Care A2 Plus Pty Ltd v Pichardo

Care A2 Plus Pty Ltd v Pichardo - [2024] NSWCA 92 - NSWCA 2024 case summary — Zoe

JUDGMENT

By notice of motion filed on 2 April 2024, the first respondent on the appeal, Karla Pichardo, applied to stay the orders that the Court of Appeal made on 22 February 2024, pending the outcome of an application for special leave to the High Court of Australia. The orders of the Court of Appeal were as follows: "1. Appeal allowed in part with respect to the First Respondent, Karla Patricia Pichardo. 2. Set aside orders 9 and 10 entered 14 February 2023 so far as they refer to the First Respondent. 3. In lieu thereof, order that the First Respondent pay the Appellants amounts totalling $1,090,000 together with interest from the date of payments by the Appellants to DCA Sydney Enterprises Pty Ltd calculated in accordance with the rates provided under s 100 of the Civil Procedure Act 2005 (NSW). 4. Order that the First Respondent pay the Appellants an amount of $30,000 by way of exemplary damages. 5. Order that the First Respondent be jointly liable with the Second Respondent in respect of the Appellants' costs of the cross claim before the primary judge. 6. Order that the First Respondent pay the Appellants' costs of the appeal."
Ms Pichardo made the application to this court in accordance with the procedure approved in Jennings Construction Limited v Burgundy Royale Investments Proprietary Limited (1986) 161 CLR 681 at 684; [1986] HCA 84 ("Burgundy Royale"), namely, that an application for a stay pending determination of a special leave application to the High Court should be made to the court from which the appeal is to be brought: Zhu v Wang [2021] NSWCA 265 ("Zhu") at [12] (Gleeson JA). The appellants, to which I will refer collectively as the Care A2 companies, oppose the application.
The parties were not in dispute regarding the applicable principles, which Kirk JA considered in 123 259 932 Pty Ltd v Cessnock City Council (No 2) [2023] NSWCA 89 ("Cessnock (No 2)") by reference to authorities including Burgundy Royale and, in this court, Rinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 ("Rinehart"). Kirk JA provided the following summary of those principles in Cessnock (No 2) at [10]: "In summary, then, exceptional circumstances must be shown to warrant the grant of a stay pending the determination of a special leave application; significant factors in that regard are whether the applicant has substantial prospects of obtaining special leave, where the balance of convenience lies and whether the application for special leave may be rendered nugatory unless a stay is granted; those factors are not exhaustive; "substantial prospects" does not require that the court conclude that a grant of special leave is likely; the overall question is whether, taking account of all the circumstances, there are sufficiently significant prospects of special leave being obtained to warrant a grant of a stay, perhaps on terms designed to protect the interests of the respondent."

[3]

