Sarks v Cassegrain & Ors; Cassegrain v Cassegrain & Ors [2015] HCATrans 223 (11 September 2015)

Last Updated: 16 September 2015

[2015] HCATrans 223

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S64 of 2015

B e t w e e n -

ANTHONY BLAKE SARKS

Applicant

and

DENIS PATRICK CASSEGRAIN

First Respondent

CATHERINE BRIGETTE DUNN

Second Respondent

PATRICK ANTHONY CASSEGRAIN

Third Respondent

JOHN BAPTISTE CASSEGRAIN

Fourth Respondent

Office of the Registry
Sydney No S65 of 2015

B e t w e e n -

CLAUDE GEORGE RENE CASSEGRAIN

Applicant

and

DENIS PATRICK CASSEGRAIN

First Respondent

CATHERINE BRIGETTE DUNN

Second Respondent

PATRICK ANTHONY CASSEGRAIN

Third Respondent

JOHN BAPTISTE CASSEGRAIN

Fourth Respondent

Applications for special leave to appeal

BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 SEPTEMBER 2015, AT 10.20 AM

Copyright in the High Court of Australia

MR M.L.D. EINFELD, QC: In each of these applications, may it please your Honours, I appear with my learned friend, MR P.G. BOLSTER, for the applicant. (instructed by Oliveri Lawyers)

MR M.A. ASHHURST, SC: May it please your Honours, I appear with my learned friend, MR G.B. COLYER, in each of those matters for the respondents. (instructed by McCabes)

BELL J: Yes, Mr Einfeld.

MR EINFELD: Your Honours, the first issue as to the point at which court proceedings have been concluded has significance, we submit, not just in the application of the bankruptcy law, but also more generally to the question when the court becomes functus so that further orders may not be made. May we address that matter before we turn to the form of the orders that might found the issue of a bankruptcy notice?

In proceedings for breach of trust or fiduciary duty or proceedings such as a partnership suit, the court will commonly make findings and declarations as to liability, accompanied by an order for the taking of accounts or an inquiry as to the appropriate amount of compensation or the like, and an order is sometimes made that the defendants pay such amount as is found upon the inquiry to be due. Sometimes such an order will not be made.

In the former case, the order for payment will bring the proceedings proper to an end, leaving the inquiry, as it is said, to work out the effect of the orders of the court. Otherwise, as in this case, the parties must return to the court post the inquiry so that the order for payment may be made. The contrast is critical for the purpose of the present proceedings and it was well-drawn in the decision of the New South Wales Court of Appeal in Meehan v Glazier Holdings to which the Full Court was referred to below. At first instance in Meehan the court found a breach of trust direct to the taking of accounts and made an order in that case that the defendants pay such amount as might be found to be due upon the accounting.

Your Honours, the plaintiff at the inquiry or at the taking of accounts sought to change the nature of the accounting exercise and the Court of Appeal held that the proceedings had been concluded by the order for payment and the court was functus. The relevant passage which determines, in our respectful submission, the first question in favour of the applicants in this case may be found in the application book at page 40, in particular in the passage at line 20 where his Honour Justice Giles with whom the other members of the Court of Appeal agreed said that if the order:

had ordered no more than the taking of accounts, and the orders had included –

an order that the proceedings return, it could be said that the order did not determine the claim for relief –

The composite claim to relief had two stages, and its culmination was the order that money be paid –

and the important words are –

Until the order that money be paid there would not be a “perfect judgment” –

GAGELER J: What was the issue in that case?

MR EINFELD: There was a claim for replacement of trustees on account of breach of trust. The judge at first instance ordered that there be a taking of accounts on the ordinary basis. Subsequent to the making of the orders that there be an inquiry and in particular that the defendants pay such amount of money as was found to be due on the inquiry, upon the taking of accounts the plaintiff sought to change the nature of the taking of accounts to a wilful default basis. The question was could the order then be changed or, by reason of the order that moneys be paid, had the proceedings concluded and was the court functus and therefore could not make any order subsequent to the making of the order that the moneys be paid?

