Interstar Pty Ltd v Halston Capital Pty Ltd [No 2]
[2022] WASC 110
•31 MARCH 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: INTERSTAR PTY LTD -v- HALSTON CAPITAL PTY LTD [No 2] [2022] WASC 110
CORAM: ARCHER J
HEARD: 22 MARCH 2022
DELIVERED : 23 MARCH 2022
PUBLISHED : 31 MARCH 2022
FILE NO/S: CIV 1830 of 2021
BETWEEN: INTERSTAR PTY LTD
Plaintiff
AND
HALSTON CAPITAL PTY LTD
First Defendant
SCOTT MICHAEL JAMES MUNDELL
Second Defendant
PETER ANDREW FIORE
Third Defendant
FIORE GROUP PTY LTD
Fourth Defendant
CLAUDIO IVAN STRNADICA
Fifth Defendant
Catchwords:
Application to discharge freezing orders - Turns on its own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | MD Cuerden SC |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | KA Dundo |
| Fifth Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Hotchkin Hanly |
| First Defendant | : | Hammond Legal |
| Second Defendant | : | Hammond Legal |
| Third Defendant | : | Chris Biris Barrister & Solicitor |
| Fourth Defendant | : | KD Legal (Perth) |
| Fifth Defendant | : | Not applicable |
Case(s) referred to in decision(s):
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Interstar Pty Ltd v Halston Capital Pty Ltd [2022] WASC 105
Nimemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398
Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188
Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 3] [2011] WASCA 203
Rimex Wheel Pty Ltd v Wulff [2018] WASC 180
ARCHER J:
(This judgment was delivered extemporaneously on 23 March 2022 and has been edited to correct matters of grammar, add headings, and include complete references.)
These reasons deal with an application by the fourth defendant (Fiore Group) to discharge freezing orders that I made on 27 August 2021 in relation to the third, fourth and fifth defendants (Freezing Orders).
On 22 March 2022, I gave an ex tempore judgment on an application by Fiore Group to strike out parts of the plaintiff's pleading. For convenience, I will reproduce some parts of that judgment in these reasons. However, these reasons should be read with that judgment.[1]
[1] Interstar Pty Ltd v Halston Capital Pty Ltd [2022] WASC 105.
Overview
I made the Freezing Orders at an ex parte hearing on 27 August 2021. I had previously made freezing orders in relation to the first and second defendants.[2]
[2] On each occasion, I gave oral reasons extemporaneously, but did not publish the reasons.
At an inter partes hearing on 31 August 2021, Fiore Group unsuccessfully opposed the continuation of the Freezing Orders.[3]
[3] I gave extemporaneous oral reasons, but did not publish the reasons.
Fiore Group submitted that the affidavit evidence provided by the plaintiff did not disclose any involvement of Fiore Group in the relevant events prior to July 2021.[4] Fiore Group submitted that the Third Defendant (the Father) was not acting on its behalf, that the only director of Fiore Group was, and is, its sole registered director, Mr Jonathan Fiore (the Son), and that the Father is not a director of, and has no authority from, Fiore Group.
[4] ts 76.
I found that there was a good arguable case that the Father was acting on behalf of Fiore Group when (on the plaintiff's case) the Father sent an email on 15 March 2021 directing that the funds paid by the plaintiff be sent to Dubai.[5]
[5] ts 82 - 83.
Subsequently, Fiore Group made another application to discharge the Freezing Orders, on the basis of the material filed after the August hearing. I gave leave to make that application and it was listed to be heard on 22 March 2022.
Later still, the Fiore Group brought an application seeking to strike out parts of the amended statement of claim. That application was also listed to be heard on 22 March 2022.
After receiving Fiore Group's written submissions in support of the strike out application, the plaintiff prepared a further amended pleading (ASOC).[6]
[6] Filed 8 March 2022.
After hearing the strike out application, I delivered reasons ex tempore.
The legal principles
The relevant principles were set out by Beech J[7] in Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd,[8] and in the cases cited in that case. Although Perdaman was overturned on appeal, the Court of Appeal did not express any doubt as to his Honour's statement of principles.[9] A useful summary was also provided by Vaughan J[10] in Rimex Wheel Pty Ltd v Wulff.[11] What follows is primarily drawn from these cases.
[7] As his Honour then was.
[8] Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188 (Perdaman Chemicals (first instance)).
[9] Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 3] [2011] WASCA 203.
[10] As his Honour then was.
[11] Rimex Wheel Pty Ltd v Wulff [2018] WASC 180.
