Care A2 Plus Pty Ltd v Pichardo

HEADNOTE [This headnote is not to be read as part of the judgment]

JUDGMENT

1. SIMPSON AJA: By notice of motion filed in this Court on 5 June 2023 the applicants (Care A2 Plus Pty Ltd and Care A2 Australia Pty Ltd) seek, pursuant to UCPR 25.11, an order restraining the respondent (Karla Pichardo) from removing from Australia or otherwise disposing of, dealing with or diminishing the value of any of her assets in Australia up to the unencumbered value of $2,165,000 ("freezing order"). The freezing order is sought pending the outcome of an appeal filed by the applicants against orders made by Black J (the primary judge) in the Equity Division of the Supreme Court on 23 January 2023: In the matter of DCA Enterprises Pty Ltd [2023] NSWSC 11.
2. UCPR 25.11(1) states that the purpose of a freezing order is: "… preventing the frustration or inhibition of the court's process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied."
3. UCPR 25.14 relevantly provides: "(1) This rule applies if - … (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in - (i) the court … … (4) The court may make a freezing order … against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur - (a) the judgment debtor, prospective judgment debtor or another person absconds, (b) the assets of the judgment debtor, prospective judgment debtor or another person are - (i) removed from Australia or from a place inside or outside Australia, or (ii) disposed of, dealt with or diminished in value." The language of rr 25.11 and 25.14 is sufficiently wide to encompass a prospective judgment following a successful appeal.
4. There are two preconditions, each of which must be satisfied before the freezing order may be made. They are: 1. that the applicants have a "good arguable case" (in this case on appeal); and 2. that there is a danger that, if an order is not made, a judgment or prospective judgment will be wholly or partly unsatisfied for any one or more of the reasons stated in r 25.14(4).
5. In Tomasetti v Brailey [2012] NSWCA 6 ("Tomasetti") Campbell JA expressed some reservation about how these rules apply when the prospective judgment on which the applicant relies is a judgment on appeal in favour of the unsuccessful litigant in the court below. His Honour's concern was that he had insufficient material on which to make an assessment of the applicant's prospects of success on the appeal. In that case his Honour did not need to determine whether the applicant had "a good arguable case" on appeal, because he was satisfied that the second limb - that there was a sufficient risk of dissipation of assets - had not been made out.
6. It is well established that a freezing order is an "exceptional" or "drastic" remedy which should not be granted lightly: Frigo v Culhaci [1998] NSWCA 88; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [51] (Gaudron, McHugh, Gummow and Callinan JJ); Tomasetti at [16]. To establish a "good arguable case" it is not necessary that the applicant establish better than 50% chance of success: Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [69] (McColl JA). Where an order is sought by an unsuccessful litigant pending appeal it will usually be more difficult, although far from impossible, to discharge the onus of establishing a "good arguable case".

