Re DCA Enterprises Pty Ltd

[2023] NSWSC 11

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of DCA Enterprises Pty Ltd [2023] NSWSC 11

Hearing dates:

12 October 2022; 14 October 2022; 18-21 October 2022, 29 November 2022, 6-9, 14-15 December 2022

Date of orders:

23 January 2023

Decision date:

23 January 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in short minutes of order to give effect to judgment within 14 days.

Catchwords:

CORPORATIONS – application for rectification of records maintained by ASIC – where registers maintained by ASIC evidences change to shareholders and officeholders – where no corporate step undertaken to effect such changes – whether court should order rectification of registers maintained by ASIC.

DECEIT — Where representations made in connection with acquisition of interest in company or sporting rights – Where unclear whether interest was to be acquired by issue of shares by company or sale of shares by shareholders – Where documents were fabricated and purported to be signed by non-existent persons - whether order for exemplary damages should be made

MISLEADING OR DECEPTIVE CONDUCT — Where representations made in connection with acquisition of interest in company or sporting rights – Where unclear whether interest was to be acquired by issue of shares by company or sale of shares by shareholders – Whether the representations were misleading and deceptive and causative of loss suffered by the Defendants/Cross-Claimants – whether knowing involvement established on the part of several Cross-Defendants.

FALSE IMPRISONMENT – Whether circumstances of meeting gave rise to claim in false imprisonment.

Legislation Cited:

- Australian Consumer Law, s 18

- Corporations Act 2001 (Cth), ss 201G, 205B, 237, 1071B, 1308, 1322, 1324

- Evidence Act 1995 (NSW), s 140

Cases Cited:

- Alesco Corporation Ltd v Te Maari [2015] NSWSC 469

- Armagas Ltd v Mundogas SA [1985] 1 Ll R 1

- Australian Securities and Investments Commission (ASIC) v Activesuper Pty Ltd (in liq) (2015) 105 ACSR 116; [2015] FCA 342

- Australian Securities and Investments Commission (ASIC) v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; 23 ACLC 929; [2005] NSWSC 267

- Australian Securities and Investments Commission (ASIC) v PFS Business Development Group Pty Ltd (2006) 57 ACSR 553; [2006] VSC 192

- Balagiannis v Balagiannis [2022] NSWCA 18

- Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58

- Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508

- Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

- Changizi v Rizaie [2021] NSWSC 613

- Chidiac v Bhatt [2014] NSWSC 1253

- Dale v Karp [2021] NSWSC 969

- El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717

- ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24

- Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81

- Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313

- Galati v Deans [2021] NSWSC 1094

- Gambotto v WCP Ltd (1995) 182 CLR 432; [1995] HCA 12

- Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298

- Hill v James [2004] NSWSC 55

- Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810

- James v Hill [2004] NSWCA 301

- Janssen-Cilag Pty Ltd v Pfizer Pty Ltd

(1992) 37 FCR 526; (1992) 109 ALR 638

- John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

- Lewis v Australian Capital Territory (2020) 271 CLR 192; [2020] HCA 26

- Magill v Magill (2006) 226 CLR 551; [2006] HCA 51

- Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; 205 ALR 402; [2003] FCAFC 289

- Menzies v Perkins [2000] NSWSC 40

- Musca v Astie Corporation Pty Ltd (1988) 80 ALR 251

- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449

- No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345

- Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705

- Re Centura Global Holdings Pty Ltd (2016) 111 ACSR 185; [2016] NSWSC 62

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re DJG Equities Pty Ltd [2014] NSWSC 194

- Re McDonough Management Pty Ltd (2019) 139 ACSR 447

- Re Mediation & Online Dispute Resolution Operating Network Pty Ltd [2022] NSWSC 5

- Re Reserve Hotels Pty Ltd [2021] NSWSC 376

- Re Seabay Kitchen Pty Ltd [2019] NSWSC 790

- Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313

- State of NSW v Ibbett (2006) 229 CLR 638; [2006] HCA 57

- Stav Investments Pty Ltd v Taylor [2022] NSWSC 208

- Stuart v Rabobank Australia Ltd [2021] FCA 1388

- Swiss Re International SE v Simpson (2018) 354 ALR 607

- Sze Tu v Lowe (2014) 89 NSWLR 317

- Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118

- Varma v Varma [2010] NSWSC 786

- Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963

- Wambo Coal Pty Ltd v Ariff & Anor (2007) 63 ACSR 429; [2007] NSWSC 589

- Watson v Foxman (1995) 49 NSWLR 315

- Yang v Zhang [2022] FCA 697

- Yorke v Lucas (1985) 158 CLR 66; [1985] HCA 65

Category:

Principal judgment

Parties:

Dylan Charles Azzopardi (First Plaintiff/First Cross-Defendant)
Justin Joseph Azzopardi (Second Plaintiff/Second Cross-Defendant)
Karla Patricia Pichardo (Third Plaintiff/Third Cross-Defendant)
Dominic Gerardo Galati (First Defendant/First Cross-Claimant)
Alberto Mariani (Second Defendant)
Acell Holdings Pty Ltd (Third Defendant)
Kerry Anne Hyland (Fourth Defendant)
Australian Securities and Investments Commission (Fifth Defendant)
DCA Sydney Enterprises Pty Ltd (Sixth Defendant/Second Cross-Claimant)
Care A2 Plus Pty Ltd (Seventh Defendant/Third Cross-Claimant)
Care A2 Australia Pty Ltd (Eighth Defendant/Fourth Cross-Claimant)
Raymond Nehme (also known as Raymond Younan) (Ninth Defendant)
Chloe Azzopardi (Fourth Cross-Defendant)
Mary Azzopardi (Fifth Cross-Defendant)
Joseph Azzopardi (Sixth Cross-Defendant)

Representation:

Counsel:
A J McQuillen (Plaintiffs/Cross-Defendants)
A Butt (Defendants (except ASIC)/Cross-Claimants)

Solicitors:
Metri Legal (Plaintiffs/Cross-Defendants)
Nelson McKinnon (Defendants (except ASIC)/Cross-Claimants)

File Number(s):

2021/278723

Judgment

Nature of the proceedings

1. By Amended Originating Process filed on 15 November 2021 the Plaintiffs, Mr Dylan Azzopardi (to whom I will refer, without disrespect, as “DA”) and others sought a range of relief against the Defendants, Mr Dominic Galati (to whom I will refer, without disrespect, as “DG”) and others. The relief sought was somewhat narrowed when the Plaintiffs failed in an application to bring derivative proceedings on behalf of the Sixth Defendant, DCA Sydney Enterprises Pty Ltd (“DCA”), and further narrowed when other aspects of the relief sought in Amended Originating Process (“AOP”) were struck out, including because the Plaintiffs did not seek standing to seek the relief claimed.

2. By their Amended Statement of Cross-Claim filed on 26 April 2022, the Cross-Claimants in turn sought equitable compensation, an account of profits or statutory compensation against certain Cross-Defendants and a declaration that any contract made between any of the Cross-Claimants and Cross-Defendants is void. The scope of that Cross-Claim was also somewhat narrowed by reason of the Cross-Claimants’ lack of standing to seek parts of the relief claimed.

3. DA brings a claim of false imprisonment against several Defendants, and the Cross-Claimants make several allegations of fraud and bring a claim of intentional deceit against the Cross-Defendants. In determining these allegations, I have regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and its equivalent under s 140 of the Evidence Act 1995 (NSW). 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 sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449–450; [1992] HCA 66, the plurality observed that:

“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.” [citations omitted]

4. Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in the Plaintiffs’ claim on that basis.

Affidavit evidence

5. Both parties read affidavit evidence which included evidence of oral conversations. I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318–319; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41]; Varma v Varma [2010] NSWSC 786 at [424]–[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10] (“Colorado”).

6. The principles applicable to assessing claims for representations in oral form were also helpfully summarised by Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [87] as follows:

“The principal conduct of the defendants that [the plaintiff] alleges was misleading or deceptive was the speaking of words in the course of a series of conversations. Special considerations apply when assessing alleged misleading and deceptive conduct in such a context. It is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in proved circumstances: Watson v Foxman (1995) 49 NSWLR 315 at 318 per McLelland CJ in Eq In assessing whether spoken words were misleading the Court may have to examine relatively subtle nuances flowing from the use of one word, a phrase or a grammatical construction rather than another or the presence or absence of some qualifying word, phrase or condition: Watson v Foxman (1995) 49 NSWLR 315 at 31. The fallibility of human memory and the overlaying of memory with perceptions of self-interest leading to sub conscious reconstruction are all hazards of ordinary human experience to which a Court must be alert in assessing whether particular spoken words are misleading or deceptive: Watson v Foxman (1995) 49 NSWLR 315 at 319. Ultimately each element of the cause of action must be proved to the reasonable satisfaction of the Court which means that the Court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not obtained or established independently of the nature and consequences of the fact or facts to be proved”, including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.”

7. I also note the matters relevant to the assessment of spoken words in the context of a contractual dispute, which were identified by Hammerschlag J (as his Honour was then) in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [95]:

“Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.”

8. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[29]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” (emphasis added)

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

9. I have here drawn on my summary of the applicable principles in Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 (“Atlas”) at [5] and No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345 at [53]ff.

10. The Plaintiffs rely on DA’s affidavit dated 28 September 2021 (“DA1”) and I refer to aspects of his evidence in that affidavit in reaching findings of fact below. The Plaintiffs also rely on DA’s second affidavit dated 4 March 2022 (“DA2”), significant parts of which were not admissible and were not admitted. By a third affidavit dated 23 August 2022 (“DA3”), significant parts of which were also not admissible and were not admitted, DA responded to evidence of other witnesses led in the proceedings. DA was cross-examined at substantial length. DA was an unconvincing witness, who was on occasion prepared to concede matters adverse to his or the Plaintiffs’ interests, but on other occasions denied matters despite the clear evidence of them.