The object of a freezing order is to prevent the abuse or frustration of court processes. That does not necessarily require an intention to produce those results.[12]
[12] Perdaman Chemicals (first instance) [133] - [135].
An order should be granted only with a high degree of caution. It is a drastic remedy which should not be granted lightly.[13]
[13] Perdaman Chemicals (first instance) [139].
There are essentially two conditions that must be satisfied before the court's discretion to make a freezing order is enlivened. The court must be satisfied that:
(a)the plaintiff has a 'good arguable case' against the defendant on an accrued cause of action that is justiciable in the court; and
(b)there is a danger that the prospective judgment will be wholly or partly unsatisfied because assets of the defendant might be removed or otherwise disposed of, dealt with or diminished in value.[14]
[14] Rimex Wheel [24].
If the two conditions are met, the court should consider the strength of the plaintiff's case, the danger of frustration of a prospective judgment, the balance of convenience and any other relevant discretionary factors in deciding whether to grant an order.[15]
Good arguable case
[15] Rimex Wheel [25] and Perdaman Chemicals (first instance) [142].
As noted by Beech J[16] in Perdaman,[17] the expression 'good arguable case' has its provenance in a judgment of Mustill J in Nimemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG,[18] who expressed the test as being a good arguable case 'in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success'.[19]
[16] As his Honour then was.
[17] Perdaman Chemicals (first instance) [143].
[18] Nimemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398.
[19] Nimemia Maritime Corp, 404.
Justice Beech[20] also noted, with apparent approval, that Le Miere J had treated the requirement of a 'good arguable case' as equivalent to the general law requirement stated in Cardile v LED Builders Pty Ltd,[21] that the plaintiff must establish that it has a reasonably arguable case on legal and factual matters.[22]
Danger that the prospective judgment will be wholly or partly unsatisfied
[20] As his Honour then was.
[21] Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380.
[22] Perdaman Chemicals (first instance) [144].
As was said by Vaughan J[23] in Rimex Wheel (citations omitted):[24]
The danger that the prospective judgment will be wholly or partly unsatisfied may be inferred from the nature of the case. For example, if there is a good arguable case of fraud or dishonesty then the court may infer a risk of dissipation of assets in the absence of a freezing order. Where that is not the case there must be evidence to establish the danger of asset dissipation. The authorities express the relevant danger in terms of a 'real risk' that, by reason of dissipation, the judgment or prospective judgment will go unsatisfied.
… [I]t is not sufficient for the applicant to simply assert a risk that the assets will be dissipated; the real risk of dissipation must be demonstrated by 'solid evidence'.
[23] As his Honour then was.
[24] Rimex Wheel [27] - [28].
The factual background
The parties helpfully compiled a chronology identifying the relevant factual background, much of which is not in dispute. The matters in dispute were identified by being in italics.
The following parts of the chronology are not in dispute:
| 14 March 2019 | Fiore Group is incorporated. [The Son] is its sole director and shareholder, and its principal place of business is 52 The Esplanade. [The Father] resides at 52 The Esplanade. [The Son] resided at 52 The Esplanade until January 2020. |
| 8 December 2019 | [The first defendant Halston Capital Pty Ltd (Halston)] pays the sum of $18,000 to Fiore Group. At the time of the deposit the depositor is not disclosed to the Fiore Group as being Halston[.] [The Father] advises [the Son] that the sum of $18,000 received by Fiore Group was for [the Father's] benefit to assist [the Father] to deal with Court proceedings that [the Father] was involved with at that time. |
| 18 May 2020 | Halston pays the sum of $50,000 to Fiore Group. At the time of the deposit the depositor is not disclosed to Fiore Group as being Halston. [The Father] advises [the Son] that the sum of $50,000 received by Fiore Group was for [the Father's] benefit to assist [the Father] to deal with Court proceedings that [the Father] was involved with at that time. |
| In or about early March 2021 | A director of [the plaintiff], Mr Stanley Noel Bird, attends a meeting at Clancy's City Beach with [Mr] Strnadica and Mr Brad Kidd. [Mr] Strnadica advises Mr Bird that he and Mr Kidd have identified an investment opportunity with Halston, which was attempting to raise $4 million to take part in a short term private placement program with Rothschild New York, which would return 100% on investment in 30 days. |
