a reflection of the company's obligation to pay without question as and when payment was demanded. Had the situation been of that kind, there could and would have been no objection to Claude's making demands for payment and receiving payment. The finding that the $4.25 million was not Claude's to deal with as he wished is the product of three further findings:
at paragraph [12] of the reasons:
"I am satisfied that the split was agreed between Claude and his father with a view to reducing the capital gains tax otherwise payable on the $9.5m. I am satisfied that Gerard and Claude did not at the time regard the sum of $4.25m as Claude's money."
also at paragraph [12]:
"I am satisfied that the $9.5m was paid to GC & Co and received by it in settlement of its claim against CSIRO and that no attempt was ever made genuinely to estimate a sum for any personal claim by Claude including any claim falling within the terms of s160ZB(1)."
at paragraph [15] of the reasons:
"I am satisfied that neither Gerard nor Patrick, who signed the letter to Garrett & Walmsley of 6 July 1993, looked upon the $4.25m as Claude's money . . ."
It follows that the contention of GC & Co at paragraph [58] above is correct and that GC & Co and Claude are, in these proceedings, bound by the findings (a) to (d) there set out.
Events leading up to the CSIRO settlement
The findings just mentioned are of central significance in the resolution of the present proceedings. They are not, however, dispositive and it is necessary to refer to essential matters of fact.
In approaching the facts, I note the submission made on behalf of Claude that, where issue estoppels arise from findings in earlier proceedings, the party having the benefit of them must either make do with the findings thus made available or abandon them and seek to prove relevant matters afresh. I am not persuaded that this is so. Issue estoppels put established facts at the disposal of the parties and the court. They must accept and have regard to those facts even if some attempt to call them into question is made. But those facts do not constitute the whole of the available facts. It is open to the plaintiff to prove other facts in the ordinary way.
I therefore turn to the evidence.
In about 1987, representatives of GC & Co and representatives of CSIRO began discussions about possible application of certain soil improvement technology to land of GC & Co. On 10 July 1987, a written agreement was entered into between GC & Co and CSIRO. A joint venture company called "Cassiro Pty Ltd" was formed. Disputes later arose and, in 1992, GC & Co commenced proceedings in the Federal Court against CSIRO, Cassiro and a CSIRO-owned company (Sirotech Pty Ltd). Shortly afterwards, CSIRO filed proceedings in the Federal Court seeking winding up of GC & Co on the just and equitable ground.
In the proceedings instituted by GC & Co, a draft pleading was prepared which referred to several matters that CSIRO and Sirotech had allegedly published to various Government persons which, it was said, were defamatory of GC & Co. There were also allegations of injurious falsehood perpetrated by CSIRO and Sirotech against GC & Co.
Moves towards settlement were in due course made. Claude, as secretary of GC & Co, wrote to the chairman of CSIRO on 5 May 1993 providing "some numbers that support our demands" - apparently demands communicated at a meeting a few days earlier. Various items said to warrant compensation were then set out. They totalled more than $56 million. Among them was:
"Damages to the name, reputation and standing of GC & Co, Cassegrain Family name, Cassegrain Group of companies, and Claude Cassegrain and his family as a result of being publicly associated with a failed venture involving bitter litigation and disruption to the family and their associated business activities - $5,000,000."
The letter concluded by saying:
"... we would accept a payment of $15,000,000 tax effective plus legal costs on an indemnity basis ...".
On 16 June 1993, CSIRO's solicitors (Blakes) wrote to GC & Co's solicitors (Garrett & Walmsley) offering to settle the proceedings on the basis of a payment of $7.25 million to GC & Co, subject to CSIRO obtaining Ministerial approval. That amount was said to represent $4.32 million in respect of damages claimed by GC & Co, $2 million for costs and $930,000 for transfer to CSIRO of GC & Co's interest in certain technology. Blakes' letter stated that comprehensive releases would be required from GC & Co and relevant associates, including Claude.
This proposal was not accepted by GC & Co. The dispute went to mediation over three days. On the second of those days (29 June 1993), Garrett & Walmsley wrote to Blakes saying that they had instructions to seek leave to amend in the first proceeding by adding "counts in defamation and injurious falsehood in relation to communications between servants and agents of CSIRO and Sirotech on the one hand and the State Bank on the other". This was no doubt a reference to the draft pleading already mentioned.
This letter from GC & Co's solicitors did not refer to any proposal to add Claude as a plaintiff. On the face of things, it was the existing plaintiff, GC & Co, which was the victim of the alleged defamation and injurious falsehood. The draft pleading (never in fact filed) did not refer to any defamation claim by Claude and he never became a party to the Federal Court litigation.
The mediation resulted in an offer of $9.5 million by CSIRO to GC & Co. This was communicated on 2 July 1993.
Four days later, on 6 July 1993, GC & Co, in a letter signed by Gerard and Patrick, informed Garrett & Walmsley:
"It was resolved at an extraordinary general meeting held by the shareholders on Saturday 3 July 1993 that the following offer in settlement of the dispute would be accepted by Gerard Cassegrain & Co Pty Ltd:
$5.25m to Gerard Cassegrain & Co Pty Ltd ($4.32 in respect of damages, $.930 sale of GC & Co's shares in Cassiro Pty Ltd).
$4.25m in personal damages payable to Claude Cassegrain."
Claude himself wrote to Garrett & Walmsley on the same day saying that he was "prepared to accept in settlement of the proceedings $4.25m as personal damage". He added:
"This has been discussed with the company at an extraordinary general meeting held by the shareholders on Saturday 3 July 1993."
The meeting thus referred to was apparently a discussion on 3 July 1993 involving Gerard, Francoise, Claude and Mr Walmsley, solicitor. Garrett & Walmsley were thus told by Gerard, Patrick and Claude himself that GC & Co had agreed that $4.25 million out of the negotiated $9.5 million was to pass to Claude.
On 6 July 1993, Garrett & Walmsley sent a letter to Blakes proposing various matters to be included in the settlement documentation and said:
"1. Payment of $9.5 million to occur on execution and exchange of settlement documentation and in accordance with the written authority of Gerard Cassegrain and Co Pty Ltd ('GC').
2. In consideration of the personal releases etc by Claude Cassegrain the amount of $9.5 million be paid as follows:
(a) $5.25 million to Gerard Cassegrain and Co Pty Ltd ($4.32 million on account of damages and $930,000 consideration for share transfer);
(b) $4.25 million to Claude Cassegrain."
At that point, the $4.25 million proposed to be paid to Claude had not been characterised in any correspondence as damages for defamation or damage to reputation. It had not been tied to any entitlement or loss on Claude's part.