11. The Plaintiffs also rely on the affidavit dated 4 March 2022 (“JA1”) of DA’s brother, Mr Justin Azzopardi (to whom I will refer, without disrespect, as “JA”). Some parts of JA’s affidavit were inadmissible and were not admitted. JA was also cross-examined at some length and was a somewhat argumentative witness. I address other events to which he refers in setting out my factual findings below. JA’s cross-examination was undermined by the approach taken by Mr Butt (who appeared for the Defendants other than the Australian Securities and Investments Commission (“ASIC”) and the Cross-Claimants) of putting to JA that “you” took a particular step, where the reference to “you” was not a reference to JA, but a reference to DCA or sometimes to DA rather than JA, and there was no basis to suggest that JA had himself undertaken that step. Mr Butt continued that approach after JA had rightly pointed to the confusion which it was causing him, and after I had requested that he refer to “the company” rather than to “you” when he intended to refer to DCA rather than to JA (see, for example, T347, 355, 358). JA’s evidence in cross-examination was that he understood the underlying arrangement between the parties to be an investment by DG in DCA, involving the acquisition of DCA by DG, presumably by the issue of a majority of its shares or the acquisition of a majority of its shares from existing shareholders, and that DCA was then free to apply the monies received to its ordinary expenditures (T352-353). I will note the uncertainty as to the substance of that arrangement below. JA’s evidence in cross-examination was also that he had no knowledge of a purported Services Agreement (“Purported AHA Agreement”) between DCA and the Australian Hotels Association (NSW) (“AHA (NSW)”) which purported to provide that AHA (NSW) would pay $30m to DCA (Ex J1, 1733, 1746), although he added the comment that AHA (NSW) would not pay DCA (T362) and he maintained his denial of having seen that agreement (T365). JA’s evidence in cross-examination was initially that he had also not seen financial projections provided by DA to DC and BM, then that “[t]here's been so many documents but I can't recall” and then, equivocally, that he had “seen it probably” (T366-367).

12. The Plaintiffs also rely on four affidavits dated 4 March 2022 (“KP1”), 15 August 2022, 5 October 2022 and 21 October 2022 (“KP4”) of Ms Karla Pichardo (to whom I will refer, without disrespect, as “KP”) who is an accountant who 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. By her first affidavit, KP refers to her shareholding in DCA at January 2021, to her appointment to that role and to the preparation of a company register for DCA including its constitution, documents lodged with ASIC and share certificates in March 2020 and the preparation of instruments of transfer of shares from June 2020, when there was a sale or acquisition of shares by shareholders in DCA. She refers to subsequent steps in respect of invoices issued to Care A2 Plus Pty Ltd (“Care A2 Plus”) and payments made by Care A2 Plus, on 11 May 2021, 18 May 2021 and 9 June 2021, and to information which she provided to the Second Defendant, Mr Alberto (or “Berti”) Mariani (to whom I will refer, without disrespect, as “BM”) on 11 June 2021 which disclosed the ASIC corporate key for DCA. I find that access to that corporate key allowed DG and his associates to make several changes to ASIC’s share and director records in respect of DCA, to which I refer below, which had not been authorised by any directors’ meeting or shareholder meeting of DCA’s then director, DA, or its shareholders. KP also refers to a further payment of $100,000 made by Care A2 Australia Pty Ltd (“Care A2 Australia”) on 30 June 2021. I will refer to her evidence as to changes in the officers and shareholdings in DCA in dealing with that question below.

9. By her second affidavit dated 15 August 2022, KP refers to an agreement to pay her salary and to arrangements in respect of the transfer of shares in DCA, in evidence that was largely not admissible and was not admitted. By her third affidavit dated 5 October 2022, KP responds to the affidavit dated 1 September 2022 of Ms Kerrie Hyland (also known as Bhavani Ma, to whom I will refer, without disrespect as “KH”). By her fourth affidavit dated 21 October 2022, KP addressed issues in respect of legal advice provided by a Swiss lawyer, Mr Boris Vittoz, and purportedly provided by a Mr Boris “Vitoz” to which I refer below. KP’s fourth affidavit established that DCA was dealing with Mr Vittoz, but did not provide any support for the proposition that the advice purportedly provided by Mr Boris “Vitoz” was genuine.

10. KP’s evidence in cross-examination was that she was not involved in contracts, negotiations or sport arrangements involving DCA but only with financial matters; she knew that DA, DG and BM were in negotiations, but could not confirm the number of meetings or which meetings JA had attended and she had not attended those meetings; and she had seen a budget prepared by Mr Colin Kleyweg (to whom I refer, without disrespect, as “CK”) as to expenditure in relation to the 2021 Rugby League World Cup (“RLWC”) (T400), which (as I note below) was consistent with an overall expenditure of $9m to broadcast the RLWC, including expenditures in addition to the cost of acquiring the rights to do so from the licensing entity, RDA Sports Media Rights (“RDA”). Her evidence was that she did not know that DCA or DA or JA were representing to DG or BM in April or May 2021 that the rights fee to acquire the RLWC rights was $9m (T409). It was put to her in cross-examination that she should have known that sort of matter as chief financial officer of DCA; that proposition has the difficulties, first, that that title overstated her role in a small proprietary company; second, that any matters supporting an allegation of constructive knowledge on her part were not pleaded by the Defendants/Cross-Claimants; and, third, constructive knowledge is not sufficient to support an allegation for knowing involvement in misleading and deceptive conduct in any event.

11. KP’s evidence was that she did not have any knowledge of a purported “Sub-License Agreement” dated 27 April 2021 (to which I will refer as the “False Sub-Licence Agreement”, its falsity being common ground between the parties) and initially that she did not know when the real agreement dated 24 May 2021 between RDA and DCA (“May RDA Agreement”) was signed and did not participate in the relevant negotiations (T414). She accepted that she received an invoice from RDA after 24 May 2021 and DA directed her to send several emails to RDA after that date (T415-416). She subsequently accepted that she knew of the existence of the False Sub-Licence Agreement (Ex J1, 1209) as at 7 May 2021, because DA directed her to send it to BM (T426), although that does not in itself establish that she knew of its falsity. There was a potential inconsistency between her evidence in that respect and her evidence on the previous day of her cross-examination as to when she became aware of that document; but the position is complicated by the implication in some of Mr Butt’s questions that the document was “false” and her denial that she knew of the falsity of that document. In fact, KP does not appear to have sent the document on 7 May 2021, although DA gave evidence that he directed her to send it, but DA instead sent that document. It is not necessary to determine any dispute as to that matter in order to determine the proceedings.

12. KP accepted in cross-examination (T470ff) that information that she had provided to RDA relating to remittals made to it from early June 2022 was false; however, that information was not communicated to the Cross-Claimants and I will find below that it was not causative of any loss which they suffered. KP also sent a remittance advice to KH in late June 2021 which wrongly recorded a payment to RDA which had not been made. The Cross-Claimants did not plead, or establish, any case that the provision of that document, was causative of the loss they suffered in respect of the last payment made by Care A2 Plus and Care A2 Australia (“Care A2 companies”) on 30 June 2021, still less in respect of prior payments.

13. KP had not interacted with DCA’s legal advisers, whether Mr Vittoz or the purported Mr “Vitoz” and she, understandably, gave evidence that she had paid little attention to any difference of spelling in any correspondence from Mr Vittoz and Mr “Vitoz” (T479). She was copied on correspondence relating to negotiations with AHA (NSW) directed to the possibility of DCA’s sponsorship of AHA (NSW) which would have involved a payment by DCA to the AHA (NSW) rather than the reverse (T479ff). She had not seen the document provided by DA to BM concerning potential profits generated by a deal relating to the RLWC (T480-481, Ex J1, 1282, 1289). Her evidence, which I accept, was that, while that document should have been brought to her attention, it was not (T481). KP accepted, however, that she had sent two financial projections to BM which contemplated earnings from pubs and clubs in May 2021, incorporating information that was provided to her by DA (T485-486).

14. The Fourth Cross-Defendant, Ms Chloe Azzopardi (“CA”) gave oral evidence, in response to a subpoena issued by the Cross-Claimants, by audio-visual link in difficult circumstances, while seeking to supervise an active child at the same time of giving evidence. Her evidence was that she had executed a loan agreement dated 20 October 2020 between Flick TV Investments Pty Ltd (“Flick TV”) as lender and DCA as borrower (“Flick TV Loan Agreement”), but had not executed other documents to which her signature had purportedly been applied. Her evidence was that, as the mother of three young children, she had little knowledge of or involvement in the DCA business. Notwithstanding strident criticisms of her credit made by Mr Butt, it seemed to me that CA was a credible witness and I accept her denial that she executed the documents to which her name had been applied, other than the Flick TV Loan Agreement. That denial is, of course, consistent with DA’s acceptance that he had applied her signature to those other documents without her authority.

15. The Defendants and Cross-Claimants read DG’s affidavits dated 28 February 2022 (“DG1”) and 1 September 2022 (“DG2”). By his first affidavit dated 28 February 2022, DG referred to his experience in sports and sports media, to his noticing an article about “Sportsflick” acquiring certain rights to stream sports in March 2021, and to his and BM’s meeting with DA on 27 April 2021 and to further meetings on 7 and 11 May 2021. I will refer to those meetings in setting out my factual finding below. DG also addressed payments made by the Care A2 companies and an email sent on 13 May 2021 in relation to the terms of the acquisition of an interest in DCA, which I address in my factual findings below. DG also addressed subsequent conversations and dealings with DA, including a conversation on 18 May 2021 (DG1 [33]) where he claims to have again made clear that payment would be made over the “next three months” and to have suggested that DA negotiate time for payment with RDA. He also refers to a further conversation concerning payment of a claimed amount of $9m in relation to the RLWC with DG on 7 June 2021 (DG1 [35]) and to events at the meeting on 3 July 2021 (DG1 [45]ff) which I address in reaching findings of fact below. By his second affidavit dated 1 September 2022, DG responded to DA’s second affidavit dated 4 March 2022 and his third affidavit dated 23 August 2022, to KP’s affidavit dated 4 March 2022, and to JA’s affidavit dated 4 March 2022, taking issue with substantial parts of those affidavits.

