• Lawyers in Sydney
• Lawyers in Melbourne
• Lawyers in Brisbane
• Lawyers in Perth
• Family lawyers
• Employment lawyers
• Criminal lawyers
• Wills and estates lawyers
• Find a lawyer

Texts Cited: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths)
RP Austin and IM Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths)

Category: Principal judgment

Parties: Landco Group Middleton Grange Pty Ltd atf LGMG Unit Trust (Plaintiff)
Australian Agrivision Pty Ltd (First Defendant)
Rashnyl Prasad and Sean Wengel in their capacity as purported former Receivers and Managers of Landco Middleton Grange Pty Ltd (Second Defendant)

Representation: Counsel:
C Bova SC / A Chowdhury (Plaintiff)
N Kidd SC / J Jaffray (First Defendant)
Solicitors:
Madison Marcus Law Firm (Plaintiff)
Piper Alderman (Defendants)

File Number(s): 2026/00263343

Publication restriction: Nil

JUDGMENT

1. On 9 August 2023, Capital Bridging Finance Pty Ltd (CBF), as lender, and the plaintiff, Landco Group Middleton Grange Pty Ltd (Landco), as borrower, entered into a Loan Agreement and a General Security Agreement. The General Security Agreement contained a power to appoint a receiver to all of Landco’s present and future property on the occurrence of an Event of Default, as defined.

2. CBF and the first defendant, Australian Agrivision Pty Ltd (Agrivision), are related companies. CBF assigned the Loan Agreement, the General Security Agreement and the related transaction documents to Agrivision pursuant to a Deed of Assignment dated 25 December 2025. By this point, following some presently immaterial amendments and extensions, the loan to Landco was set to mature on 28 May 2026, at which time the whole amount would become due and payable without further notice.

3. Landco did not repay the loan by 28 May. This gave rise to an Event of Default within the meaning of the General Security Agreement.

4. On 3 June 2026, Piper Alderman, solicitors for Agrivision, sent a letter of demand to Landco requiring payment to Agrivision of the whole amount of the facility by 5:00pm on 4 June 2026 (the 3 June letter of demand). The amount then due and payable was $619,702.37.

5. The 3 June letter of demand included the following:

“As you were previously notified, the Varied Facility and other Transaction Documents, along with all of the associated rights and obligations set out within the aforementioned documents, were assigned by CBF to [Agrivision] on 25 December 2025.”

6. It is common ground that, contrary to this assertion, notice of assignment of the General Security Agreement had not previously been given.

7. Landco did not make payment by 5:00pm on 4 June.

8. That evening, Agrivision appointed Mr Rashnyl Prasad and Mr Sean Wengel (the Receivers) as joint and several receivers and managers of all of Landco’s present and future property. At the time of their appointment, Mr Damien Simonfi, the sole director of both Agrivision and CBF, instructed the Receivers not to take steps to realise any assets and not to notify creditors, banks or even the Australian Securities and Investments Commission (ASIC) of their appointment.

9. Landco received notice of the appointment of the Receivers at about 9:30pm and paid the amount requested in the 3 June letter of demand by about 9:58pm.

10. Notwithstanding Mr Simonfi’s instruction not to do so, on 16 June the Receivers duly and quite properly gave notice of their appointment to ASIC as they were required to do pursuant to s 427(1) of the Corporations Act 2001 (Cth). An historical search of the ASIC register relating to Landco discloses the appointment of the Receivers on 4 June and their retirement on 16 June.

11. The principal issue in these proceedings is whether the appointment of the Receivers was valid. Landco seeks a declaration pursuant to s 418A of the Corporations Act that the appointment was invalid, as well as an order under s 1322(4)(b) rectifying the ASIC register to remove the reference to the appointment. It seeks that relief on two bases.

12. First, Landco contends that neither CBF nor Agrivision gave ‘express notice in writing’ of the assignment of the General Security Agreement, as required by s 12 of the Conveyancing Act 1919 (NSW). It contends that the 3 June letter of demand did not meet the requirements of that section. As such, Landco says that the assignment of the General Security Agreement was incomplete at law and that Agrivision was not entitled to exercise the power of appointment under it.

13. Secondly, Landco contends that if Agrivision did have the power to appoint the Receivers, it did so for an improper purpose. By the conclusion of the hearing this contention had solidified into the proposition that Mr Simonfi caused Agrivision to appoint the Receivers in order to place pressure on Landco’s sole director, Mr Mena Ibrahim, in connection with some machinations concerning an unrelated property development venture known as the SDR Project. Mr Simonfi, Mr Ibrahim and another party, Mr Peter Micalos, were separately involved in the SDR Project.

14. Landco says that there was never any serious question about its ability to repay the loan and that the timing of the demand for payment, the timing of the appointment of the Receivers, and the instruction to the Receivers to take no action to realise the security are all matters that are explicable only by reference to what was occurring at the very same time in relation to the SDR Project. It contends that the power to appoint the Receivers was not exercised bona fide for the purpose of realising the security and recovering the debt.

15. Agrivision disputes these contentions. It also says that even if it failed to give Landco express written notice of the assignment of the General Security Agreement, it was entitled to exercise the power of appointment as an equitable assignee of the charge created by that agreement.

The procedural background

16. The proceedings were commenced by Summons and a Commercial List Statement, both dated 25 June 2026. An Amended Summons was filed on 13 July, together with an Amended Commercial List Statement. The substantive relief claimed in the Amended Summons is as follows:

“1 A declaration pursuant to s 418A of the Corporations Act 2001 (Cth) (Corporations Act) that the first defendant’s appointment of the second defendants as Receivers and Managers of all present and after acquired property of the plaintiff on 4 June 2026 is invalid.

2 Alternatively, a declaration that the first defendant’s appointment of the second defendants as Receivers and Managers of all present and after acquired property of the plaintiff on 4 June 2026 is invalid.

3 Pursuant to s 1322(4)(b) of the Corporations Act, an order requiring the rectifying the [sic] Australian Securities and Investment Commission’s register to remove records of the invalid appointment and retirement of the Receivers.

4 Pursuant to s 12GD of the ASIC Act, an order requiring the first defendant to relinquish any security it holds in relation to the payment of any debt under the:

a. the Loan Agreement dated 9 August 2023;

b. the General Security Agreement dated 9 August 2023;

c. and the Guarantee and Indemnity Agreement dated 9 August 2023,

as amended from time to time.

5 Pursuant to s 12GF of the ASIC Act, damages against the first defendant.”

17. So far as the fraud on the power case is concerned, Landco’s Amended Commercial List Statement states the following:

“21D Alternatively to paragraphs 21B and 21C above, Agrivision purported to exercise the power to appoint the Receivers under the General Security Agreement for a purpose other than the realisation of the security and the repayment of the Debt.

PARTICULARS

Exhibit to DS-1 dated 7 July 2026, email from Richard Briedis of CBF and Agrivision to Rashnyl Prasad and Mathew Bor dated 4 June 2026.

Email from Simonfi to Boulos dated 4 June 2026 produced by Boulos under subpoena on 8 July 2026 (advanced copy provided 3 July 2026).

Email from Simonfi to Boulos dated 10 June 2026 produced by Agrivision under a Notice to Produce on 8 July 2026.

Letter from Piper Alderman to Madison Marcus dated 15 June 2026 at [14].

Simonfi and Agrivision instructed the Receivers to not notify the Australian Securities and Investments Commission of the fact of their purported appointment.

Simonfi and Agrivision instructed the Receivers to not notify any third parties of the fact of their purported appointment.

Simonfi and Agrivision instructed the Receivers to not take control of or freeze Landco’s bank accounts.

21E In the premises, Agrivision did not exercise the power to appoint the Receivers under the General Security Agreement:

(a) in good faith; or

(b) for a proper purpose.

21F By reason of paragraphs 21D and 21E above, the purported appointment of the Receivers on 4 June 2026 was invalid.”

18. This general contention underwent some refinement during the course of the hearing, over the first defendant’s objection. The plaintiff’s position was that the evidence upon which it relied in support of the general contention in paragraph 21E of its Amended Commercial List Statement supported the more targeted, positive contention to which I referred at paragraph [13] above. I allowed the plaintiff to put its case in this way because it did not involve any procedural unfairness to the first defendant.

19. The Receivers are together named as the second defendant. They have filed a submitting appearance.

The facts

20. The day before the hearing, the plaintiff informed the first defendant that it would not be calling any witnesses and that it would rely only on documents. The first defendant informed the plaintiff that it too did not intend to call any witnesses. As such, the following statement of facts is drawn from matters that are either not in dispute or which are evident from the documents.

The Landco Loan

21. The plaintiff is the trustee of the LGMG Unit Trust. In that capacity, it owns a number of assets including a property in Middleton Grange, New South Wales (the Middleton Grange property).

22. CBF is a moneylender.

23. On 9 August 2023, CBF as Lender and Landco as Borrower (in its capacity as trustee) entered into the Loan Agreement and the General Security Agreement. I will refer to the loan as the Landco Loan. At the same time, CBF entered into an agreement entitled Guarantee and Indemnity with Mr Ibrahim and his brother Mr Romany Ibrahim, as Guarantors. Without intending any disrespect to Mr Romany Ibrahim, I will generally refer to Mr Mena Ibrahim as Mr Ibrahim. When it is necessary to refer to Mr Romany Ibrahim, I will refer to him as such.