Evidence on the application

Ms Pichardo relied on two affidavits in support of her application. The first affidavit was one of Ms Pichardo, sworn on 2 April 2024. In that affidavit, Ms Pichardo gave evidence that on 6 March 2024, Care A2 Plus Pty Ltd lodged a caveat on what she described as "my property" (at [6]). Ms Pichardo also gave evidence that on 13 March 2024, the Care A2 companies served Bankruptcy Notice 263750 (Bankruptcy Notice) on her by email (at [7]).
The second affidavit on which Ms Pichardo relied was an affidavit of her instructing solicitor, Katarina Healey, sworn on 5 April 2024. Ms Healey annexed to her affidavit a copy of the special leave application that has been filed, and clarified that when Ms Pichardo referred, in [6] of her affidavit, to "my property", she was referring to the property that is named in the caveat, which is located in Green Valley, NSW and is Ms Pichardo's residence (the Property).
The Care A2 companies relied on two affidavits of Tino Di Bello, who is the solicitor with the daily carriage of the matter on behalf of the solicitor on the record for the Care A2 companies. Mr Di Bello affirmed both affidavits on 15 April 2024. In the first affidavit, Mr Di Bello addressed a number of matters said to be relevant to the balance of convenience. Ms Pichardo objected to paragraphs 2-3 and 5-7 of the affidavit on the basis of relevance. I admitted those paragraphs subject to relevance and consider they are relevant having regard to the parties' submissions on the application. Mr Di Bello's evidence in the first affidavit included the following: 1. A title search of the NSW Land Registry Services indicated that the Property is the only property registered to Ms Pichardo in New South Wales (at [2]). 2. A title search of the Property annexed to Mr Di Bello's first affidavit showed a mortgage is registered on the title of the Property (at [3]). 3. Of two internet valuation estimates that Mr Di Bello obtained in relation to the Property, the first estimated the mid-range value at $845,000 and the second estimated the value to be between $750,000 and $800,000 (at [6]). On the basis of those estimates, Mr Di Bello expressed the opinion that Ms Pichardo did not have the capacity to satisfy the orders of the Court of Appeal in their entirety (at [7]). 4. On 13 March 2024, a paralegal in Mr Di Bello's firm sent the Bankruptcy Notice by email to Ms Pichardo (at [8]). The Bankruptcy Notice, which was issued on 11 March 2024, identified a debt of $1,120,000 owed by Ms Pichardo to Care A2 Plus Pty Ltd, being the sum of orders 3 and 4 of the orders that the Court of Appeal made (Annexure F). 5. On 3 April 2024, Ms Pichardo filed an application in the Federal Court of Australia seeking to set aside the Bankruptcy Notice pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth), or, alternatively, to extend the time for compliance with the Bankruptcy Notice pursuant to s 41(6A) of the Bankruptcy Act, having regard to the special leave application (at [9]) (Annexure G). 6. On 9 April 2024, the Federal Court listed Ms Pichardo's application but did not give notice of the listing to the parties. The application was thus adjourned to 23 April 2024 (at [10]).
In his second affidavit affirmed on 15 April 2024, Mr Di Bello annexed a number of documents that were included in the blue appeal book before the Court of Appeal, which he described in his affidavit as "certain key documents" (at [5]). Counsel for Ms Pichardo objected to the tender of these documents on the basis of relevance and contended that the documents were selective. Counsel for the Care A2 companies took me to a number of these documents during his oral submissions so as to establish their relevance. Although I accept their relevance to the matter generally, as I observed to both counsel in response to oral submissions that each respectively advanced, on an application to stay orders of this court pending the High Court considering an application for special leave to appeal, the assessment of prospects is necessarily impressionistic. It is not desirable for me to engage in a detailed analysis in these reasons of the merits of Ms Pichardo's special leave application, for the reasons Kirk JA articulated in Cessnock (No 2) at [21].

[4]