On 7 July 1993, GC & Co's external accountant, Mr Griffith, wrote to Mr Farrell of Deloiotte Touche Tohmatsu. The letter is headed "Re Section 160ZB(1) CGT" and begins by referring to a conversation the previous day in relation to "the effects of Part IIIA on the receipt by taxpayers on compensation for damages". Mr Griffith then set out a request for written advice on capital gains tax. He described the position as follows:
"The court proceedings have reached the position where mediation was completed last week and a total sum of money for compensation was agreed to between the parties.
The compensation has two components to it -
Compensation to the company for loss sustained by it on account of the defendant's failure to discharge its duty of care to the company.
An amount payable to the person (director) for defaming the good name of the person.
Would you please advise me of the CGT implications of each of the amounts agreed to ..."
This advice was given by Mr Farrell in a letter dated 9 July 1993. It was to the effect that, under s 160ZB(1) of the Income Tax Assessment Act 1936 (Cth), a capital gain is not to be taken to accrue to a taxpayer by reason of the obtaining of a sum by way of compensation or damages for wrong or injury suffered to his or her person or in his or her profession or vocation; and that there was "little doubt" that payment of compensation to the individual would not be treated as a capital gain. Mr Farrell also advised that it was unlikely that a company would merit this favourable treatment since a company could not suffer injury in relation to "his or her person".
GC & Co, through its solicitors, then renewed requests to CSIRO's solicitors for part of the settlement sum to be payable to Claude and, for the first time, identified defamation as the basis. CSIRO resisted any such element of the settlement. It said that, even if Claude had been a party to the litigation and had pursued a defamation claim, he would not have recovered more than about $500,000. CSIRO also referred to its responsibilities as a Commonwealth instrumentality and said that it did not wish to be a party to a document that did not fully represent the true position. In short, CSIRO refused to countenance either an apportionment between GC & Co and Claude or any acknowledgement of any claim in defamation on Claude's part to which any part of the overall sum was attributable. It obviously thought that $4.25 million was a ridiculous sum for any defamation settlement.
The relevant deed ("Deed of Settlement and Release") was executed on 27 September 1993, along with numerous other documents effecting the settlement. The parties to the deed were GC & Co, Claude, CSIRO, Sirotech and Cassiro. The operative provisions run to 54 pages and there are numerous schedules and annexures. For present purposes, the focus should be upon the provisions involving Claude. He is referred to in the deed as "Cassegrain". GC & Co and Claude together are designated "the Cassegrain Parties". Other relevant provisions are as follows:
1. "Cassegrain Claim" is defined as "any present or future or future action, proceeding, claim or demand, which GC & Co, Cassegrain, Cassiro or any Associate of GC & Co or of Cassegrain may bring against SCIRO or Sirotech or against any Associate of CSIRO or Sirotech, whether or not the action, proceeding, claim or demand is identified or known at the date of this Deed or at Completion with certainty or at all, and whether or not the action, proceeding, claim or demand also involves or may involve some other party, arising directly or indirectly in any way from or referable to" certain stated matters.
2. Clause 2.1 states that the deed does not become binding on the parties unless and until CSIRO has paid $9.5 million "to or at the direction of the Cassegrain Parties".
3. Clause 2.2 states that the $9.5 million "will be referable to" certain specified matters as follows:
(a) $8,835,083 to discharge of all liabilities which "any party to this Deed" has to pay costs or damages to any other party to the deed (whether under the first proceedings or otherwise) and the benefit of the covenants and other promises of the Cassegrain Parties under the deed;
(b) $503,667 for the transfer of certain rights by GC & Co to "CSIRO or its nominee";
(c) $155,000 for the transfer of certain machinery; and
(d) $6,250 for a specified "net difference" in the value of goods exchanged between GC & Co and CSIRO.
4. By clause 6.1, GC & Co, Cassiro and Claude accepted certain restraints on future activities.
5. Clause 7 provided for the parties to seek the making of certain orders by consent to put an end to the two Federal Court matters.
6. Clauses 8, 9, 10 and 11 recorded certain comprehensive releases and indemnities given by and to "GC & Co, Cassegrain and Cassiro".
The deed did not refer to any division of the $9.5 million between GC & Co and Claude or refer to any specific interest of anyone in any part of the proceeds.
The $9.5 million was paid by CSIRO in accordance with a written direction given to it by GC & Co and Claude. They were the "Cassegrain Parties" and, as has been noted, clause 2.1 contemplated payment of the $9.5 million "to or at the direction of the Cassegrain Parties". The written direction required the following payments by CSIRO:
$8,309,502 to State Bank of New South Wales
$1,170,000 to Garrett & Walmsley
$20,498 to Garrett & Walmsley "on account of income tax calculated for Cassiro Pty Limited".
GC & Co was, at the time, heavily indebted to the State Bank. By letter to the bank dated 7 July 1993, Claude said that "the whole of the proceeds" of the CSIRO settlement were to go to the bank, after providing for legal costs amounting to $1,374,443.10 as at 30 June 1993. The sum of $8,309,502 received by the bank on settlement was applied in reduction of GC & Co's liability to the bank. Upon receipt of it, the bank released security it held over property to be transferred to CSIRO as part of the settlement.
The bank had provided GC & Co with funding specifically for the CSIRO litigation. It had done so on the express condition that any proceeds would be applied in reducing GC & Co's debt to the bank. When settlement with CSIRO was imminent, Garrett & Walmsley wrote to the bank as follows by letter dated 27 August 1993:
"The settlement sum is payable as damages to both GC & Co and Mr Cassegrain. Clause 2.1 in its current form is a 'compromise' clause. The parties have decided (to date) not to express the apportionment of that sum between GC & Co and Mr Cassegrain. However, as we understand it, there is no disagreement that a significant sum is being paid to Mr Cassegrain in respect of his own claims identified in the recitals, his releases and the restraints of trade imposed upon him.
The Bank's security at present only covers the damages (net of costs) payable to GC & Co. Our clients intend to pay to the State Bank that amount of damages due to Mr Claude Cassegrain personally (after provision for costs). In this respect it might be desirable for him to execute a Deed of Assignment to the Bank in respect thereof, and we seek your advice accordingly.
The charge from GC & Co to the Bank, and Mr Cassegrain's proposed assignment, will cover all settlement proceeds after payment/provision of costs."
The essential message here was that, although part of the total receipt from CSIRO would be "damages due to Mr Claude Cassegrain personally", the whole (less legal costs) would be received by the bank in reduction of GC & Co's bank debt, with Claude perhaps executing "a deed of assignment" to the bank in respect of his part.
On or about 31 October 1993, an entry was made in GC & Co's books of account crediting $4.25 million to a loan account in the name of Claude, which account, immediately before that point, reflected a balance of $178,095.16 in Claude's favour.