24. The total facility limit under the Loan Agreement was $6,093,604.25 plus a maximum of one month’s interest. Interest was at 4.67% per month, reducing to 1.67% per month on certain conditions. The initial advance was $1,093,604.25 and was required to be applied towards the payment of the Lender’s fees and expenses and otherwise to repay the Commonwealth Bank of Australia as first mortgagee of the Middleton Grange property. The balance of the facility was to be used for the purpose of meeting project costs for a property development project at a site in Belconnen, Australian Capital Territory. The Loan Agreement refers to the Guarantee and Indemnity, the General Security Agreement and to a mortgage of the Middleton Grange property.

25. The Repayment Date under the Loan Agreement was 9 February 2024, at which point the whole of the advance plus interest was to become due and payable without further notice.

26. Clause 17.1 of the General Security Agreement was as follows:

“17. APPOINTMENT OF RECEIVER

17.1 Power to appoint

On the occurrence of an Event of Default:

(a) the Lender (without the Lender being deemed or being liable as a Lender in possession) may by instrument in writing appoint a person (or two or more persons acting jointly and severally) to be Receiver of the Secured Property and/or the income from it;

(b) the provisions of any statute dealing with Receivers will be varied and extended as provided in this clause;

(c) the Lender will have power from time to time to revoke any such appointment and to appoint another Receiver;

(d) a Receiver will be the agent of the Security Provider unless otherwise specified in his appointment; and

(e) the Security Provider will be solely responsible for the Receiver’s acts, defaults and omissions and the Receiver will not in any circumstances be liable to the Security Provider for any act or default and without any consent or other authority on the part of the Security Provider and the receivership provisions of this Agreement apply to the Receiver and to the receivership and management.”

27. It is also relevant to note clause 29.3, which dealt with assignment:

“29.3 Lender may assign

The Lender may assign to any person this Agreement, the Secured Moneys, the rights, title and interest of the Lender to the Secured Property, the benefit of any term of this Agreement (irrespective of whether it touches or concerns the Secured Property), the benefit of any surety provisions contained in or relating to this Agreement or the benefit of any indemnity under this Agreement, irrespective of whether all or any of them would not otherwise be assignable and upon the Security Provider receiving notification of completion of the assignment, the Security Provider releases the assigning and transferring Lender from all liability in relation to this Agreement and the Facility and the Transaction Documents. The Security Provider will (at the expense of any assignee requiring the same) enter into any further mortgages, deeds or other agreements for security or re-affirming to the satisfaction of such assignee the benefit of this Agreement and the benefit of and entitlement to all Rights of the Lender and Obligations of the Security Provider under this Agreement.”

28. The Secured Property was, in effect, all present and after-acquired property of Landco as trustee. Clause 2.1 granted the Lender a security interest over all of the Secured Property. Landco’s failure to pay the amount of the Landco Loan under the Loan Agreement when it was due and payable was an Event of Default within the meaning of clause 13.1(a) of the General Security Agreement.

29. In January 2024, the Repayment Date was extended by agreement for a period of six months. On 26 August 2024, CBF, Landco, Mr Ibrahim and Mr Romany Ibrahim entered into a Deed of Variation which varied the terms of the Loan Agreement. Schedule 2 to the Deed of Variation acknowledged the repayment of the original advances and provided for a further advance of $655,000, which was made the following day. Schedule 3 varied the Repayment Date to 28 February 2025. That date was later extended by agreement to 28 November 2025. Although the evidence about how it occurred was unclear, the parties agreed that the Repayment Date was then further extended to 28 May 2026.

30. On 25 December 2025, CBF as Assignor and Agrivision as Assignee entered into the Deed of Assignment. Clause 2 provided:

“2. ASSIGNMENT AND TRANSFER

The Assignee agrees to pay to the Assignor the Assignment Money immediately upon the Assignee recovering money under the Assigned Loan from the Debtor or a Guarantor and in exchange, on the Assignment Date, the Assignor:

(a) assigns to the Assignee all its right, title and interest in the Debt, the Assigned Loan and the Transaction Documents; and

(b) assigns and transfers to the Assignee all its right, title and interest in the Securities.”

31. Clause 4 provided:

“4. NOTIFICATIONS OF ASSIGNMENT

On completion of the assignments and transfers made under clause 2, the Assignor must deliver to the Assignee, the Notifications of Assignment, which the Assignee must, at its own cost:

(a) in the case of the Notice of Assignment to the Debtor, each Security Provider and Guarantor - forward the Notices of Assignments to the Debtors, and guarantors in accordance with the service of Notice provisions under the Securities and Transaction Documents;

(b) in the case of the transfer of the Securities which are registered mortgages over the Security Property - lodge for registration in the relevant Office of the Registrar of Titles; and

(c) in the case of the transfer of the Securities which are registered PPSR Interests under the PPS Act - register on-line the transfer to the Assignee of the PPSR Interests.”

32. Landco met all of its interest and other obligations under the Loan Agreement between 25 December 2025 and the maturity of the loan, save for repayment on the due date.

The SDR Project

33. In August 2024, Mr Simonfi proposed that Mr Ibrahim and Mr Micalos become involved in what was to become known as the SDR Project. This was a project to acquire a parcel of land in Jerrabombera, Australian Capital Territory, and to develop it into data centres. The opportunity to acquire and develop the land came to Mr Simonfi and CBF by reason of their involvement as lender to a previous purchaser of the site who had failed to complete.

34. On 19 August 2024, Mr Simonfi forwarded a term sheet to Mr Ibrahim and Mr Micalos in relation to the SDR Project. He proposed that a new company be incorporated to acquire and develop the site, the 50:50 shareholders of which would be an entity controlled by him or CBF and an entity controlled by Mr Ibrahim and Mr Micalos.

35. Mr Simonfi’s proposal eventually resulted in the incorporation of Sustainable Data Resources Pty Ltd (SDR) and its holding company, Sustainable Data Resources Holdings Pty Ltd (SDR Holdings) on 13 October 2024. The initial shareholders of SDR Holdings were GTC Landowner Pty Ltd as trustee for the GTC Unit Trust (GTC) and DJ Partners Holdings Pty Ltd as trustee for the Vault Trust (DJ Partners). I note that DJ Partners, of which Mr Simonfi was the sole director and shareholder, transferred 20 of its 51 shares in SDR Holdings to CBF in October 2025. The shareholders of GTC were MI GTC Pty Ltd and IP GTC Pty Ltd, which were controlled by Mr Ibrahim and Mr Micalos respectively. They were also its two directors.

36. At the time of incorporation, the directors of SDR and SDR Holdings were Mr Ibrahim and Mr Micalos.

37. On 11 December 2024, the parties entered into a Shareholders Agreement in relation to the SDR Project. The parties were Mr Simonfi, Mr Micalos, Mr Ibrahim, DJ Partners, GTC and SDR Holdings. The Shareholders Agreement was conditional on SDR completing the purchase of the SDR Project site.

38. Clause 5 of the Shareholders Agreement dealt with funding. Clause 5.1 was as follows:

“5.1 Debt funding by GTC

Subject to clause 5.4, GTC must procure funding for the whole of the Projecting, including, the purchase of the Parcel and refinancing for approvals and construction and all stages of the whole of the Project, on the following basis:

(a) the Senior Debt may be secured by a first registered mortgage initially over the Parcel and then over the Project Site once Stage 1 Works are complete, and a general security agreement over the Company;

(b) Peter and Mena, must if required by the Project Financier, give personal guarantees and indemnities but neither DJP nor Damien are required to give a guarantee and indemnity;

(c) other assets of GTC or Peter and Mena, may be used as security for the Senior Debt, but loan money secured against such other assets, may not be secured over the Project Site, or the Developer’s or Company assets (ie no collateralized debt against the Project Assets); and

(d) the terms of the Senior Debt must be approved unanimously by the Shareholders.”

39. Clause 5.3 was as follows:

“5.3 Failure to procure Debt funding

Subject to clause 5.4, [i]f GTC is unable to procure funding for all stages of the whole of the Project, then at the stage when development of the Project Site or Development Lots cannot proceed further, GTC will then be deemed to be in default under this Agreement and a Bad Leaver. However, for GTC to be deemed to be in default and a Bad Leaver under this clause, DJP must give GTC at least 30 days written Notice of DJP’s intention to exercise its rights under this clause and GTC may remedy the funding problem in that notice period.”

40. One of the consequences of being a ‘Bad Leaver’ was that DJ Partners could acquire GTC’s interest in the project for a nominal value.

41. Clauses 5.4 and 5.5 were as follows:

“5.4 DJP facility

If funding is not reasonably available from the Project Financier, DJP will provide a loan facility for the Stage 1 Works, to a maximum of $7 million, at an interest rate of 20% per annum, to be repaid upon completion of the Stage 2 Works.

5.5 Additional initial funding

It is acknowledged that on completion of the Land Purchase Contract, the Company will obtain a loan of 3,500,000 from an entity related to the seller, on the basis that:

(a) the debt must be repaid within 3 years after the completion date of [the] Land Purchase Contract;

(b) interest is payable at the rate of 10% per annum, but may, at the election of the Purchaser, be capitalised until the repayment date; and

(c) the seller’s lending entity is entitled to hold, from the completion date of the Land Purchase Contract, a signed mortgage over the Parcel or the Project Site, but which will not be lodged for registration, unless and until there is a default by the Purchaser under the facility.”

42. Day-to-day management of the SDR Project was to be the responsibility of a ‘Project Control Group’, consisting of two representatives appointed by GTC and up to two representatives appointed by DJ Partners. Clause 8.1(c) provided that the board of directors (as well as the Developer and Development Manager, as defined) were required to implement decisions of the Project Control Group.

43. However, clause 8.1(a) provided that:

“All Determinations relating to Critical Business Matters are reserved to the Shareholders.”