16. DG was cross-examined at some length and often did not address the questions he was asked in a direct manner, but offered commentary or explanation in relation to the general territory of a question rather than directly responding to it, and his recollection of some matters was imperfect. He plainly had significant expertise and experience in respect of the acquisition of broadcasting rights. He was cross-examined at some length as to whether he personally intended to be a director of DCA, and I accept his evidence that, in referring to being a director of DCA in discussions with DA, he intended to leave open the possibility that he would cause another person to be appointed, in effect, as his or the Care A2’s nominee director to DCA. He frankly accepted that he committed to pay $9m in respect of the proposed transaction at the first meeting, intending to source payments from the Care A2 companies or from an overseas entity, Acell International. His evidence, consistent with his affidavits, was that that amount would be payable in instalments over a period of time and he emphasised the need for documentation in relation to the acquisition of the sporting rights (T669ff). It seemed to me that DG was generally a credible witness, when dealing with the circumstances of his dealings with DCA and DA, but was less open and his evidence was less convincing in relation to the events that occurred at the 3 July 2021 meeting which I address below.

17. The Defendants and Cross-Claimants read BM’s four affidavits dated 25 February 2022 (“BM1”), 31 August 2022 (“BM2”), 2 September 2022 and 6 October 2022. By his first affidavit, BM referred to his background in soccer and pay television, to his approach to DCA in late April 2021 and to subsequent meetings with DCA, which I address in setting out my findings of fact below, and to the steps taken to progress the transaction, including the several payments made to the Care A2 companies. By his second affidavit dated 31 August 2022, BM responded to DA’s second affidavit of 4 March 2022 and his third affidavit dated 23 August 2022 and to KP’s and JA’s affidavits dated 4 March 2022 and took issue with significant aspects of their evidence. By his third affidavit dated 2 September 2022, BM identified a further email relating to dealings with Mr Boris Vittoz, an issue to which I refer below. By his fourth affidavit dated 6 October 2022, BM provided a copy of comments which he had provided to DA on 10 May 2021 in relation to the purported contract with RDA concerning the RLWC rights sent to BM and DG on 7 May 2021. He also refers to DA having then said he would follow up the comments with the rugby people, a comment which obviously did not disclose that that False Sub-Licence Agreement was not genuine.

18. BM was cross-examined at some length. He was plainly experienced and knowledgeable in respect of issues as to sports broadcasting. In cross-examination, BM denied that DA had proposed that $9m be paid for the shares in DCA, provided DCA had secured the RLWC rights (T544) and contended DG was paying that $9m for the rights fee and would expect to have a majority shareholding in DCA (T545). That evidence highlighted the uncertainty as to the underlying arrangement, where the parties do not seem to have determined how any amount paid by DG to DCA to fund the acquisition of the rights fee would be treated in respect of the issue or acquisition of shares in DCA so as to create that majority shareholding. BM was cross-examined to seek to establish that he could have made further inquiries with AHA (NSW) and to develop a suggestion that DA was relying on information provided to him by AHA (NSW) in respect of the AHA (NSW) arrangement (T547ff). The former would not be answer to a misleading and deceptive conduct case and the latter does not establish reasonable grounds for the representation by DA concerning AHA (NSW), absent evidence of the truth of the proposition that anyone in the AHA adopted the position which DA attributed to it. The proposition that DA’s “guy” in AHA (NSW) had conveyed that AHA (NSW) would pay subscription fees in respect of the RWLC was part of DA’s misleading and deceptive conduct, rather than providing any reasonable basis for that conduct. BM was also cross-examined as to the fact that he had not consented to his appointment as a director of DCA from 4 July 2021, but little turns on that matter where he had not been validly appointed as a director by any effective corporate step in any case. He was also cross-examined as to the steps taken by KH and him to change the signatories to DCA’s bank account, but the Plaintiffs did not plead any case as to that matter and I need not address it further. BM was also cross-examined as to the circumstances in which he became aware, through CK, of the issues the led to the meeting with DA on 3 July 2021 (T579) and as to the events which occurred at that meeting (T579ff). It seemed to me that BM was generally a credible witness, doing his best to answer the questions asked, when dealing with the circumstances of DG’s and his dealings with DCA and DA, but was less open and his evidence was less convincing in relation to the events that occurred at the 3 July 2021 meeting which I address below.

19. The Defendants and Cross-Claimants rely on KH’s affidavit dated 1 September 2022. Her evidence is that she is the sole director of DCA, although I will find below that she was not validly appointed to that position. Her evidence is that she became aware, from 27 April 2021 onwards, that DG and BM were pursuing an opportunity with DCA concerning broadcasting rights in relation to the RLWC, and she refers to DG’s advice to her of what occurred as his meeting with DA on 27 April 2021. DG put the proposal to her as an opportunity to obtain exposure for Care A2 Plus, and advised of the cost of $9m payable to DCA to acquire the RLWC rights, and KH says she supported the proposal as an opportunity to obtain exposure for Care A2 Plus. It seems to be likely that she gave effect to DG’s view in that respect. KH also refers to a further conversation with DG concerning that arrangement in May 2021 and says that she decided that Care A2 Plus would pay $9m to DCA to benefit from the RLWC deal as presented to DG.

20. KH’s evidence is that she received documentation from BM from 14 May 2021, and forwarded that information to Care A2’s solicitor for review and advice. There was no evidence as to the content of any advice that solicitor provided. KH also referred to her receipt of invoices from DG or BM, which they had received from DCA, and to her transferring amounts to DCA from the Care A2 companies’ accounts totalling the amount of $2.2m now claimed by the Care A2 companies in the proceedings. KH’s evidence is that DG told her, after the meeting on 3 July 2021, of admissions which DG claimed that DA had made at that meeting and that DA had agreed to repay the monies. KH also refers to her attendance, with BM, at a branch of the Commonwealth Bank of Australia (“CBA”) on 5 July 2021 and to steps which she and BM took to obtain access to DA’s banking records and control of its bank accounts, purportedly in her capacity as a director of DCA. She and BM were cross-examined at some length as to that matter. It is not necessary to address it, where no claim is brought by the Plaintiffs in respect of it, and the resolution of that issue would in any event follow from my finding below that BM and KH were not properly appointed as directors of DCA.

21. KH was also cross-examined and presented as a careful and precise witness, with limited involvement in the more contentious aspects of the proceedings. She was cross-examined at some length as to the payments made by the Care A2 companies to DCA and the process adopted in respect of those payments, and as to her attendance at a branch of the CBA to become a signatory on DCA’s bank account, which she supported by reference to her purported appointment as a director of DCA. As I have noted above, it is not necessary to determine any separate question as to the circumstances in which BM and KH became signatories to DCA’s bank account, a matter which was not pleaded by the Plaintiffs, which depends upon the validity or otherwise of their appointment as directors of DCA.

22. The Defendants and Cross-Claimants relied on the affidavit dated 1 September 2022 of Mr Raymond Nehme, also known as Mr Raymond Younan (to whom I will refer as “RY”) which was relevant only to what occurred at the meeting on 3 July 2021 which I address below. RY described his occupation as building supervisor and referred in cross-examination to his involvement in “mediation” activities. It appears, from his cross-examination, that allegations of intimidation have previously been brought against him although it is not necessary to reach any finding as to those allegations in order to decide these proceedings. I will address his evidence as to the 3 July meeting in dealing with that meeting below. RY also referred to DA’s affidavit dated 28 September 2021 and denied aspects of his account of the meeting. RY wrongly denied having spoken to DA since the meeting on 3 July 2021, but little turns on that, where I already approach RY’s evidence with scepticism and those contacts are not relevant to the false imprisonment claim brought by DA. RY was plainly familiar with the environment of a Court and was a relaxed and even jocular witness. I formed the strong impression that RY did not treat the exercise of giving evidence as a particularly serious one and would have had no hesitation in lying about events had it served his purposes. I approach his evidence with caution.

23. The Defendants and Cross-Claimants also relied on CK’s affidavit dated 25 February 2022. CK is a civil engineer and a shareholder in a company which was a shareholder in DCA. CK had an interest in rugby league and was involved in business dealings between DCA and RDA in respect of the RLWC. Parts of CK’s affidavit were not relevant and were either not read or not admitted, so far as they were directed to the relationship between CK and DCA and did not cast any light on the conduct that is in issue in the claims between the parties. CK’s evidence was, as the documents plainly establish, that the price payable to RDA for the RLWC rights was $5m although he had suggested a budget including other costs of delivering broadcasts of $9m, inclusive of seed funding for a European club rugby league competition (CK1 [44]) and that the $4m difference related to matters such as expansion of DCA’s staff and marketing and establishing a European club rugby league competition to create longer term broadcasting opportunities (CK1 [45]). CK had little involvement in dealings between DG and BM on the one hand and DA on the other, and had no contact with BM or DG after he referred them to DA on 26 April 2021 until he contacted BM on 3 July 2021. That contact disclosed matters which were then agitated at a meeting between the parties on 3 July 2021, which I address in reaching findings of fact below. CK also received copies from DA of some correspondence from Mr Geggo, a purported employee of CBA, and copies of some correspondence between DA and RDA concerning the delay in payment of the licence fee for the RLWC. His evidence as to those matters does not substantially advance matters beyond the evidence which emerges from the documentation. By a second affidavit dated 31 August 2022, parts of which were not admissible and were not admitted, CK responded to DA’s affidavit dated 23 August 2022, and took issue with the contents of that affidavit. CK was not cross-examined

24. The Defendants and Cross-Claimants also relied on an affidavit dated 27 February 2022 of Mr Richard Dennis (to whom I will refer, without disrespect, as “RD”) which outlined RDA’s dealings with DCA. His evidence added little to what plainly emerged from the documentary record of those dealings. He was cross-examined and presented as an experienced businessman and a credible witness. His evidence established that RDA may well have been misled by DCA and by DA for an extended period, and by KP from late May 2022, in respect of delays in the payment of the licence fee for the RLWC by DCA to RDA. However, that evidence did little to advance the Cross-Claimants’ case, where DCA’s, DA’s or KP’s conduct in respect of RDA did not mislead or deceive the Cross-Claimants or contribute to any loss suffered by the Care A2 companies.