Thereafter, Claude drew upon his loan account with GC & Co for personal expenses. Ledger entries relating to, for example, David Jones, St Joseph's College, Peters of Kensington and State Bank Visa bear this out. There are also entries concerning the transfer of the Dairy Farm. These will be examined in some detail presently.
Subsequent taxation matters
It is necessary to refer next to certain taxation litigation that began in or about 2000.
The litigation arose from objections by GC & Co against its taxation assessment for the year ended 30 June 1994. The Commissioner of Taxation ("ATO") originally assessed GC & Co on the basis that the full $9.5 million from the CSIRO settlement should be included in GC & Co's assessable income. An objection was disallowed by the ATO and GC & Co appealed to the Administrative Appeals Tribunal: Re Gerard Cassegrain & Co Pty Ltd and Commissioner of Taxation [2005] AATA 72. There was then an appeal by GC & Co to the Federal Court (Lindgren J) on questions of law: Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2007] FCA 415; (2007) 66 ATR 198. The court set aside the AAT decision and remitted the matter to the AAT to be determined according to law.
The matter was then determined again by the AAT: Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2010] AATA 12; (2010) 78 ATR 328. The determination eventually concerned the status, for tax purposes, of the $8,835,083 that formed the bulk of the apportionment under clause 2.2 of the settlement deed (see item 3(a) of paragraph [84] above).
These taxation proceedings cannot, of course, be regarded as the source of facts or findings binding on the parties to the present proceedings. Nor, as I have said, can the decisions be called in aid as evidence of facts found in the proceedings: Evidence Act , s 91. GC & Co, however, places reliance on submissions made in the taxation proceedings.
Reference is made, in particular, to written submissions filed by CG & Co with the AAT on 10 July 2009. At paragraph 93 of those submissions, GC & Co stated how the $8,835,083 should be apportioned:
"The amount of $8,835,083 is to be apportioned by taking into account:
(a) allowance to Claude Cassegrain for compensation for foregone remuneration discounted to its NPV as at 27 September 1993: $9.722m (before tax);
(b) a deduction from paragraph (a) above for income actually earned by Claude Cassegrain during the 19 year loss period allowed for by Mr Costello: ($1,220,765);
(c) payment to Claude Cassegrain for general reputation damages for his defamation claim: $500,000;
(d) payment to Claude Cassegrain for his legal costs: $200,000;
(e) payment to GC&Co for reimbursement of its legal costs in the Federal Court proceedings of $2,503,449."
It was then stated in paragraph 94:
The combined effect of those amounts is that, by the Deed, Claude Cassegrain disposed of assets valued as at 27 September 1993 at $9,201,235 (sub-paragraphs 103(a) + 103(c) + 103(d) - 103(c) above). GC&Co gave up assets valued at $2,503,449 (sub-paragraph 103(e) above). In consideration for the above they received the apportioned amount of $8,835,083 under cl. 2.2(a) of the Deed."
The references here to sub-paragraphs 103(a), 103(c) and 103(d) are confusing. It seems that the references should be to 93(a), 93(b) and 93(d); also that "103(a) + 103(c) + 103(d) - 103(c)" should read "93(a) + 93(c) + 93(d) - 93(b)".
The proposition advanced by GC & Co was thus that, under the CSIRO settlement, GC & Co "disposed of" assets to the extent of $2,503,449 and Claude "disposed of" assets to the extent of $9,201,235, so that GC & Co's share of the $8,835,083 was the proportion that $2,503,449 bears to the aggregate of $2,503,449 and $9,201,235.
Particularly noteworthy is the point that the element said to be attributable to Claude for "general reputation damages for his defamation claim" was only $500,000.
However, the ATO's statement of findings produced in 2000 in consequence of CG & Co's appeal to the AAT contains the following under a heading "Taxpayer's Contentions":
"Claude Cassegrain has contended that the $4,250,000 settlement payout was made by CSIRO to settle his defamation action against CSIRO" [original emphasis].
If one then moves to the decision of Lindgren J of 23 March 2007, one finds reference to the need for the applicants (relevantly, GC & Co - Claude was not a party) "to prove that Claude Cassegrain provided part of the consideration for the sum of $9.5 million". Then follows:
"They did so, because they proved not only that he gave the surrender of all and any existing claims, but also that he gave contractual undertakings."
The documents concerning the taxation proceedings are of use in this case only to the extent that they record statements by GC & Co (or by its lawyers on its instructions) or recordings by the ATO, the AAT or the Federal Court of things so said by way of submission. It is clear that it was Claude who acted for CG & Co in these respects.
The significant point is that, as is clear from paragraph [101] above, GC & Co initially took the line with the ATO that $4.25 million of the settlement moneys had gone to Claude to settle his own "defamation action against CSIRO" and that GC & Co subsequently changed tack. Once it had been held by Lindgren J (see paragraph [102] above) that GC & Co had succeeded in showing that Claude had provided part of the consideration for the $9.5 million by surrendering claims and giving contractual undertakings, GC & Co's focus shifted to attributing sums to a range of elements of the consideration so provided by Claude: see paragraph [96] above. The overwhelmingly predominant element then became foregone remuneration with only a relatively modest $500,000 for "general reputation damages for his defamation claim".
The first Dairy Farm transfer and the consideration for it
On 2 September 1996, Claude and Anne-Marie, as directors of GC & Co, resolved that the company transfer the Dairy Farm property to Claude and Felicity as joint tenants for a consideration of $1 million; and that there also be transferred to them, for the written down book value thereof, the cattle, milk quota, plant and equipment and other assets of the dairy business.
A transfer under the Real Property Act 1900 between GC & Co as transferor and Claude and Felicity as transferees dated 14 September 1996 was executed under the common seal of GC & Co. The transfer was for an expressed consideration of $1 million and the meeting of GC & Co's directors that resolved that the company should undertake the transaction had before it a valuation of the Valuer-General supporting that consideration. There is no suggestion that the transaction was at an undervalue from GC & Co's perspective.
The transfer was not signed personally by either Claude or Felicity as transferee. It was accepted by the solicitor for the transferees, Mr McCarron. The transfer was registered on 10 March 1997.
The consideration for the transfer of the land and other property was debited to Claude's loan account, in the sense that the account was adjusted to reflect a reduction in the balance owing by CG & Co to Claude equal to the amount of the consideration. This was in accordance with a resolution passed by the directors at the meeting of 2 September 1996:
"RESOLVED that the Company debit the loan account of Claude Cassegrain in the books of the Company for the amount of the consideration payable pursuant to resolutions 2, 4 and 5 hereof and that the debiting of the said loan account shall be full satisfaction of the amounts payable to the Company pursuant to resolutions 2, 4 and 5 hereof and that thereafter the Company shall relinquish all right title and interest in the property referred to in resolutions 1 and 3 hereof."
