[2023] NSWCA 88
Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340(2014) 98 ACSR 347
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640[2013] HCA 54
Australian Securities and Investments Commission v Narain (2008) 169 FCR 211[1938] HCA 34
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592[2004] HCA 60
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Granitigard Pty Ltd v Termicide Pest Control Pty Ltd [2011] FCAFC 81; (2011) 281 ALR 1
Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10
Havyn Pty Ltd v Webster [2005] NSWCA 182
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52
Hill v James [2004] NSWSC 55
Holmes v Jones (1907) 4 CLR 1692; [1907] HCA 35
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
James v Hill [2004] NSWCA 301
Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564; [2000] FCA 1572
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68
Magill v Magill (2006) 226 CLR 551; [2006] HCA 51
Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; [2003] FCAFC 289
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31
Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251; [1988] ATPR 40-855
Nadinic v Drinkwater [2020] NSWCA 2
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44
Richard v Gendore Enterprises Pty Ltd [2004] NSWCA 116
Rookes v Barnard [1964] 1 All ER 367
State of NSW v Ibbett [2005] NSWCA 445
Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233
Trade Practices Commission v Manfal (No 3) (1991) 33 FCR 382; (1991) 105 ALR 520
Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731; (2013) 102 IPR 161
Wormald v Maradaca Pty Ltd [2020] NSWCA 289
XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448; [1985] HCA 12
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65
Texts Cited: Colin Lockhart, The Law of Misleading or Deceptive Conduct (5th ed, 2018, LexisNexis)
David Rolph et al, Balkin & Davis: Law of Torts (6th ed, 2021, LexisNexis)
Category: Principal judgment
Parties: Care A2 Plus Pty Ltd (First Appellant)
Care A2 Australia Pty Ltd (Second Appellant)
Karla Patricia Pichardo (First Respondent)
Dylan Charles Azzopardi (Second Respondent)
Representation: Counsel:
[2]
A Butt (Appellants)
A J McQuillen (First Respondent)
[3]
Nelson McKinnon Lawyers (Appellants)
G.H. Healey & Co (First Respondent)
File Number(s): 2023/57428
Publication restriction: N/A
Decision under appeal Court or tribunal: Supreme Court of New South Wales
Jurisdiction: Equity - Corporations List
Citation: [2023] NSWSC 11
Date of Decision: 23 January 2023
Before: Black J
File Number(s): 2021/278723
[4]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[5]
HEADNOTE
[This headnote is not to be read as part of the judgment]
Care A2 Plus Pty Ltd and Care A2 Australia Pty Ltd (the Appellants or Care A2 companies) made six payments, in the sum of $2,200,000, to DCA Sydney Enterprises Pty Ltd (DCA). The payments were induced by fraudulent misrepresentations to the effect that: (i) DCA was purchasing streaming rights over the 2021 Rugby League World Cup (RLWC) for $9,000,000; and (ii) that acquiring the streaming rights would generate an annual revenue of $15,000,000 or $30,000,000.
Both representations were false, and instead of directing the Appellants' payments to the acquisition of the RLWC streaming rights, the then sole director of DCA, Dylan Azzopardi (DA), misappropriated the funds for personal gain.
The plaintiffs, DA and others, sought a range of relief against Dominic Galati (DG), the major shareholder of the Care A2 companies, and others. By Amended Statement of Cross-Claim filed on 26 April 2022, various parties, including the Care A2 companies, sought damages for misleading and deceptive conduct and deceit against, inter alia, DA and Karla Pichardo (KP).
The primary judge held that DA was liable for misleading and deceptive conduct and deceit, and awarded damages for each of the payments made by the Care A2 companies to DCA. The primary judge also awarded exemplary damages against DA in the sum of $75,000. The primary judge held that KP, DCA's Chief Financial Officer and chartered accountant, was not liable for misleading and deceptive conduct or deceit.
The Care A2 companies appealed on several grounds, including that KP should have been held: (i) liable for misleading and deceptive conduct (either directly or accessorily); (ii) liable for tortious deceit; and (iii) been ordered to pay exemplary damages.
The Court (Bell CJ, Stern JA and Basten AJA agreeing), upholding the appeal, in part, held that:
1. KP engaged in misleading and deceptive conduct, and was not a mere conduit of the misleading information forwarded to the Appellants. KP sent the Appellants objectively misleading emails containing false financial projections and letters that she was reasonably expected to have taken responsibility for. Such misrepresentations induced four of the Appellants' payments, amounting to $1,090,000: [165]-[170] (Bell CJ); [203] (Stern JA); [204] (Basten AJA).
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44; Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31; Wormald v Maradaca Pty Ltd [2020] NSWCA 289; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41; Henville v Walker (2001) 206 CLR 459; [2001] HCA 52; Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75, applied.
Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1; Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564; [2000] FCA 1572; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1993] ATPR 41-203; Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167; Nadinic v Drinkwater [2020] NSWCA 2; Borzi Smythe Pty Ltd v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233; Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (No 2) [2009] FCA 1153; (2009) 74 ACSR 373; Richard v Gendore Enterprises Pty Ltd [2004] NSWCA 116; Granitigard Pty Ltd v Termicide Pest Control Pty Ltd [2011] FCAFC 81; (2011) 281 ALR 1; Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200; Havyn Pty Ltd v Webster [2005] NSWCA 182; CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54, referred to.
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60, distinguished.
1. Alternatively, KP was accessorily liable for misleading and deceptive conduct, as she knew, or was recklessly indifferent to, the essential facts underlying the misleading or deceptive conduct of DA, concerning the true cost of acquiring the RLWC rights and the revenue projected to be earned in connection with the rights: [171]-[183] (Bell CJ); [203] (Stern JA); [204] (Basten AJA).
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65; Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731; (2013) 102 IPR 161; Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233, appliedAnchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88; Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340; (2014) 98 ACSR 347, referred to.
1. KP was liable for tortious deceit on a similar basis to her direct liability for misleading and deceptive conduct: [184]-[186] (Bell CJ); [203] (Stern JA); [204] (Basten AJA).
Magill v Magill (2006) 226 CLR 551; [2006] HCA 51; Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75, applied.
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68; Crouch v Bloody Mary Group Pty Ltd [2020] SASC 68; Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561; Holmes v Jones (1907) 4 CLR 1692; [1907] HCA 35; Gipps v Gipps [1978] 1 NSWLR 454, referred to.
1. Exemplary damages should be awarded against KP, in the sum of $30,000, due to her active participation in the fraud, dishonesty and the use of her accounting credentials to lend legitimacy to misleading or deceptive commercial conduct: [190]-[197] (Bell CJ); [203] (Stern JA); [204] (Basten AJA).
Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10; XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448; [1985] HCA 12, applied.
Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251; [1988] ATPR 40-855; Hill v James [2004] NSWSC 55, referred to.
[6]
JUDGMENT
BELL CJ: By his judgment delivered on 23 January 2023, Black J (the primary judge) held that a serious fraud had been committed by Dylan Charles Azzopardi (DA) involving contraventions of the Australian Consumer Law (ACL) and commission of the tort of deceit. His Honour ordered judgment against DA in favour of:
1. Care A2 Plus Pty Ltd (Care A2 Plus), for the sum of $1,970,000 plus interest; and
2. Care A2 Australia Pty Ltd (Care A2 Australia), for the sum of $230,000 plus interest.
His Honour also ordered that DA pay both Care A2 Plus and Care A2 Australia (jointly the Care A2 companies) $75,000 by way of exemplary damages.
The primary judge found that a number of payments by the Appellants to DCA Sydney Enterprises Pty Ltd (DCA) (a small proprietary company controlled by DA) had been induced by false misrepresentations by DA to the effect that DCA had acquired streaming and broadcasting rights for the 2021 Rugby League World Cup (RLWC) for $9,000,000 and that these rights would attract an annual revenue of $15,000,000 or $30,000,000 through payment from the Australian Hotels Association (NSW) (AHA (NSW)). The fraudulently induced payments made were made on the following dates in the following amounts:
1. 11 May 2021 - $110,000;
2. 18 May 2021 - $1,000,000;
3. 9 June 2021 - $850,000;
4. 9 June 2021 - $10,000;
5. 9 June 2021 - $130,000; and
6. 30 June 2021 - $100,000.
A series of other claims were made in the proceedings at first instance, both for other relief and against other parties (for example, against DA's parents). Many of these claims were abandoned or not ultimately pressed during the course of the proceedings at first instance.
One claim that still was pressed, however, was that made against Karla Patricia Pichardo (KP), a chartered accountant and described in correspondence to the Appellants or their representatives as the Chief Financial Officer (CFO) of DCA - a perhaps somewhat grandiose title in view of the size of DCA but a not insignificant title, as shall be seen. The primary judge's rejection of the claims against KP is the subject of the present appeal.
KP provided affidavit evidence stating that she graduated in 2000 with the degrees of Bachelor of Commerce (Accounting) and Bachelor of Commerce (Economics & Finance) from the University of Western Sydney. She commenced working as an accountant at the firm Occhiuto Partners, in the areas of Superannuation and Taxation. In 2005, KP graduated from the Chartered Accountants program, and in 2011 obtained a tax agent's licence to work as a registered tax agent for clients. KP obtained a Certificate of Public Practice from the Institute of Chartered Accountants in 2015.
[7]
Overview of the fraud
DCA was the vehicle through which DA conducted his business, known variously as "Sportsflick" or "Sports Flick", which purportedly provided a platform to broadcast and stream sports events.
On 14 April 2021, DCA submitted a bid of $5,000,000 (an amount which it did not then have) to RDA Television LLP (RDA) for the 2021 RLWC broadcast and streaming rights (PJ [33]).
On 23 April 2021, Richard Dennis (RD), the CEO of RDA, requested that DA provide DCA's company information and proof of its ability to make the $5,000,000 payment. DA replied to RD indicating that he would "get Karla [KP] to send this information to you as soon as possible".
On the same day, Colin Kleyweg (CK) (a 4.98% shareholder in DCA) emailed DA (copying KP) concerning the budget required to expand Sportsflick's broadcasting capacity. In this email, CK referenced $5,000,000 as the cost to acquire the RLWC rights. This email also stated:
"For full transparency, we need a budget of A$9 mil to expand Sports Flick suitably to deliver broadcasts of this size. Here are the base numbers, which if you agree to these in principle, I will develop up a full financial model and set KPl's with you for Karla and I to manage through delivery. Dylan is the salesman extraordinaire. I am an engineer and I am detail focused. This is why we make a good partnership."
The email contained a rough costing of expenses. These included, under the heading "Marketing and Management Budget", payment of $200,000 to DA and $120,000 to KP.
Interpolating here, under cross-examination, KP said that "at all times" she understood that the cost of the RLWC rights was $5,000,000.
"Q. You had no knowledge that there was any other bid, other than something that was $5 million at any time with the RDA, did you?
A. Not to my knowledge, no.
…
Q. At all times, you knew that the real contract that was being negotiated or agreed to by DCA and RDA was for $5 million to acquire the licencing rights, that's true isn't it?
A. That's correct."
It may be that CK's email of 23 April 2021 ([16]-[17] above) was the first source of her knowledge of this, but she also stated in cross-examination that she first became aware of the amount that had to be paid when she saw the invoice dated 20 May 2021. However, the reference to the $5,000,000 cost for the RLWC rights was repeated in an email CK sent to DA and KP (via the Sportsflick accounts email address) on 11 May 2021 (see [31] below).
[8]
The pleaded case against KP
In November 2021, DA and JA, together with KP, commenced proceedings in the Corporations List in the Equity Division challenging the steps taken by DG and others involved with the Care A2 companies to take control of DCA, in the course of the meetings referred to in the last two paragraphs above. The Appellants' claims against DA and others associated with the misleading and deceptive conduct described above were introduced by way of a First Cross-Claim. KP was the Third Cross-Defendant in those proceedings. The First Cross-Defendant was DA and other members of his family were named as the Second and Fourth to Sixth Cross-Defendants. The First Cross-Claimant was DG and the Care A2 companies were the Third and Fourth Cross-Claimants respectively. The Second Cross-Claimant was DCA, but it was removed by an Amended First Cross-Claim.
The Amended First Cross-Claim commenced by alleging that the First to Fourth Cross-Defendants were liable to the Cross-Claimants (other than DCA) under the ACL. Various representations were alleged to have been made in trade or commerce under the meaning of the ACL, although none of those representations were alleged to have been made expressly by KP.