9. The Cross-Claimants also relied on two affidavits dated 4 February 2022 of Mr Sean Morrissey and Ms Leone Cruden of AHA (NSW), which related to dealings between DCA and the AHA (NSW). Mr Morrissey was cross-examined and was a credible witness and Ms Cruden was not cross-examined. Their affidavits made clear that the negotiations between DCA and AHA (NSW) had never been directed to any arrangement by which the AHA would pay any amount, still less any substantial amount, to DCA in respect of broadcasting rights for member pubs, but were instead directed to an arrangement by which DCA might provide a modest sponsorship to AHA (NSW), as other sports broadcasting companies did. That evidence was relevant to establishing that the representations made by DA in relation to the AHA (NSW) arrangement were false.

10. The Defendants and Cross-Claimants also read an affidavit dated 2 September 2022 of their solicitor, Mr Di Bello, which related to communications with Mr Vittoz, who denied that he had given the advice to DCA attributed to Mr “Vitoz”. I will address that issue, which is ultimately only of tangential relevance, below. Mr Di Bello was not cross-examined.

Factual findings

31. I now set out my factual findings as to relevant events, as to which I have had regard to the parties’ chronologies, the affidavit evidence and cross-examination and the documents tendered, and reached findings as to contested facts as necessary. The broad chronology of events is not controversial, although the content of particular meetings is controversial.

32. In late 2017, DA started a business, conducted through DCA and known as “Sportsflick”, which provided a platform to broadcast or stream sports events (DA2 [4]). From February 2020, DA and JA were each director and secretary respectively of DCA (DA1 [2]).

33. Sportsflick had the opportunity to bid for broadcast and streaming rights for the RLWC in December 2020, initially with a suggested bid of $5m to $10m, and text messages were exchanged between CK and DA in relation to the potential acquisition of the RLWC rights (DA2, [6]). On 15 February 2021, a video call took place between DA, Mr Michael Turner of DCA and RD of RDA (RD, [5]). In early April 2021 DCA submitted a bid of $5m (an amount which it did not then have) to RDA for the 2021 RLWC broadcast and streaming rights (Ex J1, 1028; DA2 [10]; RD [7]). RDA responded by email dated 16 April 2021 (Ex J1, 1027) noting, inter alia:

“Financial: we will need an improved upfront payment (which will be payable into a solicitor’s escrow account immediately prior to contract signature), please propose. In terms of the overall guaranteed revenue share, how would you effectively guarantee this which provides the organisers with 100% security?”

34. By email dated 19 April 2021 (Ex J1, 1026), DA responded:

“Financial

We will pay the entire rights fee up front of $5 million which is 100% security, We can then add you as a user to our back end to see what the PPV numbers are with our new platform that Sportradar are building. Once the competition has finished we will make the appropriate payment of what the final revenue is.”

That correspondence occurred prior to DA’s first meeting with DG and BM which took place on 27 April 2021.

35. About 18 April 2021, BM and DG became aware of “Sportsflick” from newspaper articles and BG sent a message to Sportsflick on 26 April 2021 (BM1 [2]-[7]). About 22 April 2021, CK suggested a budget for the provision of the RLWC of $9m.

36. On 23 April 2021, RDA emailed DA requesting company information concerning DCA and proof of its ability to make the $5m payment to RDA (RD [11]). By email dated 23 April 2021, DA advised RDA that DCA wanted to negotiate an agreement before providing the requested information and DA emailed RDA on the same day saying he would get KP to send the proof of DCA’s ability to pay $5m to secure the suggested deal (RD [12]).

37. On 26 April 2021, DA emailed RD of RDA, with a copy to Mr Scott (who was associated with the RLWC) and CK, a series of ASIC extracts and a purported transaction summary issued by the CBA which recorded the then balance of DCA’s account as in excess of $42m (Ex J1, 1090, 1099; RD [14]). That document was plainly false and was sent when DCA had minimal funds in its account and DA accepted in cross-examination that he intended RDA to act on that false document (T225- 226). That matter had no impact upon the process by which DG agreed to invest in DCA or the Care A2 companies made payments to it and is not causative of any loss suffered by the Care A2 companies.

38. On 26 April 2021, BM contacted DCA expressing an interest in soccer rights and suggested a meeting between DA, DG and BM (DA2 [13]; BM1 [7]-[8]) On the same date, a phone call took place between CK and BM (BM1 [8]). DA advised JA on 27 April 2021 that BM had called JA and arranged a meeting to discuss an investment in DCA and JA’s evidence was that he was told that BM requested only DA attend the meeting on behalf of DCA (JA1 [3]).

39. On 27 April 2021, a first meeting took place between DG, BM and DA. DA set out a lengthy account in direct speech of what was said at the 27 April 2021 meeting (DG1 [4]), as follows:

“[DG]   [BM] and I are interested in investing in [DCA]. We understand [DCA] is negotiating for media rights to the English League, the Spanish LA Liga, and the Italian League. We are willing to invest in [DCA] to assist [DCA] in securing those media rights. Are you interested in such a proposal?”

[DA]:   “Yes, we are very interested. The media rights for such events once secured are very interested. The media rights for such events once secured are very valuable.”

[DG]:   “We would want to have a significant interest in [DCA] for us to invest money in [DCA].”

[DA]:   “[DCA] would require between nine million Australian dollars and fifteen million dollars in order for it to successfully bid for and secure those media rights.

If you were to invest nine million or fifteen million Australian dollars we would consider giving you a significant interest in [DCA].”

[DG]:   “For nine million we would want fifty percent (50%) holding in [DCA]. If we were to invest fifteen million, we would want sixty percent (60%) interest. We would want [BM] to become a joint Director with you.”

[DA]:   “If you are to invest nine million in [DCA] that would enable [DCA] to bid for more rights. The 2021 [RLWC] is a further possibility which would provide a very good income stream. [DCA] is currently interested in bidding for the 2021 [RLWC].”

[DG]:   “Alright, we will invest the nine million in exchange for a 50% interest, [BM] to be a joint Director with you and [BM’s] company Acell to have 50% shareholding. I will be a shadow Director. I will invest fifteen million once you get the Italian Soccer rights. I will bid separately for the English premier league. Leave the English Soccer League to me. I will sort that out. Also, we will give you whatever money you need for the Serie A [being the Italian soccer rights].”

40. I am comfortably satisfied that a conversation did not take place in those terms, although there was plainly a discussion of a possible investment in DCA and of DCA’s negotiations to sports rights. DA’s suggested recollection of a conversation of this length is entirely inconsistent with his repeated inability in cross-examination to recall other matters, relying on the fact that they took place some 18 months ago.

41. By his affidavit dated 4 March 2022, DA claimed to recall “further conversations and events” that had occurred on the meeting on 27 April 2021, not addressed in his earlier affidavit. These include that he said to DG and BM that:

“How do you see Sportsflick in the future as a streaming platform? The platform we have at present will need a significant upgrade as the current platform will not cope with a major increase in streaming rights. We need a lot of funding to meet expenses to pay for the cost of upgrade. As you know the company does not have the funds to meet those expenses.” (DA2 [14])

42. DA also there outlined a more extended conversation concerning the RLWC and claimed that he told DG that the rights for the RLWC would cost between $5m and $10m and refers to a discussion of pricing and the number of subscribers concerning RLWC packages and claims that he told DG that a range of revenue between $500 and $2,500 per venue per month which could be derived by DCA from sports rights including RLWC. I am not satisfied that DA has any genuine recollection of those matters, where they were not set out in his first affidavit in dealing with the relevant meeting; his recollection of those matters was inconsistent with his lack of recollection of other matters in cross-examination; and the information said to have been disclosed is inconsistent with the information provided by DCA to DG and BM in written communications. DA also claims to have then provided DG and BM with an email received from CK on 22 April 2021 relating to the costs involved in respect of the RLWC (DA2 [14]). I do not accept his evidence in that respect. DA denied in cross-examination that he told DG and BM that the rights for DCA to acquire the RLWC would cost $9m, and contended that the rights would cost $5m, that there would be marketing costs, system upgrades and the need to employ more staff (T60). I do not accept that evidence.

43. DG’s evidence (DG1 [10]) is that, at the meeting on 27 April 2021, DA had told him that:

“Sportsflick has secured the rights to stream the 2021 RLWC from the RDA on free to air television or a streaming platform. For you and your company to join in this venture, the rights to the media will cost $9,000,000. That’s how much RLWC wants for the rights.”

44. DG also indicates that he expressed interest in the deal and DA said that Sportsflick needed financial backing moving forward and then said:

“In terms of this RLWC deal, we are negotiating with the [AHA (NSW)] for Sportsflick to stream at about 6,000 NSW pubs and hotels for the AHA [(NSW)] to pay Sportsflick $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 Sportsflick at around the same fee per month. So getting the funds is our priority.”

45. Mr Morrissey’s cross-examination indicates that the reference to 6,000 pubs and hotels was plainly incorrect, because AHA (NSW)’s membership in New South Wales is substantially less than 6,000 pubs and hotels, which relates to a national figure, and AHA (NSW) does not represent interstate pubs and hotels. However, the Cross-Claimants did not challenge that figure in their pleaded case and I need not address that question further.

46. DG also refers to his stating that he would need to have control of DCA, meaning that he would need to be the major shareholder and a director, and would control DCA (DG1 [10]).

47. BM’s evidence (BM1 [12]) was that, at the first meeting with DA on 27 April 2021, there was initially discussion of DCA’s involvement with soccer rights, and DA then referred to the RLWC rights and to discussions with the AHA (NSW) to the effect that:

[DA]   “The RLWC will be great too. And we have been talking with the AHA about coming on board for the broadcast. They have around 6,000 venues and we are talking with them about a guaranteed fee per venue to show the games.”

[DG]   “That’s a lot of venues. How can you guarantee they all will pay?”

[DA]   “The AHA has said they can lock in all of their venues to pay to broadcast the games and our initial discussions with them indicated a fee of around $2,500 per venue to [DCA] for the month of the broadcast. I have a guy there that I know well and speak with constantly who assures me that it can be done.”

[DG]   “6,000 venues at $2,500 per venue, that’s sounds like a great deal for you, provided the AHA can be locked in.”

[DA]   “The AHA will come on board for this deal and with the RLWC locked in they will do with [DCA] a long-term deal at around the $2,500 per venue per month. But right now we need funds to finalise the RLWC rights.”