The contrast here is with the orders in the present proceedings. Those orders are set out in the book at pages 36 and 37 where it is accepted that the Chief Judge had made a final declaration – that is in order 10 – and then order 17 that:

An Inquiry be held as to the existence and quantum of any loss –

So that the question of the existence of any loss was in issue still, even though, as the majority of the court held below, some final orders had been made. Then the next words are important, that the inquiry be held –

for the purpose of making orders for equitable compensation to be paid –

making it quite clear that at that point in the proceedings no orders had been made for payment of money by the defendants to the plaintiff.

GAGELER J: The question here is whether Order 16 is a final order within the meaning of the bankruptcy legislation.

MR EINFELD: No, to the contrary, your Honour, it is not. The question here upon an application of the New South Wales Rule of Court, the costs that were ordered during the course of proceedings were not payable until the conclusion of the proceedings unless the court otherwise ordered, and the court did not otherwise order. The question - - -

GAGELER J: This is your rule 42.7 point.

MR EINFELD: This is the rule 42.7 point. The question is, when will the proceedings have been concluded? The error below that the majority made was to themselves conclude that the proceedings in equity had concluded because some of the orders that had been made were final, such as the declaration and the order for costs. The question is not whether final orders have been made. It is a quite separate question which his Honour Justice Pagone recognised in the minority. That is, irrespective of whether some final orders have been made, the question that is required to be answered in order to determine whether proceedings have concluded is whether the parties need to come back to the court for orders that will dispose of the proceedings.

In Meehan v Glazier those orders had been made such as any attempt to modify them was too late. In these proceedings, her Honour expressly left open the requirement that the parties come back to the court for the making of orders that the defendants pay to the plaintiff such amount as by then would have been found, if any, to be payable upon the inquiry. So the rule which has its counterparts in at least two other States and both of the Territories - - -

BELL J: Justice Flick raised a question about whether the rule applies other than in respect of interlocutory costs orders.

MR EINFELD: It does. The only reference to interlocutory orders is in the heading of the section - - -

BELL J: Yes.

MR EINFELD: - - - and the Interpretation Act in section 35 provides that headings as to sections - - -

BELL J: Put that to one side, Justice Flick provided one might think rather more cogent reasons for querying the applicability of the rule other than to interlocutory orders.

MR EINFELD: His Honour did do that. The question as to whether the orders were interlocutory is, with respect, not the question to be answered. The question to be answer is, save for the heading, there is nothing to indicate in the rule or elsewhere that it is not applicable at all stages of proceedings up to, as its language suggests, the conclusion of those proceedings. So if, for example, they were hearing as to liability with a deferral of the question of damages or compensation, the court might make findings, indeed, declarations as to liability and make orders as to costs, but the rule provides that those costs do not become payable until the conclusion of proceedings. The rule would apply as much to such a hearing and such a circumstance, whether or not it would be appropriate to describe the proceedings as interlocutory or otherwise.

GAGELER J: The difficulty is that subrule (1) actually refers to:

the costs of any application or other step in any proceedings - - -

MR EINFELD: This was another step in the proceedings. These were steps in the proceedings.

GAGELER J: Save that the order for costs is costs of the proceedings. You would have to do a bit of work with the language of subrule (1).

MR EINFELD: No, your Honour, the costs of the proceedings may be ordered. That does not alter the fact that until the proceedings are concluded, everything that happens along the way, from the filing of the originating process up until the conclusion of the relevant hearing seeking the relevant orders that were sought – in this case compensation orders were sought by the plaintiffs – up until that point in time, everything that happens along the way are steps in the proceedings.

BELL J: Mr Einfeld, subsection (2) of rule 42.7 makes clear that:

Unless the court orders otherwise, costs referred to in subrule (1) –

MR EINFELD: Yes.

