Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd

The Court has before it two notices of motion: an amended notice of motion filed by the plaintiff, Blue Mirror Pty Ltd (Blue Mirror), and further amended notice of motion filed by an interested party, Tan & Tan Australia Pty Ltd (Tan & Tan).

The relief sought by Blue Mirror is twofold: first, that Tan & Tan (the proposed third defendant), Anthony Tan (the proposed fourth defendant) and Australian Construction Company Pty Ltd (the proposed fifth defendant) (ACC) be joined as defendants (together, the Proposed Defendants); and, second, that it be granted leave to file and serve a Further Amended Statement of Claim (FASOC). For convenience, and without intending any disrespect, I will refer to Ken Tan (the second defendant), Anthony Tan and others in these reasons by their given names.

Tan & Tan's further amended notice of motion seeks relief dissolving freezing and disclosure orders made by this Court on 29 October 2020 and 13 November 2020. Tan & Tan seeks alternative relief that Blue Mirror be ordered to provide security for its undertaking as to damages, if the freezing and disclosure orders are to remain in force.

For the reasons which follow, the Court will grant Blue Mirror leave to file the FASOC and dismiss Tan & Tan’s further amended notice of motion.

Mr R D Glasson of Counsel appeared for Blue Mirror. Mr F Corsaro of Senior Counsel and Mr T Rogan of Counsel appeared for Tan & Tan. Mr D Brezniak of Counsel appeared for Anthony and initially also appeared for ACC, including at the hearing on 30 April 2021, although Mr W G Muddle of Senior Counsel appeared for ACC thereafter. There was no appearance for either Pegasus Australia Developments Pty Ltd (the first defendant) (Pegasus) or Ken.

Blue Mirror conducts a business of supplying healthcare products, including personal protective equipment products, internationally. Pegasus conducts a business of sourcing and assisting buyers in the acquisition of personal protective equipment to be used in combatting COVID-19.

On 28 June 2020, Blue Mirror issued a purchase order to Pegasus for 1 million boxes of nitrile examination gloves.

On 30 June 2020, Blue Mirror and Pegasus entered into an agreement styled "Declaration of Commercial Intent, Service & Supply Agreement" (the Agreement), which set out the terms upon which Blue Mirror would purchase the 1 million boxes of nitrile examination gloves. The Agreement included:

As provided in article 3.2 of the Agreement, the gloves were to be delivered to a mutually agreed location in Vietnam.

By its FASOC (and prior iterations of that pleading), Blue Mirror also asserts that the Agreement includes an implied term that "within 7 business days of the transfer of the Funds, alternatively, within a reasonable time of the transfer of the Funds, Pegasus would inform Blue Mirror of the address in Vietnam to which the Gloves were to be delivered to enable Blue Mirror to carry out the inspection pursuant to Article 4.2". That term, Blue Mirror asserts, is implied as a matter of fact and law.

On the same day as its entry into the Agreement (30 June 2020), and in accordance with its terms, Blue Mirror transferred the purchase price of $9,924,834 into a bank account operated by Pegasus (the First Pegasus Account), from which, it is alleged, Pegasus effected these transactions, the sum total of which is $9,924,800:

These amounts, Blue Mirror asserts, were thereafter further transferred to third parties (some of whom include the Proposed Defendants) in these alleged transactions:

There are additional transactions that are alleged to have occurred between the defendants, Proposed Defendants and other third parties, however, the preceding summary suffices for present purposes.

Blue Mirror alleges that, notwithstanding articles 3.1 and 3.2 of the Agreement, Pegasus did not deliver the gloves for inspection within 7 business days of Blue Mirror's transfer of the purchase price, or at all. The Proposed Defendants do not (or, at least are yet to) deny this allegation, although Mr Brezniak did, in a roundabout way, advance a submission that the Court should draw an inference, on the basis of financial information produced by Blue Mirror in answer to a notice to produce issued by Tan & Tan, that Pegasus did deliver the gloves. I consider this submission in [114].

From 2 July 2020 to 17 July 2020, Blue Mirror (represented by Brett Trevillian) and Ken (on behalf of Pegasus) engaged in several discussions about their respective compliance with the Agreement and whether the Agreement ought to have been amended. The discussions pertaining to proposed amendments of the Agreement, Blue Mirror asserts, came about predominately as a result of Pegasus' delays in delivering the gloves.

Those discussions, it is asserted, culminated in a meeting between Brett and Ken on 15 July 2020, where the additional terms to the Agreement were purportedly agreed, including:

Later that day, an amended version of the Agreement, which incorporated the above and additional terms (the Amended Agreement), was forwarded by Blue Mirror to Pegasus for Pegasus to sign. Neither Blue Mirror, nor Pegasus, signed the Amended Agreement. Blue Mirror nevertheless asserts, as an alternative pleading, that the Agreement was amended by the Amended Agreement. Blue Mirror also asserts that, notwithstanding the additional terms contained within the Amended Agreement, Pegasus did not provide the address at which the gloves were to be inspected by 17 July 2020, or at all, and failed to deliver the gloves by 22 July 2020, or at all.

By this stage, Pegasus had appointed Lucy Nguyen, Anthony's wife, as its power of attorney. Lucy was purportedly appointed as Pegasus' power of attorney on 13 July 2020. Lucy also acted for Pegasus in relation to the Agreement, and its renegotiation, from about 10 July 2020 in her capacity as a solicitor in the employ of Law Australia.

Between 14 and 27 July 2020, Blue Mirror made several attempts to contact Pegasus, most of which either fell on deaf ears or were met with, in its view, an unsatisfactory response. The correspondence included:

There was significant contest between the parties, on both motions, about their respective alleged non-compliance with the Court’s procedural orders, including orders directing Tan & Tan to disclose identified information on a regular basis, and Blue Mirror's asserted failure to commence proceedings against the Proposed Defendants with due despatch. It is therefore necessary for the Court to set out, as concisely as possible, the somewhat convoluted procedural history of this litigation.

