The plaintiff, Natural Raw C Pty Ltd, manufactures and sells coconut water to the independent retail grocery and petrol convenience sectors. It employs six full-time staff across all its operations.
Between 16 February 2016 and 23 February 2017, the plaintiff employed the first defendant, Mr Bradshaw, as a sales representative working in the Melbourne metropolitan area.
The third defendant, Ms Tran, is Mr Bradshaw's wife.
Mr Bradshaw is currently the sole director of the second defendant, Bradshaw Tran Investments Pty Ltd, which I will call "the Company". Mr Bradshaw and Ms Tran are the sole shareholders of the Company.
The fourth, fifth and sixth defendants are companies associated with Mr Bradshaw, but are not directly relevant to the relief that the plaintiff seeks today.
The plaintiff claims that it has established a good arguable case that Mr Bradshaw has misappropriated its stock and, through the Company, sold some of that stock to a customer of the plaintiff.
Accordingly, the plaintiff seeks continuation of a freezing order made on 17 March 2017 against Mr Bradshaw, Ms Tran and the Company. That order was made by consent, but without admissions. It was expressed to be "until further order". When the order was made, the matter was adjourned for hearing before me today in anticipation that the relevant defendants would then move to have the order dissolved.
The defendants have made that application. I am not, however, persuaded that I should dissolve the order, although it must be varied in some respects.
The threshold question is whether the plaintiff has a good arguable case against the defendants on an accrued cause of action.
The accrued cause of action that the plaintiff relies upon is, as against Mr Bradshaw, a claim for damages for breach of his fiduciary duty and breach of his employment contract, and as against Ms Tran and the Company, a claim of damages based upon their accessorial liability.
In this context, a good arguable case is one which is more than barely capable of serious argument, but not necessarily one in which there is more than a 50 per cent chance of success: Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG ('The Niedersachsen') [1983] Com. L.R. 234 (Mustill J). The test is less stringent than the requirement of proof on the balance of probabilities: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 325 (Gleeson CJ) cited with authority in Frigo v Culhaci [1998] NSWCA 88 at 8 (Mason P, Sheller JA and Sheppard AJA).
In support of a continuation of the order, Mr Jordan who appeared for the plaintiff, pointed to four matters which emerged from an affidavit sworn by one of the directors of the plaintiff, Mr Dennis Ghetto, dated 15 March 2017.
It is necessary to go to those matters in a little detail.
First, Mr Jordan pointed to a document purporting to be a purchase order dated "6/12/12" [sic] addressed to the plaintiff. The date is obviously a mistake. It should be 6 December 2016.
That purchase order purports to be from an actual customer of the plaintiff, Melbourne Live Seafoods Pty Ltd, for eight pallets of coconut water at a total price of $18,000. The purchase order has the order number "DANVICOO1". It records an email address of "danny@rawc.com.au". It states that the "customer to pick up from McPhee ASAP". McPhee is a logistics provider engaged by the plaintiff to handle and store its stock. The instruction goes on "Ring Danny to confirm please".
The document purports to be signed by a "Paul Pappas". The customer's name is actually spelt "Papas". The document bears what purports to be Mr Papas's signature.
Mr Jordan also drew attention to what purports to be an invoice from the plaintiff to Melbourne Live Seafoods for $18,000 and to a delivery receipt which shows that the person who collected the goods from McPhee was someone called "Danny".
In his affidavit sworn in support of the plaintiff's application, Mr Ghetto gave evidence that he telephoned Mr Papas and that during this telephone call with Mr Papas, the following conversation took place:
"[Mr Ghetto]: 'Can you please confirm when you will be paying Natural Raw C's outstanding invoice?'
[Mr Papas]: 'What invoice?'
[Mr Ghetto]: The invoice for 1,200 1 litre bottles of coconut water that you ordered.'
[Mr Papas]: 'I didn't order any coconut water. I don't even sell coconut water'."
This evidence is, of course, receivable on an interlocutory application such as this.
Mr Ghetto went on to say that Mr Papas had told him that on or about 6 December 2016, Mr Papas delivered a spit that he was selling to Mr Bradshaw to an address in Victoria, and that Mr Bradshaw told Mr Papas that he had a second warehouse across the road which Mr Bradshaw showed Mr Papas. Mr Papas said that he saw within that warehouse "a large amount of Natural Raw C stock".
Second, Mr Jordan pointed to a similar purported purchase order. This document is dated 2 February 2017 and purports to be an order by "Andres IGA Watsonia" for goods to the value of $9.000. The email address on the document is stated to be that of "Danny". Again, there is what purports to be an invoice from the plaintiff to Andres IGA. The delivery receipt shows that this document was also received by someone called "Danny".
The plaintiff has received an email from the IGA organisation, an extract of which is set out in Mr Ghetto's affidavit, stating that:
"Andres IGA store has not received any stock from [the plaintiff] for [the amount in the purported invoice].
Both the managers have also confirmed that they have not even ordered any stock relating to the invoices in question."
Next, Mr Jordan referred to what purports to be a tax invoice from the plaintiff to another IGA entity, IGA Yarraville, for the plaintiff's product in the amount of $24,750. Again, the delivery document shows that this stock was collected by someone called "Danny".