48. BM then refers to a discussion in which DA said that RLWC wanted $9m for the rights and DG indicated an interest in being involved and indicated he would need to have control of DCA to invest that amount. I bear in mind that BM’s evidence, in direct speech, of a conversation of this length likely involves a degree of reconstruction. I think it likely that there was discussion of AHA (NSW)’s involvement and of a fee of about $2,500 per venue, at least for the month in which the RLWC would be broadcast, although DA did not then claim that there was any finalised arrangement with AHA (NSW), and that there was also reference to a price of $9m for the RLWC rights.

49. I should also recognise here that a real lack of clarity existed from the beginning of the negotiations between DG and BM on the one hand and DCA on the other, as to whether the monies which were to be paid by interests associated with DG and were paid (in part) by the Care A2 companies were to be paid in consideration of the issue of new shares in DCA to those companies, or for the acquisition of existing shares in DCA by them, or for the acquisition of rights concerning the RLWC and other media rights from DCA, or some combination of those transactions, and that uncertainty was reflected in a real lack of clarity in the Cross-Claimants’ formulation of their case in these proceedings. It seems to me to be likely that the arrangement contemplated the issue of shares in DCA, to which DCA would be party, or the purchase of existing shares in DCA, to which the existing shareholders would be party, on the basis of an understanding that monies received by DCA (or possibly its shareholders) would be applied to the acquisition of sporting rights by DCA. The legal structure of that arrangement was plainly not addressed by the parties and involved at least a question as to how monies could be paid by DCA to acquire media rights, if they were consideration for the acquisition of existing shareholders’ shares and payable to those shareholders rather than to DCA. It is not necessary, and it is also not possible on the evidence as it stands, to determine that question in order to determine these proceedings. The findings which I reach below should be understood in the light of the lack of clarity in the parties’ proposed arrangement.

50. On 29 April 2021, RDA emailed DA (copying CK and others) attaching a draft license agreement with DCA for review and comment (RD [16]).

51. On 3 May 2021, a third party provided RDA a due diligence report on Sportsflick, noting ‘red flags’ around funding and adverse media, and that it was unknown how funds were raised for anything more substantial than “small rights ‘circa 5-10k’” (RD [20]).

52. On 7 May 2021, a further meeting took place between DA, BM and DG (DA2 [15]; DG1 [17]). DG’s evidence (DG1 [17]) of that meeting is that he reaffirmed his requirement that he have control of DCA going forward and that he be appointed as director and become a majority shareholder, but indicated that DA would need to continue with control of DCA’s day-to-day operations. DG also said:

“I can pay you some money in a few days or so. This will get things moving. The rest I will get to you by up to 3 months. I need some time to get that kind of money transferred. But I want to see the contract with the RLWC people first, [DA]. I want you to send that [BM].”

DG’s evidence in cross-examination was consistent with that account.

53. BM’s evidence (BM1 [19]) was that there was further discussion of the RLWC rights and of the timing of any investment by DG at that meeting and DG referred to a payment of $9m for RLWC rights, and DA outlined the position as to the AHA (NSW) arrangements as follows:

[DA]:   “I am confident the AHA deal with come off. As I said before, I have someone there I talk with constantly and he’s “close to me”. He says he can guarantee the deal for the RLWC at $2,500 and a long term fee of around $1,500 to $2,500 per month. He will need a little time to put all the pieces in place.

[DG]:   “That should be fine. But we need them to lock in the figures sooner rather than later so we can get a good idea of what the overall deal can actually deliver.”

[DA]:   I still believe he can get us the $2,500 a month for the long-term. I will talk with him now to push it along.”

This version of the conversation does not convey any representation by DA that the AHA (NSW) arrangement was finalised, and it left open the possibility that any amount payable by AHA (NSW) would be less than $2,500 per month. However, little turns on that, where there was never any prospect that AHA (NSW) would make payments to DCA under the arrangements then under discussion with it.

54. Also on 7 May 2021, DA emailed DG and BM several emails attaching a letter dated 7 May 2021 titled “Re: Offer to Purchase Shares in [DCA]”, the False Sub-Licence Agreement and an updated letter dealing with the purchase of shares in DCA. The False Sub-Licence Agreement recorded a sub-licence fee of $9m payable in respect of the RLWC for a total of 61 matches, payable in accordance with a payment schedule, and was purportedly signed by RD of RDA. The payment schedule in Appendix 2 provided for payment of $9m on signature and that the receipt of the licence fee in full would be a condition precedent to the agreement. DA accepted in cross-examination that he sent the False Sub-Licence Agreement to DG (T128ff) and accepted that the document was not a “real” document. He claimed that he sent the False Sub-Licence Agreement to DG who requested it to send “a contract showing $9 million to his people to get the funding” and that DA sent it to DG under his instructions for that purpose (T129). I do not accept that evidence given the view I have formed of DA’s credit. DA accepted that that was the only contract showing the price relating to the licensing of the RLWC that he sent to DG and BM and that he never sent the May RDA Agreement which showed a rights fee of $5m to DG and BM, because they “never requested that particular one” (T132). DA also accepted that RD’s purported signature on that document was his wife’s signature and that he had he applied his wife’s signature to that document above RD’s name (T133). DA admitted that the False Sub-Licence Agreement was prepared using an earlier form of sub-licence agreement between Flick TV and Spring Media (CB 888) and by changing the details in that earlier document to create that document (T137). DA did not accept, in cross-examination, that KP necessarily knew the document was false, at the time that he directed her to send it to DG and BM.

55. JA’s evidence is that he did not know of the False Sub-Licence Agreement at the relevant time (T339) and that CK rather than he was involved with the RLWC contract (T340). His evidence is that he investigated potential subscriptions and viewers of previous world cups but CK was involved in the contracts negotiations (T340) and that his only knowledge of the arrangement between DG and DA or DCA was that DG had agreed to pay $9m to acquire a 50% interest in DCA. DA did not accept in cross-examination that JA knew that the False Sub-Licence Agreement was false and he claimed that JA did not receive that document (T274). He accepted that JA knew the price of the rights to acquire the RLWC was $5 million (T274).

56. DA accepted in cross-examination that KP knew that the price of the RLWC licensing rights with DCA was $5m and that the False Sub-Licence Agreement refers to $9m, and knew that document was not exchanged between DCA and RDA, but did not accept that she knew of the falsity of that document (T139). DA did not accept that he told KP the document was “fake” when he told her to send it to DG and BM (T139) and maintained throughout his cross-examination that he was instructed by DG to send that document to DG (T140-141).

54. BM wrote to DA on 10 May commenting on the False Sub-Licence Agreement (Ex J1, 1269; BM1 [24]). That email is only consistent with BM then understanding that the False Sub-Licence Agreement was a genuine document, and is inconsistent with at least BM having been involved in any attempt to obtain that document in order to use it to induce other persons to invest with DG in DCA (T141-142). I do not accept DA’s denial that he knew that BM was treating the False Sub-Licence Agreement as a genuine document in making those comments (T142-143). The Defendants claim and I accept that they did not know of the falsity of the False Sub-Licence Agreement until 3 July 2021 (BM1 [21]-[22], [63]; DG1 [18]-[20]). The provision of that document to the Defendants was plainly misleading and deceptive, where I have not accepted that DG requested it to be issued in a false form or that the Defendants knew of its falsity prior to 3 July 2021.

55. On 10 and 11 May 2021, DA sent emails to BM and DG attaching AHA(NSW) payment dates and payment figures/income projections, and a “wish list” for rights and financial projections (BM1 [25], [32]; BM2 [11]; DG1 [21]; DG2 [8]-[9]). An email dated 10 May 2021 from DA to BM (Ex J1, 1285) headed “Sportsflick Pub Numbers” read:

“As discussed,

6000 pubs at $2000 a month (including all [Sportsflick] 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 m referred to in other evidence concerning revenue from the suggested AHA (NSW) arrangement. DA’s evidence in cross-examination was that he did not recall sending emails like this and then that he did not send that email (Day 2 T37). I do not accept that evidence. DA accepted in oral evidence that he at least represented to BM that pubs and clubs would be charged between $500 and $2,500 (Day 2 T38).

59. A further meeting took place on 11 May 2021 between DA, JA, DG and BM and is again addressed in several affidavits (DA1 [6]; JA1 [5]; DA 3 [50]-[53]). The Defendants contend that DA and JA represented that the rights fee for DCA to stream or broadcast the RLWC was $9m; it was contemplated that DG or his nominee would immediately become a major shareholder in DCA with a 60% interest; DG would immediately become a director of DCA and would take ultimate control of DCA; DA would no longer be DCA’s sole director and would have management control of DCA on a day-to-day basis; if DG brought in an investor, that investor would need a 20% interest in DCA; DA and JA reiterated the profit ($15m) to be obtained from the AHA (NSW) arrangement; DA and JA sought $110,000 to secure rights to soccer leagues and tournaments, and DG said he would pay the $100,000 plus GST for activity in China and to secure the RLWC deal. The Defendants deny that a date of 19 May 2021 for payment by the Care A2 companies was mentioned at that meeting (BM1 [26]-[29]; BM2 [33]-[34], [47]-[50]; DG1 [23]- [26]; DG2 [15] [24]-[31]). It is not necessary to determine that dispute given the narrowing of the parties’ claims in the course of the hearing.

60. In his first affidavit (DA1 [6]), DA provided his account of the conversation on 11 May 2021, which first related to a payment of $110,000 to fund the purchase of Chinese Super League and CONCACAF Cup Rights. DA says a further conversation then took place:

[DG]:   “I will transfer the nine million we agreed on, to the Company’s account by the 19 May 2021. An Invoice for that amount is to be issued addressed to Care A2 Plus Pty Ltd at this address.”

[DA]:   “I will send you written terms of our agreement for the nine million payment and provide the Invoice to CARE A2.”