On 30 July 2020, Blue Mirror commenced these proceedings by way of summons. The matter was heard by Ward CJ in Eq in the Duty List on that day and her Honour made asset preservation and ancillary orders in relation to Pegasus only. The matter was relisted on several further occasions between 30 July 2020 and 21 October 2020. The substance of those occasions is not of any present relevance other than to note that, on 6 August 2020, Ken departed Australia for Mexico and appears to continue to reside there. Thereafter, Blue Mirror encountered great difficulty in liaising with him. Ken also appears to have failed to comply with several of the Court's orders made on those occasions, which included his failure to attend Court via an audio-visual link to be cross-examined on his affidavit of 20 August 2020.

On 28 September 2020, Lander & Rogers, the solicitors for Blue Mirror, sent a letter to Tan & Tan enclosing copies of the asset preservation and ancillary orders made by Ward CJ in Eq, and the subsequent orders extending her Honour's orders, and, inter alia, putting Tan & Tan on notice of Blue Mirror's claims against Pegasus.

On 21 October 2020, the proceedings were relisted before Lindsay J in the Duty List. On that occasion, Blue Mirror sought leave to file a notice of motion which sought asset preservation and disclosure orders against Ken and Tan & Tan. His Honour made those orders. The asset preservation orders made by his Honour mandated that both of Ken and Tan & Tan "not remove from Australia or in any way dispose of, deal with or diminish the value of any of [their] assets in Australia" up to the unencumbered value of $9,611,900 and $8,500,000 respectively. It was an express term of his Honour's orders that the asset preservation orders were not "intended to prohibit either Ken Tan or Tan & Tan from using their respective assets to fund their reasonable legal expenses". The disclosure orders made by his Honour required that Ken and Tan & Tan independently serve upon Blue Mirror's solicitors an affidavit setting out the full details of:

The affidavits referred to above were required to be served within 7 days from Ken and Tan & Tan being served with the notice of motion and the Court's orders.

Copies of Lindsay J's orders, the notice of motion, the affidavit in support and a proposed amended statement of claim were served on Ken and Tan & Tan on 21 and 23 October 2020 respectively. A copy of Lindsay J's orders was also sent to Australia and New Zealand Banking Ltd (ANZ) (with whom Tan & Tan held and continues to hold bank accounts) by Lander & Rogers. Upon receipt of that correspondence, ANZ froze Tan & Tan's bank accounts, notwithstanding the express exemption contained in his Honour's orders permitting Tan & Tan to use its assets to fund its reasonable legal expenses.

On 29 October 2020, the proceedings were relisted in the Duty List before Rees J, on which occasion Tan & Tan was represented by Mr P Barham of Counsel instructed by Lucy. The matter was listed before her Honour principally to extend or dissolve the asset preservation and disclosure orders made by Lindsay J, which included granting Tan & Tan leave to file a notice of motion seeking orders:

Her Honour granted the orders sought by all parties, which included an order granting leave to Tan & Tan to file its notice of motion. Thereafter, Tan & Tan was permitted to sell or otherwise dispose of its trading stock in the ordinary course of its business and to use the proceeds of any sales to:

The proceedings were again listed before her Honour in the Duty List on 5 November 2020. On that occasion, Tan & Tan sought the relief contained in its notice of motion dated 4 November 2020, that:

Her Honour granted the orders sought by Tan & Tan, but in relation to the second order, imposed a further requirement upon Tan & Tan that it provide additional financial information to Blue Mirror, including copies of bank account statements and records of transactions for certain bank accounts in its name.

On 13 November 2020, the proceedings were listed before Parker J in the Duty List, and his Honour made the following orders:

His Honour also made the following additional orders, the first of which assumed some importance in the hearings before me:

For the balance of these reasons, I will refer to the asset preservation and disclosure orders of Lindsay J, Rees J and Parker J collectively as "the Freezing and Disclosure Orders".

Notwithstanding Order 1 of the second tranche of orders made by Parker J on 13 November 2020, Blue Mirror did not send a copy of its proposed amended statement of claim to Tan & Tan by 18 November 2020, or at all, prior to filing an amended statement of claim on 30 November 2020. That version of Blue Mirror's amended statement of claim was not the version of that pleading provided to his Honour on 13 November 2020 because, principally, it omitted Tan & Tan as a new defendant to the proceedings. Tan & Tan did not receive a copy of the filed version of the amended statement of claim until 15 February 2021.

On 20 November 2020, in compliance with the orders of Parker J (although Blue Mirror asserts only partial compliance), Tan & Tan filed an affidavit of Anthony and an affidavit of Robert Wainibuka, who had been appointed director of Tan & Tan on 29 October 2020. By the first affidavit, Anthony set out, in some detail, a carjacking incident in which he says he was involved on 7 November 2020. It is unnecessary to venture into the details of that incident for present purposes, however, of present importance is the fact that Anthony's laptop — upon which he says he exclusively stored close to all of Tan & Tan's financial information — was purportedly stolen. This, he asserted, significantly inhibited Tan & Tan's ability to comply with Rees J's disclosure orders. By the second affidavit, Robert exhibited bank account statements and receipts received from ANZ.

On 9 December 2020, pursuant to leave granted by Rees J on 29 October 2020, Tan & Tan issued a notice to produce to Blue Mirror seeking documents to corroborate Blue Mirror's ability to honour its undertaking as to damages. In answer to that notice to produce, Lander & Rogers indicated Blue Mirror's refusal to produce the documents sought on account of the breadth of the documents which it sought.