Resolution 2 determined the consideration for the transfer of the Dairy Farm land at $1 million. Resolution 4 fixed the consideration for the plant, stock and other business assets as the written down value in the company's books as advised by the external accountants. Resolution 5 referred to Claude's reimbursing the company for improvements since 21 September 1995.
GC & Co's balance sheet as at 30 June 1996 recorded, as a liability, shareholder loan accounts of $4,075,618. The corresponding figure at 30 June 1997 was $2,554,417. Most of the movement of $1,521,201 is accounted for by two journal entries of 30 June 1997 - one for $1 million designated "Sale dairy land to CC"; and the other for $228,922.07 designated "Tsfr Claude's loan a/c to one no". The latter debit entry corresponds in amount with a credit entry with the same designation in a separate ledger account which appears to cover a myriad of personal expenses of Claude.
I infer from these books of account that, so far as the $1 million consideration for the Dairy Farm land was concerned, the debiting to Claude's loan account envisaged by the directors' resolution of 2 September 1996 was, as a matter of bookkeeping, effected on 30 June 1997. The fact that there was no actual movement of cash indicates that it was only at 30 June 1997 that the financial impact was recorded within (and suffered by) GC & Co. The directors' resolution of 2 September 1996 set out at paragraph [108] above makes clear two important points: first, that amounts were "payable to the Company" for the assets in question pursuant to the earlier resolutions 2, 4 and 5; and, second, that a debiting of Claude's loan account in the way envisaged by the resolution would, in the future, constitute "full satisfaction of the amounts payable to the Company". Pending that debiting and satisfaction, the situation was to be one of purchase moneys payable but unpaid.
The overall effect was thus that, on 30 June 1997, GC & Co acted upon and gave effect to the directors' resolution of 2 September 1996 concerning debiting of Claude's loan account and thereby notionally paid the relevant amount to Claude (thereby reducing the debt that GC & Co owed to Claude) and that amount was paid by Claude to GC & Co to satisfy the consideration that had already become payable by Claude and Felicity in respect of the Dairy Farm land. It was thus on 30 June 1997 that value passed from GC & Co to Claude by way of debit to the loan account.
It follows that, if and to the extent that these proceedings, as they affect Felicity, are "[p]roceedings for the possession or recovery of land", s 118(1)(d) of the Real Property Act precludes their being brought.
The position reached
GC & Co has made good the allegation that Claude breached his fiduciary duty to GC & Co by:
(a) asserting against GC & Co that he was personally entitled to payment of $4.25 million in consequence of the CSIRO settlement;
(b) ensuring that GC & Co acknowledged the existence of a corresponding current liability to pay him $4.25 million; and
(c) relying on that acknowledgment to obtain money or value from GC & Co.
Subject to the question of defences about to be mentioned, GC & Co is entitled to appropriately framed declaratory relief accordingly, as well as an injunction restraining future resort to the loan account and an order for an inquiry to establish the amount of all money and value obtained by Claude in breach of duty.
Subject to the same qualification, there should also be an order that Claude pay equitable compensation to GC & Co, with the quantum to be determined after inquiry made in accordance with the court's order. There will be a need for further submissions as to the precise method of assessing equitable compensation having regard to both accrual of " value to the misappropriating fiduciary" (to quote words used by Thomas JA in Ferrari v Ferrari Investments (Townsville) Pty Ltd [2000] 2 Qd R 359; [1999] QCA 230) and financial detriments to GC & Co resulting, in each case, from Claude's recourse to the supposed loan account.
GC & Co has not established an entitlement to the relief it claims against Felicity in relation to the Dairy Farm.
It remains to consider the availability of defences based on delay.
Delay
It is unnecessary to consider time-based defences raised by Felicity. I must, however, deal with time-based defences raised by Claude.
Claude points to the fact that these proceedings were commenced by statement of claim filed on 11 September 2008. Although judgment on the s 237 application was delivered only on 23 September 2008, Sackville AJ made consent orders on 5 September 2008 granting leave on the footing that it was to be revoked if the ultimate decision was that the application for leave should be dismissed.
The substantive relief to which GC & Co has shown an entitlement, as against Claude, is equitable relief by way of declaration and an order for the payment of equitable compensation. The basis for such relief is not the mere establishment of the loan account in the books of GC & Co but the obtaining of money or value by Claude from GC & Co by resort to the loan account and in exercise of Claude's asserted entitlement to draw upon the account.
Delay and the passage of time are relevant to both a defence of laches raised by Claude and the potential operation by analogy of provisions of the Limitation Act 1969.
It is significant that the present action is brought with leave granted under s 237 of the Corporations Act . One of the matters on which the court must be satisfied in order to grant such leave is that the company itself will not bring the proceedings: s 237(2)(a). The court was so satisfied upon the hearing of the application for leave. Sackville AJ said ([2008] NSWSC 976; (2008) 68 ACSR 132 at [70]):
"The Company will not itself agree to bring proceedings against Claude because he controls the voting shares in the Company and will not authorise proceedings against himself. Accordingly, the requirement in s 237(2)(a) is satisfied."
That finding must be considered in light of certain background facts. When the loan account was established in 1993 following the CSIRO settlement, Claude and John were the only directors of GC & Co and Gerard was in the background exercising his paternal influence. When, in 1996-7 the Dairy Farm was transferred to Claude and Felicity as joint tenants and Claude resorted to the loan account to satisfy the consideration, Claude and Anne-Marie were the only directors of GC & Co. It was they who passed the relevant board resolutions and affixed GC & Co's common seal to the transfer. Anne-Marie was appointed a director on 12 April 1995 and ceased to hold office on 25 June 1998, after which, it appears, Claude was in office alone until 22 October 1998 when A B Sarks was appointed a director. Sarks held office until 13 July 2005, at which point T G Cassegrain was appointed.
There is nothing in the evidence to suggest that John played any active role in relation to the CSIRO settlement and the establishment of the loan account, even though he was a director at the time. The functionaries in that connection were Claude and Gerard, but Gerard died on 29 October 1993, so that his knowledge of relevant matters was then lost. The only repository of such knowledge on the board of directors thereafter was Claude himself.
By mi-1997, however, all relevant family members were aware of the $4.25 million loan account established after receipt of the CSIRO settlement proceeds and the subsequent transfer of the Dairy Farm to Claude and Felicity.