The context in which the application is made

1. The context in which the application is made has a significant degree of complexity. In what follows I have endeavoured to reduce the account of the background circumstances to the bare minimum necessary to explain the application and its outcome.
2. It is, I think, uncontroversial that, at relevant times, the respondent was an accountant and was the Chief Financial Officer of DCA Enterprises Pty Ltd ("DCA"), of which Dylan Azzopardi was the sole director and his brother Justin Azzopardi was secretary. The respondent held a shareholding in DCA.
3. DCA's business was to broadcast and stream sports events. In early 2021 the Azzopardi brothers, through DCA, negotiated with a United Kingdom company, RDA Sports Media Rights ("RDA"), to acquire broadcast and streaming rights to the 2021 Rugby League World Cup ("RLWC") for a licence fee of $5 million. A contract was executed on 24 May 2021.
4. The applicants sought to invest in DCA, and, over a period, paid various significant sums of money to DCA.
5. Disputes arose and the applicants or their associates took steps to amend the ASIC register and remove the Azzopardis from their position in DCA and to transfer the shareholdings, including those of the respondent. As a result the Azzopardis and the respondent, by Amended Originating Process, commenced proceedings in the Supreme Court against (so far as I can ascertain) the applicants, their directors and various others. The applicants (and others) filed a cross-claim which named Dylan and Justin Azzopardi as first and second cross-defendants, the respondent as third cross-defendant, Chloe Azzopardi as fourth cross-defendant and the Azzopardi brothers' parents as fifth and sixth cross-defendants. The precise terms of the Amended Originating Process are not before this Court. By their Amended Cross-Claim the applicants claimed damages from all cross-defendants. They pleaded causes of action against the first to fourth cross-defendants in misleading or deceptive conduct under the Australian Consumer Law (NSW) and deceit, and they asserted accessorial liability of each cross-defendant for the conduct of each other cross-defendant.
6. The substance of the cross-claim was an allegation that Dylan Azzopardi, Justin Azzopardi and the respondent engaged in a course of deceptive and deceitful conduct by misrepresenting to the applicants and their representatives that the licence fee for the broadcast and streaming rights of the RLWC payable to RDA was $9 million (it having in fact been $5 million), and that a certain profit would be realised by licensing those rights through a "deal" with the Australian Hotels Association. The applicants claimed that, in reliance on those false representations, they had paid certain significant sums of money to DCA. A curiosity of the pleadings is that, although the cross-claimants identified various representations on which they relied, some of which they attributed to Dylan Azzopardi, at least one of which they attributed to Chloe Azzopardi and another of which they attributed jointly to Dylan Azzopardi and Justin Azzopardi, no representation in the amended cross-claim was specifically attributed to the respondent. She was, nevertheless, alleged to have engaged in conduct in trade and commerce that was misleading or deceptive and conduct that constituted the tort of deceit, and to have borne accessorial liability for the conduct of each of the Azzopardis. (Although the Azzopardi parents remained parties to the proceeding, it does not appear that any orders were ultimately claimed against them.) In response to a request for particulars, solicitors for the applicants identified the conduct on which they relied against the respondent by reference to a series of email communications sent from her email account over her name.
7. The claim and the cross-claim were heard over 13 non-consecutive days between October and December 2022. As the primary judge noted, the claims of misleading or deceptive conduct and deceit against all cross-defendants were based on essentially the same evidence - repeated misrepresentations about the licence fee payable to RDA.
8. The applicants alleged that the contract with RDA was executed by Dylan Azzopardi on behalf of DCA on 24 May 2021 and that the licence fee was $5 million, and that Dylan Azzopardi had, on some earlier date, fabricated a purported contract showing that the licence fee was $9 million, for the purpose of inducing the applicants to invest on the basis that the licence fee was $9 million. That "contract" was dated 27 April 2021.
9. The primary judge delivered judgment on 23 January 2023, with lengthy reasons. Relevantly to the present application he found that misleading or deceptive conduct and deceit were proved against Dylan Azzopardi. He found that those causes of action were not proved against Justin Azzopardi, Chloe Azzopardi or the respondent.
10. On the claim made by the Azzopardis, DCA and the respondent, the primary judge made orders for rectification of the record of DCA's officeholders on the ASIC register and of the shareholdings.
11. On the cross-claim the primary judge gave judgment in favour of the applicants against Dylan Azzopardi in the sum of $1,970,000. His Honour dismissed the applicants' claims against Justin Azzopardi, Chloe Azzopardi and the respondent, and ordered the applicants to pay their costs of the proceeding. It is against the orders made in respect of the respondent that the applicants appeal. They nominate five grounds of appeal. They assert that the primary judge erred in failing to find: (i) that the respondent's conduct was misleading or deceptive and causative of loss to the applicants; (ii) that the respondent was knowingly concerned in each aspect of the misleading or deceptive conduct of Dylan Azzopardi that was causative of loss to the applicant; (iii) that the respondent was liable in deceit and caused loss to the applicants in various alternative sums; and in finding that the applicants' claim against the respondent did not include a claim for loss of a specific sum, $100,000, and in failing to award exemplary damages.
12. I turn now to the two preconditions that the applicants must satisfy before a freezing order will be made.