Paragraph 8 of the Amended First Cross-Claim then alleged that:
"The making of the Representations (and deceit below, see [18b.2]) was continuing (by silence and/or active conduct) up until and subsequent to the time all moneys were paid by the Second and Third Cross-Claimants as set out at [14] below." (emphasis added.)
This allegation was particularised at paragraph 23(c) of the Amended First Cross-Claim by reference to the following documents and matters referred to in the Cross-Claimants' Further and Better Particulars of 21 February 2022 (see [84] below):
"1. Forged contract concerning RLWC rights agreement for AUD 9,000,000 (7/5/21);
2. Forged executed AHA agreement for AUD 30,000,000 (22/6/21);
3. Falsified CommBiz transaction remittance #1 for AUD1,000,000 (18/5/21);
4. Falsified CommBiz transaction remittance #2 for AUD1,000,000 (9/6/21);
5. Falsified CommBiz transaction remittance #3 for AUD100,000 (1/7/21);
6. Forged Loan Agreement between Mr Galati and DCA for AUD40,000,000 (18/1/21) executed by Dylan Azzopardi and witnessed by Chloe Azzopardi;
7. Falsified CBA bank statement for DCA indicating balance on 24/4/21 of $43,211,618.22 instead of real $2,577.11;
8. Falsified Tax invoice sent by Dylan Azzopardi to Berti Mariani purportedly from RDA to DCA for AUD9,000,000 for RLWC rights (21/5/21);
9. Falsified CommBiz transaction remittance in relation to RLWC to RDA for AUD 4,558,000 (3/6/21); and
10. Falsified Loan Agreement between Flick TV Investments Pty Ltd as lender and DCA as borrower for $796,250 (20/10/20) with participation of among others, Dylan and Chloe Azzopardi."
[9]
Primary judgment
In considering the Cross-Claimants' several allegations of fraud and intentional deceit against the Cross-Defendants the primary judge had regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and now s 140 of the Evidence Act 1995 (NSW). In doing so, his Honour appropriately acknowledged at PJ [3] that where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is that is sought to be proved.
As has already been noted, the primary judge found DA liable for misleading and deceptive conduct and the tort of deceit. He also found that DA had fabricated, or was involved in the fabrication of, a series of documents including:
1. The False Sub-License Agreement dated 27 April 2021, purportedly between DCA and RDA;
2. The false agreement purportedly between DCA and AHA (NSW) dated 22 June 2021 (PJ [89]);
3. A false letter from the CBA purportedly signed by Mr Moseley of CBA, whom the primary judge found did not exist (PJ [69]);
4. Further falsified Commonwealth Bank statements in relation to receipt and transmission of funds to and from DCA (see [19], [32], [44], [56], [71] above); and
5. Further false invoices, false remittances and other correspondence from non-existent employees of CBA, such as Messrs Geggo or Greggo (neither of whom existed) and Mr Moseley.
These findings were underpinned by adverse findings of credit in relation to DA who was, undoubtedly, the principal architect of the fraud. It was he, for example, who was involved in the initial meetings with DG and BM where the two core falsities were first aired, namely that the RLWC rights cost (or would cost) $9,000,000 and that there was a strong prospect that millions would be earned through the sale of RLWC packages to many pubs and clubs associated with the AHA (NSW). Further, the False Sub-License Agreement appears to have originated with DA. These considerations no doubt also contributed strongly to the primary judge's decision to award exemplary damages in respect of the tort of deceit.
The primary judgment does not contain a separate section dealing with the credit of individual witnesses; rather, in the course of setting out the factual narrative, the primary judge's general practice was to note when there was a dispute on the evidence, and to express his acceptance or non-acceptance of particular witnesses' evidence. His Honour also accepted at PJ [161] the Appellants' closing written submissions that:
"DA's evidence concerning the AHA (NSW) was at best unreliable so far as he denies sending documents which were apparently sent from his email address, and there is no other plausible explanation for how they [sic] documents including the Purported AHA Agreement were sent."
[10]
Specific findings in relation to KP
The primary judge rejected the direct claim for liability against KP as follows:
"[169] Turning now to the Cross-Claimants' misleading and deceptive conduct claim against KP, they did not plead that she made the representations at the meetings on 27 April 2021, 7 May 2021 or 11 May 2021, which she did not attend. So far as the Cross-Claimants seek to expand their misleading and deceptive conduct case by the particulars to ASCC [23(c)], the False Sub-Licence Agreement was emailed to DG and BM by DA rather than KP; the Purported AHA Agreement was emailed to BM by DA rather than KP; I recognise that KP, at DA's request, sent copies of purported remittance advices of 18 May 2021 and 9 June 2021 to DG and BM on 30 June 2021; the False DG Loan Agreement and the bank statement provided by DCA to RDA do not advance the Cross-Claimants' case, since no indirect causation case was pleaded or established; the tax invoice dated 21 May 2021 was, as the Cross-Claimants acknowledge, sent by DA rather than KP to BM; and the false transmission remittance sent to RDA on 3 June also does not advance the Cross-Claimants case, again because no indirect causation case was pleaded or established. In closing submissions, the Plaintiffs also rely on KP having sent projections as to profits for DCA in 2021/2022 on 19 May 2021 (Ex J1, 1369).
[170] I recognise that KP sent the projections as to profits for DCA on 19 May 2021, including a reference to the cost of the RLWC rights, and sent the two CommBiz remittances to DG and BM on 30 June 2021, and I will assume, without deciding, that that conduct is fairly characterised as a representation by her personally, as distinct from a representation by DCA: the difference between the two was noted, for example, in Swiss Re International SE v Simpson (2018) 354 ALR 607 at [562] and Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 at [243]ff. It does not seem to me that the Cross-Claimants have established that either the reference to the cost of the RWLC [sic] rights in the profit projections sent on 19 May 2021 or the CommBiz remittances sent to DG and BM on 30 June were causative of the payments made by the Care A2 companies to DCA. The former was no more than a restatement of information provided by DA to DG and BM in a much more direct and prominent way on other occasions, and there is no basis to find that DG or BM paid any particular attention to that component of the profit projections as distinct from the direct representations made by DA as to the amount payable by DCA for the RLWC rights. The latter was not causative of the relevant payments where DG had committed to pay a much larger amount to DCA long before 30 June 2021 and the Care A2 companies had in fact paid all but $100,000 of that amounts [sic] they paid DCA before the CommBiz remittances were sent to DG and BM on 30 June 2021. The Cross-Claimants did not seek to put a case against KP in respect of the amount of $100,000 only, and I should not find the case against KP to be established on that narrower basis where it was not put on that basis. The Cross-Claimants have not established their misleading and deceptive conduct claim against KP for these reasons."
[11]
Direct liability for misleading and deceptive conduct
Direct liability for misleading and deceptive conduct, under s 18 of the ACL, depends upon whether the impugned person's conduct is objectively misleading or deceptive, or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198; [1982] HCA 44 (Parkdale); Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 at [6]-[9].
That is, a person's knowledge or intention to mislead or deceive is immaterial to determining whether that person is liable for misleading and deceptive conduct: Parkdale at 197; Yorke at 666.
Section 18 of the ACL, and its predecessor, s 52 of the Trade Practices Act 1974 (Cth), are concerned with conduct, although cases, including the present, are frequently pleaded by reference to representations. It is sufficient that the conduct leads or is likely to lead another party into error: Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564; [2000] FCA 1572 at [63], per French J (with whom Beaumont and Finkelstein JJ agreed); Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [15] (Miller). The authorities emphasise the need to consider the circumstances as a whole, and those circumstances may include people standing silently by in the context of representations by others as well as requests for information.
In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41; [1993] ATPR 41-203 (Demagogue), Gummow J (with whom Black CJ and Cooper J agreed) observed that:
"'[c]onduct' within the meaning of s 52 includes refusing to do an act and refusal to do an act includes a reference to 'refraining (otherwise than inadvertently) from doing that act': sub-s. 4(2). But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s. 4(2) to 'conduct' should not distract attention from the fundamental issue in the case at hand".
Black CJ emphasised that the "context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed": at 32. See also Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209].
[12]
Accessorial liability for misleading and deceptive conduct
A person may be an accessory to misleading and deceptive conduct where he or she participates, or is involved in, the impugned individual's misleading or deceptive conduct: ACL, ss 2, 18 and 236. An individual is "involved" in contravening s 18 where the person aids or abets, or has "in any way, directly or indirectly" been "knowingly concerned in, or party to, the contravention": ACL, s 2. The involvement provisions of the ACL do not establish liability on those deemed as accessories to misleading and deceptive conduct. Rather, the relevant provisions establish a "means of definition of the persons to whom … remedial orders may be directed": Trade Practices Commission v Manfal (No 3) (1991) 33 FCR 382 at 385; (1991) 105 ALR 520 at 523; Lockhart at [8.14].
As established in Yorke at 667, accessorial liability depends upon both knowledge and participation in the relevant misleading or deceptive conduct. Participation requires "some practical involvement" in the misleading conduct, such as helping, encouraging or inducing the conduct: Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340; (2014) 98 ACSR 347 at [543].
Furthermore, the individual must have knowledge of the essential facts constituting the breach: Yorke at 670. For misrepresentations, as in this appeal, this requires the individual to have "knowledge or [be] wilfully blind to, the falsity of the relevant representations": Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731; (2013) 102 IPR 161 at [546]-[547]. For instance, in Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233 at 242, Forster, Woodward and Wilcox JJ determined that it was necessary that Mr Sutton knew that the figures which he provided would create a "false picture" in relation to the acquisition of the impugned business.
A live debate remains as to whether persons can become accessorily liable on a wider basis, being that they have knowledge of the underlying facts which would have falsified the misrepresentation. Such issues were recently explored by this Court, in Anchorage at [329], where the Court characterised the debate as concerning:
"…whether, in order to incur liability as an accessory [for misleading and deceptive conduct], knowledge that the representation is false is required (the narrow view), or knowledge of facts which would have falsified the representation if they had been adverted to, suffices (the wider view)."
[13]
Liability for tortious deceit
The five necessary elements in a tortious deceit claim were outlined by Gummow, Kirby and Crennan JJ in Magill v Magill (2006) 226 CLR 551; [2006] HCA 51 at [114]:
"The modern tort of deceit will be established where a plaintiff can show five elements: first, that the defendant made a false representation; secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not; thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff; fourthly, that the plaintiff acted in reliance on the false representation; and fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation. Generally, the elements of the tort have been found to exist in cases which concern pecuniary loss flowing from a false inducement and the need to satisfy each element has always been strictly enforced, because fraud is such a serious allegation."
In relation to the fourth and fifth propositions, namely that the victim suffered loss due to reliance upon the false representation, Wilson J's decision in Gould has already been noted: see [115] above.
Liability for deceit may arise (the other elements being satisfied) not only through positive misrepresentations, but also through non-disclosure or silence where doing so creates a false or deceptive meaning to what has already been uttered: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 574-575; [1995] HCA 68; Crouch v Bloody Mary Group Pty Ltd [2020] SASC 68 at [276]-[279].
The causation requirements for an action in deceit are satisfied where the misrepresentation "contributed", even if only a "minor part", to the plaintiff's conduct which precipitated their loss: Gould at 236, 238-239. Therefore, a misrepresentation can relevantly cause loss despite the victim being actuated by misapprehensions from other sources, or their own predetermined intention to embark on the particular course of action: Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 570; David Rolph et al, Balkin & Davis: Law of Torts (6th ed, 2021, LexisNexis) at [23.38]. An action for deceit will only fail on causation grounds if the court determines that the plaintiff was motivated entirely upon their own judgement when they entered the transaction, or if they were aware of the representation's falsity, and instead knew the true state of affairs: Holmes v Jones (1907) 4 CLR 1692 at 1702; [1907] HCA 35; Gipps v Gipps [1978] 1 NSWLR 454 at 460.
[14]
Exemplary damages
Exemplary damages are not available under s 236 of the ACL for misleading and deceptive conduct. However, exemplary damages are available in tortious deceit claims: Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251 at 269; [1988] ATPR 40-855 (Musca).
As is well-established, exemplary damages awards are punitive, rather than compensatory, in nature. Brennan J explained in XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471; [1985] HCA 12 (XL) that the function of exemplary damages is to "punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again".
In Musca, French J (as his Honour then was) awarded exemplary damages for tortious deceit. His Honour explained (at 268) that there is:
"… nothing so anomalous or illogical about exemplary damages as to prevent their logical application, to deceit. Indeed that tort is a paradigm case for their application."