The awareness just mentioned is made clear by documents related to the Federal Court proceedings. An amended pleading produced in May 1997 referred to the CSIRO settlement and to Claude's having "agreed to accept $4.25 million of the settlement proceeds as being damages for personal injury suffered by himself"; and to Claude's having "declared himself to hold that proportion of the sum which exceeded his entitlement to an equal share in the moneys on trust, in equal shares, for all family members, including Gerard, the First to Fourth Applicants [Patrick, Catherine, John and Denis] and the Second and Third Respondents [Anne-Marie and Francoise]".
In the course of submissions before Davies J on 20 October 1997 concerning an application to amend, there was reference by counsel for Patrick, Catherine, John and Denis to a claim for a declaration that Claude held the $4.25 million in trust and "the need to identify the extent to which the claim of 4.25 [sic] now made by Claude for himself is a proper extraction from the company's assets". There was also reference to an allegation that "Mr Claude Cassegrain improperly transferred assets to himself and his wife", that there was no real or genuine transaction in that respect, that the supposed transfer "purported to confer benefits in breach of his fiduciary duty" and that the true value of the assets concerned was more than the $1.3 million represented by the documents. Davies J said, at that point, "This 1.3 million came off the loan account I take it, did it?" Counsel for Claude and the other respondents answered in the affirmative.
On 20 October 1997 Davies J granted leave to file a further amended statement of claim. It contained fully pleaded allegations in relation to the matters that had been referred to briefly in court on that day. In particular, it was alleged
(a) that, in order to minimise tax payable by CG & Co, Gerard and Patrick, at the direction of Claude, had instructed the accountants that the CSIRO settlement moneys were to be split so that Claude would receive $4.25 million purportedly as damages for injury to his reputation;
(b) that, after receipt of the $9.5 million by GC & Co, the $4.25 million loan account in favour of Claude was raised in GC & Co's books even though no loan had been made;
(c) that Claude thereby obtained benefit for himself in breach of his fiduciary duty;
(d) that, in or about July 1997, Claude caused the Dairy Farm to be transferred to himself and Felicity; and
(e) that the transfer caused loss to GC & Co, was carried out in breach of Claude's fiduciary duties as a director and was not in the best interests of the company as a whole.
The claim based on these allegations appeared in the further amended application of February 1998 (see paragraph [43] above).
Denis, who has brought these present proceedings on behalf of GC & Co, was one of the applicants in the Federal Court proceedings. The others were, as I have noted, Patrick, Catherine and John. Anne-Marie (co-director with Claude from 12 April 1998 to 25 June 1998) was a respondent.
It is thus clear that, in the second half of 1997, Denis, Patrick, Catherine, John and Anne-Marie were all fully aware of the facts concerning the CSIRO settlement proceeds, the $4.25 million loan account and the Dairy Farm transfer to Claude and Felicity that form the basis for these present proceedings. Moreover, all of them except Anne-Marie had explicitly alleged breaches of duty by Claude that correspond with (or are closely analogous with) those at the centre of the present litigation. And all of them were aware of the judgment of 15 July 1998 in which Davies J, referring to the events concerning the CSIRO settlement moneys, and their application, said:
"If the applicants wish to claim that Claude should repay moneys to GC & Co, those proceedings can be taken and an order for the taking of accounts as between Claude and GC & Co can be sought. I do not think that these present proceedings are concerned with that."
In the period between the exchanges in court on 20 October 1997 and 25 June 1998, Claude and Anne-Marie were the only directors of GC & Co. The board thus constituted would not, as a practical matter, have caused the company to sue Claude, particularly since he and Anne-Marie were aligned on the same side of the Federal Court proceedings. After 25 June 1998, and until 22 October 1998, Claude alone was in office as a director and unable to function as a board (even if minded to cause the company to sue him). From 22 October 1998 until 13 July 2005, the board consisted of Claude and A Sarks, while from 13 July 2005, the directors were Claude and T G Cassegrain. Such a two-person board could not have caused the company to sue Claude except with Claude's concurrence which would not have been forthcoming.
From at least mid-1997, it must have been obvious to the other shareholders of GC & Co - in particular, Denis, Patrick, Catherine and John - that, if there were to be any meaningful move to assert GC & Co's rights of recovery against Claude, it would be necessary for one or more of the shareholders to take the initiative.
The statutory derivative action procedure now provided for in Part 2F.1 of the Corporations Act has been available since December 1999 by virtue of amendments made to the Corporations Law by the Corporate Law Economic Reform Program Act 1999 (Cth). Before that, a member could bring a derivative action for the company's benefit only under recognised exceptions to the rule in Foss v Harbottle (1843) 2 Hare 461; 67 ER 189.
None of the shareholders acted until 18 December 2007 when Denis filed the application upon which Sackville AJ made the orders of September 2008 granting leave under s 237 for him to bring proceedings on behalf of GC & Co against Claude. None of the other shareholders joined in that application, although Patrick, Catherine and John gave certain undertakings supporting Denis for the purposes of a security for costs application; also, they were described by Sackville AJ as "supporting" Denis's s 237 application.
Why did Denis wait ten years? The answer is found in the judgment of Sackville AJ of 25 September 2008:
"I also accept Denis' evidence that the primary reason for the very long delay in bringing the leave application was that the Company was in receivership from 1999 until the end of 2004 and that he considered that proceedings were not feasible during that period."
An ASIC extract in evidence shows that Mr Smith and Mr Kershaw were receivers and managers of GC & Co from 15 June 1999 to 21 December 2004. They were appointed by the Commonwealth Bank, a secured creditor. Since all registered charges recorded are described as "fixed/floating", it may be accepted that, during the period of receivership, decision-making with respect to any right of action GC & Co had against Claude was in the hands of the receivers. The prospects of leave being granted for a member to bring a derivative action while the company was in that state would be very remote. The "best interests" criterion in s 237(2)(c) would, in the particular circumstances, direct attention to the agency and decision-making role of the receivers and treat as predominant their function of serving the interests of the secured creditor, with the normal decision-making organs superseded although not destroyed: Hawkesbury Development Pty Ltd v Landmark Finance Pty Ltd (1969) 92 WN (NSW) 199 at 209.
The question of delay in commencing these proceedings should therefore be approached on the basis that
(a) the board of directors of GC & Co was, at all relevant times, constituted in such a way as to make it impossible, in every practical sense, for GC & Co to commence proceedings against Claude through a decision of the directors;
(b) Denis, Patrick, Catherine and John were aware, from at least mid-1997, of all facts relevant to the institution of the proceedings;
(c) from mid-1997 to 15 June 1999 (when receivers were appointed) it was open to any one or more of Denis, Patrick, Catherine and John to take steps to initiate a general law derivative action asserting GC & Co's causes of action against Claude;
(d) the practical ability of those persons to take such steps came to an end on 15 June 1999;
(e) after 21 December 2004, however, it was again open to any one or more of Denis, Patrick, Catherine and John to seek leave under s 237 to bring a statutory derivative action against Claude.