61. I think it highly unlikely that a conversation that conversation took place in those terms, or that a commitment was then made by DG or other Defendants to pay that large amount in 8 days, and before the position in relation to AHA (NSW) was resolved, although there was plainly a discussion of the transfer of funds to DCA, where that occurred in a smaller amounts. I prefer DG’s account that he told DA on several occasions of the steps that would need to be taken before payment and the time that would be required for the Care A2 companies to source the funds. In cross-examination, DA denied that he represented to DG and BM at the 11 May meeting that the rights fee for DCA to secure the RLWC was $9m and contended that the entire investment was $9m (T276), and that the bid had been secured by that time, although money had not been paid to acquire the rights (T276). I do not accept his evidence in that respect.

62. JA’s evidence (JA1, [5]) is that he was introduced to DG and BM at this meeting and he refers to a conversation in which DG said:

“I have agreed with [DA] that I will transfer nine million dollars to your company for 50% of the shares in the company by 19 May. I want to be a Director later on, but not now as I have a number of issues including with channel nine and , the fish markets and the shares I own in a milk company. I want the milk company to go public. Once we have done the transfer of shares [BM] will be a director.”

I also think it unlikely that DG referred to a concluded agreement to transfer the funds at this point, although it is not necessary to decide that question given the narrowing of the parties’ cases. JA also refers to a discussion as to whether money would be paid until documentation was finalised and says that he opposed payment of money until the documentation was finalised.

63. DG’s evidence (DG1 [26]) is that, at the meeting on 11 May 2021, DA said:

“My negotiations for payments from the AHA [(NSW]) are continuing with my guy. He is confident of getting $2,500 per pub or hotel for the month of the RLWC, especially when its compared with what they paid for the NRL. For the long-term deal, he said the fee might drop a little per month but he still believes he can convince him of the $2,500.”

64. That statement indicated that the payments would be made by AHA (NSW) rather than individual agreements being negotiated by DCA with individual pubs or hotels. DG also refers to discussions concerning the Chinese Super League and the CONCACAF Cup and Belgium League, and to DA having referred to DCA “need[ing] the $9,000,000 to lock in the Rugby League people” and DG responding by reference to the need to “lock in” AHA (NSW).

65. BM’s evidence (BM1 [26ff]) is that, at the meeting on 11 May 2021, there was further discussion of the position in respect of AHA (NSW) and DA claimed that AHA (NSW) “has the ability to lock in an overall deal and then get each venue to contribute via a subscription fee”, there was further reference to a $2,500 per month payment, and DG indicating that that needed to be “confirmed as soon as possible”. BM refers to further discussion of DG’s need for control of DCA if he was to pay $9 million for the RLWC rights and to discussion of other sporting rights.

66. By email dated 11 May 2021, DA sent DG a document headed “SF Projections”, and the attachment (Ex J1, 1290) referred to the projected profit from the RLWC and from “Pubs & Clubs” as follows:

“There are over 6,000 registered pubs in Australia, and we are going to have Sportsflick available in all registered pubs. The pubs will be paying $2,500 for the World Cup or they can pay $2,000 a month on a 12 month contract and get all the Sportsflick 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”

67. DA’s evidence that he sent that email to DG but he contended that DG wanted it to give to someone to obtain “potential more investment” (Day 2 T39). DA’s evidence in cross-examination was that he believed that the RLWC would be shown in every pub and club but he did not expect DG and BM to rely on such a representation (T41). It seems to me highly unlikely that an experienced businessman such as DG would have given significant weight to a profit projection of this character, without any real attempt to inquire as to its basis.

68. By email dated 11 May 2021 (Ex J1, 1423), CK provided a budget for the RLWC, comprising a rights fee of $5m and additional costs totalling $9m. The Defendants contend this documentation was not known to DG, BM and any Defendant until this litigation. Also on 11 May 2021, DA emailed BM, with a copy to KP, attaching an invoice for $110,000 from DCA to Care A2 Plus and Care A2 Plus paid $110,000 to DCA (BM1 [30]-[31]; DG1 [28]; DG2 [15]; KH [12]). Only matters occurring prior to this date can give rise to misleading or deceptive representations or conduct that induced that payment, although subsequent events may of course be relevant to the truth of such representations.

69. On 12 May 2021, DA emailed RD, copying CK and Mr Scott of RLWC, attaching a false loan document dated 18 January 2021 for a loan of $40M between DG as lender and DCA as borrower, purportedly signed by DA and witnessed by CA and a purported letter from the CBA (Ex J1, 1322; RD [17]; DG1 [54]- [55]). The attached loan agreement dated 18 January 2021 between DG and DCA (“False DG Loan Agreement”) purportedly recorded a loan of $40m by DG to DCA with a drawdown date of 18 January 2021 and a due date of 18 January 2024. This document was plainly fabricated. The letter from CBA (Ex J1, 1325), purportedly signed by Mr Moseley of CBA, who it appears did not exist, was also fabricated and stated that:

“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.”

70. DA contended in cross-examination that CK “ordered” him to send that document to RD. I do not accept that evidence. DA accepted in cross-examination that DCA had never had a loan agreement with DG and that DG did not know of that document (T230). DA also accepted that he forged the purported signature for DG (Ex J1, 1333) but claimed he did so under the “instructions” to send the document to RD (T231). He also accepted that a signature of his wife, recorded as the witness to his signature, was also false (T232).

71. 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 (Ex J1, 1342). DA accepted in cross-examination that these documents were not executed (T278).

72. Also on 13 May 2021, DA emailed DG and BM purportedly attaching written confirmation of terms of the agreement including as to payment of $9m (DA1 [9]). The email contained two offers for ‘review,’ asking if they ‘require any adjustments or changes’, which the Defendants contend changed material terms from prior discussions and were never signed or agreed. DG claims that, due to his “surprise” at the content of the documents, he then engaged lawyers to “protect [his] interests” (BM1 [36]–[43]; BM2 [51]; DG1 [30], [32]; DG2 [16]).

73. On 16 May 2021, DCA received an email from Mr Boris Vittoz, a Swiss lawyer in relation to notices of termination in connection with another sub-licence with the UEFA (BM3 [3]). The correspondence from Mr Vittoz becomes relevant to further matters that I address below.

74. On 18 May 2021, a further meeting took place between DA, DG and BM, which the Defendants contend discussed possible payment time frames and a request by the Defendants that DA sign up the AHA (NSW). I will refer to the evidence as to that meeting in dealing with the Cross-Claimants’ misleading and deceptive conduct claims below. On the same date, DCA sent an invoice for $1m to Care A2 Plus and received payment of $1m from Care A2 Plus. Only matters occurring prior to this date can give rise to misleading or deceptive representations or conduct that induced that payment, although subsequent events may again be relevant to the truth of such representations.

75. 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.

76. On 20-21 May 2021, RDA sent emails to DA attaching revised draft license agreements and an invoice (RD [21], [22]). On 21 May 2021, DA sent CK a purported email from a non-existent Mr Geggo of CBA (Ex J1, 1419) and purported confirmation issued by CBA dated 12 May 2021, signed by the non-existent Mr Moseley of CBA, confirming the status of monies that were not in fact then held, in any substantial amount, by DCA. DA did not accept in cross-examination that that particular document was false (T234). I do not accept his evidence in that respect and I am satisfied that document was false. On 21 May 2021, CK emailed a copy of the purported confirmation to RD of RDA and Mr Scott of RLWC (Ex J1, 1392).

77. By an email dated 22 May 2021 (Ex J1, 1422) CK provided further information concerning a suggested expansion of DCA’s media department to manage requirements for, inter alia, the RLWC. On 24 May 2021, the May RDA Agreement was signed between RDA and DCA for the RLWC rights at a price for the licence of $5m rather than $9m (Ex J1, 1426-1435; DA1 [14]; RD [23], CK1 [50]-[52]). Only part of that amount was ultimately paid to RDA.

78. On 25 May 2021, a further meeting took place between DA, DG and BM (BM1 [65]; DG2 [32]). DA referred to a further conversation at that meeting where he said that DCA had ‘secured the rights for RLWC” but needed the funds to keep the rights and says that DG then advised that the balance of $9m was to be paid by 30 June 2021 (DA1 [15]).

79. By email dated 26 May 2021, RD expressed disappointment that RDA had not received the amount due under the invoice issued to DCA and the May RDA Agreement and sought payment of the balance no later than 3 June 2021. 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. On 26 May 2021, DCA paid $192,000 to RDA as a part payment of the licence fee for the RLWC rights (DA1 [16]), although that payment fell well short of the amount due. From 26 May 2021, RD followed up on payment due by DCA under the May RDA Agreement and KP subsequently emailed DG and BM referring to the need for them to make payment to DCA (BM1 [68]; DG1 [34]).

80. By email dated 27 May 2021 from KP to BM and DG, copied to DA (Ex J1, 1481; DA1 [17]), KP requested further funds from DG and stated that RDA “rightly mentioned that the full payment was to be paid upon signature of the contract which was signed on 27 April 2021”. No contract was signed with RDA on that date, which was the date of the False Sub-Licence Agreement that falsely recorded the amount payable to RDA as $9m. DA accepted in cross-examination that the only contract that was signed and dated 27 April was false (T158). However, 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.

81. A further meeting took place on 31 May 2021 between DA, JA, Mr Turner, DG and BM (DA1 [19]; JA1 [6]; BM1 [73]-[75]; BM2 [56]; DG2 [25]). In his first affidavit, JA refers (JA1 [6]) to a discussion of sporting rights and claims that he told DG that:

“It’s great us going for all these rights but we don’t have the necessary infrastructure and you haven’t held up your end of the bargain. We have not received the $9 million you agreed to pay for the shares and voting rights by 19 May 2021.”

I think it likely that statement was made, taking issue with the delay in DG making good his or his companies proposed investment in DCA, although I have accepted DG’s evidence above that he had previously foreshadowed that payment would take some time.