In Musca, the defendant made false representations concerning future profits in order to induce the plaintiff into establishing a business in an arcade. French J noted that the defendant knowingly made the misrepresentations, and awarded exemplary damages in the sum of $12,500 for tortious deceit.
In Hill v James [2004] NSWSC 55 at [280], Bergin J observed that:
"Essential elements of the tort of deceit include the falsity of the representation, the defendant's knowledge that the representation is false and the defendant's intention that the plaintiff will rely upon or be induced to act upon the false representation. This kind of conduct, essential for the proof of the tort, may fit within the descriptions of the type of conduct that has been found to warrant the award of exemplary damages - 'contumelious disregard for the plaintiff's rights', 'conscious wrongdoing'", 'high-handed' and 'reprehensible': Gray v Motor Accident Commission (1998) 196 CLR 1; Lamb v Cotogno (1987) 164 CLR 1."
Bergin J awarded exemplary damages in the sums of $75,000 and $125,000 against two defendants due to their deceptive conduct of changing certain contractual documents with the "obvious intent upon trickery". While there was an appeal from this decision, the exemplary damages ground of appeal in relation to tortious deceit was dismissed: see James v Hill [2004] NSWCA 301 at [66]-[85].
[15]
Ground 1: KP's misleading and deceptive conduct
The Appellants contend that the primary judge should have found that, in addition to DA, KP also engaged in misleading and deceptive conduct, and that such conduct caused the Appellants loss and damage of $1,090,000 (or alternatively $100,000). The alternative claim to $100,000, reflecting the payment made by the Appellants on 30 June 2021, is the subject of Ground 4 (see [187]-[189] below).
The primary judge's reasons in relation to the direct claim against KP for misleading and deceptive conduct have been noted at [96] above. His Honour's task was not made easy by the somewhat obscure manner in which the claim was pleaded against KP, with three separate sets of particulars. Nevertheless, as his Honour's reasons make clear (as does a perusal of the written and oral submissions at first instance), a direct liability case based upon a combination of particularised communications and silence was pursued against KP.
Although, on appeal, some (legitimate) criticism was made of the pleading, I am satisfied that the trial was fought on the basis that KP herself engaged in misleading and deceptive conduct of a continuous kind contrary to s 18 of the ACL, and was not merely accessorily liable.
KP's knowledge (or ignorance) of the fact that her conduct was misleading or deceptive is not, on well-established principles, relevant to any question of direct liability: see [7] and [100]-[101] above.
The primary judge's dismissal of the direct liability case against KP appeared to be based upon findings of causation: see PJ [170] reproduced at [96] above. Implicit in this conclusion was a finding or assumption that KP did engage in misleading or deceptive conduct vis-à-vis the Appellants but that such conduct was not causative of any loss. Put slightly differently, his Honour's conclusion was that any misleading conduct did not materially contribute to the Appellants' loss. The principles relating to causation under the ACL have been noted at [113]-[117] above.
The central thrust of the Appellants' complaint under Ground 1 was that the primary judge did not engage with large parts of the case they had sought to make against KP and had also overlooked certain key documents. The Appellants' complaint about the primary judge's failure to deal with attacks on KP's credit has already been noted: see [95] above. In this context, the Appellants submitted that the primary judge downplayed the extent of KP's dishonesty and, to the extent he found dishonesty in relation to KP's dealings with RDA, it was submitted that the primary judge in effect, and illegitimately, "siloed" that discreditable conduct.
[16]
KP no mere conduit
Mr McQuillen, who appeared for KP, submitted that she was a mere conduit who could not be held responsible for any misleading or deceptive conduct or misrepresentations. He drew attention in this regard to the primary judge's observation at PJ [12] that KP was "at one point described as the 'chief financial officer' of DCA, although that role description appears to have overstated her role in a small proprietary company".
The primary judge was, with respect, wrong to say that "at one point", KP was described as the CFO of DCA. At all material times she held that role (on her own evidence) and was so described on a number of key emails referred to earlier in these reasons. She was also introduced both to DG and BM, as well as RDA, as "our CFO". The fact that DCA was a small proprietary company may have rendered the description somewhat grandiose; it did not, however, reduce KP to an inconsequential ministerial agent.
KP's conduct bore this out. Hence, it was KP who sent two sets of projections to DG and BM on 19 May 2021 (see [37]-[40] above) and this is precisely the kind of financial document for which it may reasonably be expected a CFO or accountant would take responsibility. So, too, it was KP who was the point of contact for due diligence exercises (see [61]-[62] above) and it was also KP who purported to explain to RDA about Australian banking practices as well as taxation issues: see [48]-[49] above. KP's active and independent role in continuing the fraud is evidenced by her 27 May 2021 email, which sought payment from the Appellants according to a fictional deadline. KP acknowledged in cross-examination that these false assertions were made on her own behalf and as a joint statement - rebutting suggestions that she was a mere conduit:
"Q. No, what you say in the line 'They rightly mention that the full payment was meant to be paid upon signature of the contract which was signed on 27 April 2021'. They never mentioned that to you, did they?
A. Not to me. Dylan directed me to send this email. He directed, he directed me to write this email.
Q. You're making an assertion on behalf of yourself there, aren't you?
A. (No verbal reply)
Q. You are making an assertion on behalf of yourself in that email, aren't you?
A. Yes.
…
Q. You agree that nowhere in this email do you put forward that this was under instructions of Dylan, do you?
A. Not in the email.
Q. You were putting it forward as a joint position, weren't you?
A. Yes."
[17]
Ground 2: KP's knowing involvement and accessory claims
Even if I were not satisfied that KP engaged in misleading or deceptive conduct in the ways described above, I would have held that she was knowingly involved in the sense of aiding and abetting DA's misleading and deceptive conduct which induced the payments made on 9 and 30 June 2021 amounting to some $1,090,000.
KP knew or was recklessly indifferent to the fact that DCA had not paid $9,000,000 for the RLWC rights. KP further knew, at the time she sent her email of 7 June 2021, that neither $6,000,000 nor $8,000,000 was owing to RDA as the balance of what DCA had paid for the RLWC rights. As she volunteered under cross-examination, she knew at all material times that these rights had been acquired for only $5,000,000: see [18] above.
The Appellants bolster their submissions as to KP's knowledge of the falsity of DCA's dealings with DG and BM with the fact that, effectively simultaneously with her email of 7 June 2021, KP was lying to RDA about having sent $5,000,000 to them in emails of 3 and 4 June 2021: see [56]-[57] above. KP's willingness to lie in these emails and attach fabricated documents renders it unlikely in the extreme that she was ignorant of the cognate aspects of the deception being directed to DG and BM at precisely the same time. Even though her evidence as to the date of her knowledge varied somewhat under cross-examination, she was plainly aware of this fact from 20 May 2021.
KP was also recklessly indifferent to the projections as to revenue to be earned from the AHA (NSW), as set out in the projections and revised projections of 19 May 2021: see [37]-[42] above. That recklessness was reflected in KP's evidence under cross-examination in which she accepted that she was never aware of any potential deal that involved payments from AHA (NSW) to DCA:
"Q. Do you accept based on your communications with AHA in the other email that I referred to you, and the later ones, that you would know that the AHA does not pay broadcasters money, do you accept that?
A. I wasn't party to any negotiations. Emails where I was cc'd in, I didn't know anything with AHA.
Q. None of the documents that you were cc'd in involved the AHA paying money. It was the opposite, wasn't it? DCA would potentially pay--
A. Well, there was no understanding or any information that I had that there was going to be them paying any payments to us, no.
Q. Is it seriously your evidence that you did not even look at the documents at all, in any way, to be able to say whether money was proposed to be paid or received with AHA from DCA?
A. I looked at the figures, but they were only being proposed. They weren't final figures.
Q. Nothing that was proposed, envisaged the AHA paying money to the DCA, correct?
A. Well, I, I - not that I know of, no."
[18]
The payments in May 2021
As noted at [10] above, the Appellants also seek to make KP accessorily liable for the payments on 11 May 2021 and 18 May 2021 in the sums of $110,000 and $1,000,000 respectively. In order for her liability to be established, it would be necessary for the Appellants to demonstrate that KP had the requisite knowledge at the time of those payments and had rendered relevant assistance to DA in his misleading and deceptive conduct.
The evidence does not, in my view, establish such knowledge.
The Appellants relied upon the fact that KP sent an invoice on 18 May 2021 for $1,000,000 in respect of the RLWC rights coupled with the fact, as asserted by the Appellants, that KP knew of the existence of the False Sub-License Agreement which referred to a payment of $9,000,000 being due as at 27 April 2021. The Appellants pointed to certain evidence given under cross- examination by KP which appeared to support this assertion but also pointed to other evidence that contradicted it. This highlights the difficulty of express credit findings not having been made in respect of various aspects of KP's varying evidence and, more precisely, as to what she knew at what point in time.
The mere fact that KP sent an invoice for $1,000,000 on 18 May 2021 does not establish the requisite degree of knowledge. Whether KP was aware of the False Sub-License Agreement and, in particular, the $9,000,000 figure it contained, as at the date it was purportedly signed, namely 27 April 2021, is extremely difficult for this Court to determine. No piece of documentary evidence establishes that fact. It was DA who sent the false document to DG and BM, and KP was not copied in on this email. That leaves conflicting oral evidence. On the one hand, the Court was referred to evidence given by DA to the effect that KP was aware of the document and its terms, but much of DA's evidence was rejected by the primary judge. One then has contradictory evidence from KP herself. Her cross-examination was not, at all times, particularly clear. The Court is not in a position fairly to resolve the evidentiary inconsistency in these circumstances and the Appellants expressly eschewed any remitter of the matter or order for a retrial.
It should be noted that KP was not involved in any of the meetings with DG and BM, and was not copied into some of the early email communications, rendering it perhaps less likely that she had knowledge of, or was party to, the falsity of the representations and deceit at the time of DA's early representations which induced the first two tranches of payments on 11 May 2021 and 18 May 2021. The fact that one might expect a person in KP's position to be aware of documents such as the False Sub-License Agreement is not to the point in circumstances where DA's dealings could not be described as regular, and no other evidence was available pointing to the requisite knowledge.
[19]
Ground 3: KP's deceit
The Appellants contend that the primary judge should have found KP liable in deceit for $2,090,000, alternatively $1,090,000 or $100,000. The primary judge dismissed the deceit claim against KP for the "same reasons" as in relation to the s 18 misleading and deceptive conduct claim against KP, as both relied on substantially the same conduct (PJ [186]).
Of course, liability for the tort of deceit rests on a very different basis from liability for misleading or deceptive conduct, as intent to deceive is not a necessary component of the latter statutory cause of action.
In the present case, however, I have found not only that KP engaged in misleading and deceptive conduct in respect of the payments made on 9 and 30 June 2021 but that she had knowledge of the falsity of what she represented by her conduct from at least 19 May 2021 onwards. As such, Ground 3 of the appeal must be upheld to the extent of those final four payments, in the sum of $1,090,000.
[20]
Ground 4: Claim for $100,000 payment on 30 June 2021
As noted above, the primary judge rejected the claim against KP in relation to the $100,000 payment on 30 June 2021 on the footing that "it was not put on that basis" at first instance (PJ [170] and [177]). By this I understood his Honour to have been saying that the Appellants did not advance the submission that, if KP were found to be not liable in respect of the earlier payment, they still pursued her in respect of the $100,000 payment on 30 June 2021.
The Appellants argued that they did advance a claim against KP in relation to the $100,000 and rely upon [14f] of their Amended Statement of Cross-Claim.
I have dealt with this argument at [164] above. In view of the conclusions which I have reached in respect of Grounds 1 and 2, it is not necessary to give any further consideration to this ground of appeal.
[21]
Ground 5: Exemplary damages
The Appellants contended that the primary judge ought to have awarded exemplary damages against KP for $75,000. They claim that the tort of deceit is a paradigm case for exemplary damages, and that KP had deliberate and contumelious disregard for the Appellants' interests.
The Appellants relied on KP's many admissions as to dishonest and reprehensible conduct whilst operating as an accountant and ASIC agent although it must be noted, as the primary judge did, that, for the most part, these admissions related to KP's dealings with RDA and not the Appellant companies, nor DG and BM. Examples of such admissions may be seen at [56]-[58] above.
In relation to KP's misrepresentations to RD of RDA by emails on 8 June 2021 and 9 June 2021, she provided the following evidence in cross-examination:
"Q. And then on 8 June, you wrote to Mr Dennis, copying others, you see? At 1617?