| A few days later | Mr Bird attends a further meeting at Clancy's City Beach with [Mr] Strnadica. [Mr] Strnadica provides Mr Bird with a written agreement for [the plaintiff] to invest the sum of $850,000 with Halston to facilitate investment into a managed AUD $4,000,000 Rothschild & Co (Global Equities New York) Short Term Private Placement Program. The Rothschild & Co (Global Equities New York) Short Term Private Placement Program does not exist. Shortly after this meeting, Mr Bird informs his daughter, Kim Knight, that he has decided to make the investment and asks her to transfer the funds to the account specified in the document. |
| 12 March 2021 | [The Son] causes a payment to be made by Fiore Group to the payee being BSB: [***-*]99 Account: [*******]50 in the sum of $70,070 on behalf of [The Father]. The payee was [Mr] Strnadica. |
| 17 March 2021 | [The plaintiff] transfers the sum of $850,000 to Halston. Halston transfers the sum of €525,000 to the Maiolo Account. |
| 31 May 2021 | Bearcat transfers the sum of $15,000 to Fiore Group. The transfer appears on Fiore Group's bank statement as a transfer from Bearcaresoupt Consulting. [The Father] informs [the Son] that he had arranged for the funds to be deposited and that they were for his (ie. [the Father's]) benefit. [Mr] Strnadica is the sole director and shareholder of Bearcat. |
| 2 June 2021 | Bearcat transfers the sum of $15,000 to Fiore Group. The transfer appears on Fiore Group's bank statement as a transfer from Bearcaresoupt Consulting. [The Father] informs [the Son] that he had arranged for the funds to be deposited and that they were for his (ie. [the Father's]) benefit. |
| 21 June 2021 | Andeo transfers the sum of $25,000 to Fiore Group. The transfer appears on Fiore Group's bank statement as a transfer from Andeoholdipt Consulting. [The Father] informs [the Son] that he had arranged for the funds to be deposited and that they were for his (ie. [the Father's]) benefit. [Mr] Strnadica is the sole director and shareholder of Andeo. |
| A few days after 4 July 2021 | Mr Bird attends a meeting at Clancy's City Beach with [Mr] Strnadica, who introduces Mr Bird to [the Father]. In the presence of [the Father], [Mr] Strnadica informs Mr Bird that: (a) he had arranged for [the Father] to pay the funds owed to Mr Bird by Halston, and that [the Father] was going to take care of Mr Bird's problems with Halston; (b) he and [the Father] would meet with solicitors that day to arrange preparation of the paperwork for an assignment of [the plaintiff's] agreement with Halston. |
| 15 July 2021 | Mr Bird receives emails from Frances Lai of KD Legal, advising that they have been instructed to act for Fiore Group, and providing Mr Bird with a copy of a document entitled "Deed of Assignment" and containing terms providing for an assignment of [the plaintiff's] rights under its agreement with Halston to Fiore Group. The emails are copied to [the Father]. |
| Between 21 July 2021 and 5 August 2021 | Mr Bird exchanges emails with Ms Lai regarding the Deed of Assignment. From time to time Ms Lai copies [the Father] into her emails to Mr Bird. The "Deed of Assignment" was never finalised or executed by the parties. |
| 1 September 2021 | Fiore Group's Principal Place of Business is changed to 84B Woolwich Street, West Leederville[.] |
The plaintiff's pleaded case against Fiore Group
The Fiore Direction
One of the factual matters that is in dispute is the plaintiff's allegation that on 15 March 2021 the Father sent an email to the second defendant (Mr Mundell) attaching details of the transfer by the plaintiff to Halston of $850,000, 'for Euro 525 000.00 to Orlando in Dubai' and that the email attached account details for the Maiolo Account.
The plaintiff refers to this as the 'Fiore Direction'.[25]
[25] ASOC [28].
The plaintiff alleges that the Father gave the Fiore Direction acting for and on behalf of the Fiore Group.[26] Paragraph 29 of the ASOC identifies those matters from which the plaintiff invites the Court to infer that that is so.
(a)A.Fiore was a director of Fiore Group as pleaded in paragraph 6C herein.
(a)B.Further or alternatively to particular (a)A herein, particulars (c) to (f) of paragraph 6A above and particulars (a) and (b) herein reveal a pattern of conduct in which Fiore dealt with Halston and Strnadica on behalf of Fiore Group rather than in his (Fiore's) personal capacity.
(a)At a meeting in or about July 2021 between Fiore, Strnadica, and Interstar's Mr Bird at Clancy's City Beach, Strnadica said to Mr Bird in the presence of Fiore words to the effect that Fiore would take an assignment of the Rothschild Agreement, and was meeting with solicitors that day to arrange preparation of the paperwork.