44. Clause 9 dealt with meetings of shareholders. Clause 9.6 relevantly provided that SDR and SDR Holdings ‘may only do or commit to do, any of the Critical Business Matters listed in Schedule 2’ by a unanimous vote of the shareholders. Clause 9.7 laid down a procedure for attempting to resolve a deadlock but ultimately provided that the absence of a unanimous vote on any matter was taken to be a resolution to take no action on the matter. The Critical Business Matters in Schedule 2 included ‘obtaining a loan facility from a Project Financier, refinancing it or varying the terms of any such loan facility’.

45. Clause 15 defined various Events of Default. Clause 15.2(a)(ii)(A) provided that the effect of certain Events of Default was that the non-defaulting party could acquire the defaulting party’s interest in the SDR Project at 50% of market value.

46. Notwithstanding some minor hiccups, GTC secured funding and SDR acquired the project parcel in February or March 2025.

47. Separately from the SDR Project and the transactions described above, another entity controlled by Mr Micalos, Intellectual Property Group Pty Ltd (IPG), entered into a loan agreement with CBF on 13 October 2025. I will refer to this as the IPG Loan.

Dispute among the SDR Project shareholders

48. In December 2025, a dispute broke out between the GTC camp and the Simonfi camp. The context was the expiry of the acquisition financing facility, which had been obtained from Qualitas, an unrelated lender. On 21 December, Mr Micalos informed Qualitas that it would not be renewing the facility with Qualitas when it expired on 26 February 2026. Qualitas did not take this news well. It responded by pointing out that SDR had failed to top up an interest reserve, which it was contractually required to do. Qualitas alleged that this was a monetary default under the facility which gave rise to the potential application of default interest. At 10:31am on 24 December 2025, Qualitas wrote ‘please top-up the reserve and it will be returned upon refinance’.

49. Mr Micalos acted swiftly to top up the reserve, as requested by Qualitas. He did so by 1:08pm that day.

Mutual notices of default

50. On 24 December (I do not know when, exactly) the GTC parties caused a Notice of Default under the Shareholders Agreement to be served on DJ Partners. This was done by letter from their solicitors. The notice referred to clause 5.4 of the Shareholders Agreement and contended that DJ Partners and Mr Simonfi had failed to secure sufficient financing to allow GTC to make the interest top-up payment.

51. At 9:58pm that evening, Piper Alderman on behalf of DJ Partners served a Notice of Default under the Shareholders Agreement on GTC, Mr Ibrahim and Mr Micalos. The notice alleged that:

“6. GTC has failed to pay the entirety of the Interest Service Reserve top-up obligation required by the Syndicated Facility Agreement dated 25 February 2025 (Syndicated Facility Agreement). The failure to pay the entirety of the Interest Service Reserve top-up constitutes an Event of Default under the Syndicated Facility Agreement and its associated security documents.

7. The failure to make the payment in full means that GTC will not procure funding for the whole of the Project.

8. This constitutes a breach of clause 5.1 of the Agreement.”

52. The notice further contended that the default was of the kind which gave rise to DJ Partners’ right to acquire GTC’s interest in the SDR Project at a 50% discount pursuant to clause 15.2(a)(ii)(A) of the Shareholders Agreement.

53. The dispute between the parties was taken up in lengthy correspondence between their solicitors. By 24 February 2026, they had reached agreement on a range of matters which were set out in a letter from Piper Alderman. The agreement included that Mr Simonfi and DJ Partners would assume responsibility over the accounting and bookkeeping for the SDR Project. However, the letter from Piper Alderman made clear that Mr Simonfi wished to revisit the Shareholders Agreement in the near future and that he expected this to be a subject of negotiation between the parties.

54. On 17 March 2026, SDR Holdings appointed Grant Thornton to perform a range of ‘management accounting reconciliation’ services in relation to the accounting records of SDR and SDR Holdings. This was to include a review of the companies’ Xero accounts, a transaction and invoice review, a review of cashflow and bank transactions, and a review of related party transactions. The Grant Thornton review proceeded through the months of April and May.

Mr Simonfi’s 30 April email

55. On 30 April 2026, Mr Simonfi sent an email to Mr Angus Kenyon and Mr Benjamin Weber of William Buck (the 30 April email). It is necessary to set out the body of the email in full:

“Hi Angus & Ben,

Do you have time tomorrow to discuss the following? I’m available 2:15pm – 4pm.

I have two borrowers who have loans and owe money to Caprial [sic] Bridging Finance.

1. Peter Micalos – IP Group

2. Mena Ibrahim – Land Co [sic]

These loans have been assigned to Australian Agrivision.

The borrowers’ companies and individuals are whom we discussed at dinner. They are both Directors and Shareholders in Sustainable Data Resources; a company I created and subsequently invited them to the table.

I have carriage of the financials and have appointed Grant Thorton [sic] as tax agents and accountants for SDR. It is evident that Peter and Mena have misappropriated funds of a substantial amount.

Late next week, it is our intention to let Peter and Mena know that we are aware of what they have done and that we would like to come to a workable solution.

However, if they do not agree to what we propose we would default Peter’s and Mena’s loans with CBF Australian Agrivision and place them into receivership.

We would propose this occurs in person or on a TEAMS call and if we don’t have the desired result, William Buck would have documents prepared already and I would sign during the teams call and their borrowing entities would be placed into default on the spot. Whilst it might not be necessary to execute documents and place them into receivership, I would like this prepared in advance for immediate execution. Please let us know what documents you require for these two potential receivership engagements.

At this stage we have not provided them default notices, however, should that meeting need to take place we will issue them with a one-day default notice and letter of demand prior to the meeting.

We will provide you with a full suite of loan documents, company documents, and anything addition [sic] you might require.

Thanks,

Damo”

56. Whether Mr Simonfi honestly believed that Mr Micalos and Mr Ibrahim had ‘misappropriated funds of a substantial amount’ when he sent this email was not the subject of any evidence. I note that when Grant Thornton later sent the result of their inquiries (see paragraph [62] below), they recorded a change to the loan balance between SDR Holdings and IPG. One possibility is that when he wrote the 30 April email, Mr Simonfi knew about the issue that gave rise to the later accounting amendment and that he had formed the view that the change in the loan balance reflected a ‘misappropriation’ of funds. However, that is only a possibility.

57. Correspondence between CBF and the potential receivers shows that Mr Simonfi intended that the plan outlined in his 30 April email would come to fruition late in the week commencing 4 May 2026. However, by this stage only the IPG Loan was in default. The Landco Loan was not due to mature until 28 May.

58. Mr Liam Marsh of CBF had written to Mr Ibrahim in relation to the Landco Loan on 28 April. The subject was ‘Loan Maturity Letter – Landco’. The email relevantly stated:

“We confirm that your loan with Australian Agrivision Pty Ltd matures on 28/05/2026. You are required to ensure that the debt is repaid in full on or before this date.

For clarity, the debt has been assigned to Australian Agrivision Pty Ltd.”

59. For reasons that he did not explain, Mr Simonfi decided not to raise the serious allegations of misappropriation with Mr Micalos and Mr Ibrahim in early May, as his 30 April email and his subsequent correspondence suggested he would. I infer that he did not do so because the Landco Loan was at this point not in default, so the plan to raise the issue in the way described in his 30 April email could not have played out as he intended.

60. There was no response from Mr Ibrahim to Mr Marsh’s 28 April email.

The events of late May

61. On 25 May 2026, Mr Marsh again wrote to Mr Ibrahim about the maturity of the Landco Loan, reminding him that it was due to mature on 28 May. As with his email of the previous month, no response was received from Mr Ibrahim. As mentioned, Landco failed to repay the loan on 28 May. Landco did however make two interest payments on around 27 May, being a scheduled payment as well as one further payment.

62. There was a meeting among Mr Simonfi, Mr Micalos, Mr Ibrahim and Grant Thornton on 29 May to discuss Grant Thornton’s conclusions. These conclusions were set out in an email from Grant Thornton later that day (the 29 May Grant Thornton email). In relation to ‘Accounts Payable – IP Group’, the 29 May Grant Thornton email stated that they had ‘previously recognised an accounts payable balance of $1,193,500 owing from SDR Holdings to IP Group, based on invoices we have received’. The invoices were set out in an annexure.

63. Grant Thornton then said:

“We understand that all of these invoices have since been cancelled and should not be recognised in the accounts. We will therefore remove these invoices from the Xero file, such that there is no accounts payable amount owing to IP Group.”

64. Under the heading ‘Loan Balance – IP Group’, Grant Thornton said:

“As discussed, we have updated the accounts to reflect that the payment made from SDR Holdings for $200,000 on 28th March 2025 was paid to IP Group.

Please find attached the updated general ledger balance, showing all cash contributions / costs paid by IP Group on behalf of SDR Holdings (i.e. credits) against all cash withdrawals made by IP Group (i.e. debits). The closing balance reflects that IP Group owes $720,088.34 to SDR Holdings as at 21st May 2026.

If our understanding of any of the above is incorrect, please let us know.”

65. That evening, Mr Simonfi wrote a lengthy email to Mr Ibrahim and Mr Micalos that included the following:

“Thank you for your time today at our meeting.

The sole purpose of the exercise was to listen to Grant Thornton’s (GT) independent assessment of SDR’s accounts and to discuss any issues contained therein. Incidentally, there was a very serious issue raised that requires our collective attention. As we have discussed on numerous occasions, we sometimes need to have uncomfortable conversations.” (my emphasis)

66. His email then laid out what he contended to be the proof of misappropriation from SDR Holdings by IPG. He said:

“As it stands, you have enriched yourself at the cost of SDR, which is a serious matter that must be resolved immediately.