A. Yes.
Q. You said 'The payment could take anywhere between three to five business days'. That was false, wasn't it?
A. Yes.
Q. You said you would speak to your bank about it, regarding the progress of the payment. That was also false?
A. Yes.
Q. At 1616, on 9 June, at the bottom there, you've said 'We went into our bank branch today, and the bank notified us that the transfer is still in clearance,' and you're waiting for release which could take three to five business days. That was also false, wasn't it?
A. Yes.
Q. You'd never been into the branch, had you?
A. No.
Q. There was nothing to wait for, because nothing was sent, correct?
A. Correct.
Q. And then again, on 9 June, you made a misleading statement along the same lines, about 'being advised by our bank', correct?
A. Yes, that's correct.
Q. Again, no money had been sent at this time, had it?
A. No.
Q. And that was deliberate in terms of what you wrote, wasn't it?
A. It was to allow more time for payment to come through, yes. That was at Dylan's direction after he spoke with your client, who requested additional time.
Q. And this is at 9 June, and so that was two days after you were writing to Dominic and Bertie seeking, I put it to you, six or $8 million to send to the RDA, that was the email that we saw before?
A. Yeah."
In relation to the 23 June 2021 email sent by DA to RS and RD (copying KP), which suggested that KP had been in conversation with the fictional Mark Greggo at the CBA, KP provided the following evidence in cross-examination:
"Q. You're copied on both the email to the RDA people and RLWC and the email below with Mark Greggo, do you see that?
A. Yes, I can see that.
Q. The forwarded email suggests you were in a conversation with Mr Greggo, doesn't it, looking at 1789?
A. The email does show that, yes.
Q. You would have seen this email at the time, correct?
A. At--
Q. 23 June 2021.
A. 23 June, yes.
Q. You knew at that point in time there was no Mark Greggo at the CBA, correct?
A. Well, I didn't know if there was or there wasn't.
Q. You never personally dealt with a Mark Greggo at the CBA, did you?
A. No, I didn't.
Q. You certainly didn't talk to anyone called Mark Greggo, did you?
A. No, I didn't.
Q. Nor anyone called Mark Geggo without the R, correct?
A. No.
Q. So you knew that this email was fake, correct?
A. Well, I didn't know if there was a person like that at the bank, but that correspondence, yes, was not legitimate."
[22]
Conclusions
For the above reasons, the appeal should be allowed in part with respect to KP, with KP to pay the Appellants' costs of the appeal.
Orders 9 and 10 of the primary judge entered on 14 February 2023 dismissing the Amended First Cross-Claim against KP should be set aside.
In lieu thereof, judgment should be entered against KP in the sum of $1,090,000 together with interest from the date of payments made by the Appellants to DCA calculated in accordance with the rates provided under s 100 of the Civil Procedure Act 2005 (NSW).
I would also order that KP be liable for exemplary damages in the sum of $30,000.
KP should also be jointly liable with DA in respect of the Appellants' costs of the Cross-Claim before the primary judge.
STERN JA: I agree with the orders of the Chief Justice and with his Honour's reasons for proposing those orders.
BASTEN AJA: I agree with Bell CJ.
[23]
Amendments
22 February 2024 - Added hearing dates to coversheet.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 22 February 2024
The evidence also disclosed that KP had made loans valued at $37,149.77 to DCA from late 2020 to 10 May 2021, which DCA had not repaid up until the time that it started dealing with the Care A2 companies. There was also evidence that KP owned 507 shares in DCA from January 2021 although whether the "loans" and shares were by way of what is sometimes colloquially styled "sweat equity" was not apparent. KP only appears to have been paid a salary from 17 May 2021, a date post-dating the first of the payments referred to in [2] above.
The claims made against KP were for misleading and deceptive conduct and tortious deceit and, in the alternative, for accessorial liability, namely knowing involvement in the misleading or deceptive conduct of DA. Exemplary damages were also sought against KP. An important difference between direct and accessorial liability for misleading and deceptive conduct relates to the element of intention. No intention to mislead or deceive is required for direct liability; in respect of accessorial liability, however, a party must know of the misleading and deceptive nature of the relevant conduct: Yorke v Lucas (1985) 158 CLR 661 at 667-668, 670; [1985] HCA 65 (Yorke); see also Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; [2003] FCAFC 289 at [9]-[15].
The precise claims made against KP are set out at [79]-[85] below, and the primary judge's reasons for rejecting these claims are set out at [86]-[99].
The Appellants raised five grounds of appeal as follows:
"1 The primary judge erred in failing to find that [KP's] conduct was misleading and deceptive, and causative of loss to the Appellants in the amount of $1,090,000 alternatively $100,000.
2 The primary judge erred in failing to find that [KP] was knowingly involved in each aspect of the conduct of [DA] that was found by the primary judge to be misleading and deceptive, and causative of the loss to the Appellants of $2,090,000 alternatively $1,090,000 alternatively $100,000.
3 The primary judge erred in failing to find that [KP] was liable in deceit, causing loss to the Appellants of $2,090,000 alternatively $1,090,000 alternatively $100,000.
4 The primary judge erred in finding that the Appellants' case against [KP] did not include a claim for loss of $100,000.
5 The primary judge erred in failing to award exemplary damages against [KP] in the amount of $75,000."
The Appellants structured their grounds of appeal so as to confine their claim against KP for misleading and deceptive conduct (as opposed to the claim in deceit and for accessorial liability) to the payments made after 11 May 2021 and 18 May 2021, these being payments that amounted to $1,090,000 (see [2] above).
Although DA was named as Second Respondent to the appeal, no relief was sought against him, and, although served with appeal papers, he did not appear or participate in the hearing of the appeal.
Before turning to consider the case made against KP and the primary judge's rejection of it, it is first necessary to provide a detailed overview of the underlying fraud for which DA was held liable and in respect of which KP was also sued. This overview incorporates unchallenged findings by the primary judge as to what occurred or was said in various meetings where there had been a dispute on the evidence at first instance between DA and Dominic Galati (DG), the major shareholder of the Care A2 companies, and Alberto (Berti) Mariani (BM), a consultant to the Care A2 companies.
On 26 April 2021, DA (and not KP) emailed RD (copying Russell Scott (representing RLWC) (RS) and CK) a series of Australian Securities and Investments Commission (ASIC) extracts and a purported transaction summary issued by the Commonwealth Bank of Australia (CBA) which recorded the then balance of DCA's account as in excess of $43,000,000. These were false documents (PJ [37]). DCA in fact had a bank balance of only $2,577.11 at the time. KP was not copied into this email.
On 26 April 2021, BM contacted DA, expressing interest in DCA's acquisition of soccer rights and suggested a meeting between DA, DG and himself.
From late April until June 2021, DA engaged in multiple meetings with DG and BM to discuss various rights for both soccer and the RLWC, but principally the RLWC, and the Appellants' potential investment in DCA to benefit from these rights. KP was not a participant in these meetings.
As the primary judge noted, there was a lack of clarity on the evidence as to whether the Appellants would invest in DCA, with DG acquiring control of it, or whether they would simply take some benefits from DCA's possession of the RLWC rights. On either view, the misrepresentations about the RLWC rights were material to the Appellants' payment of moneys to DCA.
The first meeting between DA, BM and DG occurred on 27 April 2021. During the meeting, the RLWC streaming rights were discussed. DG's evidence (which the primary judge accepted) was that during the 27 April 2021 meeting, DA explained that acquiring the RLWC streaming rights from RDA would cost $9,000,000. At this meeting, DG's evidence was that DA said that Sportsflick needed financial backing, and said:
"In terms of this RLWC deal, we also are negotiating with the Australian Hotels Association for Sports Flick to stream at about 6,000 NSW pubs and hotels for the AHA to pay Sports Flick $2,500 per month for the month of the broadcast per pub or hotel. I am told by my guy that this is a sure thing if we pay the fees to RDA for the RLWC rights. With the RLWC secured, they will do a long-term deal for Sports Flick at around the same fee per month. So getting the funds is our priority."
On 7 May 2021, a second meeting occurred between DA, BM and DG. BM gave evidence that DG referred to a payment of $9,000,000 for the RLWC rights, and that DA expressed confidence that the deal with the AHA (NSW) would come off with clubs to pay $2,500 for the RLWC streaming with ongoing monthly long-term fees.
Also on 7 May 2021 (after their second meeting), DA sent DG and BM several emails attaching:
1. a letter dated 7 May 2021, titled "Re: Offer to Purchase Shares in [DCA]". KP was copied into this email. In this email, DA noted that he had "CC'd Karla, our CFO". This may have been KP's introduction to DG and BM. As will be seen, she was to engage in subsequent email communications with both of them.
2. a purported sub-license agreement between DCA and RDA, dated 27 April 2021 (False Sub-License Agreement), described with the file title "RLWC executed contract Australia 27-04-21.pdf".
3. an updated letter dated 7 May 2021, titled "Re: Offer to Purchase Shares in [DCA]".
The False Sub-License Agreement recorded a sub-license fee of $9,000,000 (rather than the true $5,000,000) payable by DCA to RDA in respect of the RLWC streaming rights, and was purportedly signed by RD of RDA.
On 10 and 11 May 2021, DA sent emails to BM and DG attaching AHA (NSW) payment dates, payment figures and income projections. An email dated 10 May 2021 from DA to BM headed "Sportsflick Pub Numbers" read:
"As discussed,
6000 pubs at $2000 a month (including all sports flick content & rugby league World Cup)
6000 pubs at $2500 for just the rugby league World Cup package only."
The result of that calculation corresponds to the amount of $15,000,000 referred to in other evidence concerning revenue from the suggested AHA (NSW) arrangement (PJ [58]).
On 11 May 2021, a third meeting took place between DA, his brother Justin Azzopardi (JA), DG and BM. By email on the same day, DA sent DG a document headed "SF Projections", and the attachment referred to the projected profit from the RLWC and from "Pubs & Clubs" as follows:
"Our conservative estimate buys for Rugby League World Cup 2021 are 1.2 million buys, 1.2 million buys at $24.99 PPV buys are $29,988,000.00.
PROFIT - $20,000,000.00
RIGHTS FEE - $9,000,000.00
2. Pubs & Clubs
There are over 6,000 registered pubs in Australia, and we are going to have Sports Flick available in all registered pubs. The pubs will be paying $2500 for the World Cup or they can pay $2000 a month on a 12 month contract and get all the Sports Flick content. $2,500 x 6,000 = $15,000,000 or at $2,000 a month x 6,000 on a 12 month contract = $144,000,000.00.
Profit - $124,000,000.00
Operating Costs - $20,000,000.00"
Also on 11 May 2021, KP (through her alternative "accounts@sportsflick.com.au" address) emailed BM, with a copy to herself and DA, attaching an invoice for $110,000 from DCA to Care A2 Plus, and Care A2 Plus paid $110,000 to DCA. This was the first of the payments referred to in [2] above however the invoice did not appear to relate to the RLWC. Rather, the fee was described as being for "Rights - Chinese Super League, Belgium Pro-League, CONCAF Gold Cup".
On the same day, CK emailed DA and KP (through her "accounts@sportsflick.com.au" address) to further discuss the future investments for Sportsflick. Here, CK refers to a cost of $5,000,000 to acquire the rights to the RLWC and payments of $200,000 and $120,000 to DA and KP respectively.
On 12 May 2021, DA emailed RD, copying CK and RS, attaching a false loan document dated 18 January 2021 for a loan of $40,000,000 between DG as lender and DCA as borrower, purportedly signed by DA and witnessed by Chloe Azzopardi (CA) who was DA's wife and a purported letter from the CBA. The attached loan agreement dated 18 January 2021 between DG and DCA (False DG Loan Agreement) purportedly recorded a loan of $40,000,000 by DG to DCA with a drawdown date of 18 January 2021 and a due date of 18 January 2024. This document was fabricated. Also attached to the 12 May 2021 email was a fabricated letter from CBA to DCA, purportedly signed by Mr Moseley of CBA, who it appears did not exist. The letter purportedly confirmed the successful and legal transfer of funds by DG to DCA:
"At the request of our client [DCA], we Commonwealth Bank of Australia … hereby irrevocably and conditionally confirm that the current sums are good, unencumbered, clean and cleared funds derived from a legal source and without any criminal antecedents."