It follows that operative delay was confined to the period mid-1997 to 15 June 1999 and the period 21 December 2004 to the filing of Denis's s 237 application on 18 December 2007.
The Significance of Delay
The remedies to which GC & Co has established an entitlement against Claude (subject to any defence based on delay) are, as I have said, equitable remedies. The first question to be addressed in relation to delay is therefore whether the equitable doctrine of laches operates as a discretionary bar to recovery. If that bar does not operate might it be appropriate to consider some analogy with a bar created by the Limitation Act 1969.
That this is an appropriate approach is, I think, indicated by Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 at 509-511 and The Duke Group Ltd v Alamain Investments Ltd [2003] SASC 415 at [116]. The Limitation Act itself states, in s 9, that nothing in the Act affects the rules of equity concerning the refusal of relief on the ground of laches, acquiescence or otherwise, thus implying that the applicability of those rules should be considered first.
Laches
A succinct summary of principle appears in the judgment of Owen J in Bell Group Ltd v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1 at [9303] - [9308]:
"The equitable defence of laches follows the maxim that the law assists those who are vigilant, not those who sleep over their rights. As Lord Blackburn said in Erlanger v New Sombrero Phosphate Co (1878) 3 AC 1218 ; Erlanger v New Sombrero Phosphate Co (1878) 3 AC 1218 at 1279 (approved by Kitto J in Lamshed v Lamshed (1963) 109 CLR 44; Lamshed v Lamshed (1963) 109 CLR 440 at 453-454):
'A Court of Equity requires that those who come to it to ask its active interposition to give them relief, should use due diligence, after there has been such notice or knowledge as to make it inequitable to lie by.'
Thus laches provides a bar to the grant of relief where there has been an unreasonable delay in the commencement or prosecution of proceedings and where the delay renders it unjust in all the circumstances to grant the relief sought.
Mere delay is insufficient to invoke the laches defence, even in cases of 'spectacular delays'. For example, in Burroughes v Abott [1922] 1 Ch 86; Burroughes v Abott [1922] 1 Ch 86, the court granted rectification of an instrument after a delay of twelve years. A mortgagor's redemption suit was held not time-barred in Weld v Petre [1929] 1 Ch 33; Weld v Petre [1929] 1 Ch 33 despite a delay of twenty-six years. Finally, in Fitzgerald v Masters (1956) 95 CLR 420, the High Court granted specific performance twenty-six years after the cause of action arose.
The point of time from which the reasonableness of the delay is assessed is, prima facie, the time when the plaintiff became aware of facts that give rise to the availability of equitable relief. In Meagher, Gummow & Lehane at [36-085], the authors commented that where a plaintiff has knowledge of the relevant facts, he or she is presumed to have knowledge of his or her rights to a cause of action. They go on to say that the 'availability of the means of knowledge is as good as knowledge'. These propositions were confirmed in: Savage v Lunn [1998] NSWCA 204 at 5-6; Savage v Lunn [1998] NSWCA 203 at 59-60 (per Handley and Sheller JJA and Sheppard AJA).
Unreasonable delay alone will not be sufficient to attract the laches defence. The delay must render it unjust in the all circumstances of the case for relief to be granted (Spry, Equitable Remedies , 6th edition, 2001 at 43). The doctrine can be relied upon where a plaintiff, in delaying to take or pursue an action, has:
(a) acquiesced to the defendant's conduct; or
(b) caused the defendant or a third party to alter their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted a situation to arise that would be unjust to disturb.
The question is whether the balance of justice favours granting the remedy or withholding it. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221; Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221; Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, the Privy Council looked at, among other things, the nature of the claim, the nature of the property to which the claim relates, the identity of the party against whom the defence is raised, the length of the delay, the extent to which the delay has prejudiced the defendant and the acts of each party during the delay."
There are thus two central questions: first, whether the plaintiff has been guilty of unreasonable delay in bringing proceedings; and, second, whether any such unreasonable delay makes it unreasonable, in the particular circumstances, for the relief to be granted because the plaintiff has either acquiesced in the defendant's conduct or caused the defendant or someone else to change their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted to arise a situation that it would be unjust to disturb.
Some further facts
It is necessary, against this background, to consider yet further factual matters.
On 24 August 1998, John, Catherine and Patrick gave what purported to be a notice convening a general meeting of GC & Co for 15 September 1998. Its efficacy as a notice of meeting and the question whether proposed resolutions notified lay within the competence of a general meeting do not matter. Its significance lies in the concerns it embodies. The proposed resolutions included the following:
"That Claude Cassegrain and Anne-Marie Cameron being the Directors of GC&Co provide a written report to the meeting listing, identifying and explaining basis of each movement in all company loan accounts of Claude George Rene Cassegrain from 1 September 1993 to 15 September 1998."
"The Directors of GC&Co advise the meeting whether they have taken steps to rectify the loan account or to require payment by Claude Cassegrain to GC&Co of the amount of the loan account in view of the declaration by His Honour Justice Davies on 15 July 1998. If so, what steps have been taken. If not, an explanation by the Directors as to why they have not taken such steps."
"Further, an explanation to the meeting as to what steps the Directors of GC&Co propose to take in respect to the matters in Item 2 above and a written Timetable for taking such steps."
"That no further funds shall be drawn by Claude Cassegrain or for his benefit against his loan account in GC&Co."
"That GC&Co amend its accounting records to reverse and rectify the entry made in relation to the $4.25 million in 1993."
"That GC&Co take all necessary and proper steps to call, to account and recover from Claude Cassegrain all assets of the Company misapplied by him against his loan accounts."
Commentary in the notice of meeting referred to the 15 July 1998 judgment of Davies J and his Honour's findings about the establishment of the loan account and drawings on it.
On 27 October 1998, a memorandum ostensibly from Catherine, Patrick, John and Denis and signed by John alone was sent to Claude as "managing director" of GC & Co. It referred to Davies J's judgment and to the notice of meeting dated 24 August 1998 and continued:
"I refer to the meeting which was held on 15 September 1998. As you are aware you refused to participate in that meeting. The only conclusion that we can draw is that you intend to continue to conduct the affairs of the company for your own benefit and not for the benefit of the shareholders as a whole."
The memorandum then set out a request under s 247A of the Corporations Law for access to books showing movement of funds from 1 April 1998 to the date of the memorandum. Claude replied to John (with a copy to Patrick, Catherine, Denis, Anne-Marie and others) on 28 October 1998 referring to a multitude of matters about family businesses that he regarded as reflecting badly on John. On the question of access to GC & Co's books, Claude merely said that John had had access over a period of two months "last year".