(b)On or about 15 July 2021, solicitors acting for Fiore Group prepared a Deed of Assignment pursuant to which Fiore Group was to take an assignment of the Rothschild Agreement and, on from 15 July 2021, communicated by email with Interstar and its solicitors regarding the Deed of Assignment, from time to time copying such emails to Fiore.
[26] ASOC [29].
I will refer to the assignment referred to in these paragraphs as the 'Proposed Assignment'.
The allegation that the Father was a director of Fiore Group
The plaintiff acknowledges that the Son was the sole registered director and shareholder of Fiore Group. However, it bases its plea in paragraph 6C that the Father was a director on the matters it pleads in paragraph 6A (which it describes as a 'shadow director' plea) and the matters it pleads in paragraph 6B (which it describes as a 'de facto director' plea). Those matters include the relationship between the two of father and son, the principal place of business being the Father's residence even after the Son moved out, the transactions on the Fiore Group's bank account, and the allegation that the Father spent money on a fit out of premises for Fiore Group in circumstances that were alleged to be more consistent with him being in control of Fiore Group.
Involvement pleas
The plaintiff pleads in paragraph 32 of the ASOC that Fiore Group was knowingly involved in the fraudulent misrepresentations of the fifth defendant, alternatively the first and second defendants.
In relation to the fifth defendant, three representations are alleged, namely the Strnadica Program Representation, Strnadica Investment Representation and the Own Money Representation.[27] Each of the three is said to have been made in early March, orally. The first two are said to have also been made at a meeting on 11 March 2021, orally and, by providing the Rothschild Agreement, in writing and by conduct.
[27] ASOC [15] - [17].
In relation to the first and second defendants, there are two representations alleged - the Halston Program Representation and the Halston Investment Representation. Each is said to have been made on 11 March 2021 in writing by the Rothschild Agreement which was signed by Mr Mundell for and on behalf of Halston, and given to the plaintiff at a meeting.
The plaintiff pleads in paragraph 34 of the ASOC, further or alternatively, that Fiore Group was involved in the misleading or deceptive conduct of the fifth defendant, alternatively the first and second defendants, in that the Fiore Group:
(a)aided and abetted the contraventions;
(b)further or alternatively, was knowingly concerned in the contraventions;
(c)further or alternatively, conspired with Mr Strnadica or Halston and Mr Mundell to effect the contraventions.[28]
[28] These are included in the definition of 'involved' in Competition and Consumer Act 2010 (Cth) sch 2, Australian Consumer Law s 2. The definition provides:
A person is involved, in a contravention of a provision of this schedule or in conduct that constitutes such a contravention, if the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced, whether by threats or promises of otherwise, the contravention; or
(c)has been in any way, directly or indirectly, knowing concerned in, or party to, the contravention; or
(d)has conspired with others to effect the contravention.
The plaintiff alleges that the relevant knowledge and involvement is established because
(a)the Father's knowledge is taken to be the knowledge of the Fiore Group (the Father's knowledge is said to be inferred from the allegation that he gave the Fiore Direction and the matters alleged in paragraph 29 of the ASOC in relation to the Proposed Assignment);
(b)further or alternatively, it is to be inferred from the fact of the Fiore Direction and the fact that the Father gave the Fiore Direction for and on behalf of Fiore Group, the pattern of conduct in which Fiore dealt with Halston and Mr Strnadica on behalf of Fiore Group rather than in his (the Father's) personal capacity, and the matters alleged in paragraph 29 of the ASOC in relation to the Proposed Assignment.
Conspiracy plea
The plaintiff pleads in paragraph 36 of the ASOC that Fiore Group and others combined in an 'unlawful means' conspiracy.[29]
[29] ASOC [32], [34] and [36].
The evidence
In seeking the Freezing Orders, the plaintiff relied on the following evidence:
(a)Affidavit of Stanley Noel Bird sworn 19 August 2021;
(b)Affidavit of Nicholas William Kalmund sworn 19 August 2021;
(c)Supplementary Affidavit of Nicholas William Kalmund sworn 19 August 2021;
(d)Affidavit of Nicholas William Kalmund sworn 27 August 2021; and
(e)Further Supplementary Affidavit of Nicholas William Kalmund sworn 27 August 2021.
In defending the current application, the plaintiff continues to rely on these affidavits, and also relies on two additional affidavits of Mr Kalmund, one sworn 22 December 2021 and the other sworn on 7 February 2022 (Kalmund 2022 Affidavit).