On 13 May 2021, DA sent a further document to BM, indicating an acceptance of the transaction on specified terms and, the next day, sent documents to DG and BM asking if they required adjustment or changes (PJ [71]). Also on 13 May 2021, DA emailed DG and BM (copying KP) purportedly attaching written confirmation of terms of the agreement including as to payment of $9,000,000.
On 18 May 2021, a further meeting took place between DA, DG and BM. On the same date at 7.50am, KP (through her "accounts@sportsflick.com.au" address) had sent BM (copying DA and KP's personal email addresses) an invoice for $1,000,000 with the description "Rights - 2021 Rugby League World Cup".
Interpolating here, it is not surprising that the Appellants do not pursue their claim against KP on appeal in relation to the first two payments (as they had at first instance). On the evidence before the primary judge, KP's only involvement to this point in time was sending an invoice to BM on 11 May 2021 (see [30] above) and 18 May 2021 (see [34] above), and being copied in on emails of 23 April 2021, 7 May 2021 and 13 May 2021 (see [16], [25] and [33] above).
At 5.11pm that same day, Care A2 Australia made the payment of $1,000,000, attaching a payment remittance receipt.
On 19 May 2021, KP sent two emails concerning DCA's "5 year projections". First, at 9.44am on 19 May 2021, KP sent to BM and DG, with a copy to DA, an email entitled "DCA Sydney Enterprises Pty Ltd - 5 Year Projections". This email read as follows:
"Dear Berti,
Please find attached [a] copy of 5 year projections as requested.
If you require any changes or have any questions, please feel free to contact."
An attached document was headed "DCA Sydney Enterprises Pty Ltd 5 Year Projected Profit and Loss Statement". The income projected for 2021/2022 in respect of pubs and clubs was $60,000,000. The expense identified as "Rights Fees" for 2021/2022 was $11,000,000. The figure did not possess an accompanying breakdown which specified the cost of acquiring the RLWC rights (cf [40] below).
Later that day, by email at 12.40pm, KP sent to BM and DG (with a copy to DA) an "updated 5 years projected report". The email stated "[p]lease find attached updated 5 year projections report as requested".
The email contained an attachment with an updated 5 year projected profit and loss statement for DCA. Importantly, the updated 5 year projected profit and loss statement contained a number of notations which were not included in the projections sent less than three hours earlier. Alongside the income entry headed "PPV (RLWC) for 2021", which indicated an income of $24,975,000, a PPV fee of $49.95 was indicated. Secondly, alongside the expense item for "Rights Fees" which showed $11,000,000 for 2021/2022, there was a notation which indicated a breakdown of this figure as $9,000,000 attributed to RLWC and $2,000,000 attributed to football.
It may readily be inferred that, following receipt of the 9.44am email, BM and DG made enquiries of KP as to particular entries on the projections document and that those enquiries, and the answers to them, were reflected in the notations on the second email. Of particular significance, as shall be seen, is the fact that the rights fees for the RLWC were identified as $9,000,000 (when the true figure was $5,000,000) and the projected income in relation to the RLWC was identified as being $24,975,000.
Both the 9.44am and 12.40pm projection emails carried the signature block:
"Karla Pichardo CA
CFO"
CA was presumably a reference to Chartered Accountant.
On 20-21 May 2021, RD sent emails to DA attaching a revised draft license agreement and an invoice. It referred to a license fee of $5,000,000. Interpolating, KP's evidence under cross-examination was that she became aware of the amount that was to be paid for the RLWC rights when "the invoice came through for the payment". It may be inferred that it was this invoice, dated 20 May 2021, to which she was referring.
On 21 May 2021, DA sent CK a purported email from a non-existent Mark Geggo of CBA and purported confirmation issued by CBA dated 12 May 2021, signed by the non-existent Mr Moseley of CBA, confirming the status of moneys that were not in fact then held, in any substantial amount, by DCA. The primary judge was satisfied that that document was false. The email was not copied to KP.
On 21 May 2021, CK emailed a copy of the purported confirmation to RD and RS. Again, KP was not copied in on this email.
On 22 May 2021, CK emailed DA (copying KP) to discuss expanding the media department to manage the requirements in-house for RLWC and other investments. The email was addressed "Dylan / Karla".
On 24 May 2021, an agreement was signed by RDA and DCA for the RLWC rights at a price for the license of $5,000,000. KP was not copied in on an email which included RDA's counterpart of the agreement, although, as has already been noted, she accepted under cross-examination that "at all times" she knew that the true rights for the RLWC was $5,000,000 (see [18] above) and that she became aware of this when the invoice came through for payment (see [43] above).
On the same day, KP emailed RD and RS to provide advice on the impact of Australia's double tax treaty with the UK on the rate of withholding tax on overseas royalties in Australia.
Further emails ensued in relation to payments. Of particular significance, KP sent an email at 4.24am on 25 May to RD and RS (copying DA and Hannah Griffiths of RDA (HG)) in the following terms:
"Thank you for the introduction and for providing the information we requested.
We have been advised by our financial institution and the ATO that your invoice needs to include the WHT deduction as follows:
Gross $5,000,000
Less: 5% WHT ($250,000)
Net payment $4,750,000 AUD
Can you kindly update your invoice and send to accounts@sportsflick.com.au
Once we receive your updated invoice we will be able to make the WHT payment to the ATO and pay your invoice.
Subsequently we will provide you with the relevant documentation for you to claim the WHT."
This email was clear further evidence that KP understood that the amount owing by DCA to RDA for the RLWC rights was $5,000,000.
By email on 25 May 2021, HG emailed KP (copying DA) with a revised invoice for $5,000,000.
By email on 26 May 2021, KP notified HG and RD (copying DA) that DCA could only make the $5,000,000 payment to RDA once they attended their bank's branch in person, which would occur on 3 June 2021. KP indicated that DCA had nonetheless transferred $192,000 to RDA as a deposit in relation to the invoice and as a gesture of "good faith" that the balance of the invoice would be paid the following week. Of this email, the primary judge said at PJ [79] that the explanation for late payment was:
"… at best incomplete where DCA would not have the funds to make that payment until it received funds from the Care A2 companies."
By email dated 27 May 2021 from KP to BM and DG (copying DA), KP requested further funds from DG. KP's email to BM and DG relevantly stated:
"We had another phone meeting last night with the Rugby League World Cup organization. Unfortunately they were unhappy and very frustrated that the whole amount has not been paid in full as yet. They have given us a deadline for Monday 7th June at 5pm to send them a remittance showing that we have sent the full balance of the payment.
We have tried as long as possible to delay full payment to them although they rightly mentioned that the full payment was meant to be paid upon signature of the contract which was signed on the 27th April 2021. As such we have had to agree that the amount will be paid by the [sic] their deadline[.]
Dylan and I understand your situation, however, they are putting immense pressure on us which is also putting us in a position you may be feeling the pressure too.
If you could confirm when funds will be in our account so we can satisfy their deadline that would be greatly appreciated."
No contract was in fact signed with RDA on 27 April 2021. Instead, the date of 27 April 2021 related to the False Sub-License Agreement (see [25(2)] above) which falsely recorded the amount payable to RDA as $9,000,000 and was not a genuine document. DA accepted in cross-examination that the only contract that was signed and dated 27 April 2021 was false although he had sent it to DG and BM on 7 May 2021.
In relation to the 27 May 2021 email, the primary judge noted at PJ [80] that KP's evidence in cross-examination was that she was only told of the 27 April agreement, and that it had not been established that she knew it was a fabrication. Two points may be noted. First, his Honour did not expressly indicate that he accepted KP's evidence on this point. Second, even if he did, his Honour did not address the balance of the 27 May 2021 email and KP's role in sending it. This is a matter about which the Appellants complain given that the email perpetuated the representation that DCA had a sub-license agreement in respect of the RLWC dated 27 April 2021 and this agreement falsely referred to a fee of $9,000,000.
By email dated 3 June 2021, KP advised RD that the balance of RDA's invoice (for $5,000,000), less withholding tax, had been transferred to RDA. It is plain that this statement was false. DA's evidence was that he instructed KP to send the email to RDA. An attachment to the email was a purported record on CBA letterhead of an international money transfer for the amount of $4,558,000. DA accepted in cross-examination that that document was also false and he accepted that he had never corrected that document in dealing with RDA and that that transfer had not been made (PJ [82]). KP, as DCA's CFO, must have known that the document was false, and accepted as much in the following passage of cross-examination:
"Q. … You wrote to Mr Dennis on 3 June, and you said 'We advise the balance of your invoice less withholding tax has now been transferred to you.' And you attached a transfer receipt. Do you recall?
A. Yes.
Q. And that receipt appears at 1562, $4.558 million?
A. Yes, I see that.
Q. That document is false, isn't it?
A. Yes, it is.
Q. And your email is also false, isn't it?
A. In regards to that payment and receipt, yes.
Q. You knew at the time of writing that the money had not been sent to them, didn't you?
A. Yes.
…
Q. In fact, at that point in time, the company only had about $50,000, do you accept that?
A. That's on the bank statement, yes.
Q. So, where it says 'Confirmed and authorised' on the receipt, at 1562, that is all false, isn't it?
A. I already said yes it was.
Q. Again, this is entirely unacceptable for a tax accountant, isn't it?
A. Yes, it is.
Q. It's misleading and deceptive conduct, isn't it?
A. It is a bit misleading.
Q. It's a lot misleading. It's $4.558 million that hadn't been sent, correct?
A. Correct."
Further deceitful conduct on KP's part followed. Thus, on 4 June 2021, she responded to an email from RDA indicating that the payment had not yet arrived by writing:
"We note that for previous payments we have made greater than $1 million it can take anywhere between 3 to 5 business days for the payment [to] clear.
Please let us know if payment is not received by the above payment period."
KP was also constrained to admit under cross-examination that this statement was false, as was her subsequent statement in an email on 8 June 2021 to RD that "[t]he bank did advise us last week that it could take anywhere between 3 to 5 business days for the transfer to clear". By email dated 7 June 2021, KP advised BM and DG, with a copy to DA, that:
"[DA] advised me that you confirmed with him that a further payment would be made to us today to pay the RLWC. Can you please advise if the invoice will be for $8M plus GST or $6M plus GST so we can prepare an invoice.
Can you also please confirm approx time of payment today as we need to ensure we make payment of at least $6M to the RLWC this afternoon." (emphasis added.)
The forensic significance of this email was that it necessarily continued the concealment of the true cost of the RLWC rights, which was $5,000,000, especially since the Appellants had already paid DCA $1,000,000 towards what they understood to be the true cost. Request for a payment of "at least $6M" was in excess of what was truly owing by at least $2,000,000. By a further email on 7 June 2021, KP (through her "accounts@sportsflick.com.au" address) sent BM (copying DA and KP's personal email address) an invoice for $1,100,000. It may be inferred that this was the amount they indicated they could or would pay at this point.
On 9 June 2021, BM sent remittances to DA (copying KP and DG) for three payments valued at $990,000 (Care A2 Plus making two payments of $850,000 and $10,000, and Care A2 Australia paying $130,000). On the same day, KP emailed BM, DA and DG confirming receipt of the remittances. These were the third, fourth and fifth payments referred to at [2] above.
By email on 10 June 2021, BM sent DA (copying KP and DG) due diligence requests concerning DCA. On the same day, KP responded to BM's email, explaining that they would return with answers to their questions shortly.
By email on 11 June 2021, KP sent an email to BM and DA (copying DG), providing answers to BM's due diligence questions, attaching an ASIC company statement, company tax return, balance sheets and profit and loss statements for the 2020/2021 financial year.
By email on 15 June 2021, KP sent to BM (copying DA and DG) a copy of a "Register of Member for shares issued and transferred by shareholders for DCA" as at 15 June 2021.
On 17 June 2021, KP sent a further email to BM, copying DG and DA, providing a breakdown of income and expenditure associated with various streaming rights (including the RLWC).
By email dated 22 June 2021, DA sent BM a copy of a purported agreement between DA and the AHA (NSW) which was dated 22 June 2021 and purportedly signed by DA and by Leone Cruden for AHA (NSW). That document recorded that DCA would provide "Services" described as providing Sportsflick channels to NSW pubs and hotels, and recorded that "Australian Houses Hotel (NSW) shall pay [AHA (NSW)] $30,000,000 plus GST", with a payment of $2,500,000 plus GST to be made monthly. The primary judge found that this agreement was falsified (PJ [88]).
On 23 June 2021, DA forwarded to CK, RS and RD (copying KP) a further email purporting to be from Mark Greggo of CBA to him and KP. That document was also false because Mark Greggo did not exist (PJ [90]). KP acknowledged in cross-examination that she never met or communicated with a Mark Greggo and that that correspondence was not legitimate.