After the exchange of further correspondence, Blue Mirror ultimately produced two documents in what appears to be a partial answer to the notice to produce. The two documents produced by Blue Mirror were a NAB account summary of its bank accounts as at 28 October 2020 and a letter from Metal Alpha Pty Ltd (Metal Alpha) dated 30 June 2020, in which Metal Alpha confirmed a loan from it to Blue Mirror in the amount of $10,200,000. The salient terms of that loan are:

Also on 9 December 2020, Blue Mirror caused a subpoena to be issued to ANZ, by which it sought production of, among other documents, copies of all bank statements, transaction summaries, transaction reports, records of transactions and receipts for the period of 1 July 2020 to the date of the subpoena in respect of certain bank accounts held by Tan & Tan with ANZ (the First ANZ Subpoena). ANZ produced documents sought by the First ANZ Subpoena and general access orders were granted on 21 January 2021. As Tan & Tan was not a party to the proceedings at this stage, it received a copy of the First ANZ Subpoena, and the documents produced by ANZ in answer to it, on 26 January 2021.

On 25 February 2021, Blue Mirror caused a second subpoena to be issued to ANZ, in response to which ANZ produced further financial documents pertaining to Tan & Tan (the Second ANZ Subpoena). ANZ continued to produce documents in response to either or both of the First ANZ Subpoena and Second ANZ Subpoena until 11 March 2021.

The documents produced by ANZ in response to the First ANZ Subpoena and Second ANZ Subpoena appear, at least prima facie, to corroborate Blue Mirror's assertions that the various payments set out at [11]–[12] in fact occurred. Blue Mirror also submitted that it was only after ANZ produced documents on 5 March 2021 that it was able to trace properly the movement of funds to and from Tan & Tan, Anthony and ACC and thus, properly understand the causes of action it had available to it against them.

On 26 March 2021, the proceedings were again listed in the Duty List before Robb J. This was at the request of Tan & Tan, seeking orders varying Parker J's asset preservation orders of 13 November 2020 to enable it to accept an offer for the purchase of its inventory of facemasks and milk formula.

In support of that application, Tan & Tan sought to rely upon a further affidavit of Robert, which included:

Robb J made orders on that occasion, which were ultimately largely by consent:

On 30 March 2021, Blue Mirror filed a notice of motion. That motion annexed a proposed Further Amended Statement of Claim, which was different in substance and form to the pleading which it now seeks leave to file. I return to the significance of this discrepancy later in these reasons.

On 31 March 2021, the proceedings were listed before me in the Duty List for Tan & Tan's amended notice of motion to be heard. At the commencement of that hearing, Tan & Tan sought leave to file a further amended notice of motion dated 29 March 2021, which the Court granted. It is this iteration of Tan & Tan's notice of motion that the Court presently has before it. On that occasion, it became clear, for several reasons, that Tan & Tan's further amended notice of motion could not, and ought not, be heard in the Duty List. Those reasons included:

For these reasons, and because Tan & Tan's notice of motion (which had, by the Court granting it leave to file its further amended notice of motion, been superseded) was already listed to be heard by me on 30 April 2021, the Court made orders that Blue Mirror's notice of motion and Tan & Tan's further amended notice of motion were to be listed before me in the Applications List on 30 April 2021. Additional timetabling orders were also made on that occasion, including for the filing of written submissions.

On 30 April 2021, the Court heard, albeit only partially, the two notices of motion. It is necessary for the Court to explain why the hearing could not conclude on that occasion, not only to clarify the procedural history of this litigation, but to understand properly the submissions directed at Blue Mirror's conduct in these proceedings.

Shortly after the hearing commenced, it became apparent that Blue Mirror was seeking to rely upon a different version of the proposed FASOC than that which it had initially annexed to its notice of motion of 30 March 2021. Mr Glasson sought to explain what, on an adverse view, appeared to be a sleight of hand by directing the Court's attention to a letter from Lander & Rogers to Citilawyers on 27 April 2021, in which, Mr Glasson submitted, Lander & Rogers foreshadowed that Blue Mirror would be relying upon a different version of the proposed FASOC and enclosed a copy of that pleading.

Although that may have been the intent of the correspondence, the terms of letter were equivocal and fell well short of properly elucidating Blue Mirror's intention vis-à-vis its pleading. The letter also did not serve a proposed amended notice of motion annexing the new version of the proposed FASOC, which it ought to have done. Simply put, these matters ought to have been foreshadowed in that correspondence and brought to the Court's attention at the commencement of the hearing, neither of which actually occurred. It was thus not clear to the Court or Messrs Corsaro SC or Brezniak that Blue Mirror was seeking to rely upon a new version of the proposed FASOC.

In the interest of utilising the time allocated to the proceedings on 30 April 2021, the Court nevertheless proceeded with the hearing of the two notices of motion, including on the basis of the new proposed FASOC. Directions were made that Blue Mirror file an amended notice of motion annexing the new version of the proposed FASOC. That amended notice of motion was filed on 4 May 2021. The Court also ordered additional written submissions to take account of the new version of the FASOC and fixed the matter for further hearing, limited to one hour, on 28 May 2021.

At the request of Tan & Tan and unopposed by the other parties, the hearing on 28 May 2021 was adjourned. The proceedings were again listed before me on the next available date — 28 June 2021 — on which occasion the parties made further oral submissions on both motions presently before the Court.

By the FASOC, Blue Mirror is seeking to introduce the following additional causes of action against the Proposed Defendants:

Pursuant to r 6.24(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the Court may order that a person be joined as a party to proceedings if their joinder is proper or necessary "to the determination of all matters in dispute". The principle embodied in r 6.24 of the UCPR reflects the general proposition that, "where there is one subject-matter out of which several disputes arise, all parties may be brought before the Court, and all those disputes may be determined at the same time without the delay and expense of several actions and trials": Montgomery v Foy, Morgan & Co [1895] 2 QB 321 at 324 (per Lord Esher MR).

Necessarily associated with the Court's power to order that a person be joined as a party to proceedings is the Court's power to permit an amendment to pleadings. It is often necessary, upon joining a party or parties to proceedings, that the pleadings be amended to reflect not only the joinder, but also to appropriately propound the cause or causes of action upon which the plaintiff relied in support of the joinder application.