In this application, Fiore Group relies on:
1.an affidavit sworn 9 September 2021 by the Son, its sole registered director (Son's September Affidavit);
2.another affidavit sworn by the Son on 13 December 2021 (Son's December Affidavit);
3.its defence and counterclaim filed 13 December 2021 (Fiore Group's Defence and Counterclaim); and
4.materials filed by the Father in this action, being paragraphs 3 and 4 of the defence of the third defendant dated 21 September 2021 (the Father's Defence), and the affidavit of a Mr Simon Caruso filed 19 October 2021 (Caruso Affidavit).
Good arguable case
In Fiore Group's written submissions, it submitted that the plaintiff did not have a good arguable case due to various alleged deficiencies in the plaintiff's pleading. I dealt with the alleged deficiencies in my judgment on the strike out application. That judgment should be read with these reasons. However, in short, I largely rejected Fiore Group's assertions.
I did find some parts of the pleading to be flawed. I considered that the plaintiff ought not merely plead that Fiore Group was 'knowingly involved' in the fraudulent representations of others or 'involved' in the misleading representations of others. I considered it also needed to plead the elements. I also considered that, in the allegation of the unlawful means conspiracy, the plaintiff should separately identify what matters were said to support each element. None of my concerns related to whether, if properly pleaded, the matters relied upon would support the allegations and the claim as a whole.
In its oral submissions, Fiore Group made the following points.
The Son's evidence
First, Fiore Group addressed the criticisms that had been made by the plaintiff of the affidavits sworn by the Son in support of this application.
In its written submissions, the plaintiff pointed out that the Son's September Affidavit incorrectly stated in paragraph 14:
At the date of swearing this Affidavit and in particular since 1 March 2021, the Fourth Defendant [Fiore Group] has not received any moneys directly or indirectly from the Plaintiff, the First Defendant, the Second Defendant, the Third Defendant [Father] or the Fifth Defendant.
In fact, Fiore Group had received amounts of $18,000 and $50,000 from the first defendant Halston on 8 December 2019 and 18 May 2020 respectively.[30] Further, Fiore Group had received three deposits totalling $55,000 between 31 May 2021 and 21 June 2021 from companies controlled by the fifth defendant (Mr Strnadica).[31]
[30] Son's December Affidavit [7] and [8].
[31] Son's December Affidavit [12].
The incorrect statement was not corrected until the Son's December Affidavit was filed, which was after the plaintiff's solicitors wrote a letter dated 27 October 2021 referring to those transactions.[32]
[32] Kalmund 2022 Affidavit [4]; 'NWK-46'.
The Son asserts in his December Affidavit, by way of explaining the incorrect statement in his September Affidavit:[33]
When completing the September Affidavit, I was focused on events of 15 March 2021 and now wish to clarify matters referred to in the September Affidavit.
[33] Son's December Affidavit [5].
The Son asserts that, at the time of the deposits from Halston, he was informed by his Father that those moneys were for his Father's benefit to assist him (the Father) to deal with court proceedings he was involved with at that time. The Son asserts that he was not told that that money was from Halston.[34]
[34] Son's December Affidavit [8].
In relation to the deposits by companies controlled by Mr Strnadica, the Son further asserts that he was informed by the Father (this time, he does not say when) that he had arranged for that money to be deposited and it was for the Father's benefit. He asserts that he did not know that that money came from Mr Strnadica.[35]
[35] Son's December Affidavit [12].
The plaintiff also notes that, in paragraph 13 of his December Affidavit, the Son acknowledged that on 12 March 2021 he had caused a payment of $70,070 to be made from Fiore Group's bank account on behalf of (and, by necessary implication, on the instruction of) the Father. The plaintiff says that it is significant that this was only three days before the alleged Fiore Direction on 15 March 2021, which the plaintiff alleges the Father gave for and on behalf of Fiore Group.
The plaintiff submits that, in light of the way in which the evidence has emerged, there is reason to be cautious before accepting the Son's untested affidavit evidence.
Fiore Group submitted that the error in the Son's September Affidavit was an innocent mistake. It referred to the Son's December Affidavit in which the Son said he did not know that the deposits coming into Fiore Group's bank accounts were from Halston and companies controlled by Mr Strnadica.
For the purposes of this application, I will assume that it was an innocent mistake. Nevertheless, the Son did not depose in his September Affidavit that he was not aware of any deposits from other defendants into Fiore Group's bank account. He swore that Fiore Group 'has not received any moneys directly or indirectly from the Plaintiff, [Halston], the Second Defendant, the [Father] or [Mr Strnadica]'.[36]
[36] Son's September Affidavit [14].