BELL J: - - - and subrule (1), as Justice Gageler has pointed out, is directed to costs of any application or other step in the proceedings. On the face of the rule, it is very difficult to see its application to the order made by Justice Bergin in Order 16 which were the costs of the proceedings.

MR EINFELD: Here was a hearing which determined, as it were, liability, and upon that hearing, on the conclusion of that part of the hearing, her Honour made a final declaration that it be accepted.

BELL J: Respecting the costs of the proceedings, Mr Einfeld.

MR EINFELD: I was dealing with the first order, which was the final declaration, and then made what must be accepted to be a final order as to the costs of the proceedings. Now, that said, if our submission is correct that the proceedings had not concluded – and for the reasons we have given we say they had not yet concluded – any order as to the proceedings is nevertheless to be understood as being the costs of the proceedings up to that point.

Let us assume there was a subsequent hearing at which, in the course of considering the results of the taking of accounts or the inquiry, there was debate as to whether or not the inquiry had miscarried or something of that kind. In such circumstances, the court might well have made an order that the costs of that part of the hearing be paid by one party or the other.

The submission must be – and is, with respect – that understanding as we do your Honour the presiding judge’s point that the proceedings sounded pretty final, as it were, if I may slip into the vernacular, by the time the declaration was made, the rule itself envisages its application not just in the case of an application – it being an interlocutory application, but any part of the proceedings short of their reaching their conclusion.

That is what the rule is addressing itself to, and the reason is obvious because, prior to the conclusion of proceedings, the court commonly makes costs orders and if one party has special reasons for asking that they be payable forthwith an application will be made and sometimes it is granted, and if they do not, the rule provides - as it does in other States - the rule provides that the costs do not become payable until the proceedings are at an end. In this case they were not, and so much was, as we say, the point made by his Honour Justice Pagone in the minority.

In our submission, since Pepper v McNiece in this Court many years ago, it is accepted that the requirement in the Bankruptcy Act for there to be a final judgment or order before a bankruptcy notice may issue is subject to the qualification that such a final judgment or order must be capable of enforcement or execution at the time of the issue of the bankruptcy notice. If the rule has application then, in our submission, it is clear enough that it was not susceptible to execution at the time of the bankruptcy notice.

May we turn then to the second issue in the application which raises squarely, may we say, the very real and practical question? Once costs are taxed or assessed and then become the subject of a certificate which becomes registered in the court, the question is does the resulting order qualify as a final judgment or order for the purposes of section 40 and 41 of the Bankruptcy Act? The bankruptcy notices here in issue did not found upon the orders for costs that your Honour the presiding judge has identified, being the orders made by the Chief Judge in the equity proceedings, but rather upon the form of judgment or order, as it is called, which was issued by the registry of the Supreme Court after the certificate as to the assessment of costs was filed in the registry.

Your Honours, the Legal Profession Act and now the Legal Profession Uniform Law provided that upon registration of the certificate in the court registry, the certificate would take effect as if it were a judgment and could be executed upon as if it were a judgment; it would be taken to be a judgment. But as the New South Wales Court of Appeal has point out and as this Court has pointed out, language such as “as if it were a judgment” or “taken to be a judgment” does not constitute the relevant instrument in fact as a judgment. It is, to use the language adopted in this Court in recent times, a fiction.

The true character of the certificate once registered in the registry was identified by Justices Handley and Giles in the New South Wales Court of Appeal’s decision Frumar, the relevant passage of which is reproduced in the application book at page 43. Justice Handley had pointed out that the exercise of the registrar in issuing the so-called judgment or order was a ministerial, not a judicial, act. At page 43 at the foot of the page is extracted by the members of the majority below the passage from Justice Giles’ judgment in Frumar that is the telling one for present purposes. The certificate:

was taken to be a judgment of the District Court. In truth, there was no District Court judgment. So-called judgments –

under the relevant provisions –

have been considered . . . and while reference to them as judgments is convenient . . . they take their force from the statute and are not judgments of the court.