The Court's power to grant leave to a party to amend its pleadings is found in s 64 of the Civil Procedure Act 2005 (NSW) (CPA), which includes:

Section 58 of the CPA provides:

Sections 56 and 57 of the CPA require that the Court give effect to the overriding purpose of the CPA, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings, while having regard to the following objects (s 57(1)):

The principles applicable to an application to amend pleadings did not appear to be in dispute between the parties. In Kelly v Mina [2014] NSWCA 9, Barrett JA (with whom Ward (as her Honour then was) and Leeming JJA agreed) said:

Also of relevance to Blue Mirror's application to amend are the principles set out by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, which were conveniently summarised by Gleeson J in Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm); In the matter of Tamaya Resources Ltd (in liq) [2015] FCA 1098 at [127]:

Mr Glasson's submissions on Blue Mirror's application to join the Proposed Defendants and amend its pleadings can be summarised as:

At [14] above, I referred to a submission made by Mr Brezniak that the Court can, and should, draw an inference that the gloves were in fact delivered. That submission can be summarised as:

Mr Glasson answered that submission in reply with three submissions:

Mr Corsaro SC's principal submissions, which were largely adopted by Mr Brezniak, on the issue of Blue Mirror's application to amend its pleadings may be summarised as:

Mr Corsaro SC's first submission was directed at the circumstances which have been set out in [31], [33], [43]–[44] above. He submitted that Blue Mirror failed to serve its amended pleading joining Tan & Tan by 20 November 2020 pursuant to the orders of Parker J on 13 November 2020 and failed to adequately explain that delay. Blue Mirror should not, he submitted, be granted "an Aon indulgence to excuse its delay": [8] of Mr Corsaro SC's submissions dated 29 April 2021.

The gravamen of Mr Corsaro's second submission, by contrast, pertains to Tan & Tan's alleged knowledge of Pegasus' impropriety and the failure by Blue Mirror properly to plead and particularise what appears to be an allegation that the defendants, including the Proposed Defendants, engaged in and concocted a dishonest and fraudulent arrangement, scheme or design; that is, they conspired.

Mr Corsaro SC developed his submission that the FASOC is deficient on account of its omission of "[t]wo crucial links in the chain of inference sought to be constructed": [19] of Mr Corsaro SC's submissions dated 10 May 2021. The two "crucial links" were:

The argument was that although it appears that Tan & Tan was aware by 28 September 2020 that funds it had received from Pegasus were alleged to have been transferred in breach of trust, it was not aware of this fact prior to that date, that is, at the time of the relevant transactions. It is for this reason, Mr Corsaro SC submitted, that Blue Mirror's Barnes v Addy claims are bound to fail.

However, Mr Corsaro SC did appear to accept ([32] of Mr Corsaro SC’s submissions dated 10 May 2021) that Blue Mirror has an arguable claim against Tan & Tan pursuant to Black v Freedman and, although taking issue with the pleading of knowledge, Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81 (Fistar).

A further aspect of Mr Corsaro SC's second submission was summarised in his oral submissions (Tcpt, 30 April 2021, p 32(40–50)):

Mr Muddle SC's submissions, although similar to those advanced on behalf of Tan & Tan and Anthony, were directed to the claims made against ACC and may be summarised as:

The gravamen of Mr Muddle SC's first submission was that, by [56(b)] and [56B] of the proposed FASOC, Blue Mirror alleges that ACC received $6,147,000 from Tan & Tan and then repaid $6,000,000 to Tan & Tan shortly afterwards. Mr Muddle SC submitted that Blue Mirror's claim that ACC holds $6,147,000 as constructive trustee for Blue Mirror was bound to fail because, on Blue Mirror's own pleadings, ACC no longer holds the amount transferred from Tan & Tan to it. It was also submitted that the additional claims made against ACC are bound to fail for the same reason.

Mr Muddle SC's second submission, advanced in the alternative, was that the pleadings that pertain to ACC's knowledge of Pegasus' impropriety are deficient. By the pleadings, Blue Mirror asserts that Anthony's knowledge of Pegasus' impropriety is to be imputed to ACC on account of his directorship of ACC at all relevant times. Anthony's purported knowledge of Pegasus' impropriety is multifaceted and largely inferential. The following is a summary of how, on its pleadings, Blue Mirror asserts that ACC (and Tan & Tan and Anthony) had knowledge of Pegasus' impropriety:

Mr Muddle SC argued that these pleadings and particulars fall short of what is required of Blue Mirror in the circumstances and cannot support Blue Mirror's Barnes v Addy claims against ACC. Mr Muddle SC's submissions did not, however, specifically attack Blue Mirror's pleadings that ACC is a constructive trustee for Blue Mirror pursuant to Black v Freedman.

The Court has the power to make asset preservation orders, and ancillary orders in relation thereto, pursuant to rr 25.11, 25.12 and 25.14 of the UCPR and the Court's inherent jurisdiction "to take such steps as may be necessary in order to ensure that its orders are not frustrated": Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 (Patterson) at 328 per Rogers AJA; see also Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 at 32; [1998] HCA 30 per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ; Cardile v LED Builders Pty Limited (1999) 198 CLR 380; [1999] HCA 18 at [42] per Gaudron, McHugh, Gummow and Callinan JJ (Cardile). Rules 25.11. 25.12 and 25.14 of the UCPR provide:

As the High Court explained in Cardile, different considerations apply to the Court's disposition of an asset preservation order application directed at a non-party than those that apply to a party against whom final relief is sought. Where asset preservation orders are sought against a party to the proceedings, the Court's focus is upon "the frustration of the court's process": Cardile at [42]. An asset preservation order directed at a non-party, by contrast, is directed at "the administration of justice": Cardile at [42].

An asset preservation order against a non-party may be appropriate in one of the following two archetypal scenarios:

In either scenario, but perhaps more pertinently to the second, the High Court's observations in Cardile at [53] are salient and bear significantly on this Court's exercise of discretion in granting, or ordering the continuance of, an asset preservation order. Those observations were thus:

Albeit that Tan & Tan is a non-party to the proceedings, it is, and has been at least since Parker J's orders of 13 November 2020, a putative defendant. The above principles applicable to the Court's grant of an asset preservation order against non-parties thus have direct relevance to the Court's determination of Tan & Tan's amended notice of motion.