The IGA organisation has also sent an email to the plaintiff about that invoice in the following terms:
"I have just spoken and shown the invoice to the manager of Yarraville IGA, and she said they have not ordered any stock from [the plaintiff] for the [amount in the purported invoice]. They do not even have the stock as shown on the invoice. That is why there is no original invoice as well."
Finally, Mr Jordan drew attention to a series of invoices from the Company to an entity that is a customer of the plaintiff, A&V Fresh, in the Melbourne markets.
Mr Ghetto has given evidence that the Company was never a customer of the plaintiff. Mr Ghetto has also given evidence of a conversation he has had with Mr Angelo Taranto from A&V Fresh.
Mr Taranto told Mr Ghetto that he had been purchasing the plaintiff's product through the Company and that in mid-February 2017, Mr Bradshaw had telephoned Mr Taranto and said words to the effect:
"If Dennis [Ghetto] or Scott [Mendelsohn, the other director of the plaintiff] call you, please tell them that you haven't spoken to me or dealt with me."
Mr Bradshaw has sworn an affidavit in which he sets out the basis upon which he resists the continuation of the freezing orders against he, his wife and the Company.
In that affidavit Mr Bradshaw denied the allegations made by Mr Ghetto that "I had engaged in fraudulent transactions", denied making any false purchase orders, and said:
"All of the purchase orders referred to were, so far as I am aware, genuine purchase orders issued in respect of genuine purchases made by the customers themselves. I deny forging any signatures on behalf of any of the customers."
Mr Bradshaw did not, however, address the detail of the evidence adduced on behalf of the plaintiff. In particular, he did not dispute the conversations that Mr Ghetto reported that he had had with Mr Papas and Mr Taranto, nor the statements made on behalf of IGA, that it had not ordered the stock the subject of the purported invoices issued to IGA at Watsonia and Yarraville, respectively.
In answer to the complaint of the plaintiff concerning the invoices from the Company to A&V Fresh, Mr Bradshaw said in his affidavit that:
"...I believe that Mr Ghetto had given me his consent to continue to pursue my own interests, so long as I was able to fulfil my employment duties to the plaintiff at the same time."
Mr Bradshaw swore that he had formed that belief, based upon what he sets out in this paragraph of his affidavit as follows:
"When I started my employment with the Plaintiff in or around February 2016… I recall that I told Mr Ghetto that I had my own outside business interests. I recall that I used the words to the following effect:
[Mr Bradshaw]: Guys, I do do [sic] businesses on the side.
Mr Ghetto: [W]hat sort of businesses do you do; does it conflict with us in relation to coconut water?
[Mr Bradshaw]: No, I do alcohol only.
Mr Ghetto: What alcohol do you do[?]
[Mr Bradshaw]: Coronos [sic: Corona] only to Costco.
Mr Ghetto: Great, maybe we could invest with you later."
But that conversation, if it occurred, showed no more than that Mr Ghetto was not concerned that Mr Bradshaw might have a side business selling alcohol. It provides no basis upon which Mr Bradshaw could possibly have thought that he was authorised by Mr Ghetto or by the plaintiff to sell the plaintiff's products on his own account.
I find Mr Bradshaw's suggestion that he regarded this conversation as providing a basis to have the belief that I have referred to above, to be disingenuous.
The matters that I have set out above establish, to my mind, at the very least, a good arguable case that Mr Bradshaw has misappropriated the plaintiff's stock and has sold some of it to customers of the Company through the Company.
Indeed, Mr Zmood who appeared for the plaintiff, accepted that the plaintiff had established a good arguable case, although he submitted it was a weak one.
I do not find that Mr Bradshaw's general denial of wrongdoing, especially when combined with the disingenuous evidence to which I have referred, to provide a persuasive answer to the detailed evidence that has been adduced on behalf of the plaintiff.
Mr Bradshaw must know what the true position is. If he denies that he prepared the purchase orders referred to, or procured the invoices referred to, or gave the accounts that Mr Ghetto reports the relevant customers gave, he could have said so. He has not.
On Mr Bradshaw's behalf, Mr Zmood pointed out that the plaintiff has not called Mr Mendelsohn to give evidence and has not, otherwise than I have set out above, put into evidence its financial records.
I do not see what significance I could attach to the fact that Mr Mendelsohn has not given evidence. He is evidently one of the two directors of the plaintiff. His fellow director has given a detailed affidavit setting out what the plaintiff contends to have occurred.
The plaintiff has adduced some evidence from its financial records. It may be that there are further financial records that are relevant. But absent any attempt by Mr Bradshaw to grapple with what the records adduced so far appear to show, I do not see what inference I should draw against the plaintiff from the present state of the documentary evidence.
I am not persuaded that I should refuse to allow the order to be continued.
Indeed, I am persuaded that the plaintiff has established a good arguable case that it has been defrauded by Mr Bradshaw and, accordingly, there is good reason to think that, absent restraint, he will not preserve his assets, nor cause the Company to do so. As Ms Tran is a shareholder of the Company, I think the current restraint should also apply to her.
I will now hear submissions as to the precise terms upon which the order should continue.
[3]
Amendments
30 March 2017 - [11] last sentence - typographical error corrected
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Decision last updated: 30 March 2017