Determination of the stay application

Starting with the prospects of the special leave application, an assessment of those prospects directs attention to the criteria for granting special leave to appeal set out in s 35A of the Judiciary Act 1903 (Cth): Zhu at [13]. The criteria include whether the proceeding to which the judgment relates involves a question of law that is of public importance; and whether the interests of the administration of justice generally, or in a particular case, require consideration by the High Court.
The decision of the Court of Appeal was unanimous, with Bell CJ giving the reasons with which Stern JA and Basten AJA agreed: Care A2 Plus Pty Ltd v Pichardo [2024] NSWCA 35. The appeal concerned the conduct of Ms Pichardo in what Bell CJ described as a serious fraud committed by the second respondent, Dylan Azzopardi, whom the primary judge found had engaged in contraventions of s 18 of the Australian Consumer Law (ACL) and committed the tort of deceit: at [1]. Ms Pichardo, a chartered accountant, was described in emails, including emails she sent to Dominic Galati, the major shareholder of the Care A2 companies, and Alberto (Berti) Mariani, a consultant to the companies, as the Chief Financial Officer of DCA Sydney Enterprises Pty Ltd (DCA), which Mr Azzopardi controlled: at [4].
As Bell CJ described in [2] of his Honour's reasons, the primary judge found that the Care A2 companies had made a number of payments to DCA, "induced by false misrepresentations by [Mr Azzopardi] 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)…". The appeal concerned the Care A2 companies' allegations against Ms Pichardo, relevantly that by representations she made in correspondence with the Care A2 companies, she had engaged in misleading and deceptive conduct contrary to s 18 of the ACL in respect of payments that the companies had made to DCA on 9 June 2021 and 30 June 2021 (ground 1). Alternatively, the appellants contended that she was accessorily liable for the contraventions of the ACL that Mr Azzopardi was found to have committed (ground 2). The Care A2 companies also alleged that Ms Pichardo was liable for deceit (ground 3) and sought exemplary damages (ground 5).
Before addressing the grounds of appeal, Bell CJ summarised the applicable principles concerning each of the grounds of appeal. The only debate in terms of those principles that, as his Honour described it, was "live", concerned accessorial liability, namely, whether persons can be accessorily liable for a contravention of s 18 of the ACL on the basis that they have knowledge of the underlying facts which would have falsified a misrepresentation (the broad view) or whether it is necessary for the person to have actual knowledge of the falsity of the representation (the narrow view): at [121]. His Honour noted that the Court of Appeal had adopted the narrow view in Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88 at [342]-[343].
Bell CJ concluded that the primary judge should have found that Ms Pichardo engaged in misleading and deceptive conduct which caused the Care A2 companies loss and damage of $1,090,000: at [170]. In reaching that conclusion, his Honour engaged in the objective analysis of the conduct complained of that s 18 of the ACL requires (see [100]-[101]), noting that the Court of Appeal was, in that analysis, "in as favourable a position as the primary judge to make an assessment of the matter": at [141]. His Honour accepted the submissions of the Care A2 companies, which relied on a number of documents that Ms Pichardo sent to them (identified in [144] of the reasons) together with her silence in not disclosing the true picture, as constituting misleading or deceptive conduct of a continuing kind. His Honour also found that Ms Pichardo's conduct was causative of loss and damage in terms of the payments that the Care A2 companies made on 9 and 30 June 2021: at [170].
In concluding that Ms Pichardo had engaged in misleading or deceptive conduct, Bell CJ rejected the submission made on her behalf that she was a mere conduit who could not be held responsible for any misleading or deceptive conduct or misrepresentations: at [165]. His Honour noted the position of Chief Financial Officer that Ms Pichardo held at all material times, and that she used that title in a number of the key emails she sent: at [166]. His Honour concluded that Ms Pichardo was "plainly the author of a number of key documents, and there was no objective basis for believing that she was a mere conduit": at [168].
Bell CJ next concluded that even if he were not satisfied that Ms Pichardo had engaged in conduct that contravened s 18 of the ACL, he would have held that she "was knowingly involved in the sense of aiding and abetting [Mr Azzopardi's] misleading and deceptive conduct which induced the payments": at [171]. His Honour concluded that Ms Pichardo "knew or was recklessly indifferent to the fact that DCA had not paid $9,000,000 for the RLWC rights" and that she knew at all material times that those rights had been acquired for only $5,000,000: at [172]-[173]. Bell CJ also found that Ms Pichardo was recklessly indifferent about the revenue projections that were made in documents she attached to two emails on 19 May 2021, noting that she had accepted in cross-examination that she was never aware of any potential deal that involved payments from the Australian Hotels Association (NSW) to DCA: at [174]-[175]. Contrary to the primary judge, his Honour considered that the projection documents had a material role in inducing the payments on at least 9 June 2021, which amounted to $990,000: at [177].
As to deceit, Bell CJ accepted that liability rested on a different basis from liability for misleading and deceptive conduct: at [185] (having earlier discussed the elements of the tort at [123]-[126]). However, his Honour had found not only that Ms Pichardo had engaged in misleading conduct in respect of the 9 June 2021 and 30 June 2021 payments, "but that she had knowledge of the falsity of what she represented by her conduct from at least 19 May 2021 onwards": at [186]. Having regard to Ms Pichardo's conduct as his Honour had found, "allowing her apparent credibility as an accounting professional to lend respectability and legitimacy to what was brazen fraudulent conduct including fabrication of bank documents", his Honour considered the case an appropriate one for the award of exemplary damages: at [197].