I cannot see how there can be any other interpretation of this matter other than that IP Group has taken more money from SDR than it has put into SDR. I consider that IP Group has enriched itself above and beyond the interest that was due to Qualitas and payable through the course of the Qualitas/Trilogy facility settlement.

As it stands, I am not treating this as a difference of opinion, I am treating it as a misappropriation of monies from SDR. More concerningly, you were unwilling to continue discussing this critically important matter once I started drilling down into the detail, offering only to discuss on Tuesday next week.

That being the case, I will schedule a meeting for Tuesday, 2 June from 12-3pm. We may be able to conclude the meeting sooner, as I consider the matter to be straight forward. However, three hours of our collective time is more than sufficient to conclude the matter and resolve what is glaringly obvious to everyone.”

67. Mr Simonfi’s email shows that he had orchestrated matters to make it appear as though he only discovered the supposed ‘misappropriation’ of SDR funds during the Grant Thornton meeting that day.

2 June

68. At 9:44am on 2 June 2026, Mr Simonfi caused Piper Alderman to serve a notice of default on IPG in relation to the IPG Loan. The notice stated that the outstanding debt was $544,982.21 and that this amount was incurring interest at 5.1% per month. It said that if the whole of the outstanding debt was not repaid by 5:00pm on 3 June 2026 or other suitable arrangements were not reached, enforcement action would be taken including recovery of the guarantor’s mortgaged property. A notice in similar terms was sent to the guarantor, IP Property Botany Street Pty Ltd, which was another company associated with Mr Micalos.

69. A Teams meeting took place at midday but there is no direct evidence as to what occurred.

70. The evidence shows that Mr Ibrahim and Mr Simonfi spoke that afternoon. There is, again, no direct evidence as to what was said. However, Mr Simonfi sent a lengthy email to Mr Ibrahim at 5:42pm which reveals much about his strategy concerning the SDR Project (the 2 June email).

71. The 2 June email stated that Mr Simonfi had ‘formed an unshakable view that the [SDR Project] must be wrapped up; with the only exception being that Peter [Micalos] is removed for his misappropriation of funds’. He stated that he had ‘no patience left when it comes to Peter, and I have no desire to continue working on this project while Peter remains involved’. He also said that he had been ‘committed to wrapping this project up today, by whatever means I deemed necessary’ but that ‘on account of your [Mr Ibrahim’s] repeated willingness to do whatever is necessary to salvage the project and to redress Peter’s actions, I have agreed to stall my own actions’.

72. The email then contained the following:

“While accepting that documentary changes, including to the Shareholders’ Agreement, will necessarily take longer to finalise, Peter must be removed as a shareholder of SDR/SDRH by COB 4 June 2026. Further, the money Peter has withdrawn from the company must be returned without delay and, as we discussed, his shareholdings will be distributed between both you and me equally. Mena, I again stress that if not for your agreement to pursue this course of action, I would at this moment be instructing my legal counsel to act on my standing instructions to pursue an entirely different course of action.

I take you at your word that you now understand the seriousness and significance of the issue, and that you want to look towards the future of the project and de-risk it as we progress. Provided the above occurs swiftly, I am willing to discuss with you in more detail when we meet in person on Sunday in Queensland.

I have instructed senior legal counsel to prepare the required documents to support Peter’s exit from SDR.” (emphasis in original)

73. Quite how Mr Simonfi was proposing to achieve Mr Micalos’s ‘exit’ from the SDR project in light of the terms of the Shareholders Agreement (paragraphs [37] and following above) was not explained.

3 June

74. The following morning, Mr Simonfi sought confirmation from Mr Ibrahim that he was agreed on the strategy outlined in Mr Simonfi’s 2 June email, namely that they would team up to (somehow or other) remove Mr Micalos from the SDR Project by the close of business on 4 June. He sent a text message seeking Mr Ibrahim’s acknowledgement of the email and of ‘the direction we have agreed to which is now on foot’.

75. An hour or so later, Mr Simonfi received an email from Ms Jamie Antonopoulos, the Group General Counsel of IPG. Ms Antonopoulos categorically denied each of the allegations contained in Mr Simonfi’s email dated 29 May (see paragraphs [65]-[66] above) but proposed on a without prejudice basis that IPG would make immediate payment of $620,000, representing the amount alleged to have been ‘removed’ from SDR, less an amount that had been paid to SDR but not reimbursed. She attached relevant bank transfers showing that this amount had been deposited.

76. Mr Ibrahim seems not to have responded to Mr Simonfi’s earlier attempts to contact him. At 1:19pm, Mr Simonfi sent a further message to Mr Ibrahim demanding that he clarify his position without delay. He added:

“I will interpret delay as confirmation you support the email from Jamie Antonop[o]ulos”.

77. Mr Simonfi presumably did not immediately hear back from Mr Ibrahim because at 2:56pm, Piper Alderman served the 3 June letter of demand referred to at paragraphs [4]-[5] above.

78. The letter was entitled:

“Australian Agrivision Pty Ltd and loan to Landco Group Middleton Grange Pty Ltd ATF LGMG Unit Trust (Landco): Event of Default”

79. The body of the letter read as follows:

“We act on behalf of Australian Agrivision Pty Ltd.

Background and assignment of facility

1. We refer to the loan and facility totalling $6,093,604.25 (plus a maximum of one month’s interest) that was advanced to Landco by Capital Bridging Finance Pty Ltd (CBF) on about 9 August 2023 (Facility).

2. To help you better secure the repayment of the Facility, personal guarantees were provided by you and Romany Ibrahim and a mortgage was granted to CBF over the real property located at 17 Southern Cross Avenue, Middleton Grange, NSW (Middleton Grange Property).

3. On 26 August 2024, the Facility was varied, the facility limit reduced to $655,000, the mortgage over the Middleton Grange Property was discharged and a mortgage provided to CBF over the real property located at 66 Cross Street, Guildford NSW.

4. As you were previously notified, the Varied Facility and other Transaction Documents, along with all of the associated rights and obligations set out within the aforementioned documents, were assigned by CBF to Australian Agrivision Pty Ltd (Agrivision) on 25 December 2025.

Facility agreement terms

5. Pursuant to the terms of the Facility (as varied on 26 August 2024) (Varied Facility), the outstanding debt was due to be repaid in full on 28 May 2026.

Event of default

6. In breach of the terms of the Varied Facility, Landco failed to repay the outstanding debt on 28 May 2026 and has thereby committed the following events of default:

6.1 (non-payment) – the failure to repay on time the Debt due and payable to the Lender (clause 9.1(a) of the Varied Facility); and

6.2 (non-performance) – default in the performance of an Obligation under the Varied Facility (clause 9.1(c) of the Varied Facility),

(together, Events of Default).

7. As a consequence of Landco committing each of the above Events of Default (jointly and severally), we put you on notice that:

7.1 each of the above Events of Default are separately deemed by Agrivision to be an event of default under the Facility and the Transaction Documents;

7.2 the Debt and all Further Moneys owed to Agrivision are immediately due and payable;

7.3 the Concessional Rate Conditions are no longer applicable; and

7.4 Agrivision reserves the right to exercise all or any of its Rights or remedies available under the various Security Interests and Transaction Documents.

8. We confirm the balance of the Loan as at 2 June 2026 is $619,702.37 (Outstanding Debt) and the standard interest rate of 4.67% per month is applicable to the outstanding balance.

9. We enclose a loan statement as at 2 June 2026.

Next steps

10. Our client requires payment of the Outstanding Debt immediately.

11. We put you on notice that if the Outstanding Debt and any Further Moneys owing to Agrivision are not repaid by 5pm on 4 June 2026, or other suitable arrangements not reached, we expect to receive instructions to commence enforcement action against you and the guarantors without further notice – which will necessarily include recovery of the guarantor’s mortgaged property located at 66 Cross Street, Guildford NSW.”

80. Piper Alderman also served a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) in relation to the Middleton Grange property, over which Agrivision held a mortgage. It also served a letter of demand on Mr Romany Ibrahim as guarantor.

4 June

81. If there were relevant communications among the protagonists about all of these matters on 4 June 2026, I do not know what they were.

82. It is however common ground that the Landco Loan was not repaid by 5:00pm that day, as had been demanded in the 3 June letter of demand.

83. Mr Simonfi wasted no time in acting on what was foreshadowed in the 3 June letter of demand. At 6:45pm, his colleague Mr Richard Briedis sent an email to the proposed receivers attaching a Deed of Appointment of Receivers and Managers and Deed of Indemnity to Receivers and Managers under the General Security Agreement in relation to Landco. The Deed of Appointment was executed by Agrivision. The email also attached the various default notices that had been issued, together with a loan statement. The email said:

“Please commence actions this evening in accordance with the latest directions from [Mr Simonfi] provided to you late this afternoon.” (emphasis in original)

84. The ‘latest directions’ to which Mr Briedis referred were those explained in the correspondence subsequently sent by Mr Simonfi, as described at paragraph [86] below, namely to take no immediate action to recover the debt.

85. Mr Ibrahim caused $619,702.37, being the amount that had been demanded in the 3 June letter of demand, to be repaid by deposit into CBF’s bank account by 9:58pm on 4 June.

86. Shortly thereafter, Mr Simonfi sent an email to Mr George Boulos, who was an associate of each of the main players and who had (seemingly unbeknownst to Mr Ibrahim) funded 40% of the Landco Loan. The email advised Mr Boulos that Landco had been placed into receivership. The email included the following:

“However, it was done surgically. My instructions to the Receiver were very specific;

1. Do not notify ASIC until instructed

2. Do not notify any 3rd parties such as other mortgagees or financiers to freeze bank accounts until instructed

Receivers have up to 2 weeks to do this. (Most people do not know of this).