As Blue Mirror is seeking, albeit defensively, to justify the continuation of the Freezing and Disclosure Orders, it bears the onus of satisfying the Court that the orders ought to be continued: Resort Hotels Management Pty Ltd v Resort Hotels of Australia Pty Ltd (1991) 22 NSWLR 730 at 731. Blue Mirror must satisfy the Court that:

The criterion of a "good arguable case" requires proof "of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success": Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH &Co KG, The Niedersachen [1983] 1 WLR 1412; [1984] 1 All ER 398 (Ninemia) at 404 per Mustill J. In the Court's assessment of a "good arguable case", the Court "should not be drawn into a premature trial of the action, rather than a preliminary appraisal of the plaintiff's case": Ninemia at 404; see also Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [69] and [70], where McColl JA approved the observations of Mustill J in Ninemia.

The second relevant criterion is whether there is a risk that the defendant will, either by absconding or dissipating its assets, render itself "judgment proof". In satisfying the Court of this criterion, it is not incumbent on the plaintiff to establish this risk or danger on the balance of probabilities: see Patterson at 325 per Gleeson CJ; see also Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102 at [57]–[60] per Bathurst CJ, with whom Beazley P and Barrett JA agreed. Rather, it is incumbent on the plaintiff to satisfy the Court that there is a danger that the prospective judgment will not be satisfied if the asset preservation order is not made, notwithstanding that the risk of that occurrence may be less probable than not. There is no requirement that evidence of the real risk that a defendant may abscond or dissipate its assets be direct; it may, and often will, be adduced by evidence that calls for inferences to be drawn. Additionally, there is no requirement imposed upon the plaintiff to adduce evidence of a positive intention by the defendant to frustrate any judgment: National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277; [1990] HCA 10 per Mason CJ, Brennan and Deane JJ.

Although the second criterion does not need to be established on the balance of probabilities, the plaintiff is nevertheless required to adduce "solid evidence" that there exists a real risk that the defendant will abscond or dissipate its assets; mere assertion of that risk or proof that a company is incorporated abroad and does not have assets within the jurisdiction is insufficient: Ninemia at 406; Frigo v Culhaci [1998] NSWCA 88; Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [12] per Kenny J. As Lawton LJ explained in Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB 645, there must be facts from which the Court, "like a prudent, sensible commercial man, can properly infer a danger of default if assets are removed from the jurisdiction": at [56]. I would respectfully add to his Lordship's observations that there may be evidence, inferential or otherwise, demonstrating a sufficient danger of default if the defendant's assets are dissipated within the jurisdiction.

In its assessment of the purported risk or danger posed by a defendant absconding or dissipating its assets, the Court may also have regard to the nature of the allegations raised against the defendant, particularly in circumstances where the "good arguable case" is one involving serious dishonesty or fraud. In Patterson, Gleeson CJ relevantly said (at 325–6):

The third criterion — that the Court should exercise its discretion in favour of continuing the Freezing and Disclosure Orders — engages a wide range of considerations, including those set out by the High Court in Cardile at [53] (see [76] above). In addition to those considerations, the discretionary considerations in an application of the present kind include the Court's assessment of the parties' respective compliance with orders of the Court and disclosure obligations, particularly those obligations impressed upon a plaintiff where asset preservation orders are obtained ex parte, which necessarily includes what is contained in [19] of Practice Note SC Gen 14. That paragraph provides:

If a plaintiff fails to comply with these obligations, the Court may, subsequent to its grant of an asset preservation order — which is usually the case where an order is made ex parte because evidence of a plaintiff's non-compliance with Practice Note SC Gen 14 will ordinarily be brought to the Court's attention by the party against whom the order is made — dissolve that order in the exercise of its discretion. As the High Court explained in Thomas A Edison v Bullock (1912) 15 CLR 679 at 681–2:

Also of relevance to the Court's exercise of its discretion in applications of the present kind is the issue of whether the plaintiff has proffered an undertaking as to damages and, consequentially, the adequacy of that undertaking. An undertaking as to damages will be required in applications of the present kind unless exceptional circumstances exist justifying departure from that rule, including where the plaintiff establishes an unarguable case of fraud: see, eg, De Boer v Williams [2004] NSWSC 351 at [20] and [23] per Einstein J; Southern Tableland Insurance Brokers Pty Ltd (in liq) v Schomberg (1986) 11 ACLR 337 (Southern Tableland) at 340 per Young J (as his Honour then was), quoting Kerridge v Foley (1968) 70 SR (NSW) 251 at 255 per Sugerman JA with approval. The failure of a plaintiff to proffer an undertaking as to damages, although not ipso facto fatal to an application for an asset preservation order, weighs heavily against an order of that nature.

The Court will also take into account, in the exercise of its discretion, the adequacy of that undertaking. Akin to the absence of an undertaking, the Court will be less inclined, in the exercise of its discretion, to grant an asset preservation order in circumstances where it is satisfied that a plaintiff does not have the wherewithal to honour its undertaking, either because of practical difficulties the defendant is likely to encounter in enforcing the undertaking or on account of the plaintiff's want of sufficient funds: Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) Ltd (1987) 76 ALR 633 at 640; Southern Tableland at 342–3. If the Court is not satisfied that the undertaking proffered by the plaintiff would be sufficient to satisfy losses caused by the Court's order preserving the defendant's assets, then the Court may require security to support that undertaking: Southern Tableland at 343; Re DPR Futures Ltd [1989] 1 WLR 778 at 786.