I have considered the special leave application that Ms Pichardo has filed (noting the time for the Care A2 companies to file their response has not yet elapsed), together with the written and oral submissions both parties advanced on the issue of prospects. At the impressionistic level at which I have considered this issue, I am not persuaded that the special leave application has substantial prospects of success. The application does not raise a question of law that is of public importance. Rather, in the part of the special leave application that is to contain a concise statement of the special leave questions, Ms Pichardo raises the Court of Appeal's application of settled principles to the circumstances of this case and takes issue with conclusions that the Court of Appeal reached on matters of fact. As I noted above, the only debate of principle that Bell CJ described as "live" related to accessorial liability, and his Honour determined that Ms Pichardo was accessorily liable on the settled basis that she knew of the falsity of the representations relied on or was recklessly indifferent as to their falsity.
Nor do I consider there to be substance in the contention that special leave is required in the interests of the administration of justice in this case or generally. In oral submissions, counsel for Ms Pichardo emphasised in this respect Bell CJ's observation, at [141] regarding the position of the Court of Appeal being as favourable as that of the primary judge in terms of making an assessment of the matter, contending that this statement was contrary to the principles of appellate review in Fox v Percy (2003) 214 CLR 218; [2003] HCA 22 at [28]-[29], as was the Court of Appeal's general approach. Counsel for Ms Pichardo also relied in this respect on the High Court's decision in Robinson Helicopter Company Inc v McDermott [2016] HCA 22; (2016) 331 ALR 550.
Accepting that the principles of appellate review on a rehearing are well settled, it is difficult to discern the basis for what appears to be Ms Pichardo's central contention, as it was put to me, that the Court of Appeal did not acknowledge the advantages enjoyed by the primary judge in seeing and hearing the witnesses; and interfered with the primary judge's findings where they were not glaringly improbable or contrary to compelling inferences. Bell CJ made the statement at [141], that Ms Pichardo emphasised, in the context of s 18 of the ACL, which involves an objective inquiry. Further, Bell CJ's findings as to Ms Pichardo's knowledge at relevant times rested predominantly on inferences drawn from the documents, together with answers she gave in cross-examination, in circumstances where Bell CJ accepted that there was some force in the criticism that while the primary judge may have referred to the relevant documents he did not do so in the context of considering Ms Pichardo's liability (at [145]); and the primary judge did not make credibility findings about Ms Pichardo one way or the other.
As this Court stated in Rinehart at [48], even if the Court is unable to reach the view that an application for special leave has substantial prospects of success, "[t]here may be cases, albeit rare, when the other factors material to the grant of a stay may be of such significance that a stay should be granted". The evidence as to other factors in the present case does not satisfy me that this is such a case.
The subject matter of the litigation is a monetary sum. Ms Pichardo gave evidence that a caveat has been lodged over her residential property, which is her only real asset. Although counsel for Ms Pichardo submitted that the basis for the caveat was not clear, he also accepted that there was no evidence that Ms Pichardo had sought any information from the Care A2 companies about the caveat. Ms Pichardo gave an undertaking to prosecute the special leave application with diligence, but she did not provide any further evidence regarding her financial position, nor, as the Care A2 companies pointed out in submissions, did she offer to pay any sum of money representing any part of the judgment debt into court.
In so far as the Care A2 companies have served the Bankruptcy Notice, Ms Pichardo has by way of response taken steps for which the Bankruptcy Act provides, namely, to apply to the Federal Court to set aside the notice or to extend the time for compliance given the special leave application. Section 41(6A) of the Bankruptcy Act provides that where, before the expiration of the time for compliance with a bankruptcy notice, the debtor has instituted proceedings to set aside a judgment or order in respect of which the bankruptcy notice has been instituted or an application has been made to set aside the bankruptcy notice (both of which Ms Pichardo has done), the Court (being the Federal Court) may, subject to s 41(6C), extend the time for compliance with the notice. The exception in s 41(6C) applies where the Court is of the opinion that the proceedings to set aside the judgment or order have not been instituted bona fide or are not being prosecuted with due diligence. When asked why a stay would be required from this Court if the Federal Court made an order extending the time for compliance on the basis of the special leave application, counsel for Ms Pichardo referred only to the existence of the caveat.
I am not satisfied on the basis of the evidence that Ms Pichardo has put before me that without a stay her pursuit of the special leave application would be stultified or otherwise relevantly prejudiced in the period before it is determined. Additionally, there is no evidence to suggest that the judgment sum would be at risk of being lost in the event that it were paid and special leave were granted and the appeal allowed: cf. Cessnock (No 2) at [15]; Bingham v Bevan [2023] NSWCA 186 at [37]-[40]. In considering the balance of convenience I have also considered the reliance the Care A2 companies placed on a stay keeping them from the fruits of the judgment, noting that the limited evidence does not support Ms Pichardo having the capacity to satisfy the whole of the judgment sum in any event.

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