By email dated 25 June 2021, DA sent BM an invoice purporting to be issued by RDA which referred to license fees due for the RLWC of $9,000,000. That document was plainly also false (PJ [91]). KP was not copied in on this email.
By email on 29 June 2021, DA sent to RD and RS (copying KP) further false correspondence from Mark Greggo of CBA on 29 June 2021 to DA (copying KP), explaining why the transfer of funds from DCA to RDA had not been completed. KP must have known this correspondence was false.
By email also dated 29 June 2021, KP sent to RD, RS, CK and DA a purported remittance from DCA to RDA of $50,000.
On the same day, DA forwarded to DG and BM purported legal advice from a Swiss lawyer regarding RDA's capacity to terminate DCA's acquisition of the RLWC rights:
"My recommendation to you is to pay that invoice ASAP and not be sued for the full amount plus damages."
By email at 9.20am on 30 June 2021, KP (at DA's request) sent copies of two purported remittances to DG and BM concerning the RLWC payments, which recorded $1,000,000 paid on 18 May 2021 and $1,000,000 paid on 9 June 2021 by DCA to RDA, both under the heading "RLWC", on forged CBA stationery. In cross-examination, DA accepted that those amounts had not been sent to RDA but claimed these documents were provided to DG under instructions from him. However, the primary judge was not persuaded by DA's evidence of that matter (PJ [97]).
By email at 1.56pm of the same day, KP requested DG and BM to provide remittance advices once payment had been made. By email at 2.36pm of the same day, BM advised KP (copying DA and DG) that the IBAN reference number provided was not recognised by the bank, preventing the transfer of funds.
By email at 4.10pm of the same day, Bhavani Ma (also known as Kerry Hyland (KH)), the sole director of Care A2 Plus and Care A2 Australia, provided KP with a remittance receipt of $100,000 paid by Care A2 Australia.
By email at 4.57pm of the same day from KP to KH (copying DA, DG and BM), KP confirmed receipt of the transfer of $100,000, and attached a CommBiz remittance advice purporting falsely to evidence that a $100,000 payment had been made by DCA to RDA. This payment of $100,000 to DCA on 30 June 2021 was the last of the payments referred to in [2] above.
By email on 1 July 2021, DA sent to CK, RD and RS (copying KP) further false communications with Mark Greggo of CBA, purportedly explaining why DCA's transfer of $4,588,000 to RDA had not been completed.
Contrary to the purpose for which all of the payments were made, $1,900,000 of the $2,200,000 funds paid by the Care A2 companies to DCA were spent on personal gain, a mortgage in the name of DA's parents, and other business expenses. None of these expenses were disclosed to, or authorised, by the Care A2 companies.
On 3 July 2021, the Appellants became aware of the "fraud" in relation to the money paid to DCA, and DG, BM and others then met with DA on 3 July 2021. A meeting also took place between DA, DG, BM and Raymond Younan that same day. DA claimed that he was falsely imprisoned during the meeting but the primary judge rejected that claim (PJ [135]).
After the 3 July meeting, DG, BM and KH initially caused BM and KH to be purportedly appointed as directors of DCA in place of DA. Since 10 July 2021, KH was purportedly the sole director of DCA up until the primary judgment, and also caused DCA's registered office address to be changed to DG's address. Furthermore, BM, Acell Holdings Pty Ltd and KH are described as the secretaries and shareholders of DCA, replacing JA and DA. JA's evidence was that he did not authorise the appointment of BM or KH as director or secretary of DCA from 4 July 2021. This issue, which was also dealt with by the primary judge in his judgment, is not relevant to the appeal.
Further particulars in relation to the allegations of silence and active conduct referred to in paragraph 8 of the Amended First Cross-Claim were sought on 10 May 2022. This request was answered as follows:
"i. As to this:
a. Silence is self-explanatory. The First to Fourth Cross Defendants knew the true position as to relationships, which contract/s were in existence, which documents were purported and false/fabricated 'contracts' pertaining to both the RLWC/RDA and the AHA. They failed at all material times to disclosure [sic] the true position to the Cross Claimants.
b. The First to Fourth Cross Defendants are liable for misleading and deceptive conduct as pleaded.
ii. The misleading and deceptive representations were continuing and never corrected by any of the First to Fourth Cross Defendants. This conduct was reinforced by sending emails, repeating representations in conversations, sending fabricated agreements, sending pay reminders and remittances (as pleaded and particularised) throughout the period that Care A2 Australia/ Care A2 Plus continued to make the payments up to the full AUD 2.2m, being misled and deceived when it did. See further e.g., 21 February 2022 Particulars, para [23] of the Amended Cross Claim."
KP was also alleged to have been accessorily liable for the contravention of the ACL ultimately found to have been committed by DA. The particulars included in the Amended First Cross-Claim did not refer to KP but further particulars were supplied on 21 February 2022 as follows:
"(iii) [KP] was involved at all times and inter alia, email to [BM] of 7 May; email on 11 May re Accounts; 13 May 2021 copied on letters of offer; communications with [BM] in mid-late May re due diligence; 18 May 2021 email from Accounts; email of 27 May 2021 seeking payment; purported tax invoice for RLWC for AUD9,000,000 on 25 June 2021; 7 June 2021 email correspondence seeking payment; 7 June 2021 correspondence to [BM]; received remittances on 9 June 2021 and email from [KP] confirming receipt; 11 June 2021 answers to [BM]; 17 June 2021 email to [BM] concerning company cash flow; 30 June 2021 sent fraudulent CommBiz documents and related false communication; [KP] confessed fraud to [DG] on 3 July 2021; [KP] involved in false transaction to RDA in June, and correspondence in July re non-payment to RDA as required under (real) contract; involvement with Mark Greggo, CBA."
The items of correspondence referred to in these particulars have largely been referred to in the earlier section of these reasons headed "Overview of the fraud".
His Honour rejected DA's evidence that "he did not 'expect' the Cross-Claimants to rely on revenue or profitability information provided to them" (PJ [161]).
At PJ [162], the primary judge confirmed his finding that:
"… DG and BM were misled, on the findings which I have reached, as to the amount to be paid to RDA for the RLWC rights, including by the provision of the False Sub-Licence Agreement recording a rights fee of $9m, and was [sic] also misled as to the nature of the arrangements with AHA (NSW), which I accept were fundamental to the economic viability of the investment in DCA."
It should be noted that the primary judge rejected an indirect causation case advanced by the Appellants at first instance (PJ [164]-[165]):
"[164] Mr Butt also made submissions concerning an unpleaded indirect causation case, which appeared to develop a claim that the Cross-Claimants had suffered loss caused by representations made by DA or KP to RDA or to CK. In this context, Mr Butt addressed correspondence from DA and KP to RDA and communications with CK to which I referred above. Mr Butt also addressed, at some length, the circumstances in which an indirect causation case may be brought, referring to earlier decisions involving such a case, Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; (1992) 109 ALR 638; and Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313 …
[165] I accept that such a case is available in principle, where the material facts on which it relies are pleaded and the necessary causation, albeit arising indirectly, is established by evidence. However, the Cross-Claimants did not plead the material facts required to establish any indirect causation case, that any misleading or deceptive representation made to RDA or to CK had any impact upon the Cross-Claimants' conduct, nor is there any apparent evidentiary basis for that case. It is not to the point that misleading and deceptive conduct toward RDA may have caused RDA to defer terminating any arrangements with DCA, because the Cross-Claimants had not made any inquiry with RDA as to the status of those arrangements. The hypothesis put by Mr Butt that, if the RLWC deal had been ended much earlier, and that was honestly communicated, then the Care A2 companies would not have sent funds to DCA, is not pleaded and does not rise beyond hypothesis."
The primary judge made a small number of adverse credit findings in respect of KP in the course of his reasons. Thus, his Honour held that:
1. "By email dated 26 May 2021, KP sought to explain the delay by reference to a need to attend the bank branch in person and confirmed that 'payment of the remaining balance will be made in full next Thursday and a remittance will be sent to you once the payment is made' (Ex J1, 1620). That explanation was, at best, incomplete where DCA would not have the funds to make that payment until it received funds from the Care A2 companies." (PJ [79]);
2. "By email dated 3 June 2021, KP advised RD that the balance of RDA's invoice, less withholding tax, had been transferred to RDA (Ex J1, 1552). It is plain that statement was false, as DA accepted on cross-examination, and his evidence was that he instructed KP to send the email to RDA" (PJ [82]). It should also be noted that an attachment to the email, being a purported record on CBA letterhead of an international money transfer for $4,558,000 was fabricated; and
3. In respect of the email dated 30 June 2021, by which KP, at DA's request, sent copies of two false remittances to DG and BM, the primary judge said at PJ [177] that:
"The Cross-Claimants have not established their claim for accessorial liability against KP, where they did not establish, in respect of any particular representation by DA, that KP was both involved in the making of that representation and aware of its falsity in the relevant sense, with the possible exception of the 30 June 2021 communication of the false remittances." (emphasis added.)
The tentative nature of this conclusion ("possible exception") is somewhat surprising in light of the following passage of KP's cross-examination:
"Q. On 30 June, you sent Dominic and Bertie remittances suggesting that payments of $2 million made their way to RDA, do you recall?
A. Yes, I do.
…
Q. Can you see the two attachments that follow being two invoices for $1 million on 9 June and 18 May?
A. Yep, two remittances, yes.
Q. You would agree that those remittances are false documents, correct?
A. Yes.
Q. That money was never sent, was it?
A. No.
…
Q. Both of the documents purport that you confirmed and authorised the payments, that is they are false in that regard, are they not?
A. They are false, yes.
Q. And you knew that they were false--
A. Yes, I did.
Q. --at the time. Correct?
A. Yes, I did."
At PJ [122], in the context of dealing with an aspect of the case not material to this appeal, namely the purported transfer of shareholding in DCA after the fraud was discovered, the primary judge said:
"I have not neglected the fact that there is evidence of improper conduct on the part of DA and KP, in her case largely in her dealings with RDA rather than the Defendants/Cross-Claimants."
The primary judge did not make any positive findings in relation to KP's credit, and, although noting at various points in his judgment that KP said that she had been told to do certain things or send certain documents by DA, his Honour did not make any findings as to whether or not he accepted KP's answers in this regard. This was notwithstanding the fact that the Appellants, in closing submissions at first instance, had made serious criticisms of KP's evidence and her lack of credibility. One of the Appellants' grievances on appeal was that the primary judge did not deal with these attacks on KP's credit, or consider her brazen mendacity in relation to her dealings with RDA in the context of what was argued to be implausible evidence in relation to KP's dealings with DG, BM and the Appellant companies.
In relation to the deceit claim, the primary judge held at PJ [186] that:
"The deceit claim and the misleading and deceptive conduct claim rely on substantially the same conduct, since (as I noted above) the Cross-Claimants' relied on the particulars to the deceit claim to expand their misleading and deceptive conduct claim. That claim succeeds against DA and fails against JA, KP and CA, for the same reasons as the misleading and deceptive conduct claim succeeds against DA and fails against those other persons."
The primary judge also rejected the accessorial liability claim against KP in relatively short reasons at PJ [177]:
"The Cross-Claimants' particulars of the accessorial claim against KP refer to the communications that she sent, on behalf of DCA, to DG and BM. However, involvement in aspects of a transaction in which misleading and deceptive conduct occurred is not sufficient to establish liability for damages for knowing involvement, without involvement in the conduct that was both misleading and deceptive and causative of a plaintiff's loss. The Cross-Claimants have not established their claim for accessorial liability against KP, where they did not establish, in respect of any particular representation by DA, that KP was both involved in the making of that representation and aware of its falsity in the relevant sense, with the possible exception of the 30 June 2021 communication of the false remittances. Her involvement to that limited extent does not support the amount of damages which they claim against her for the reasons noted above. It is not necessary to decide whether KP was involved in misleading and deceptive conduct directed to RDA, in her explanations of delays in payments made to RDA, where RDA brings no claim against her and her conduct in respect of RDA had no impact on any step taken by the Cross-Claimants."
Against this background, I turn to a discussion of applicable legal principles and then the grounds of appeal.
In Nadinic v Drinkwater [2020] NSWCA 2, Barrett AJA, with whom Meagher and Leeming JJA agreed, observed at [40] that:
"Silence is itself a fact that must be assessed like any other and, unless the circumstances as a whole are such as to give rise to a reasonable expectation of disclosure of some relevant fact known to exist but not communicated, there is no basis on which silence of itself can warrant an inference of a representation that the fact does not exist."