Mr Corsaro SC's submissions in support of Tan & Tan's application to dissolve the Freezing and Disclosure Orders may be summarised as:

Mr Corsaro SC's first submission principally addresses the manner in which Blue Mirror's claims against Tan & Tan were articulated before her Honour in October 2020. In short, Blue Mirror's claim against Tan & Tan before her Honour was that Blue Mirror was entitled to trace the funds received by Tan & Tan from Pegasus, which Pegasus received from Blue Mirror, or that alternatively, Tan & Tan was liable to account to Blue Mirror for the sum of $8,500,000, or such other sum that it received, as constructive trustee. Blue Mirror had not, by this stage, articulated most of the claims that it now seeks to propound by the FASOC against Tan & Tan.

Mr Corsaro SC's second submission is multifaceted and, for its constituent elements to be properly considered, they ought to be distinguished. The first aspect of Mr Corsaro SC’s second submission was that the FASOC is deficient because it does not allege that Tan & Tan was aware of Pegasus' alleged impropriety at the time of its receipt, and subsequent disbursal, of funds from Pegasus to Anthony and ACC (this submission is, although not identical, similar to that advanced by Mr Muddle SC on this issue, albeit that differences are manifest in the claims made by Blue Mirror against the respective parties). The highest the evidence rises, Mr Corsaro SC submitted, is to suggest that Tan & Tan may have first become aware of Pegasus' alleged impropriety via second-hand hearsay through Anthony (as its director) on or around 13 August 2020, or alternatively, upon its receipt of the letter from Lander & Rogers on 28 September 2020. However, Tan & Tan's knowledge of Pegasus' alleged impropriety from on or about 13 August 2020 is insufficient to support a claim that Tan & Tan holds, as constructive trustee, the funds it received from Pegasus for Blue Mirror.

It was also submitted, under the first aspect of Mr Corsaro SC's second submission, that because Blue Mirror does not have a good arguable case of fraud, the Court's discretion to make the Freezing and Disclosure Orders was never enlivened such that the Freezing and Disclosure Orders ought not have been made and must now be discharged.

The second aspect of Mr Corsaro SC’s second submission was that there was no evidence before her Honour in October 2020, nor now, that Tan & Tan will dissipate its assets. Mr Corsaro also submitted that, because the cause of action propounded against Tan & Tan before her Honour was deficient, and the causes of action now sought to be propounded against Tan & Tan by the FASOC are deficient, the Court ought to disregard the substantive allegations made against Tan & Tan in the Court's assessment of whether Tan & Tan poses a real risk of dissipating its assets and thus frustrating the administration of justice (referring to the principle expressed by Gleeson CJ in Patterson at 325–6).

The third aspect of Mr Corsaro SC’s second submission addressed what is alleged to be Blue Mirror's failure to commence proceedings against Tan & Tan diligently and expeditiously: see Cardile at [53]. Blue Mirror's failure to commence proceedings against Tan & Tan diligently and expeditiously, it was contended, is manifest from the following events after Lindsay J's orders in October 2020:

Mr Corsaro SC’s third submission was that the undertaking as to damages proffered by Blue Mirror was (as at October 2020) and remains inadequate. Both at the time of its ex parte application in October 2020 and presently, Blue Mirror does not have assets, other than cash, available to satisfy a prospective order that it compensate Tan & Tan for its loss occasioned by the Freezing and Disclosure Orders. At the time that it gave undertakings to the Court in October 2020, Blue Mirror had between $298,359 and $307,470 in cash at bank. At 28 April 2021, Blue Mirror had $192,316 in cash at bank.

Tan & Tan estimated that it has suffered losses consequent upon the Freezing and Disclosure Orders in the amount of at least $3,000,000, which well exceeds Blue Mirror's cash at bank. The basis for Tan & Tan's estimates are that "[f]rom late September 2020 through to November 2020, Tan & Tan received purchase offers for its inventory which it did not accept in order to maintain the required asset value of $8,500,000.00 AUD": [35] of Robert’s affidavit dated 26 March 2021.

This submission was advanced notwithstanding that the Freezing and Disclosure Orders did not prohibit Tan & Tan from selling or otherwise disposing of its trading stock of motor vehicles and other stock in trade in the ordinary course of its business and that, on 1 February 2021, Tan & Tan sold facemasks for the sum of $19,800.

Mr Glasson's submissions on Tan & Tan's further amended notice of motion can be summarised as:

In his written submissions in reply dated 18 May 2021, Mr Glasson also sought, for the first time, to distinguish the principles relevant to an application for a freezing order in circumstances where a plaintiff's claims are in rem and in personam: see, eg, National Australia Bank Limited v Human Group Pty Ltd (No 2) [2020] NSWSC 1900 at [106]–[112] per Henry J; Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 403 (Paris King Investments) at [58] per Brereton J (as his Honour then was). Mr Glasson's submission was, albeit brief, responsive to Mr Corsaro SC's submission that in the absence of a good arguable case of fraud against Tan & Tan, the Freezing and Disclosure Orders ought not have been made. Simply put, Mr Glasson's submission was that a claim of fraud is not required to justify the Freezing and Disclosure Orders and that those orders may be supported by the other proprietary and non-proprietary claims made against Tan & Tan.

The object of an asset preservation order where an in rem claim is made, in contradistinction to an asset preservation order where an in personam claim is made, is to preserve the property in which the plaintiff claims at least a prima facie proprietary interest. The injunctive relief thus attaches to the property to which it is addressed and is properly to be characterised as a traditional interlocutory injunction, the rights of which the plaintiff seeks to enforce on a final basis: Paris King Investments at [58]. Where an in personam claim is made, by contrast, the asset preservation order seeks to prevent the person or entity at whom the order is directed from dissipating their own property, thus preserving the integrity of the Court's processes: Cardile at [42]. It is this type of order, rather than the former, that became known as a Mareva injunction.