In summary, nobody other than the lender, the borrower and the lenders professionals acting, knows of this action. Nor will they until I do.

In short, I provided plenty of wiggle room for the borrower but they would not be aware of this. However, I am sure I have the borrower’s attention as opposed to our office being repeatedly ignored for an extended period.

Since writing this email, Landco, just now, have repaid their debt. It is short as there is (WIP) in the system to also be repaid but one can safely say it is almost repaid now.

I am sure you understand the requirement to do so and the elegance of how this was done.”

The events of 5 June and following

87. On the morning of the following day, 5 June 2026, the Receivers emailed Mr Ibrahim to inform him that the deposit of $619,702.37, made the previous evening, did not clear the balance of the Landco Loan, which was claimed to be $621,599.45. They also noted that there would be additional charges to cover Agrivision’s enforcement costs and their own remuneration.

88. An email from Mr Simonfi was also sent to the Receivers on 5 June 2026, showing that Mr Simonfi’s boast to Mr Boulos about the elegance of his actions was significantly overblown. His email included the following:

“When we spoke yesterday, I parted with you my strategy regarding appointing receivers over IP and [Landco].

The purpose for not advising ASIC immediately, other mortgagees on our security and all financiers was to ensure the borrowers understood this is not a bluff, you are in Receivership. Meaning, no damage done if you cure the debts before the Receiver notifies any of the above bodies. Which surprisingly seems to have worked.

However, this morning [Mr Briedis] has advised me that you informed him that you must now notify ASIC of your appointment/retirement. This is new information and not consistent with the strategy we were discussing in detail yesterday.

Whilst I don’t actually care about the borrowers in this regard, (they needed to be in Receivership), moving forward this information must be crystal clear. I have worked with many receivers in the past and never deployed the strategy of yesterday. Considering our relationship in [sic] very new we must ensure critical information such as this is crystal clear every time. Noting, the borrowers now have a permanent blemish on their records.”

89. It is relevant to note one further piece of correspondence between Mr Simonfi and Mr Boulos. On 10 June 2026, Mr Boulos wrote to Mr Simonfi about this matter. By this stage, Mr Simonfi had received a lengthy complaint from Mr Ibrahim about the appointment of the Receivers. In his reply to Mr Boulos, Mr Simonfi asserted:

“FYI only, to ensure minimal inconvenience to Landco, I instructed the Receivers prior to their appointment to not notify ASIC, any financial institutions or mortgagees unless absolutely necessary. So, nobody has been notified at the time of writing this quick note other than Landco.

I have not read his 7 pages of complaining in his letter, nor will I. That is with counsel, a matter for counsel and the Receivers, and they are dealing with Landco.”

90. After some days of Landco pressing the Receivers and Agrivision for a payout figure, it was finally provided with a revised figure of $34,127.30 in a letter from Piper Alderman on 15 June 2026. Landco paid that amount to Piper Alderman on the same day. The Receivers retired the next day, on 16 June.

The issues in dispute

91. The substantive issues in dispute were as follows:

92. Did CBF or Agrivision give express written notice of the assignment of the General Security Agreement as required by s 12 of the Conveyancing Act, such that the assignment was effective at law?

93. If not, as an equitable assignee of the charge created by the General Security Agreement, did Agrivision have power to appoint the Receivers?

94. If Agrivision did have power to appoint the Receivers, did it exercise that power in good faith for the purpose for which it was granted?

95. I will deal with these issues in turn.

The s 12 notice issue

93. Section 12 provides as follows:

“Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.” (emphasis added)

94. In Consolidated Trust Company Limited v Naylor (1936) 55 CLR 423; [1936] HCA 33 (‘Naylor’), Dixon and Evatt JJ said at 438-439:

“The object of the requirement made by the words ‘of which express notice in writing shall have been given’ is, we think, correctly stated in Warren’s Choses in Action (1899), at pp. 177, 178.

‘The term “express notice” is doubtless employed by way of opposition to notice arising by implication or operation of law, and to what was known in equity as constructive notice. It means a notice which indicates an express intention—a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred.’

The purpose is to make essential actual notice that the debt has been assigned. ‘One of the objects of the giving of notice to the debtor is that he shall “know with certainty” in whom the legal right to sue him is vested’ (McIntosh v Shashoua, per Evatt J). The purpose does not extend to giving the debtor particulars of the assignment. The assignment must be by writing, but, if it is in writing, then notice to the debtor is necessary only to acquaint him with the fact that the debt is payable to the assignee and the statute requires that he shall be expressly notified. But, neither in exact terms, nor according to its general intent, does the provision appear to make it essential that the notice should contain an express statement that the assignment is a written one.” (my emphasis, citations omitted)

95. In Naylor, the particular document that was found to give express notice of the assignment was a document given under the Moratorium Act 1932 (Cth). It was not a document that was expressed to be a notice of assignment or a notice under the Conveyancing Act. The notice described the plaintiff as the ‘transferee’ of the mortgages, which were identified by their registration numbers. The notice stated that the plaintiff intended to exercise all of its rights as against the guarantor. Dixon and Evatt JJ pointed out that the document acquainted the defendant with the fact that ‘the plaintiff company is or claims to be the transferee of the mortgages, and is or claims to be entitled to the rights and remedies the mortgages confer against the defendant’: at 437-438. The fact that it did not identify any particular instrument of transfer did not stand in the way of the conclusion that it gave express notice of the assignment.

96. In Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 (‘Showa Shoji’) at 564G-566G, Giles J considered Naylor and other authority in relation to s 12. His Honour concluded at 566A that ‘no special form of notice is necessary, and the notice need only convey to the obligor the fact that the obligation had been transferred to an assignee’.

97. Landco submits that the 3 June letter of demand did not purport to be a notice of assignment. It was, rather, a notice of default which proceeded on the mistaken basis that previous notice of assignment of the ‘Transaction Documents’ had been given. Nor did it specifically identify the General Security Agreement.

98. A similar argument was rejected by the Court of Appeal of England and Wales in Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607 (‘Van Lynn’), which considered the UK equivalent to s 12. In that case, the disputed ‘notice’ was contained in a letter dated 27 June 1968, as follows:

“Dear Sirs, We have been instructed by our above-named clients [the plaintiffs] to apply to you for the payment of a sum of £5,296 19s. 6d. outstanding to them following the assignment of the debt to them by National Provincial Bank Ltd. Notice of this assignment has already been given to you. Unless we receive payment for the full amount of this debt at this office by the first post on Monday, July 1, we have instructions that proceedings will be taken against you without further notice.” (emphasis added)

99. As Lord Denning MR pointed out at 612, the sentence ‘Notice of this assignment as already been given to you’ was wrong. Notice had not previously been given. However, as his Lordship explained, the relevant question was whether notice of the assignment was given by this letter. His Lordship found that it had been and that the wrong sentence could be ignored as ‘merely an inaccurate surplusage’: at 613.

100. At 615, Widgery LJ said that:

“… the only formality required by the section is that express notice in writing be given to the debtor. The section does not speak of ‘a notice’: it speaks of ‘notice’. … Once it is appreciated that the section requires no more, it becomes obvious that the objection to the notice in this case, that it was not intended as a notice but merely to record the fact that notice had already been given, must fail.”

101. See also the reasons of Brereton J in Claudio Grizonic v Suzanne Ranken Suttor & ors*; Dawn Wade v Suzanne Ranken Suttor* [2011] NSWSC 471 (‘Grizonic’) at [25].

102. Landco submitted that in order to constitute express notice in writing, the notice in question must allow the debtor to ‘know with certainty’ the person in whom the legal right to sue him or her is vested (Naylor at 439) and must not be one that misleads: Grizonic at [25] citing Van Lynn. It submitted that the tendency of the 3 June letter of demand to mislead was to be judged in the light of the fact that previous notice had been given but that it had only been notice of the assignment of the Loan Agreement. Viewed in that light, Landco submitted that paragraph 4 of the letter presented it with a conundrum: was the first clause mistaken because notice had not previously been given; or was the balance of the sentence mistaken because the previous notice was only that the loan had been assigned?

103. There may be cases in which an error such as this has a genuine tendency to mislead the recipient as to whether the relevant rights have been assigned. I do not however consider this to be such a case. When the 3 June letter of demand is read as a whole, it makes quite clear that Agrivision was asserting itself to be in a position to exercise rights under the security documents including the General Security Agreement. At paragraph 7.4, Agrivision expressly reserved the right to exercise powers under ‘the various Security Interests and Transaction Documents’. This can only sensibly have been understood to be a reference to the other transaction documents including the General Security Agreement. The letter also referred to the provision of a mortgage in paragraph 2 and foreshadowed the recovery of the guarantor’s mortgaged property in paragraph 11.

104. I therefore conclude that the 3 June letter of demand did give express notice in writing of the assignment of the General Security Agreement within the meaning of s 12. In my view, Agrivision was the assignee of the General Security Agreement at law and entitled to exercise the power to appoint the Receivers under that Agreement.

The equitable assignment issue

105. My conclusion on the s 12 notice issue means that it is strictly unnecessary to express a conclusion in relation to Agrivision’s alternative argument, which is that it was nevertheless entitled to exercise the power of appointment as an equitable assignee of the charge created by the General Security Agreement.

106. However, because it was argued and in case I am wrong about the s 12 notice issue, I will state the conclusion I would have reached.

107. The starting point of Agrivision’s argument was that even if the assignment of the General Security Agreement was ineffective at law, it was nevertheless effective in equity. I accept this premise. The assignment was supported by consideration (clause 2 of the Deed of Assignment at paragraph [30] above) and therefore would be effective in equity even if not at law: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths) at [6-060].