The role of silence, and misleading and deceptive conduct more generally was considered extensively in Miller. In Wormald v Maradaca Pty Ltd [2020] NSWCA 289 at [111], I sought to isolate certain key propositions to emerge from Miller as follows:
1. "the language of reasonable expectation [found in cases such as Demagogue] is not statutory: at [19]";
2. "in commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context: at [20]";
3. "close analysis of all of the circumstances of a transaction embraces a consideration of the sophistication of the parties and their experience in their fields: at [91]";
4. "the knowledge of the person to whom the conduct is directed may be relevant: at [20]. See also Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 319; [2009] HCA 25 at [26]";
5. "the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business may also be relevant: at [20]";
6. "the analysis is objective: at [20]";
7. "the analysis is to be 'unmediated by' high moral expectations exceeding the requirements of the general law: at [21]";
8. "the statutory prohibition on misleading or deceptive conduct does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party: at [22]"; and
9. "the failure to make reasonable inquiries, whilst not automatically defeating a statutory claim for damages for misleading or deceptive conduct, is a circumstance that is relevant to a consideration as to whether a failure to make disclosure is correctly characterised as misleading: at [91]".
More than one individual may engage in the same or related misleading or deceptive conduct, or, alternatively, a person may become knowingly involved in such conduct. Sometimes, a person (or corporation) who or which otherwise appears to have engaged in misleading or deceptive conduct by, for example, making a particular representation that engages the statute, may escape liability if they are a mere conduit of misleading information on behalf of another. As Mason ACJ, Wilson, Deane and Dawson JJ observed in Yorke at 666, persons who are mere conduits of information are not liable for misleading and deceptive conduct:
"That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive."
The status of an employee or officer does not necessarily immunise him or her from liability for contravening conduct engaged in in that capacity: Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88 at [362] (Anchorage); Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; [2008] FCAFC 120 at [94]. The question is whether the role of the individual was more than merely ministerial.
In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [39] (Butcher), Gleeson CJ, Hayne and Heydon JJ explained that determining whether a person is a mere conduit of information involves a holistic assessment of the nature of the information conveyed, surrounding circumstances and the relationship between the parties:
"In applying those principles, it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character."
An intermediary is more readily inferred to be merely passing on information (and therefore not directly liable for misleading and deceptive conduct) where: (i) the alleged victim possesses experience or knowledge of the subject matter relating to the representations made; (ii) the conduct relates to information which is not ordinarily within that individual's expertise or knowledge; and (iii) the intermediary "does nothing more than provide or refer to a document that, on its face, was prepared by another": Borzi Smythe Pty Ltd v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233 at [53]; Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (No 2) [2009] FCA 1153; (2009) 74 ACSR 373 at [31]; Richard v Gendore Enterprises Pty Ltd [2004] NSWCA 116 at [26]; Colin Lockhart, The Law of Misleading or Deceptive Conduct (5th ed, 2018, LexisNexis) at [4.57] (Lockhart).
Conversely, an intermediary is more likely to have adopted information where: (i) the underlying third-party document has been altered before being passed on; (ii) the individual knows that the representations passed on may not be reliable; and (iii) the representation concerns a "relatively simple matter", supposedly within the intermediary's "professional judgment": Granitigard Pty Ltd v Termicide Pest Control Pty Ltd [2011] FCAFC 81; (2011) 281 ALR 1 at [31]; Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 at [3139], [3165]; Havyn Pty Ltd v Webster [2005] NSWCA 182 at [89]; CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 at [123]; Lockhart at [4.57].
For example, in Butcher, a real estate agent passed on inaccurate survey diagrams provided by the vendor by incorporating the diagram into an advertising brochure for prospective purchasers of the property. The real estate agent was held to have been a mere conduit of the information because, as Gleeson CJ, Hayne and Heydon JJ explained at [40]:
"The agent did no more than communicate what the vendor was representing, without adopting it or endorsing it. That conclusion flows from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself."
Whether KP can be characterised as a mere conduit of the misrepresentations provided by DA is analysed below at [165]-[170].
To claim damages under s 236 of the ACL for misleading and deceptive conduct, the impugned person's conduct must have caused the loss or damage suffered. The relevant breach need not, however, be the "sole" cause of the victim's loss: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 at [33], [57]-[58]. Rather, conduct will be treated as having relevantly caused loss where it made a "non-trivial" or "material" contribution to the victim's loss: Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [60]-[61], [109], [163]; Gould v Vaggelas (1985) 157 CLR 215 at 236, 250-251; [1985] HCA 75 (Gould).
Furthermore, as French CJ, Crennan, Bell and Keane JJ explained in Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [55]:
"It has long been recognised that, where a representation is made in terms apt to create a particular mental impression in the representee, and is intended to do so, it may properly be inferred that it has had that effect. Such an inference may be drawn more readily where the business of the representor is to make such representations and where the representor's business benefits from creating such an impression."
In Gould at 236, Wilson J, after famously observing that "[i]f a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation", went on to observe that a representation "need not be the sole inducement" and that it was "sufficient so long as it plays some part even if only a minor part in contributing to the" relevant loss. Later in his judgment, at 238, his Honour held that:
"Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract."
A representation (or conduct) which is confirmatory either of a prior representation or of a pre-existing impression or belief of the representee may be causally significant. As Burchett J observed many years ago, a representation "which accords with the recipient's prior impression, and confirms it, is all the more likely to be accepted without question": Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043 at 51,593 (Benlist).
Logically and inexorably, as the primary judge consistently pointed out in his judgment, conduct causing the loss must also have occurred before the relevant loss was incurred. Therefore, the Appellants must establish that the relevant payments (made on 11 May 2021, 18 May 2021, 9 June 2021 and 30 June 2021) were each respectively induced by misrepresentations made by KP prior to these relevant dates.
Following a detailed analysis of the competing authorities, their Honours concluded that only the narrow view should be adopted, determining that (at [342]-[343]):
"…a person who knows that another is going to make certain representations, but does not know that they are misleading, cannot be said to be knowingly concerned in the other engaging in misleading conduct… It follows that … to establish liability … as an accessory, it [is] necessary that they be shown to have actual knowledge of the falsity of the relevant misrepresentation."
In respect of the appropriate quantum of exemplary damages to be awarded, Heydon JA explained in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10 at [253] (Harris) that if "exemplary damages are to fulfil their threefold purpose, they must not merely irritate, they must sting". His Honour continued at [254] that it is the "gravity and character of the Defendants' conduct which guides the Court's discretion as to the proper amount to award by way of exemplary damages".
Therefore, as his Honour explained at [254], a "minimal amount of damage inflicted on a plaintiff may, if the wrongdoing was outrageous, nevertheless require heavy exemplary damages to be visited upon the defendant" and the necessity for exemplary damages is increased where the wrongdoing was motivated by profit. That is, there need not be proportionality between the loss suffered and the quantum awarded for exemplary damages: XL at 471; James v Hill [2004] NSWCA 301 at [66].
This aspect of the attack was perhaps most relevant to the Appellants' case in deceit and for accessorial liability. It is not critical to Ground 1 where the exercise, as has been pointed out, involves an objective analysis of the conduct complained of. This is an appeal by way of rehearing and, insofar as the conduct of KP falls to be assessed, this Court is in as favourable a position as the primary judge to make an assessment of the matter.
It is first necessary to consider whether KP engaged in any misleading or deceptive conduct at all before turning to the question of causation by reference to which the primary judge resolved the claim under s 18 of the ACL.
The Appellants submitted that the primary judge failed to address, adequately or at all, several key documents sent by KP which contained statements by KP which were misleading or deceptive and that these, together with her silence in not disclosing the true picture, amounted to misleading or deceptive conduct of a continuing kind.
These documents were the 19 May 2021 emails from KP to DG and BM (see [37]-[40] above); 27 May 2021 email from KP seeking payment (see [53] above); 7 June 2021 email from KP seeking payment in the sum of $6,000,000 or $8,000,000 (see [58] above); 7 June 2021 KP correspondence to BM, providing the invoice (see [59] above); 9 June 2021 email from KP seeking payment; received remittances on 9 June 2021 and an email from KP confirming receipt (see [60] above).
The Appellants' point was that, even though the primary judge may have made reference to these documents, he did not do so in the context of considering KP's liability. There is some force in that criticism.
The first two documents were the forecast documents of 19 May 2021 sent by KP to DG and BM. These have been referred to at [37]-[40] above. The primary judge dealt with these two documents at PJ [75] as follows:
"From 18 May 2021, DA and KP and BM exchanged further emails containing Sportsflick presentations, projections, and other matters mainly relating to the RLWC (BM1 [50]-[51]; [55]-[59]). By email dated 19 May 2021, KP sent BM and DG, with a copy to DA, '5 year projections' as requested (Ex J1, 1369; BM1 [56]). An attached document was headed 'DCA Sydney Enterprises Pty Ltd 5 year projected profit and loss statement' and projected increasing profits between $71 million in 2021/2022 and nearly $86.5 million in 2025/2026. The income recorded for 2021/2022 in respect of pubs and clubs was stated as $60 million. Also on 19 May 2021, KP sent BM and DG a document described as 'updated 5 year projections report' (MFI 10). The updated document refers to a projected profit for pubs and clubs for $28.8 million. Again, it seems to me highly unlikely that an experienced business person such as DG would rely on a profit projection in that form without any real inquiry as to the basis of its assumptions."
The primary judge did not address the important fact, noted at [37]-[41] above, that BM sought clarification and a breakdown of the rights figure of $11,000,000 shown in the first projection. The second projection responded to this query by indicating that $9,000,000 of the $11,000,000 figure related to the rights for the RLWC. This was to repeat the deceit that had already been conveyed by earlier communications, including the provision of the False Sub-License Agreement which contained that misleading (indeed utterly false) figure of $9,000,000.
Two points may be made. First, the primary judge's observation at PJ [67] that it was "highly unlikely that an experienced business person such as DG would rely on a profit projection in that form without any real inquiry as to the basis of its assumptions" did not address the point that the core deception as to the cost to DCA of the RLWC rights was repeated. There was no relevant assumption underlying the indication of $9,000,000 other than that it was an accurate figure. That was a reasonable assumption for DG and BM to have made. Secondly, and contrary to the primary judge's supposition, the fact that clarification was sought in relation to this figure was a powerful indication that it was a matter of importance to DG and BM, and played a causal role in the decision to make further payments to DCA on 9 and 30 June 2021.
To this extent, I am unable to agree with the primary judge's conclusion at PJ [170] that this:
"… was no more than a restatement of information provided by DA to DG and BM in a much more direct and prominent way on other occasions, and there is no basis to find that DG or BM paid any particular attention to that component of the profit projections as distinct from the direct representations made by DA as to the amount payable by DCA for the RLWC rights." (emphasis added.)
The nature of the documentary projections, the identity of the person who sent them (DCA's CFO), and the fact that the second projection was sent after a request for clarification and a breakdown of the figures, invited the reader to treat it as a serious document upon which some reliance could be placed: cf Benlist.
The 19 May 2021 projection sent by KP contained a further misrepresentation, being that DCA would receive $60,000,000 from pubs and clubs from licensing the RLWC streaming rights. This representation was objectively false and misleading, as DCA had no basis for this figure, given that no pubs or clubs had agreed to pay DCA in connection with its prospective acquisition of the RLWC streaming rights (see also KP's admission that she was never aware of any pub that committed to paying DCA in relation to the RLWC). The misrepresentation as to DCA's future income arising from the RLWC rights likely contributed to the Appellants' decision to invest in DCA, thereby causing their loss in respect of the 9 June and 30 June 2021 payments.
The next document relied upon by the Appellants was the 27 May 2021 email sent by KP to BM and DG and which is set out in full at [53] above. The subject of this email was the need for DCA to pay the "full balance of the payment" for the RLWC rights. The email referred to "the contract which was signed on the 27th April 2021". That was the False Sub-License Agreement which was a fabricated document and referred to the rights fee as being $9,000,000. A copy of this had been sent by DA to DG and BM on 7 May 2021. Read in its full context, the 27 May 2021 email conveyed the representation that the balance of a sum of $9,000,000 was payable, and that RDA was pressing for payment of the balance. This communication was misleading as $9,000,000 was never owing for the RLWC rights. The Appellants submitted correctly that the 27 May 2021 email by KP "continued the deception".