Although it is true that the legal principles governing the disposition of an application for a traditional interlocutory injunction and Mareva injunction have similarities, there are certainly differences. The principles applicable to the Court's disposition of a traditional interlocutory injunction application were conveniently summarised by Bond J in Tribal Health Pty Ltd v Flush Fitness Pty Ltd [2016] QSC 103 at [23]:

Mr Glasson's submission distinguishing the principles applicable to asset preservation orders was not developed in oral submissions at the hearing on 28 June 2020, nor did it receive any response from Messrs Brezniak, Corsaro SC or Muddle SC. The controversy to which counsel directed most of their attention was the strength (or lack thereof) of the causes of action propounded by Blue Mirror and their opponents' non-compliance with disclosure obligations and procedural orders. In any event, nothing turns on the distinction in principle between a traditional interlocutory injunction and a Mareva order in these proceedings. What is important is that the authorities are clear that a pleading of fraud is not a necessary prerequisite to the grant of either a traditional interlocutory injunction or a Mareva order.

As will be apparent from what has been set out above, the procedural history of these proceedings to date has become very complex. Complexity of a different kind has been introduced by the detailed factual and legal arguments that have been advanced on the motions which are the subject of these reasons. Before setting out the Court’s particular conclusions on those motions, it is necessary to set out six general observations which have informed the Court’s exercise of its discretion regarding both motions.

First, in applying the CPA and the rules of the Court, the Court must seek to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in these proceedings (CPA s 56).

Second, the real issue in these proceedings is who is liable to Blue Mirror from among those who appear to have received or dealt with substantial parts of nearly $10,000,000 that appears, at least prima facie, to have been misappropriated from Blue Mirror.

Third, Blue Mirror has presented prima facie evidence of dealings with that money (see [11]–[12] above), by and between the Proposed Defendants — all of whom have a common connection through members of the Tan family — that have no obvious commercial purpose and for which no explanation has been attempted to be proffered by any of the Proposed Defendants. If there were innocent or straightforward responses to explain what happened to that money and how it was dealt with (including whether any of the Proposed Defendants gave consideration for what they received), then those entities or persons have singularly failed to offer any such responses.

Fourth, the Court’s orders have been framed to allow Tan & Tan to trade in the ordinary course of business. Tan & Tan has been unable to demonstrate how, in those circumstances, it has suffered any relevant prejudice by those orders. To make this observation is not to overlook that it is Blue Mirror which bears the onus of demonstrating its entitlement to interlocutory relief against Tan & Tan.

Fifth, none of the Proposed Defendants have suggested that Blue Mirror, as a matter of pleading, cannot propound its case based on Black v Freedman. They were correct to refrain from doing so. However, the heading of each relevant section of the FASOC “Black v S Freedman & Co Trust” together with the way Blue Mirror has pleaded that claim against the Proposed Defendants has, perhaps, led to some confusion in the arguments. This is because Blue Mirror has included allegations against the Proposed Defendants in relation to the funds received that they were volunteers and that they had knowledge of the wrongful circumstances in which the funds were being dealt with. The second allegation, while relevant to other equitable claims, is not essential to the Black v Freedman claim. As Griffith CJ noted in that case (at 109), “… it has been laid down in cases decided long ago that if the alienee is a volunteer the estate may be followed into his hands whether he had notice of the trust or not.” O’Connor J expresses the same view at 110 and Barton J agreed. Knowledge will be relevant, for example, to a claim under Fistar, where the volunteer recipient of trust funds subsequently acquires knowledge of the trust. While, as I will explain in what follows, the Court is satisfied that the various allegations of knowledge on the part of the Proposed Defendants are sufficiently pleaded to raise a triable issue, even if the Court had some doubt on that question, in the exercise of its discretion it would nevertheless permit those other equitable claims to go to trial. This is because the circumstances in which the Proposed Defendants received and dealt with the money claimed by Blue Mirror will necessarily be part of the factual dispute before the Court in considering the case based on Black v Freedman.

Sixth, none of the Proposed Defendants have been able to demonstrate any prejudice that they have suffered by reason of the delay they say has been a feature of Blue Mirror’s attempt to join them in these proceedings.

In addition to the matters referred to in [102]–[107], for the following reasons the Court will permit the latest amended version of the FASOC to be filed.

The Court is satisfied that the amendment is “necessary” within the meaning of s 64(2) of the CPA to determine “the real questions raised by or otherwise depending on the proceedings”. The real question has been identified in [103]. It follows the amendment should be allowed unless some countervailing matter justifies the contrary conclusion. None of the matters raised by the Potential Defendants has that result.

I have taken into account (s 58(2)(b)(i) of the CPA) that a proper reason for the amendment is the difficulty for Blue Mirror which the issues in the proceedings present. That difficulty is that nearly all of the relevant facts as to what occurred to the funds are within the knowledge of the Proposed Defendants and other third parties such as financial institutions. It has only been through the use of interlocutory processes such as subpoenas that Blue Mirror has been able to uncover facts on which it now proposes to rely.

For the purposes of s 58(2)(b)(ii) of the CPA (timeliness, including of any interlocutory activities), I do not regard Blue Mirror’s failure to provide an amended statement of claim in accordance with Parker J’s orders in November 2020 (see [33] above) as a sufficient basis to refuse Blue Mirror’s present application. While that noncompliance was unsatisfactory, it is explicable by reason of the matters to which I have referred in the preceding paragraph. I accept Mr Glasson’s submission (see [96(4)(c)]) that key information only became available to Blue Mirror in March 2021. I also have also taken into account that none of the Proposed Defendants has been able to demonstrate any prejudice by reason of the delay.

For the purposes of s 58(2)(b)(vi) (injustice to any party), the Proposed Defendants have been unable to demonstrate any injustice that they would suffer by reason of the joinder and amendments being permitted. However, there would be a significant injustice to Blue Mirror if the joinder and amendments were not allowed. The amount claimed by Blue Mirror is very large by any standard. The funds have left Pegasus, the controlling mind of which — Ken — is now apparently out of reach in Mexico. In the absence of permitting the joinder and amendments, Blue Mirror would be left without recourse to pursue those parties, which on the evidence it has been able to gather to date (see [11]–[12]), received the funds in issue in presently unexplained circumstances.

I next consider some of the specific submissions raised on behalf of the Proposed Defendants.