BELL J: At paragraph 39 on application book 46, there is reference to Justice Handley in Frumar at paragraph 42.

“the entry of judgment on a filed certificate is a ministerial act[,] [i]t makes the certificate enforceable as a judgment” –

MR EINFELD: Yes, but it does not make it a judgment. That is the critical distinction, and that is the distinction that was overlooked in the court below. It does not constitute the judgment as a judgment. What it says is it takes effect as a judgment, it takes its force as a judgment, but as Justice Giles points out critically – as Justice Giles points out, it does not turn a certificate into a judgment. It is, as it were, a certificate by another name, and the whole point of the distinction was brought home in the decision of this Court in Re Macks [2000] HCA 62; 204 CLR 158.

May we provide copies to your Honours of Re Macks in a small folder which has the cognate provisions to - the relevant provisions of the Legal Profession Act behind it – and take your Honours to two short passages. This was the decision which addressed the introduction of South Australian legislation after relevant Federal Court orders were held not to have application, and if I could invite your Honours’ attention firstly to the relevant passage in Justice McHugh’s judgment, pausing at 115 to note that the language his Honour said of the relevant section making rights and liabilities enforceable:

“as if” they were rights or liabilities “conferred, imposed or affect by a judgment of the Supreme Court.” In R v Hughes, this Court said that the use of the phrase “as if” was “a convenient device for reducing the verbiage of an enactment”. But the expression always introduces a fiction or a hypothetical contrast.

Then his Honour at the foot of that paragraph says:

Nothing in the federal or State Constitution prohibits the legislature of South Australia from doing so. But s 7(1) does not convert those rights into a judgment.

The relevance of 7(1) appears across the page at paragraph 117 where your Honours will see the identical language of that used here, just at the end of paragraph 117 that the rights conferred by section 6 and subsection (3):

each ineffective judgment of –

. . .

is taken to be a judgment of the Supreme Court constituted of a single Judge.”

The point is that the language is language of fiction. It does not turn – or it is not a judgment; in our case, not a judgment, but a costs certificate, and always a costs certificate into a judgment of the court. Just before I leave it, Justice Gummow at paragraph 208 on the last page of the extract, referring to the same indication:

the provisions of the SA Act do not by legislative fiat convert the orders of the Federal Court to orders made by the Supreme Court.

Rather, certain consequences are attached to them “as acts in the law” –

and that is the circumstance here. The significance of it is that the majority below relied on the deeming provision, section 40(3)(b) in the Bankruptcy Act – and I will conclude with this – which is reproduced in the book at page 115 and upon which our friends relied below. So one starts with the point that one requires a final order or final judgment for a bankruptcy notice, as required by section 40(1)(g), and then subsection (3) says in (b):

a judgment or order that is enforceable as, or in the same manner as, a final judgment so obtained in an action shall be deemed to be a final judgment so obtained and the proceedings –

and that is cited against us. With respect, the obvious problem with it is that it requires for its application the opening words to be satisfied; that is, that there be a judgment or order that is enforceable in the same manner as a final judgment. Here there was no judgment or order. That is not – we are not talking about the order made by the Chief Judge, because that is not the one that is attached to the bankruptcy notices. It is not the one upon which the bankruptcy notices are founded.

The one upon which the notices are founded is the administrative order issued out of the Supreme Court. Accordingly, in our submission, until and unless one had a judgment or order as such that was deemed or made enforceable in the same way as a final judgment, one does not have an operation of section 40(3)(b) and the bankruptcy notices were accordingly invalid. May it please the Court.

BELL J: Yes, thank you, Mr Einfeld. We do not need to hear from you, thank you, Mr Ashhurst.

Were special leave to be granted, in our opinion there are insufficient prospects that the appeal would succeed. Special leave is refused with costs.

The Court will now adjourn to reconstitute.

AT 10.44 AM THE MATTER WAS CONCLUDED