By a letter of 30 October 1998 addressed to Denis alone, Claude said:
"I hereby authorise you to inspect the books of Gerard Cassegrain & Co Pty Limited. Please arrange with me for a mutually convenient time during normal working hours."
Some eight months later, control of the affairs of GC $ Co passed to the receivers appointed by the Commonwealth Bank.
In a report dated 24 April 2006 forming part of GC & Co's financial statements for the year ended 30 June 2005, Claude referred to the taxation litigation then in progress. He attributed that litigation to actions of Catherine, Patrick, John and Denis. He said that, during the case heard by Davies J, they had alleged "that the compensation Claude Cassegrain received from the CSIRO was held in trust by Claude Cassegrain on their behalf and the compensation received by Claude Cassegrain was for the purpose of the company avoiding tax"; and that it was after these allegations that the Commissioner of Taxation had issued amended assessments. There were also statements implicating Catherine, Patrick, John and Denis in the creation of the financial predicament that had led to the receivership.
As at 24 April 2006, therefore, Claude made it clear that there was continuing hostility between him and Catherine, Patrick, John and Denis and that, by that time, he saw GC & Co as locked in battle with the Commissioner of Taxation and otherwise suffering continuing prejudice because of their actions.
It is thus shown that, as at April 2006, there had been no healing of family wounds and that Claude saw the taxation proceedings as a vehicle for putting to rest allegations by his siblings adverse to him concerning the CSIRO settlement proceeds and their application. It is reasonable to think that the siblings also saw the taxation litigation as a forum in which the competing contentions on that subject would be addressed.
Acquiescence?
It cannot be said that the passage of some ten years from mid-1997 to December 2007 entailed acquiescence by Denis (or any of Catherine, John and Patrick) in the diversion of GC & Co assets to Claude in the wake of the CSIRO settlement.
Denis and the siblings aligned with him were active in levelling relevant complaints at Claude in 1998. The receivership intervened in June 1999 and, for reasons I have stated, there can have been no real expectation that they would seek to assert and pursue GC & Co's rights against Claude while the receivership continued.
After the termination of the receivership in December 2004, there was no acceptance by Denis (or the associated siblings) that there should be no pursuit of Claude. Rather, taxation proceedings were on foot which they were entitled to regard as keeping alive the controversy about GC & Co and the CSIRO proceeds in which they were interested.
Change of position?
There is no basis for finding that Claude changed his position in any material way on the faith of a belief or expectation that the complaints of Denis and the associated siblings were dead or would not be pursued. Nor has it been suggested that Claude has been otherwise prejudiced by the passage of time. It is not said, for example, that his ability to assemble and present evidence has been compromised.
Conclusion on laches
This is not a case in which the passage of time has had a deleterious effect on Claude, so far as the present proceedings are concerned. It seems clear that acrimonious differences between the family factions continued unabated throughout the period of the receivership. And after the receivers retired, Claude himself showed, by his statements in the report of 24 April 2006, that he regarded the general issue of his loan account and its application to be not only alive but also a source of serious differences between himself and the sibling group associated with Denis.
There is accordingly no basis for the operation of the doctrine of laches to defeat the equitable claims pursued by Denis on behalf of GC & Co in these proceedings.
The Limitation Act
Because the relief to which GC & Co has established an entitlement is wholly equitable relief, the provisions of ss 14, 16, 17, 18, 20 and 21 of the Limitation Act have no direct application. This is the effect of s 23. Nor, in my view, does s 47 operate. This is because a company director owing fiduciary duties is not within the s 11 definition of "trustee".
The question is accordingly whether the court should apply a Limitation Act provision by analogy. In the absence of some sound analogy, a cause of action for equitable relief for breach of fiduciary duty is not subject to any period of limitation: Attorney-General v Cockle [1988] Ch 414.
It is therefore necessary to consider whether any of the causes of action dealt with by the legislation is analogous with the cause of action for equitable relief actually before the court. In other words, is there any relevant analogy between the case expressly dealt with by any of the limitation provisions and the circumstances of this case, that is, where a company director who has applied company funds for his own use has been found to have acted dishonestly in breaching fiduciary duties owed by him to his company?
It has been held in England that a claim for dishonest breach of fiduciary duty is relevantly analogous with a claim for fraudulent misrepresentation or conspiracy to defraud: Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707. In Companhia de Seguros Imperio v Heath (REBX) Ltd [2000] EWCA Civ 219; [2001] 1 WLR 112 at 121, Waller LJ, dealing with claims by a client against an insurance broker for dishonest breaches of fiduciary duty, said:
"... equity would have taken the view that it should apply the statute by analogy to a claim for damages or compensation for a dishonest breach of fiduciary duty. I say that because what is alleged against Heath's as giving rise to the dishonest breach of fiduciary duty are precisely those facts which are also relied on for alleging breach of contract or breach of duty in tort."
Clarke LJ said (at 125):
"... the essential nature of the pleaded case is the same whether it is put as damages for breach of contract, damages for breach of duty or damages (or compensation) for breach of fiduciary duty."
In Aussie Ideas Pty Ltd v Tunwind Pty Ltd [2006] NSWCA 286, the Court of Appeal (Handley JA; Giles JA and Bryson JA concurring) held, following Companhia de Seguros Imperio v Heath (REBX) Ltd , that a breach of fiduciary duty by an accountant and financial adviser involving "elements of dishonesty" warranted analogy with breach of contractual and tortious professional duties.
Breach of fiduciary duty by company directors was at issue in The Duke Group Ltd v Alamain Investments Ltd (above). But the liability for which the plaintiff actually sought redress was that of a firm of accountants who, it was alleged, had knowingly and dishonestly assisted the directors in the breach of the directors' duties to the company. Doyle CJ was of the view (at [133]) that, had the directors themselves been under attack, "there are causes of action in tort against the directors sufficiently similar to the claim against the directors for breach of fiduciary duty, to warrant in principle the application of that time limit to a claim against the directors for breach of fiduciary duty" (his Honour no doubt had in mind the species of duty of care in negligence discussed in Daniels v Anderson (1995) 37 NSWLR 438). Where, as here, the director acted dishonestly, a closer tort analogy is with deceit or conspiracy to defraud.
In this case, the characterisation with respect to company directors in The Duke Group Ltd v Alamain Investments Ltd (reinforced by Aussie Ideas Pty Ltd v Tunwind Pty Ltd) warrants an analogy with tort so that the limitation period of six years specified in s 14(1) should be applied. GC & Co seeks equitable compensation for breach of fiduciary duty by Claude. The analogy with a claim for damages for deceit or conspiracy to defraud is valid.