"Good arguable case"

1. As the freezing order is sought pending appeal in this Court, the "good arguable case" that the applicants must establish depends on the extent to which the pleaded grounds can be seen to be arguable (so far as that can be judged). This is not, however, a preliminary assessment of the merits of the appeal. All that is necessary is that the grounds (or one or more of them) raise a fairly arguable point. Regard must be had to the nature of the grounds identified.
2. As can be seen from the summary above of the grounds, with the exception of one (which appears to contend that the primary judge misunderstood one aspect of the applicants' case) they are challenges to findings of fact made by the primary judge. Interference by this Court with findings of fact made by a trial judge is constrained by the principles stated in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [29] (Gleeson CJ, Gummow and Kirby JJ); Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at [43] (the Court); and Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55] (Bell, Gageler, Nettle and Edelman JJ, Kiefel CJ agreeing).
3. The applicants' principal complaint is that the primary judge failed to address several instances of communications (most, if not all, by email) made by the respondent which, the applicants contend, signify that she was knowingly involved in the deceptive activities of Dylan Azzopardi.
4. No doubt mindful of the reservations expressed by Campbell JA in Tomasetti with respect to applications for freezing orders pending appeal, affidavit evidence was put before this Court. Attention was directed to some documentary and oral evidence that was before the primary judge, on which the applicants will rely on appeal to establish error, and on which they rely in this application to establish that they have "a good arguable case".
5. The following are instances of the evidence that the applicants contend was overlooked by the primary judge, together with reference to the manner in which the primary judge dealt with that evidence: 1. On 19 May 2021 the respondent emailed to the applicants (or their representatives) a five year financial projection which contained an entry showing that the fees for the RLWC were $9 million. It was and is the applicants' case that the respondent knew that this was false. The applicant pointed to evidence given by the respondent in cross-examination that she knew that the true license fee was $5 million. The primary judge addressed this email; he found that the email and the financial projections were sent by the respondent at Dylan Azzopardi's request and, in any event, his Honour was not satisfied that this communication was causative of any loss to the applicants. 2. On 27 May 2021 the respondent emailed the applicants, reporting that RDA were pressing for payment and referring to "the contract which was signed on 27 April". That was the "contract" that purported to show that the licence fee was $9 million. It was and is the applicants' case that the respondent knew that the purported contract was a forgery and that the actual licence fee was, as stated in the 24 May contract, $5 million. In commenting on this email, the primary judge noted that the respondent gave evidence in cross-examination that she had been "told of" the "contract" dated 27 April, and found that it was not established that she knew that it was a "fabrication". 3. On 3 June 2021 the respondent emailed RDA's representatives attaching what purported to be a bank receipt showing payment of $4,558,000. The respondent acknowledged in cross-examination that no such amount had been transferred to RDA. The primary judge found that this misrepresentation was not causative of any loss to the applicants. 4. On 7 June 2021 the respondent emailed the applicants pressing for payment so that DCA could pay RDA. The respondent asked if the payment would be $8 million or $6 million and said that at least $6 million had to be paid by DCA to RDA that afternoon. That was not correct because the total due to RDA was $5 million ($1 million of which had already been paid). The respondent said in cross-examination that the source of the information in the email was Dylan Azzopardi. She accepted that she was aware that the correct licence fee was $5 million. The applicants contend that the email constituted misleading or deceptive conduct by the respondent.
6. None of this persuades me that the applicants have a "good arguable case" to disturb the findings of fact made by the primary judge. On this basis, therefore, I will dismiss the notice of motion.

Danger that prospective judgment will be wholly or partly unsatisfied

1. The applicants base their application on what they contend to be a danger that the respondent will dispose of assets in such a way as to make them unavailable for satisfaction of any judgment that they may obtain on appeal. They contend that the evidence of the respondent's dishonesty is indicative of a likelihood that the respondent would dispose of assets in order to avoid the consequences of a successful appeal. The evidence of dishonesty is substantially the same evidence as that on which the applicants rely to establish their causes of action.
2. There was no evidence at all of any positive conduct on the part of the respondent from which an inference might be drawn that she would dispose of assets. The evidence showed that the respondent is the registered proprietor of a property in a Sydney suburb of a value of between $690,000 and $870,000, subject to a registered mortgage. An internet search did not disclose that the property is listed for sale.
3. I am not persuaded that the applicants have established that there is a danger that, should the applicants be successful on their appeal, any judgment will be wholly or partly unsatisfied.
4. Accordingly, I dismiss the notice of motion on this ground also.
5. The orders that I make are: 1. Notice of motion dismissed; 2. The applicants pay the respondent's costs.

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