In relation to the 27 May 2021 email, the primary judge said at PJ [80] that "KP's evidence in cross-examination was that she was told of that agreement and it has not been established that she knew it was a fabrication". For the purposes of assessing whether the email was misleading or deceptive, it matters not whether KP did or did not know of the terms of the False Sub-License Agreement. However, it was entirely reasonable for the recipients of the email to have assumed that the CFO of DCA, who was corresponding with them by reference to that document, was aware of its terms and was aware of the true amount owing to RDA in respect of the RLWC rights. On any view, the 27 May 2021 email continued the deception as to the cost to DCA of the RLWC rights. For the purposes of causation, KP's 27 May 2021 email went further than DA's previous misrepresentations as to the $9,000,000, because it created a timeframe for the Care A2 companies to make payments. This is suggested by KP's email explaining that payment was due to RDA according to a fictional 27 April 2021 "deadline". By attempting to force the Care A2 companies into making the transfer to DCA quickly, KP's email not only continued DA's deception - but gave it further force by reference to an apparent contractual obligation, a matter likely contributing towards the Appellants' 9 June 2021 payments.
The next document in sequence upon which the Appellants relied was the 7 June 2021 email from KP, seeking payment (see [58] above) which it will be recalled was in the following terms:
"[DA] advised me that you confirmed with him that a further payment would be made to us today to pay the RLWC. Can you please advise if the invoice will be for $8M plus GST or $6M plus GST so we can prepare an invoice.
Can you also please confirm approx. time of payment today as we need to ensure we make payment of at least $6M to the RLWC this afternoon."
The statement as to the "need to ensure we make payment of at least $6M to the RLWC this afternoon" conveyed the necessarily misleading proposition that more than $5,000,000 (of which $1,000,000, to KP's knowledge, had already been paid by the Appellants) was owing in relation to the RLWC rights. The Appellants' argument on appeal was that, as KP at all material times knew that RDA was only owed $5,000,000 for the RLWC rights, this statement was plainly misleading. This argument was correct. The primary judge did not analyse or consider whether KP, in sending this email, herself engaged in misleading or deceptive conduct. As put by the Appellants on appeal, this email "confirmed, continued and adopted the same misleading conduct of DA, never correcting the falsity thereafter, and inducing damage". There is also force in the Appellants' written submission, picking up the language of Burchett J in Benlist, that a representation which accords with, and confirms, the recipient's prior impression is all the more likely to be accepted without question. This is particularly likely when the confirmation is supplied by someone who might reasonably be expected to have direct knowledge of the subject of the communication such as a CFO in respect of amounts owing by the company.
I would also reject KP's contention that the email can only be construed as an inquiry based on discussions between DA, BM and DG. Contrary to this submission, it represented a continuation of the falsity that more than $5,000,000 was payable for the RLWC rights.
The Appellants characterised the 7 June 2021 email as "confirmation" by KP of the "Respondents'" previous "impression" created as to a false $9,000,000 RLWC rights fee. It was this confirmation which the Appellants claim induced their $990,000 payment two days later on 9 June 2021. The proximity of the payment to the misrepresentation, and its misleading nature, is supportive of it contributing in a material way to the loss suffered by the Appellants (see the principles discussed at [113]-[117] above), especially since it constituted a continuation of the misrepresentation that had been made 13 days earlier in the 27 May email, and the identification of $9,000,000 as owing in the updated projections sent at 12.40pm by KP to DG and BM on 19 May 2021.
The Appellants then relied upon KP's email to DG and BM on 30 June 2021 set out at [71] above and as to which there can be no doubt that it was seriously misleading and deceptive. Reference is made in this regard to [93(3)] above. The primary judge, however, also held at PJ [170] that this email and its false attachments were not:
"… causative of the relevant payments where DG had committed to pay a much larger amount to DCA long before 30 June 2021 and the Care A2 companies had in fact paid all but $100,000 of that [amount] [and] they paid DCA before the CommBiz remittances were sent to DG and BM on 30 June 2021."
Again, I respectfully disagree with the primary judge's assessment. The 30 June email was plainly designed to give some assurance to DG and BM that DCA was faithfully on-paying moneys paid by the Appellants to RDA in respect of the RLWC rights when, to the knowledge of both DA and KP, this was entirely false. That false assurance was no doubt designed to reassure DG and BM about the existence and integrity of the arrangements in relation to the RLWC rights and, it may readily be inferred, consistent with Gould, that that reassurance materially contributed to the making of the payment later that day.
The Respondent submitted that KP's email to BM and DG concerning the CommBiz remittances on 30 June 2021 could not have caused the $100,000 payment made by the Appellants to DCA on 30 June 2021. This was because, according to the Respondent, DG and BM had already decided to make the payment of $100,000 to DCA prior to KP's email sent on 30 June.
In support of this proposition, the Respondent relied upon BM's affidavit evidence of two separate conversations between BM and DG, and BM and DA on 29 June 2021. In respect of the conversation between DG and BM on 29 June 2021, BM explained that:
"I called Dominic as indicated and the following was discussed:
Berti: 'The RLWC has to provide us 14 days' notice to terminate the agreement.'
Dominic: 'I thought that was the case.'
Berti: 'So that gives us at least the middle of June before we really need to make any further payment. Dylan said that maybe we should pay them something as show of good faith. He suggested 100,000 dollars.'
Dominic: 'Ok we'll pay the 100,000 but we'll pay them direct. There's just something not right about all of this.'
Berti: 'Things are a little bit strange. I agree. I'll let Dylan know and get the banking details.'"
In respect of the second conversation between BM and DA on 29 June 2021, BM explained in his affidavit that:
"Later on 29 June, I phoned Dylan:
Berti: 'Dominic has agreed to make the payment, but he said the payment needs to be made directly by us to the RLWC as it will come from overseas.'
Dylan: 'I will get the bank details to you tomorrow morning.'"
These two conversations on 29 June 2021, the Respondent argued, highlighted that DG and BM had decided on 29 June 2021 that they would make the $100,000 payment, and thus KP's 30 June 2021 email to DG and BM concerning the false CommBiz remittances did not relevantly induce the Appellants' $100,000 payment on 30 June 2021.
There are two difficulties with the Respondent's submission in respect of causation. First, the two 29 June 2021 conversations between BM and DG, and BM and DA, do not evince an unequivocal and final intention to transfer $100,000 to the RLWC. Indeed, the conversation between BM and DG on 29 June 2021 exposed reservations and suspicions in respect of the $100,000 payment.
Such suspicion was perhaps made known to DA, when BM explained that the payment of $100,000 would not be made to DCA, but to the RLWC directly. But that is not what occurred. The $100,000 payment was made to DCA. It is likely that the suspicions held by DG and BM as reflected in their conversation of 29 June 2021 were assuaged by KP's subsequent email containing the false CommBiz remittances on 30 June 2021, it being constructed falsely to suggest that payments were being directed from DCA to RDA for the purpose of acquiring the RLWC streaming rights. In these circumstances, it is likely that KP's email on 30 June 2021 relevantly induced DG and BM's ultimate decision to make the $100,000 payment later that day.
The second problem with the Respondent's contention is that, even if BM and DG had committed on 29 June 2021 to make the $100,000 payment, they did not in fact make the payment until after KP's emailing of the CommBiz remittance on 30 June 2021. Therefore, KP's emailing of the false remittances to DG and BM likely reinforced or confirmed BM and DG's decision to make the $100,000 payment later that day. Misleading and deceptive conduct which reinforces an individual's decision to enter a transaction is sufficient to establish causation for the $100,000 loss incurred by the Appellants, for reasons outlined above: Benlist. The primary judge would also have rejected the claim in respect of the 30 June 2021 payment of $100,000 on the basis that the Appellants "did not seek to put a case against KP in respect of the amount of $100,000 only" (PJ [170]). Again with respect to the primary judge, the Appellants sought to recover each of the six payments made as set out in [2] above. The claim was not advanced on an "all or nothing" basis. This was not, therefore, a proper basis to reject the claim for $100,000 in respect of the payment made on 30 June 2021.
The present case is far removed from the facts of Butcher where it was evident that the misleading survey plan was authored by someone other than the real estate agent, and the agent had supplied an express disclaimer. KP was plainly the author of a number of key documents, and there was no objective basis for believing that she was a mere conduit. Even Butcher, with its very different circumstances, was relatively finely balanced in terms of ministerial agency.
One particular argument advanced on behalf of KP by reference to the 7 June 2021 email (see [58] above) should be noted. It was contended that the opening words of that email make clear that KP was merely passing on information in a confirmatory message what DA had advised KP in relation to the discussions between DA, BM and DG as to payment. It is true that that is how the email commences. What follows, however, and the misleading component of the email, is not so qualified. Indeed, KP's inclusive language of "we need to ensure we make payment of at least $6M to the RLWC this afternoon" (emphasis added.) indicates her purported involvement in receiving and transferring funds to RDA. It is a statement by KP as the CFO of DCA as to what was due in respect of the RLWC rights.
It follows from the above analysis that the first ground of appeal must be upheld. KP herself engaged in misleading or deceptive conduct and that conduct was causative of the Appellant companies' payments of 9 and 30 June 2021, in the sum of $1,090,000.
In cross-examination, KP also acknowledged that, despite the representation that DCA would receive $60,000,000 in annual revenue from pubs and clubs, she was not aware of any specific pub or club which might be willing to pay DCA to utilise their streaming rights over the RLWC:
"Q. You have no knowledge of any agreement between DCA and any pub or club in Australia to broadcast the Rugby League World Cup, do you?
A. No, I know they were in negotiations, but I didn't know of any contracts or any finalised agreements.
Q. You sent two financial projections, is that right, in May 2021?
…
A. Yes.
Q. You can see there's a figure, 60 million for pubs and clubs?
A. Yes.
Q. You're not aware of any analysis that led to that figure of $60 million, are you?
A. I was provided with some numbers for the pubs and clubs and what they would each be paying and that's the basis of that calculation.
Q. You don't have any indication or you have no documentation of a single pub that had committed to a single profit figure for broadcasting the Rugby League World Cup, correct?
A. As you can see, they're projections, so they did sign up. That's what would've been -
Q. The answer is you don't have one, do you? Do you have a single pub you can name that had a committed amount?
A. This is not a commitment; this is a projection.
Q. Sure, but please just answer my question. You didn't have a single pub that had committed to an amount, did you?
A. Not that I know of."
It was reckless for a CFO of a company to distribute projections without qualification as to the fact that no relevant agreements were in place with the AHA (NSW). KP had no basis at all, let alone any reasonable basis, for believing that the projected revenue contained in these forecasts could be earned.
Contrary to the primary judge, I do not consider that these projections did not play some material role in inducing the payments on at least 9 June 2021 of $990,000. It is not difficult to conclude that the payments of 9 and 30 June 2021 would not have been made had the true picture been disclosed by KP that: (i) DCA in fact had no contract with the AHA (NSW) or any basis for concluding that the revenue streams would be available or even likely; and (ii) DCA had deceived DG and BM as to the true cost of the RLWC rights.
For these reasons, whilst Ground 2 should be upheld to the extent of the final four payments in the sum of $1,090,000, the Appellants' claim that KP should also be found to be knowingly or accessorily liable for misleading and deceptive conduct in relation to the first two payments made by the Appellants cannot be sustained.
Such testimony evidences a sustained attempt by KP to mislead RD over a period of weeks through the use of false remittances and correspondence. That conduct cannot readily be separated from the overall fraud that was at this stage being perpetuated by both KP and DA.
KP acknowledged at various points in cross-examination that her conduct was unacceptable, especially given her position as a professional tax accountant and financial officer:
"Q. It's entirely unacceptable for you as a tax accountant, financial officer, to be sending out false documents like this to the marketplace, isn't it?
A. Yes, it is."
The Appellants submitted that exemplary damages were particularly warranted given: (i) KP's subjective knowledge of wrongdoing; (ii) the necessity for deterrence; and (iii) KP's repeated acts of wrongdoing, referring in this regard to: State of NSW v Ibbett [2005] NSWCA 445 at [44], [81]; Harris at [254]; Rookes v Barnard [1964] 1 All ER 367 at 410-411.
I agree that this is an appropriate case for the award of exemplary damages. Whilst KP may not have been the originator or author of the fraud, she became an active participant in it, allowing her apparent credibility as an accounting professional to lend respectability and legitimacy to what was brazen fraudulent conduct including fabrication of bank documents.