I further note that the Son does not expressly say he was not aware that the payment he made to Mr Strnadica was to Mr Strnadica. Rather, he says:[37]
On 12 March 2021, I caused a payment to be made from the Fiore Group bank account, for an invoice of $70,070 (reference no 41290690). The payee was BSB ***-*99 Account No. *******50. This was an invoice I paid on behalf of my father. I was not provided any additional information as to the nature of the invoice and I was not involved in any discussions between [Mr] Strnadica and my father. I did not have any contact with [Mr] Strnadica in relation to that payment.
[37] Son's December Affidavit [13].
The Son's September Affidavit was false in a material respect. It was a short affidavit with 15 substantive paragraphs. In paragraph 14, the Son swore that, at the date of swearing that affidavit and in particular since 1 March 2021, Fiore Group had not received any moneys directly or indirectly from the plaintiff, Halston, the second defendant, the Father, or Mr Strnadica. This was false. There is every reason to be cautious before accepting his other evidence.
Further, there are aspects of his evidence, taken as a whole, which actually support the plaintiff's case that the Father was a director of Fiore Group.
First, the effect of the Son's evidence is that, when he swore his affidavit in September 2021, he was not aware of Fiore Group's receipt of deposits from the other defendants.
Second, the effect of the Son's evidence is that he permitted the Father to use Fiore Group's bank account without needing to be told where the money was coming from.
Third, the Son admits making a payment from Fiore Group's bank account on behalf of (and by implication on the instruction of) the Father, and did so only three days before the Father allegedly gave the Fiore Direction.
Bank account evidence
Second, Fiore Group submitted that there was insufficient evidence to support the plaintiff's allegation in paragraph 6A of the ASOC. That allegation is that the Son, as a director of Fiore Group, was accustomed to act in accordance with the instructions or wishes of his Father.
Fiore Group drew my attention to an annexure to the Son's December affidavit.[38] Annexed to that affidavit are two pages of Fiore Group's bank account statements. The first page appears to cover transactions from 12 May 2020 to 30 June 2020. The second page appears to cover transactions from 1 December 2019 to 1 January 2020. Each page has been redacted so as to only reveal the dates on which an entry was apparently made in the bank account statement, with the exception of a single entry (on each page) in which the transaction description and amount has not been redacted. The two unredacted entries were the payments Halston made on 8 December 2019 and 18 May 2020.
[38] Son's December Affidavit, annexure JF2.
Fiore Group submitted that, as each page contained numerous other date entries, this evidence showed that only two of many transactions in the periods covered by the annexure related to a transaction that was connected to the Father.
Fiore Group further noted that the agreed chronology referred to five payments into or out of its bank account that were connected to the Father over a two year period. Fiore Group submitted that this showed that these were the only payments into or out of its bank account that were connected to the Father over a two year period.
Fiore Group submitted that, therefore, the plaintiff did not have a good arguable case in support of paragraph 6A of the ASOC.
The main difficulty with that submission is that Fiore Group has not provided to the plaintiff, or to the court, unredacted copies of its bank statements. All that has been produced are two pages that have been heavily redacted. There is simply no evidential basis upon which I could conclude that each of the redacted transactions was unconnected to the Father.
There is equally no evidence upon which I could conclude there were only five payments connected to the Father over a two year period.
In addition, even if the evidence did indicate that there were no more than those five, this would not lead, in my view, to a conclusion that the plaintiff could not establish its pleading in paragraph 6A. Whether it can establish the allegation will depend upon all of the evidence. The plaintiff does not rely solely on the Father's apparent use of the Fiore Group's bank account.
Changes in circumstances
The third point made by Fiore Group in its oral submissions was its assertion that there had been significant changes in circumstances since the Freezing Orders were first made.
In this respect, Fiore Group relied on four things:
1.the Caruso Affidavit;
2.the Father's Defence;
3.the Fiore Group's Defence and Counterclaim; and
4.the ASOC.
The Caruso Affidavit
In the Caruso Affidavit, Mr Caruso describes himself as a 'Client Technology Director and Chief Technologist'.
Mr Caruso was provided with what was said to be a copy of the email in which the Fiore Direction was contained. Mr Caruso concluded that the email had been altered or modified. He also said he examined the Father's outbox to see if that email had ever been sent from his email service. Mr Caruso says that there was no trace of that email ever being sent from the Father's email service.
Fiore Group submitted that the plaintiff had not sought to produce any expert evidence to establish the authenticity of the email. It submitted I should give weight to this failure.