108. Agrivision submitted that as an equitable assignee of the charge created by the General Security Agreement, it had the power to appoint receivers out of court. It particularly relied on Harpur v Ariadne Australia Ltd (Supreme Court (Qld), Williams J, 5 December 1994, unrep) (‘Harpur’). In Harpur, Williams J rejected an argument that a legal assignment of a charge was required before the assignee could appoint a receiver. His Honour found that what was assigned was ‘not a contract but a charge — the security together with the rights and remedies available to enforce it’, that the assignment of such a security was ‘purely equitable’, and that ‘notice has never been regarded as necessary in order to effect an equitable assignment’. The security having been duly assigned, the assignee was entitled to appoint the receivers as he did.

109. The reasoning in Harpur is difficult to reconcile with both earlier and later authority.

110. The starting point is that an equitable chargee is ordinarily not entitled to appoint a receiver out of court unless the terms of the charge provide for such an appointment: Matthews v Goodday (1861) 31 LJ Ch 282; Tennant v Trenchard (1869) LR 4 Ch App 537. Mortgage debentures usually provide for the chargee to appoint a receiver and manager in the event of default. But absent such a power, the equitable chargee must apply to the court to appoint a receiver: Melbourne Tramways Trust v Melbourne Tramway & Omnibus Co Ltd (1887) 13 VLR 487 at 490 (‘Melbourne Tramways’).

111. In Melbourne Tramways, the Full Court of the Supreme Court of Victoria considered whether a security granted pursuant to legislation was intended to confer a power of sale. The legislation referred to the security as being ‘chargeable’ on the plant and rolling stock of the defendant. The Court said it was well understood that a ‘charge’ could only be enforced by a court order. As Finkelstein J pointed out in Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64; (2010) 4 ASTLR 94 at [45], Melbourne Tramways was only concerned with the right conferred upon the holder of a charge, not with a trustee who had been granted an express power of sale in a trust instrument. His Honour added:

“Interestingly, Melbourne Tramways is cited by Sykes and Walkers’ The Law of Securities (5th ed, 1993) at p 198 for the proposition that: ‘The remedies of an equitable chargee, unless contract adds others, are judicial sale and the appointment of a receiver. Both remedies are gained only through the court’.” (emphasis in original)

112. Authority as to the ability of a transferee to appoint receivers is to the same effect.

113. In Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430 (‘Warner Bros’), Mr Rod Stewart had entered into an agreement with an American company in 1968 by which he was to make records exclusively for the company for one year. The agreement contained options to extend the term until 9 October 1973, which were exercised by the company. While that agreement was on foot, Mr Stewart and the first defendant entered into an agreement with the plaintiffs by which Mr Stewart was to record exclusively for the plaintiffs from 9 October 1973. In 1972, Mr Stewart entered into a new agreement with the American company which gave the company options to extend the term of their original agreement for two further periods of two years each. The new agreement gave the American company a right to assign it. Later that year the American company was dissolved and transferred all its rights, including contractual rights, to another company without giving express notice to Mr Stewart. When the assignee company purported to exercise the option to extend the agreement, the plaintiffs brought proceedings claiming that they had contractual rights with Mr Stewart for three years from 9 October 2023 and that both the assignor and assignee had induced or threatened to induce breaches of that contract by Mr Stewart.

114. The primary judge, Willis J, had framed the issue as follows:

“Whether or not an equitable assignee of a contractual option who has not given notice of the assignment to the grantor of the option may exercise the same in his own name so as to bind the grantor of the option.”

115. Willis J held that, having failed to give notice of the assignment, the assignee company was not entitled to exercise the option to extend the agreement so as to bind Mr Stewart for the extended term. The Court of Appeal of England and Wales dismissed an appeal by the assignor and assignee companies. Sir John Pennycuick said at 445:

“Where there is a contract between A and B, and A makes an equitable but not a legal assignment of the benefit of that contract to C, this equitable assignment does not put into a contractual relation with B, and, consequently, C is not in a position to exercise directly against B any right conferred by the contract on A. The equitable assignment may be converted into a legal assignment by notice to B: see section 136 of the Law of Property Act 1925; but so long as the assignment remains equitable only, C has no more than a right in equity to require A to protect the interest which A has assigned and to do so by exercising the option himself. If A omits to exercise the option for any reason and the option runs out it is of no avail to C in subsequent proceedings against B, for it is then too late for the option to be exercised.”

116. In Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 (‘Long Leys’), the mortgagee of the appellant’s land transferred two mortgages to the respondent. Before the transfer was registered, the respondent issued a notice under s 57(2)(b) of the Real Property Act to the appellant. When the appellant failed to comply with the notice, the respondent sought and obtained an order for summary judgment against the appellant on a claim for possession of the land. An appeal against the order directing entry of judgment for the respondent was dismissed. An appeal against that decision was heard by the New South Wales Court of Appeal. Sheller JA reviewed the authorities at 11,517-11,518 and said:

“There emerge from these cases two separate propositions. One is procedural spawned on the need to protect the defendant from repeated claims. The second is more fundamental. The right of an equitable assignee of a chose in action being one against the assignor rather than the debtor, the equitable assignee cannot exercise a contractual right against the debtor.

The demand in the present case having been made by the respondent at a time when it was no more than an equitable assignee, the reasoning in the Warner Bros Records case suggests it was ineffective. That being so, at the very least, there is a triable issue and accordingly an order should not have been made for summary judgment. …”

117. The decisions in Long Leys and Showa Shoji were considered by McMurdo J in Dwyer v Derek [2004] 1 Qd R 371; [2003] QSC 274. In that case, an unregistered transferee of two mortgages purported to appoint a receiver and manager under those mortgages upon default by the mortgagor. At [16]-[17] her Honour concluded that absent some clear agreement with the mortgagor, an unregistered transferee of a registered mortgage is not entitled to exercise the mortgagee’s right to appoint a receiver (or a receiver and manager) upon default by the mortgagor:

“[16] These cases [Long Leys and Showa Shoji] do not resolve the present question, but they strongly indicate that an unregistered transferee of a registered mortgage is not entitled to exercise the mortgagee’s default remedies, where those remedies derive from a contract, absent some clear agreement by the mortgagor that the mortgagee’s equitable assignee could do so. ….

[17] Accordingly, Mr Pope’s purported appointment under the Provident mortgage was invalid.”

118. Agrivision sought to distinguish Long Leys on the basis that it concerned contractual rights, not equitable rights such as the right to appoint a receiver which, according to its argument, did not depend on the contract itself. However, as I have sought to explain above, it is not correct to say that an equitable chargee has an ‘equitable right’ to appoint a receiver out of court in the absence of the agreement of the chargor that it may do so. Landco emphasised, correctly in my view, that the right to appoint the Receivers in this case could only stem from clause 17.1 of the General Security Agreement and that it is erroneous to approach the issue ‘from the perspective of there being some equitable interest that sits outside the contractual right which is being assigned’, as Williams J appears to have done in Harpur.

119. Landco also relied on the decision of Efthim AsJ in Native Bond Pty Ltd v Cant [2015] VSC 203 (‘Native Bond’), which was upheld on appeal by Judd J in Native Bond Pty Ltd v Cant [2016] VSC 206 (‘Native Bond (Appeal)’). The outcome in Native Bond is at odds with the decision in Harpur. The plaintiffs in Native Bond had executed a Loan Agreement and a Deed of Charge with the third defendant in November 2011. They defaulted on their obligations under the Loan Agreement by failing to repay the principal sum by 23 February 2012. By Deed of Assignment dated 21 March 2013, the third defendant assigned the loan to Downtown Visuals Pty Ltd (Downtown). By Notice of Default dated 10 December 2013, the plaintiffs received notice that the Loan Agreement had been assigned to Downtown. In May 2014, the director of the third defendant appointed the first and second defendants as receivers over the plaintiffs’ assets. The plaintiffs challenged the appointment on the basis that the third defendant’s rights under the Loan Agreement and the Deed of Charge (including the right to appoint receivers under clause 19(a) of the Deed of Charge) had been completely assigned in equity and at law to Downtown by the Deed of Assignment in March 2013, such that the third defendant no longer had the power, in its name, to appoint receivers.

120. The issue was whether there was express notice that the third defendant’s rights under the Deed of Charge had been assigned to Downtown. The plaintiffs submitted that notice of the assignment of the debt was sufficient to constitute notice of the assignment of rights under the Deed of Charge, in part because the Loan Agreement referred to the charge. Efthim AsJ rejected that submission at [22]:

“A Deed of Charge and a loan agreement are two different documents with separate terms and obligations. For there to be express notice of the Deed of Charge, there must be an express intention to assign the charge, rather than an inference that the charge has been assigned. True, the Loan Agreement refers to the charge, but there has not been express notice that the charge has been assigned. The Notice of Default is not sufficient to pass with it the legal remedies which are incidents of the deed of charge, including the right to appoint a receiver. The plaintiffs therefore fail on this ground.”

121. It followed that only the third defendant could exercise the right to appoint receivers; that right could not be exercised by Downtown as an equitable assignee. Judd J concluded that the appellants had not established any error in Efthim AsJ’s findings regarding the scope of the assignment and the right of the mortgagee to appoint a receiver under the charge: Native Bond (Appeal) at [32].

122. Save for Harpur, all of the authorities to which I have referred support the conclusion that an equitable assignee of a charge has no power to appoint a receiver out of court unless the terms of the charge confer such a power. Here, they did not. I also note clause 29.3 of the General Security Agreement: see paragraph [27] above. That clause provides that the Security Provider (relevantly, Landco) only releases CBF from liability under the agreement ‘upon the Security Provider receiving notification of completion of the assignment’. That language is not consistent with an intention to allow an equitable assignee to exercise powers under the agreement prior to completion of the assignment because it contemplates that the Security Provider (Landco) will be entitled to assume that CBF is the Lender for the purposes of the security documents until such time as it receives notification of assignment.