82. 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 (T238). There is force in DA’s claim that the delays in payments by DCA to RDA would not have arisen had the Care A2 companies promptly paid the amount contemplated for the investment in DCA. However, I have also accepted above that DG had made clear, from early in the discussions, that the Care A2 companies would require time to make the contemplated payment. An attachment to the email sent by KP dated 3 June 2021 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 (T239) and he accepted that he had never corrected that document in dealing with RDA and accepted that that transfer had not been made (T240). DA sought to explain the position, in cross-examination, by reason of non-payment by DG of the amount to be paid to acquire shares in DCA, claiming that:

“I just wanted to, well just to let you know, under all this, you know, severe duress at the time was just to, to buy more time, from [RD] because we did rely on, you know on, you know, on, on [DG] to pay everything by, by the due date and then, you know, when the – you know, when you tell someone the money was going to be in at this time and then it doesn’t, it’s it obviously creates problems, you know, what we’re looking at here. But it was just – it was out of duress, out of severe duress, to buy more time.” (T241)

While those representations were plainly false, they were not directed to DG or the Care A2 companies and had no impact on DG’s agreement to invest in DCA or the payments that the Care A2 companies made to DCA.

83. On 4 June 2021, a meeting took place between Mr Morrissey and Ms Cruden of AHA (NSW), and DA, JA and Michael Turner of DCA, and subsequent correspondence followed (Cruden [3]-[7]; Morrissey [6]-[11]). Communications subsequently took place between Mr Morrissey and Ms Cruden for AHA (NSW) and DA, JA and Mr Turner of DCA which dealt with the proposed sponsorship arrangement for AHA (NSW), by which DCA would pay amounts to AHA (NSW), rather than the reverse. On 4 June 2021, Ms Cruden of AHA (NSW) sent a document headed “corporate partnership” to DA with a copy to KP (Ex J1, 1564). By an email dated 7 June 2021, DA emailed AHA (NSW) and KP indicating that DCA was happy to go ahead with a sponsorship package of $100,000 per year and an attached partnership agreement contemplated payment by DCA to AHA (NSW). DA was cross-examined as to those communications (T55ff). He accepted in cross-examination that he did not provide the draft documents received from AHA (NSW) to DG or BM (T116) but contended that he would have discussed the sponsorship arrangements with AHA(NSW) with them (T117). I do not accept the latter evidence.

188. The amount of an award of exemplary damages plainly involves an element of evaluation, and is not a matter of mathematical certainty. I consider that the amount of exemplary damages awarded against DA should be $75,000, which is a substantial amount in respect of an individual and reflects the serious and deliberate character of DA’s conduct. The amount of that award is consistent with that made in Hill v James against the defendant who was not a solicitor, and a little less than the amount of $100,000 awarded against DG by way of exemplary damages for deceit in Galati v Deans above. An award of exemplary damages of that size is justified where DA’s conduct in falsifying documents and relying on confirmations by non-existent persons such as Messrs Geggo, Greggo and Moseley also involved “trickery” and was calculated to deceive, in a manner that can also properly be described as reprehensible.

Claim in unjust enrichment

191. The Cross-Claimants abandoned a contract claim (ASCC [24]-[31]) in the course of the hearing, on 8 December 2022, but pursued an unjust enrichment claim (ASCC [32]-[34]). Mr Butt submits that no contract ever came into existence between the parties, which he contends for present purposes are the Cross-Claimants other than DCA and the First to Third Cross-Defendants “in their right and then for DCA on the other”. There are, as I have noted above, significant complexities as to the parties to any contract and its terms, but it is not necessary to determine this claim, or any claim for unjust enrichment arising from it, where this claim would add nothing to the orders that will be made in the Care A2 companies’ favour by reason of their claims in misleading and deceptive conduct and for deceit.

Cross-claims purportedly brought by DCA

192. The Cross-Claimants abandoned claims (ASCC 35]ff) brought against the Cross-Defendants for breaches of the Corporations Act and breaches of fiduciary duty in the course of the hearing, on 8 December 2022. Those claims were rightly although belatedly abandoned, where DA was not validly removed as the sole director of DCA, KH was not validly appointed as a director of DCA, and the Cross Claimants could not authorise DCA to bring the Cross-Claim and leave to bring a derivative claim was neither sought nor obtained.

Claim for a constructive trust against the Parents

193. The Care A2 companies then plead a claim in respect of a constructive trust against the Parents (ASCC [42]ff), relating to a payment of $800,000 made by DCA to a solicitor’s trust account, which funded the release of a mortgage over their Kellyville property. The Cross-Claimants rightly abandoned a corresponding claim purportedly brought by DCA in the course of the hearing, on 8 December 2022, where (as I noted above) DA was not validly removed as a director of DCA, KH was not validly appointed as a director of DCA and the Cross Claimants could not authorise DCA to bring that claim and leave to bring a derivative claim was neither sought nor obtained. They then rightly, although belatedly, abandoned the claim brought by the Care A2 companies immediately prior to closing submissions, where they pleaded no facts and led no evidence that could establish that the Parents’ knew that the payment of the mortgage was wrongful before it was made, so as to allow an exception to indefeasibility under s 42 of the Real Property Act, and that claim was unsustainable for the reasons noted in in Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508 at [100]-[103]; Sze Tu v Lowe (2014) 89 NSWLR 317, [2014] NSWCA 462 at [241]-[243] (“Sze Tu v Lowe”) and Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313 (“Rheem”) at [224]-[229].

Claim for proprietary relief against other Cross-Defendants

194. The Cross-Claimants also brought, and maintained, a claim for several forms of proprietary relief in respect of payments made by DCA to DA, JA, KP and CA, which were likely sourced in large part from funds paid to it by the Care A2 companies (ASCC [52]ff). Mr Butt submitted that payments made by the Care A2 companies to DCA became impressed with a constructive trust in favour of the Care A2 companies, referring to El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717, Menzies v Perkins [2000] NSWSC 40 and Alesco Corporation Ltd v Te Maari [2015] NSWSC 469. These decisions broadly stand for the proposition that, where money has been stolen or misappropriated, equity imposes a constructive trust on the thief immediately upon receipt of those stolen moneys.

195. Turning now to the applicable case law, in Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58 (“Black v Freedman”), the High Court held that money given by a thief to a third party who received that money as a volunteer could be recovered by the victim of the theft although the third party had not participated in the theft.

196. In Wambo Coal Pty Ltd v Ariff & Anor (2007) 63 ACSR 429; [2007] NSWSC 589 at [40]-[41], White J summarised the relevant principles as follows:

“Where property is stolen, the property is trust property in the hands of the thief and can be traced into the hands of a third party who receives the property otherwise than as a bona fide purchaser of the legal estate for value without notice. The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. Whether the trust is characterised as a resulting trust (Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82 at [1-3]–[117]), or as a constructive trust (Westdeutsche Landesbank v Islington London Borough Council per Lord Browne-Wilkinson at 716), the trust is of an institutional rather than a remedial character. It arises because the conscience of the thief is bound.

In the same way, where property is acquired by fraud and there is a complete failure of consideration, the trust arises immediately on the receipt of the property: Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]–[156] and cases cited. So, in Neste Oy v Lloyds Bank plc [1983] 2 Lloyd’s Rep 658, referred to with apparent approval in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at 104; [1994] 3 NZLR 385 at 404, where the payee received payment from its principal of moneys which were not impressed with an express trust, but which were to be used in performance of a contract which the payee knew could not take place, the payee held the payment on trust for the payer from the time of its receipt. The circumstances which created the trust in Neste Oy were that the payee knew (as was the fact) that there could be no performance under its contract, so that there was a total failure of consideration for the payment, and the payment could not in conscience be retained. The trust was an institutional trust which attached to the moneys from the time of receipt.”

197. The relevant principles were again summarised in Sze Tu v Lowe above at [141]–[152] by Gleeson JA (with whom Meagher and Barrett JJA agreed) as follows:

“Black v Freedman is authority for the proposition that “where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character“ (O’Connor J at 110). See also Griffith CJ at 108–109 (Barton J agreeing at 110).

Where the thief makes a gift of the funds to a third party, the volunteer recipient is amenable to equitable jurisdiction. In Black v Freedman the volunteer recipient had no notice of the theft at the time of the receipt but discovered it while the funds were still in her hands. In such a case the equitable obligation arises when this knowledge is acquired: Black v Freedman at 109 (Griffith CJ); Agip (Africa) Ltd v Jackson [1990] Ch 265 at 291 (Millett J); Port of Brisbane Corporation v ANZ Securities Ltd [2002] QCA 158 at [33] (McPherson JA; Davies JA and Mullins J agreeing); Lurgi (Australia) Pty Ltd v Gratz at [74]–[75] (Byrne J).

As Millett J explained in Agip (Africa) Ltd v Jackson at 291, when describing the liability of a person who receives for his own benefit trust property transferred to him in breach of trust:

He is liable as a constructive trustee if he received it with notice, actual or constructive, that it was trust property and that the transfer to him was a breach of trust; or if he received it without such notice but subsequently discovered the facts. In either case he is liable to account for the property, in the first case as from the time he received the property, and in the second as from the time he acquired notice.

In Heperu Pty Ltd v Belle (Heperu) [2009] NSWCA 252; 76 NSWLR 230, Allsop P, at [92] summarised the effect of the principle in Black v Freedman with respect to a volunteer recipient as follows:

A person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not a party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly.

Later, at [154]–[155], Allsop P emphasised that the claim in Black v Freedman was a claim against the assets in the volunteer’s hands or so much as was still remaining (whether in original form or traceable product). His Honour continued:

To call the volunteer recipient a constructive trustee and to call upon him or her to account as a constructive trustee (because he or she upon discovery of the fund or asset belonging to another has become one) does not mean the volunteer comes under personal liabilities, independently of, or beyond, the obligation to restore the fund or asset and any attendant obligation. He or she does not, for instance, become liable to pay damages for the moneys received that led to the fund or asset being created, as if he or she were a knowing participant in the fraud.

It is also important to recognise that the trust rests on the existence of property rights and in that sense is not purely remedial. The court declares that a trust exists and existed (though the innocent volunteer did not know it)…

Tracing can be used to follow the proceeds of fraudulently obtained property or funds: Heperu at [93] citing as examples Black v Freedman itself and Creak v James Moore & Sons Pty Ltd [1912] HCA 67; 15 CLR 426 at 432. The use of tracing as a process of demonstration or proof of what has happened to property is well recognised …

Whether the trust based on a Black v Freedman claim is more properly characterised as a resulting trust: (Robb Evans at [112]–[117]); or a constructive trust: (Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] NLJR 877; AC 669 at 716 (Lord Browne-Wilkinson)), the trust is properly viewed as being of an institutional rather than simply a remedial character. It arises because the conscience of the thief is bound: Heperu at [154]–[155]; Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; 63 ACSR 429 at [40] (White J).