It appears that Mr Caruso was given a hard copy of the alleged email. The Kalmund 2022 Affidavit indicates that on 30 August 2021 the plaintiff's solicitors received an electronic copy of the alleged email. Shortly after receiving the Caruso Affidavit, the plaintiff's solicitors wrote to Fiore Group expressing concerns in relation to the Caruso Affidavit.
Included among the concerns was the plaintiff's assertion that Mr Caruso appeared to have a pre-existing relationship with the defendants to this action and the subject matter of the action. The plaintiff's solicitors said that they were enclosing a bank statement for one of Mr Strnadica's entities which apparently showed that, on 29 June 2021, Mr Caruso paid $25,000 to that entity. In addition, the plaintiff's solicitors pointed out that Mr Caruso's evidence was untested.
The plaintiff's solicitors went on to note that they now had a native version of the alleged email and said they were providing it to Fiore Group with the letter. The plaintiff's solicitors invited Fiore Group to make its own inquiries in relation to the authenticity of the email. The letter continued '[i]f your client intends to rely upon the affidavit of Mr Caruso in support of its application for summary judgement, please let us know, so that our client can file evidence regarding the authenticity of the email on or before 5 November 2021'.
It seems that no response was made to that invitation. In addition, in its written submissions in support of this application to discharge the freezing orders, Fiore Group gave no indication that it intended to rely on the Caruso Affidavit in relation to whether or not there was a good arguable case against it. Its written submissions on that topic were confined to its attack on the pleadings. It only raised the question of the Caruso Affidavit in the context of its submission that there was not a real risk of dissipation.
In its oral reply in this hearing, Fiore Group said that its written submissions needed to be read as a whole. It referred to paragraph 32(e) of its written submissions, in which it had said that the plaintiff's claim against it rested upon the alleged Fiore Direction, noting that 'there is a serious question as to the authenticity of the email'.
The chapeau to paragraph 32 is '[t]he Fourth Defendant submits that there is a lack of the element of 'danger' or any 'real risk' of dissipation of assets by the Fourth Defendant for the following reasons'.
In my view, having regard to the written submissions as a whole, the plaintiff would not have been on notice that Fiore Group intended to allege that there was no good arguable case because of the Caruso Affidavit.
In these circumstances, I would not give any weight to the plaintiff's failure to produce any expert evidence to establish the authenticity of the email.
Further, I give little weight to the Caruso Affidavit itself, at this stage.
First, Mr Caruso appears to have examined a hard copy of what was alleged to be an electronic communication.
Second, Mr Caruso's evidence is untested.
Third, it appears that Mr Caruso may not be an independent expert.
Fiore Group's Defence and Counterclaim
I accept that Fiore Group has filed a defence denying the plaintiff's claim. However, a defence is not evidence.
Further, the Defence primarily consists of bald denials of the allegations. Apart from pleading that it 'relies' upon parts of the Father's Defence and the Caruso Affidavit, the only positive pleading is a statement that the Father did not have the authority to act on its behalf.
In the Counterclaim, Fiore Group claims that it entered into a settlement agreement with the plaintiff in relation to this action. It asserts that the settlement agreement included terms that the plaintiff would keep the terms of settlement confidential and that either party would have the right to terminate the settlement if that term was breached. It further pleads that it was a term of the agreement that, if the settlement was terminated on the basis of a breach of confidentiality, the plaintiff would immediately dismiss the action against it and the Father.
Fiore Group pleads that the plaintiff breached the confidentiality term. In support of this plea, it particularises a statutory declaration of a Mr Caffey, a West Australian newspaper article, and materials said to have been produced by Mr Caffey under subpoena.
It pleads that it then terminated the settlement agreement and demanded that the plaintiff dismiss the proceedings. It pleads that the plaintiff failed to do so. It claims that the pleadings should therefore be dismissed.
The only material approaching evidence in support of these allegations is Mr Caffey's statutory declaration - it is attached to the Son's December affidavit. In the statutory declaration, Mr Caffey sets out what he says Mr Mundell said to him over the telephone on 18 November 2021. Mr Caffey said that he wanted to speak to Mr Mundell about the status of Mr Caffey's investment in Halston of $105,000.
It is unusual for evidence to be adduced in this fashion. This is an affidavit of the Son annexing the statutory declaration of another person who sets out what he says he was told by yet another person. Furthermore, in his affidavit, the Son does not say that he believed to be true what was contained in the statutory declaration.
In addition, the statutory declaration itself makes no mention of any terms of the alleged agreement other than referring to sums and timing of payments. It makes no mention of any disclosure of the settlement by the plaintiff. The 'high' point, from the Son's perspective, is that Mr Mundell is alleged to have said that the 'press was being used to pressure people to settle'.