123. Had it been necessary to decide the point, I would not have been willing to follow the authority of Harpur. I would have rejected the contention that Agrivision had a power as an equitable assignee to appoint the Receivers out of court.

The fraud on a power issue

Fraud on a power – general principles

124. The parties proceeded, as shall I, on the basis of the concise statement of general principles relating to the doctrine of fraud on a power to be found in the reasons of Brereton J in Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 at [57]-[61]. As his Honour explained at [57]:

“A power must be exercised in good faith for the purpose for which it was given, and not for an ulterior purpose – whether for the benefit of the trustee or otherwise – not contemplated by the instrument creating the power [Vatcher v Paull [1915] AC 372, 378 (Lord Parker); Cowan v Scargill [1985] Ch 270, 288D (Megarry VC)]. A ‘fraud on a power’ is an exercise of a power for such an extraneous purpose; in this context, the term ‘fraud’ does not necessarily involve conduct which would ordinarily be described as dishonest or immoral [Vatcher v Paull, 378; Re Crawshay [1948] Ch 1234]. Such an exercise of power for an extraneous purposes [sic] is invalid and void …”

125. These principles apply equally to the exercise of powers by a mortgagee, such as a power of sale. In Barns v Queensland National Bank Ltd (1906) 3 CLR 925; [1906] HCA 26 (‘Barns’), the High Court held that a mortgagee was restrained in the exercise of its power of sale by a duty to act ‘honestly for the purposes of the power’, adopting what Lord Herschell LC had said in Kennedy v De Trafford [1897] AC 180 at 185 and what Lord Westbury and Lord St Leonards had said in Duke of Portland v Topham (1964) 11 HLC 32 at 54 and 55, respectively.

126. In Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 (‘Downsview’), Lord Templeman said for the Board at 312:

“Several centuries ago equity evolved principles for the enforcement of mortgages and the protection of borrowers. The most basic principles were, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage. From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on a mortgagee may be exercised although the consequences may be disadvantageous to the borrower.”

127. In that case, the mortgagor company had issued a first debenture to a bank, which was in priority to a second debenture issued to the first plaintiff, First City Corporation Ltd (FCC). Each debenture created a fixed and floating charge and also contained a power for the debenture holder to appoint a receiver and manager. When the monies secured by the second debenture became due and payable, FCC appointed receivers and managers to the mortgagor company and removed the manager, Mr Pedersen. Mr Pedersen then consulted the second defendant, Mr Russell, who controlled the first defendant company, Downsview Nominees Ltd (Downsview). The first debenture was subsequently assigned to Downsview, and Mr Russell was appointed receiver and manager under it. Mr Russell took over the assets and management of the mortgagor company from the receivers and managers appointed by FCC and restored Mr Pedersen.

128. Lord Templeman held that the primary judge’s finding that Downsview’s appointment of Mr Russell as receiver and manager was ‘not for the purpose of enforcing the security under the Westpac debenture but for the purpose of preventing the enforcement by the plaintiffs of the [F.C.C.] debenture’ (First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 at 749 (Gault J)) established that the appointment was made for improper purposes and had been done in bad faith: at 314.

129. Downsview was applied by Einstein J in State Bank of NSW v Chia (2000) 50 NSWLR 587; [2000] NSWSC 552 at [870]-[871] where his Honour said:

“[870] … Outside of those imposed by statute, the general law imposes at least three duties upon a receiver. … In the third place, and most relevantly for these proceedings, the receiver, as the donee of a power, must exercise the powers and duties granted to him or her in good faith and for a proper purpose.

[871] The content of this last duty is determined by its assimilation with the duty imposed by the law on a mortgagee exercising a power of sale: Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 at 312. The locus classicus in this area of the law is to be found in the judgment of Lord Herschell in Kennedy v De Trafford [1897] AC 180 where (at 185), the Lord Chancellor formulated the duty of a mortgagee (and therefore a receiver) as one to act in good faith, without wilfully or recklessly sacrificing the interests of the mortgagor. To a similar effect, Lord Macnaghten said (at 192) that: … if a mortgagee selling under a power of sale in his mortgage takes pains to comply with the provisions of that power and acts in good faith, I do not think his conduct in regard to the sale can be impeached. This formulation was adopted and applied by Griffith CJ in Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 943 where evidence indicated that the mortgagee had conducted the sale in pursuit of a personal vendetta against the mortgagor. The Chief Justice, in giving the judgment of the court, suggested that a power of sale exercised not for the purpose of obtaining payment of a debt, but to deprive the mortgagor of the opportunity of retaining the property by a redemption or which wilfully and recklessly sacrificed the interests of the mortgagor, was not a power exercised in good faith.”

Mixed purposes

130. The plaintiff submitted that where the donee of a power has more than one purpose in exercising it, one of which is proper and one of which is improper, the question of whether the power was exercised in good faith for the purpose for which it was given is to be determined by asking whether it would have been exercised ‘but for’ the existence of the improper purpose.

131. Guidance on this issue can be derived from what was said in Mills v Mills (1938) 60 CLR 150; [1938] HCA 4 (‘Mills’). Mills concerned the exercise by directors of a power to issue shares. Latham CJ expressed the view that, for the exercise of such a power to be invalidated by an improper purpose, that purpose must be ‘the moving cause’ of the directors: at 165. Dixon J favoured a focus on the ‘substantial’ purpose of the directors and said at 185-186:

“The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment. It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the board’s action. If this is within the scope of the power, then the power has been validly exercised.”

132. However, his Honour added at 186:

“But if, except for some ulterior and illegitimate object, the power would not have been exercised, that which has been attempted as an ostensible exercise of the power will be void, notwithstanding that the directors may incidentally bring about a result which is within the purpose of the power and which they consider desirable.”

133. Dixon J’s reasons in Mills would appear to offer two possible frameworks for analysis:

134. If the ‘substantial object’ of a person forming the ‘real ground’ for his or her exercise of power is proper, then the exercise of power is valid (a ‘substantial purpose’ test).

135. If the power would not have been exercised ‘except for some ulterior and illegitimate object’, then the exercise of power is invalid notwithstanding that it brings about a result that is ostensibly within the scope of the power (a ‘but for’ test).

136. Later authority has been somewhat mixed on which of these tests should prevail, at least in the context of the exercise of fiduciary powers. In Ngurli v McCann (1953) 90 CLR 425; [1953] HCA 39 (‘Ngurli’) at 445, the High Court endorsed the first of Dixon J’s two formulations, namely that the focus must be on ‘[t]he substantial object the accomplishment of which formed the real ground of the board’s … action’.

137. The substantial purpose test was again affirmed by the Privy Council in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 in an appeal from the NSW Supreme Court. At 834, Lord Wilberforce for the Board said:

“Having ascertained, on a fair view, the nature of this power, and having defined as can best be done in the light of modern conditions the, or some, limits within which it may be exercised, it is then necessary for the court, if a particular exercise of it is challenged, to examine the substantial purpose for which it was exercised, and to reach a conclusion whether that purpose was proper or not.”

136. Earlier in his speech at 832, his Lordship also indicated (without any reference to a ‘but for’ test) that a ‘substantial purpose’ test would be the appropriate legal standard even where there was more than one purpose:

“… when a dispute arises whether directors of a company made a particular decision for one purpose or for another, or whether, there being more than one purpose, one or another purpose was the substantial or primary purpose, the court, in their Lordships’ opinion, is entitled to look at the situation objectively in order to estimate how critical or pressing, or substantial or, per contra, insubstantial an alleged requirement may have been.” (emphasis added)

137. In that case, his Lordship concluded that the primary judge had been correct to find that the power to issue shares had been improperly exercised on the basis that the primary purpose behind the allotment of shares was illegitimate, being to destroy the existing majority of shareholders.

138. In Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285; [1987] HCA 11, a majority of the High Court (Mason, Deane and Dawson JJ) considered that the ‘substantial purpose’ test affirmed in Ngurli and Mills represented the ‘preponderant view’ of the Court. When it came to mixed purposes, however, their Honours expressed the view at 294 that the impermissible purpose must be causative of the exercise of power in a ‘but for’ sense, citing Dixon J’s statement of the ‘but for’ test in Mills:

“In this Court, the preponderant view has tended to be that the allotment will be invalidated only if the impermissible purpose or a combination of impermissible purposes can be seen to have been dominant … The cases in which that view has been indicated have not, however, required a determination of the question whether the impermissible purpose must be ‘the’ substantial object or moving cause or whether it may suffice to invalidate the allotment that it be one of a number of such objects or causes. As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, ‘the power would not have been exercised’: per Dixon J, Mills v Mills [(1938) 60 CLR, at p 186].”

139. At least as concerns the exercise of powers by company directors, the weight of authority seems now to be that both so-called ‘tests’ are applicable. That was the approach of Ipp J (Malcolm CJ and Seaman J agreeing) in Permanent Building Society (In Liq*) v Wheeler* (1994) 11 WAR 187 (‘Wheeler’) at 218, where his Honour summarised the applicable principles in this way:

“The principles applicable in determining whether directors of a company have acted for an improper purpose and in abuse of their powers are well settled. Relevantly, as regards the issues that arise in this case, it may be said that those principles are:

(a) Fiduciary powers and duties of directors may be exercised only for the purposes for which they were conferred and not for any collateral, or improper purpose.