In Robb Evans, Spigelman CJ said (at [113]) that the thief holds any property into which the stolen property has been converted on trust in a manner which should be seen as automatic. That is, a trust arises immediately upon the acquisition of the property, not when recognised by a court. He continued (at [115]):

If appropriately characterised as “constructive“, the trust that arises upon receipt of stolen funds by an active participant in the theft is of an institutional rather than remedial character…

The authors of Jacob’s Law of Trusts in Australia (7th ed, LexisNexis Butterworths) observe (at [1310]) that there is a remedial flavour about various constructive trusts, including that in Black v Freedman. Nonetheless they state (at [1311]) that “it does not follow that the constructive trust in such cases is ‘remedial’ in the sense that it first has existence and effect only upon the Court making its decree“. The authors point out that in Black v Freedman, O’Connor J meant (at 110) that the thief became a trustee forthwith.

The institutional character of such a constructive trust may be seen as “connoting a relationship which arises and exists under the law independently of any order of the Court“: Muschinski v Dodds [1985] HCA 78; 160 CLR 583 at 614 (Deane J), although his Honour doubted (at 613) that there was any perceived dichotomy between institutional and remedial constructive trusts, preferring to view a constructive trust both as an institution and a remedy.

In Grimaldi v Chameleon Mining NL (No 2) (Grimaldi) [2012] FCAFC 6 ; 200 FCR 296 the Full Federal Court (Finn, Stone and Perram JJ) at [504]–[505] distinguished the remedial use of the constructive trust from those cases where, on proof of particular facts in a given context, the circumstances are “construed“ as giving rise to a constructive trust. Earlier, at [256], the Court noted the distinction between those cases “where a constructive trust is sought to be imposed by way of remedy on extant property which a delinquent fiduciary or a third party participant in fiduciary or trust wrongdoing has derived on their own account as a result of their wrongdoing“ and those cases “where the property or interest sought to be recovered (or its traceable proceeds) is, or had been, the property of the claimant“.

The Court continued (at [256]) by observing that in the former cases, the constructive trust is used as a remedy in addition, or as an alternative, to the well accepted personal remedies available against fiduciaries and knowing participants in fiduciary wrongdoing. In the latter cases, proprietary relief by way of imposition of a constructive trust should be granted “if appropriate“: Grimaldi at [255]. The latter category may be taken to include cases based on the Black v Freedman claim.”

198. In Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81 at [45], Leeming JA (with whom Bathurst CJ and Sackville AJA agreed), observed that:

“A person who receives trust property, otherwise than as a bona fide purchaser for value without notice, but innocently, and thereafter acquires notice of the trust and deals with it in a manner inconsistent with the trust, will also be liable as a constructive trustee. Although this is similar to first limb Barnes v Addy liability, it is conceptually distinct, because it is the subsequent dealing, rather than the receipt of property, that founds liability, as Professors Dietrich and Ridge have observed: J Dietrich and P Ridge, Accessories in Private Law (2015, Cambridge University Press) at 203. This class of liability was identified by Millett J in Agip (Africa) Ltd v Jackson [1990] Ch 265 at 291 and by the Court of Appeal in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 474; see also L Tucker et al, Lewin on Trusts (19th ed 2015, Sweet & Maxwell) at 2103–9. The distinction drawn by Millett J in Agip was cited with evident approval in Sze Tu at [143].”

199. In Rheem at [127], Parker J in turn found that a company whose funds had been paid out by an employee in fraud upon it was entitled to judgment against that employee for that sum, where the transaction was fraudulent and no proper consideration was provided for the payment, by way of a common law entitlement by way of restitution for monies had and received, as well as by a claim under Black v Freedman, giving rise to an equitable personal remedy in parallel to the common law remedy by way of restitution, the entitlement in each case being to recoup the amount misappropriated. His Honour also held that claim extended, under Black v Freedman, to a volunteer who innocently received the relevant funds, once the volunteer was made aware of the true owner’s interest, in respect of whatever monies were left or the traceable product of those monies. I have not neglected the distinction between the facts of that case and this case, namely that the Cross-Defendants were not employees of the Care A2 companies; it is not suggested that KH acted in fraud of the Care A2 companies in paying its funds to DCA; and it is not apparent that the payments made by DCA to the Cross-Defendants were made in fraud of DCA, although they were largely funded by the funds it had acquired from the Care A2 companies through DA’s deceit. I also reviewed the relevant principles in Re Reserve Hotels Pty Ltd [2021] NSWSC 376 at [167]ff, on which I have partly drawn for this summary of these principles, and that decision was affirmed by the Court of Appeal in Balagiannis v Balagiannis [2022] NSWCA 18.

200. These principles are not controversial, but their application in this case has complexities that were not adequately addressed by the Cross-Claimants’ submissions. Mr Butt submitted that DCA paid amounts to each of DA, JA, KP and CA and that the Care A2 companies “therefore” have an equitable interest in those funds by way of a constructive or resulting trust, a charge or a lien, or DA, JA, KP and CA are liable to pay equitable compensation or give an account of profits. However, the word “therefore” in that submission highlights an unanswered question: why do the Care A2 companies have such a claim, arising from monies they paid to DCA, which DCA in turn paid to DA, JA, KP and CA or, in two cases, third parties? Mr Butt did not explain the factual or legal steps leading from the fact of the payment by the Care A2 companies to DCA to the suggested conclusion that they have a proprietary interest in one of the several forms claimed, whether by way of a constructive trust, or a resulting trust, or a charge or a lien, or identify the property to which that trust or charge or lien would attach. Mr Butt also did not explain how a claim to equitable compensation or an account of profits is established or why the amounts paid by DCA to the several individual Cross-Defendants or third parties are recoverable by the Care A2 companies on that basis.

201. It is necessary to recognise that these claims are brought by the Care A2 companies rather than DCA, where DG, BM and KH did not have authority to authorise a claim by DCA and did not seek or obtain leave to bring that claim as a derivative action on DCA’s behalf. The relevant monies were here paid by the Care A2 companies, generally on invoice, in anticipation of an issue of new shares by DCA to interests associated with DG or the acquisition of existing shares in DCA from DCA’s shareholders or in connection with DCA’s anticipated acquisition of rights to broadcast sporting events, although I have held above that DCA’s conduct in respect of the transaction was misleading and deceptive and also amounted to deceit. DCA appears to have treated the funds as its own when it received them, although that position would have been more complicated if an acquisition of shares from existing shareholders was contemplated, so that existing shareholders would have had a claim to the consideration received for their shares.

202. I accept that the principle in Black v Freedman extends to property acquired by fraud and the Cross-Claimants’ success in establishing a claim for deceit against DA is sufficient to establish that element of this claim. The facts that I have found above in respect of DA’s conduct are sufficient to establish that he had notice of the fraud; and the dealings between KP and RDA are such that she arguably had notice of the fraud, although not for the whole of the relevant period and although I have held above that her conduct was not causative of the Cross-Claimants’ loss in any relevant sense. I have held above that the Cross-Claimants did not establish that JA or CA had notice of the fraud, and that is sufficient to defeat these claims against them.

203. There are other significant complexities with these claims which were not adequately addressed by the Cross-Claimants’ submissions. First, it is not apparent that there was a complete failure of consideration here, because the Cross-Claimants required DCA to acquire sporting rights and some of those rights were acquired, although the rights to the RLWC was not, and there is evidence that the Care A2 companies advertised on the relevant broadcasts, obtaining some benefit for the amounts paid to DCA. Second, no attempt was made by the Cross-Claimants to identify the property which would be the subject of any equitable proprietary relief, or how principles of tracing applied to allow any monies paid to DA or KP to be traced into that property. Third, so far as the imposition of proprietary relief on other unidentified assets of DA, JA, KP or CA would or may allow the Care A2 companies to take priority over their other creditors, the Cross-Claimants did not identify why that would be an appropriate result.

199. I cannot and should not seek to develop the factual or legal elements of these several alternative claims further, in a manner that the Cross-Claimants did not, where my doing so would deprive the Cross-Defendants of procedural fairness in respect of any additional steps which might have been taken to advance these claims. These claims do not succeed, given the lack of clarity in the evidence and submissions that support them. I also note, for completeness, that no judgment in respect of these claims could have been ordered against the third parties who received two of the payments, where they were not joined as party to the proceedings and have not had an opportunity to be heard.

Claim for knowing receipt

205. The Cross-Claimants abandoned, in the course of the hearing, on 8 December 2022, a claim for knowing receipt brought by DCA against the Parents (ASCC [55]ff) and a claim for knowing receipt or knowing assistance against JA, KP and CA. These claims were also not maintainable by the Cross-Claimants personally or by DCA, where DA was not validly removed as a director of DCA, KH was not validly appointed as a director of DCA and the individual Cross Claimants could not authorise DCA to bring the Cross-Claim.

Orders

206. For these reasons, I will make order 1 set out in the Plaintiffs’ Amended Originating Process and the individual Cross-Defendants and Acell Holdings must pay the costs of that claim as agreed or as assessed. There should be judgment in favour of Care A2 Plus and Care A2 Australia against DA of the amounts they respectively paid to DCA with interest, including an amount of $75,000 referable to exemplary damages, and my preliminary view is that DA must pay the Care A2 companies’ costs of the Cross-Claim against him as agreed or as assessed. The Cross-Claim should be dismissed as against JA, KP and CA and my preliminary view is that the Cross-Claimants (other than DCA) must pay JA’s, KP’s and CA’s costs of the Cross-Claim against them as agreed or as assessed.

207. I make the following orders:

1. Direct the parties to bring in agreed short minutes of order to give effect to this judgment and as to costs within 14 days or, if there is no agreement, their respective draft short minutes of order and submissions not exceeding eight pages in Arial font 12 and in one and half spacing concerning the differences between them.

2. Exhibits and subpoenaed material be returned forthwith; any exhibits returned must be retained by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

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Decision last updated: 24 January 2023