I accept Mr Glasson’s submissions (see [61]) as to why Mr Brezniak’s submission that the Court should infer that the gloves were delivered (see [14] and [60]) should be rejected. With respect, the proposition that the Court should infer such a fundamental matter from the extremely limited matters referred to by Mr Brezniak was fanciful. Given the vigour with which the Proposed Defendants opposed their joinder, I have little doubt that one or all of them would have sought to demonstrate, if it could be demonstrated, in a far more definitive way that the gloves had been delivered.

Mr Corsaro SC submitted (see [65]) that a missing “crucial link” was an allegation that Tan & Tan or Anthony knew that Pegasus had no money apart from the funds Blue Mirror had transferred to it. I do not agree that this is a “crucial link”. Blue Mirror’s case, as is frequently and necessarily so in fraud or conspiracy, is an inferential one and the facts and particulars now sought to be pleaded by Blue Mirror raise a triable issue.

Furthermore, as it is now sought to be pleaded, Blue Mirror’s case does not depend on establishing this alleged “crucial link”. Rather, the case (apart from the Black v Freedman claim) is that at least by specified dates as early as 1 July 2020, Anthony, and therefore Tan & Tan, knew that the funds received by Tan & Tan had come from the funds advanced by Blue Mirror to Pegasus. It is irrelevant to this claim whether or not Anthony knew that Pegasus had no other funds.

Mr Corsaro SC’s second alleged “crucial link” (see [65]) again is not essential. As a matter of pleading, the case alleged (and summarised in [51]) is sufficient to raise a triable issue. More generally, I do not accept the submission (see [68]]) that the particulars of the alleged conspiracy are inadequate. Taken together with the other matters particularised, at the pleading stage reliance on various familial relationships is sufficient to raise a triable issue.

Turning to Mr Corsaro SC’s second submission (see [64]–[68]), this might be correct if the allegation went no further than the allegation of knowledge by 28 September 2020. However, there are allegations of knowledge by Anthony with particulars that at least raise a triable issue of knowledge as at 13 or 14 July (being immediately at or before the impugned transfers from Ken to Tan & Tan).

Insofar as ACC is concerned, Mr Muddle SC’s submission (see [70]) relying upon the repayment of $6,000,000 by ACC to Tan & Tan is not the complete answer for which Mr Muddle SC contended. I accept Mr Glasson’s submissions in reply that any repayment to Tan & Tan was not an account to Blue Mirror. It was arguably a breach of the trust on which Blue Mirror alleges ACC held the money which it had received and to the extent Blue Mirror has not otherwise recovered those funds, the Court is satisfied that the proposed pleading makes out an arguable case for equitable compensation against ACC.

Mr Muddle SC also took issue with the proposed pleading of ACC’s knowledge. Similarly with the pleading against Anthony and Tan & Tan, the Court is satisfied that the proposed pleading sufficiently raises a triable issue as to ACC’s knowledge through Anthony of breach of trust in relation to the money which came into its possession. At the risk of stating the obvious, it is not necessary for ACC to have knowledge of the legal conclusion that it had received funds in breach of trust. All that is necessary, as is now proposed to be pleaded, is to demonstrate knowledge on the part of ACC of the primary facts from which the Court would draw the conclusion of breach of trust.

The Court accepts Mr Glasson’s submissions as summarised in [96]. However, in addition to the matters set out in [102]–[107], I will briefly set out the critical matters supporting the Court’s conclusion that the Freezing and Disclosure Orders were properly made, should not be discharged and that no security should be ordered in respect of Blue Mirror’s undertaking as to damages.

The case originally made by Blue Mirror against Tan & Tan was plainly one which justified the Freezing and Disclosure Orders, given Blue Mirror’s evidence that the gloves had not been delivered and Pegasus had paid away the funds for the gloves to Tan & Tan. The fact that, after interlocutory processes such as subpoenas, the case is now to be articulated differently — it would not be unfair to say, now with greater precision — does not retrospectively cast doubt on orders made on the basis of the information then available to Blue Mirror and presented to the Court Furthermore, the case made before Lindsay J and Rees J in October 2020 warranted the drawing of the inference of risk of dissipation from what at that time on the material was the at least colourable, and perhaps fraudulent, dealing with Blue Mirror’s money by reason of the transfer from Pegasus to Tan & Tan.

For the reasons set out in [111], the Court is not satisfied that any delay on the part of Blue Mirror warrants any present interference with the Freezing and Disclosure Orders.

I have dealt with the criticisms of the FASOC in considering the joinder and amendment application above. The Court is satisfied that the proposed pleading, supported by the evidence now available, warrants the continuation of the Freezing and Disclosure Orders. The case as now to be pleaded as a whole, the still inexplicable and unexplained transfers of funds between the Proposed Defendants and the arguable allegations of a fraudulent scheme involving Pegasus, Ken and Anthony (the latter including in his capacity as a director of Tan & Tan with his knowledge attributed to Tan & Tan) permits the Court to draw, as it does and in accordance with Gleeson CJ’s observations in Patterson, the inference of a risk of dissipation of assets and the potential frustration of the administration of justice if the Freezing and Disclosure Orders do not continue.

Finally, Tan & Tan has failed to demonstrate any basis on which the Court would order Blue Mirror to give security for its undertaking as to damages. Tan & Tan’s generalised references to loss are implausible, having regard to its express capacity under the current interlocutory regime to engage in the ordinary course of its business.

In October 2020, Blue Mirror had cash of approximately $300,000. At the time of the hearing before me, it had cash of approximately $190,000. In the absence of evidence from Tan & Tan of specific losses or any other presently quantifiable prejudice solely referable to the Freezing and Disclosure Orders, the Court concludes that Blue Mirror’s undertaking is adequate and that security for that undertaking is not required. Even if I am wrong in this conclusion, I would not require security given both the arguable allegations of a fraudulent scheme and what presently appears to be a strong prima facie case based on Black v Freeman.

The parties will be given an opportunity to agree on short minutes of order to give effect to these reasons and, if they can, as to costs.