In its oral reply, Fiore Group indicated that the statutory declaration was not put forward for its truth but simply as the document referred to in the Defence and Counterclaim.
In my view, Fiore Group's Defence and Counterclaim, and the statutory declaration, are of no weight in my assessment of whether the plaintiff has a good arguable case. At most, what can be said is that they do not provide further support for the plaintiff's case.
The Father's Defence
I accept that the Father's Defence shows that the Father's case will not implicate Fiore Group. The Father denies acting on behalf of Fiore Group and denies making the Fiore Direction. Again, this is not evidence. In my view, it is of little weight. Again, at most, what can be said is that it does not provide further support for the plaintiff's case.
The Amended Statement of Claim
Fiore Group submits that the particulars do not support the plea in paragraph 6A of the ASOC. In my judgment on the strike out application, I found that they do.
Fiore Group also alleges that the case in relation to paragraph 6A is weak. This is not the occasion to fully evaluate the strength of the case, nor could I do so. I have only limited evidence at this point. However, based on the evidence that I do have, I do not accept that the case is weak.
In my judgment on the strike out application, I explained my conclusions in relation to the pleading. Those observations apply equally here.
Further, it is an agreed fact that on 12 March 2021, shortly after the alleged meetings at Clancy's City Beach, and three days before the alleged Fiore Direction, the Son paid money out of Fiore Group's bank account to another account for his Father's benefit. That account was an account of Mr Strnadica.
It is an agreed fact that money was paid into Fiore Group's bank account, on two occasions, in December 2019 and May 2020. Although the depositor was not disclosed at the time of the transactions, it was Halston.
It is an agreed fact that companies of which Mr Strnadica is the sole director and shareholder paid money into Fiore Group's bank account on three occasions, in May and June 2021.
It is an agreed fact that the Father told the Son that these five deposits were for the Father's benefit.
Having regard to these objective and agreed facts, I would not characterise the plaintiff's case as weak. More relevantly, I am not satisfied that the plaintiff does not have a good arguable case.
Conduct of the Son in complying with court orders
Fiore Group also pointed out that the Son had complied with all of the orders made in these proceedings to date.
If this was intended to be a point in support of there not being a good arguable case, I do not consider it to be relevant to that issue.
Conclusion on good arguable case
For these reasons, I am not satisfied that the plaintiff does not have a good arguable case.
Real risk of dissipation
As noted earlier, the danger that the prospective judgment will be wholly or partly unsatisfied may be inferred from the nature of the case. If there is a good arguable case of fraud or dishonesty, then the court may infer a risk of dissipation of assets in the absence of a freezing order.
The initial evidence filed by the plaintiff was sufficient to establish a good arguable case of fraud and dishonesty. I inferred that there was a risk of dissipation of assets in the absence of a freezing order.
In my view, the evidence filed since then, taken as a whole, adds further weight to that inference.
I earlier discussed Fiore Group's Defence and Counterclaim, the Father's Defence, the Caruso Affidavit and the statutory declaration. For similar reasons, I do not consider any of these matters to be of significant weight in assessing the risk of dissipation.
I also discussed the Son's evidence. For the reasons I gave then, I consider his evidence as a whole adds weight to the plaintiff's case, and adds weight to the inference.
It is now agreed that Fiore Group received money from Halston and Mr Strnadica which the Son asserts he was told was for the Father's benefit.
In addition, it is agreed that the Son used Fiore Group funds to make a payment on behalf of his Father three days before the alleged Fiore Direction. This payment was to Mr Strnadica.
I accept that Fiore Group has complied with court orders to date. I further accept that the plaintiff does not allege that Fiore Group received any of the plaintiff's money. I also note that the plaintiff does not allege that the Son was himself involved in the conduct it pleads.
Nevertheless, I continue to be of the view that there is a very real risk that, if the Freezing Orders were discharged, the prospective judgment would be wholly or partly unsatisfied by the dissipation of the assets of Fiore Group. I am satisfied that there is a good arguable case of fraud. I infer from this, and from the evidence currently available to me, that there is this risk.
Discretion
Further, my view has not changed as to the appropriate balance between the nature and effect of the Freezing Orders on Fiore Group with the plaintiff's need for the orders to avoid frustrating enforcement of a prospective judgment. I remain satisfied that allowing the Freezing Orders to continue best serves the interests of justice.
Conclusion
I would dismiss Fiore Group's application to set aside the Freezing Orders.
I will hear from the parties as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KH
Associate to the Honourable Justice Archer
31 MARCH 2022
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