I have considered but rejected a possible analogy with an action in respect of fraudulent breach of trust or an action to recover trust property. Each of these, under s 47(1), attracts a limitation period of twelve years. The provisions about trustees have regard to the fact that a trustee holds trust property and that the relevant fiduciary duties are owed in relation to that very property: see, for example, Cohen v Cohen [1929] HCA 15; (1929) 42 CLR 91; Paragon Finance PLC v D B Thakerar & Co [1998] EWCA Civ 1249; [1999] 1 All ER 400. Equity views with particular disapproval cases in which a trustee actually holding property misapplies it in breach of duty. A company director who takes company assets which the company then sues to recover may be likened to such a trustee. So too may a defaulting director against whom an account of profits is sought, in that the profits should have come home to the company in the first place: JJ Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467 ; [2002] BCLC 162; Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1048; [2004] 1 BCLC 131. That is not this case. The claim against Claude is for equitable compensation.
When the analogy with tort is applied, the general rule under s 14(1) is that the cause of action becomes barred six years from the date on which it first accrued to the plaintiff. Given that relevant allegations were aired in the context of the Federal Court proceedings as early as mid-1997 (see paragraphs [193] to [196] above), it is reasonable to think that Denis, John, Patrick and Catherine became aware of the transfer of the Dairy Farm dated 14 September 1996 - and the ledger entries of 30 June 1997 - at or very soon after the happening of those events.
I have already expressed the opinion that, in relation to the Dairy Farm transfer, Claude's dishonest breach of fiduciary duty consisted of his receiving the advantage of the book entries of 30 June 1997 by which it was recognised that the consideration for the transfer had been satisfied and the supposed indebtedness of CG & Co to Claude had been reduced by an equivalent amount. It was the recording of those matters in the books on 30 June 1997 that gave effect to the directors' resolution of 2 September 1996 and brought about the effective movement of value from GC & Co to Claude and the corresponding depletion of the assets of GC & Co.
I therefore proceed on the basis that, in relation to the breach of duty involving the Dairy Farm, the start of the s 14(1) period was 30 June 1997. On that basis, the six-year limitation period applicable by analogy with the statute would be taken to have expired on 30 June 2003.
But, bearing in mind that this is an equity case in which no common law remedy is sought and that the court, acting by analogy only, will follow the law according to the justice of the case, the process must be taken further. Because, at all times after 30 June 2003, Claude was either the sole director of GC & Co or one of two directors (Anne-Marie being the other), the situation was always one in which GC & Co could not, in any realistic sense, assert its cause of action against Claude by means of action by its board of directors and any action by GC & Co would have to be a derivative action initiated by one or more of its shareholders other than Claude. Throughout the period 15 June 1999 to 21 December 2004, however, there was no real ability for any such shareholder to initiate a derivative action either under the general law or by resort to the statutory procedure when it became available in December 1999: see paragraph [205] above. The bank-appointed receivers' predominant duty was to the secured creditor, particularly regarding the realisation of assets. They were at liberty to ignore the company's own interests, except to the extent that any surplus was held after satisfaction of the creditor's debt, in which event they were bound to preserve the surplus for the company. They had no duty to pursue claims of the kind involved in these proceedings. Indeed, they might well have been criticised for doing so instead of preferring easier avenues of realisation.
The state in which GC & Co found itself between 15 June 1999 and 21 December 2004 closely resembles a state of "disability" under s 11(3) of the Limitation Act . GC & Co was, during that period, "substantially impeded in" the management of its affairs in relation to proceedings against Claude by forces virtually equivalent to "impairment of . . . physical or mental condition" or "restraint of his or her person, lawful or unlawful". By virtue of s 52, the running of a limitation period imposed by the Act is suspended while the person with the cause of action is under a disability in the s 11(3) sense. The process of analogy in the present case should be on the basis that the period 15 June 1999 to 21 December 2004 is one during which GC & Co was "substantially impeded" in the relevant sense, so that that period is excluded in determining whether proceedings commenced on 11 September 2008 upon a cause of action arising, in the relevant sense, on 30 June 1997 were commenced within six years after the accrual of the cause of action.
The period 30 June 1997 to 11 September 2008 is eleven years two months and eleven days. The period 15 June 1999 to 21 December 2004 is five years six months and six days. When the latter period is excluded, it is seen that, in relation to the consideration for the Dairy Farm transaction, the period between the accrual of the cause of action and the commencement of the proceedings was five years eight months and five days, that is, less than six years.
In relation to drawings on the loan account involving payment by GC & Co of Claude's personal expenses or drawing of cash by Claude, those occurring after the day that was eleven years six months and six days before 11 September 2008 must be treated as not affected by any time bar applied by analogy. Any earlier drawing must, however, be left out of account in determining equitable compensation to be awarded to GC & Co.
Jones v Dunkel
In the course of his closing address, Mr Walker SC referred to this case as "Jones v Dunkel at twenty paces". As I have noted, no party called any witness and the whole of the evidence was documentary. Submissions were made by all counsel regarding the significance of the absence of witnesses.
Having regard to the principles in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, I have proceeded on the basis that failure to call a particular witness cannot make up for any deficiency in evidence, allows a fact that might have been contradicted to be more readily accepted and operates in favour of drawing an inference made available in any event by the evidence actually presented.
On that basis, the absence of evidence from Claude has been much more significant than the absence of evidence from Denis or, for that matter, any of the siblings aligned with him (John, Patrick and Catherine). Denis and his allies were remote from the relevant events except, as to one isolated aspect, for Patrick who was a signatory to the letter of 6 July 1993 and, to that very limited extent, played some active role.
Claude, by contrast, was intimately involved in every facet of the events in question. He could have provided a vast quantity of relevant information. The fact that he chose not to do so has meant that inferences adverse to him available from the documentary evidence have been drawn with greater confidence.
Relief
The time-based defences having failed, relief will be granted against Claude and in favour of GC & Co as outlined at paragraphs [182] and [183] above (this is, however, subject to the limitation expressed at paragraph [243] above). The claims by GC & Co against Felicity will be dismissed.
On costs, my present inclination is to think that Claude should be ordered to pay GC & Co's costs except as they relate exclusively to the aspects of the claims against Felicity not replicated in the claims against Claude; and that GC & Co should pay Felicity's costs as a whole. It is desirable, however, that, before coming to any firm decision, I hear submissions on costs and particularly on the question whether the outcome I have tentatively indicated may cause particular difficulties for a costs assessor.
I will direct that, within fourteen days, the parties settle draft orders giving effect to these reasons and deliver them to my associate together with a statement of the parties' views as to the most expeditious method of dealing with the remaining matters. I shall then appoint a further hearing.
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Decision last updated: 29 September 2011
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