(b) It must be shown that the substantial purpose of the directors was improper or collateral to their duties as directors of the company. The issue is not whether a management decision was good or bad; it is whether the directors acted in breach of their fiduciary duties.

(c) Honest or altruistic behaviour by directors will not prevent a finding of improper conduct on their part if that conduct was carried out for an improper or collateral purpose. Whether acts were performed in good faith and in the interest of the company is to be objectively determined, although statements by directors about their subjective intentions or beliefs will be relevant to that inquiry.

(d) The court must determine whether but for the improper or collateral purpose the directors would have performed the act impugned.”

140. The same approach was favoured in Re Peninsula Kingswood Country Golf Club [2014] VSC 437 at [91]-[92] (Robson J), United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324 at [642]-[643] (Elliott J) and Slea Pty Ltd v Connective Services Pty Ltd (No 9) [2022] VSC 136 at [943] (Robson J).

141. In The Bell Group Ltd (in liq*)* v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; [2008] WASC 239 at [4464]-[4465], Owen J noted the divergence between the language of ‘substantial object’ and ‘but for’ in the authorities but considered that it might amount to a distinction without a practical difference. Ultimately, however, his Honour adopted Ipp J’s summary of the law in Wheeler set out above: at [4466]-[4467].

142. Finally, the authors of Ford, Austin and Ramsay’s Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) have expressed the view that both tests are required to be satisfied where an exercise of power by directors is impugned. At [8.240], in the section headed ‘Mixed purposes’, they explain:

“… [I]t has been accepted in Australia for some time that one looks for the ‘substantial object the accomplishment of which formed the real ground of the board’s action’: per Dixon J in Mills v Mills (1938) 60 CLR 150 at 186; 11 ALJ 527.

However, in Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 294; 70 ALR 251 at 257; 11 ACLR 715 in obiter dicta Mason, Deane and Dawson JJ, speaking of the exercise of the power to issue shares, adumbrated a ‘but for’ test:

As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, ‘the power would not have been exercised’ (per Dixon J in Mills v Mills (1938) 60 CLR 150 at 186; 11 ALJ 527).

That still requires the impermissible purpose to be a ‘significantly contributing cause’. Presumably, this would exclude an improper consideration that was subordinate to other proper considerations but which triggered action. Unless that is so, a commercial decision based on proper considerations would be bad if the timing of the decision was influenced by the apprehension of a takeover bid (cf Winthrop Investments Ltd v Winns Ltd (1979) 4 ACLR 1; (1979) CLC ¶40-554). In Darvall v North Sydney Brick and Tile Co Ltd, above, ACLR at 291 Mahoney JA distinguished between a transaction for the purpose of defeating a take-over offer and one merely prompted by the take-over offer.”

143. The notion that both tests are relevant to the question of whether a power was exercised for an improper purpose is one that has understandably proved to be somewhat problematic. On the one hand, it has sometimes been said that the tests are synonymous: Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 (‘Darvall’) at 280 (Kirby P in dissent); Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 at 492 (Kirby ACJ, Priestley and Handley JJA agreeing) referring to Kirby P’s dissenting view in Darvall. See also Re Southern Resources Ltd (1989) 15 ACLR 770 at 787, where Perry J said:

“Where there is more than one motive on the part of the directors, it is sufficient to invalidate the particular exercise of their powers that it has as its substantial object, an impermissible purpose in the sense that but for the existence of that purpose, the power would not have been exercised in that way.”

144. On the other hand, at least in cases involving the exercise of powers by a trustee, courts have sometimes suggested that only the ‘but for’ test needs to be satisfied in reaching the conclusion that a power was exercised for an improper purpose. In Curwen v Vanbreck Pty Ltd (2009) 26 VR 335; [2009] VSCA 284 the Victorian Court of Appeal (Redlich and Bongiorno JJA and Hansen AJA) considered the exercise of a trustee’s power to exclude persons from the class of beneficiaries. The Court held at [42]:

“If the trustee in deciding to exercise the power acted upon the dual consideration of whether the beneficiaries ought to be entitled to a potential distribution of trust assets and whether those beneficiaries ought to be given access to trust documents, so that the latter consideration should be regarded as part of the trustee’s primary intention, it would be an invalid exercise of power. We find no support in the cases referred to by the trustee for the proposition that the improper purpose must be the primary or dominant purpose. In our view, the improper purpose will constitute a fraud on the power if it be an operative or actuating purpose — one without which it cannot be said the appointment would have been made.”

145. Mandie v Memart Nominees Pty Ltd (2020) 62 VR 528; [2020] VSCA 281 at [183] (Tate, Niall and Emerton JJA) and Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292 at [176] (Meek J) are to the same effect.

146. In this respect, I also note the reasons of Lord Sumption in Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71 (‘Eclairs’). The case concerned an attempt by the board of directors of the respondent company to impose restrictions on the rights exercisable by minority shareholders. The issue was whether the power in the company’s articles to impose such restrictions was exercised for a proper purpose, and in what circumstances such restrictions could be challenged on the ground that they were imposed for a collateral purpose. Only the minority (Lord Sumption, with whom Lord Hodge agreed) concluded that a ‘but for’ test was the appropriate standard (at [22]), and the majority declined to express a concluded view on the issue: see Lord Mance (with whom Lord Neuberger agreed) at [53] and Lord Clarke (with whom Lord Neuberger agreed) at [46].

147. At the same time, there is support in the authorities for the proposition that the ‘but for’ test may be relevant to questions of causation but that it should have no particular role to play in determining whether a power was exercised for an improper purpose: Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 (Edelman J). In that case, after referring to Lord Sumption’s reasons in Eclairs, his Honour said at [497]-[498]:

“[497] Lord Sumption’s approach recognises a mere influence as sufficient for a breach of duty. This conclusion rests upon the fact that people are often motivated to act by a number of purposes. They need not be motivated by any single factor, or even any single substantial purpose. The recognition of a mere influence as a breach of duty means that the ‘but for’ test (would the respondent have entered the transaction but for the improper purpose) does not apply to the question of whether a breach has occurred. But the ‘but for’ test would still apply in relation to whether the consequences of the breach of duty are that a transaction should be set aside or compensation paid. It is established in Australia that the transaction will not be set aside unless ‘but for’ the breach of duty the transaction would not have occurred or the power would not have been exercised: Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 294.

[498] I have doubt whether the ‘but for’ test applies at the stage when it is determined whether a breach of duty occurs. However, all parties assumed that it did and the case was conducted in that way. As I explain below, I accept the submission by senior counsel for ASIC that in this case ‘different tests of causation are probably unlikely to make much practical difference’.”

148. Edelman J’s caution about ‘but for’ causation in this area is, I respectfully suggest, well founded. The relevant question concerns the purpose for which the particular power was exercised, not the motives of the donee of the power in deciding to exercise it and, as his Honour explained, the ‘but for’ test has a tendency to confuse this distinction: cf Automotive Invest Pty Ltd v Federal Commissioner of Taxation (2024) 283 CLR 291; [2024] HCA 36 at [109] and following (Edelman, Steward and Gleeson JJ). This same distinction was recognised by the High Court (Griffiths CJ, Barton and O’Connor JJ) as long ago as 1906 in Barns. The Court said at 943:

“The motive of the mortgagee, as distinguished from his intention, is not material. A lawful act does not become unlawful merely because the doer was actuated in doing it by an evil motive.”

149. The authorities to which I have referred concerning the exercise of powers by fiduciaries are not easy to reconcile. On balance, I do not consider that they support the position for which the plaintiff contends. In cases involving the exercise of fiduciary powers where the donee has mixed purposes, the weight of authority suggests that it is not sufficient to show only that the power would not have been exercised but for the existence of an improper purpose. It remains both necessary and appropriate to have regard to the ‘substantial object’ for which the power was exercised.

Mortgagee cases

150. Courts have arguably taken a more robust approach to the question of purpose in the case of mortgagees exercising powers of sale. This no doubt reflects the fact that a power of sale is given for the benefit of the donee of the power and so is (at least in this respect) unlike the powers given to a trustee or director. This is a circumstance that heightens the need to distinguish between the purpose for which the power is exercised and the motive of the mortgagee in exercising it because it is inevitable, given the nature of the power, that a mortgagee will take its own particular circumstances into account in deciding whether to do so. The point was made in Nash v Eads (1880) 25 SJ 95, where Sir George Jessel MR said:

“… [T]he mortgagee was not a trustee of the power of sale for the mortgagor, and if he was entitled to exercise the power, the court could not look into his motives for so doing. If he had a right to sell on 1 June, and he then said, ‘The mortgagor is a member of an old county family, and I don’t wish to turn him out of his property, and will not sell it at present’, and then on 1 July he said, ‘I have had a quarrel with the mortgagor, and he has insulted me; I will show him no more mercy, but will sell him up at once’ – if all this was proved, the court could not restrain the mortgagee from exercising his power of sale, except on the terms of payment of the mortgage debt. The court could not look at the mortgagee’s motives for exercising his power …”

151. See also Belton v Bass, Ratcliffe & Gretton Ltd [1922] 2 Ch 449 at 466 (‘Belton’).

152. In Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16; (2002) 10 BPR 19,565, Campbell J referred to both Nash v Ead**s and Belton in support of what his Honour said at [102]:

“Further, if there has truly been a default, the mortgagee is entitled to exercise the power to recover the money secured by the mortgage, regardless of certain collateral motives which he might have in exercising the power. Thus, if the power of sale has arisen, it is no objection to its exercise that the mortgagee does not really need the money, or is delighted that exercising the power of sale gives him an opportunity to harm a mortgagor whom he dislikes …”

153. These authorities do not suggest that the ultimate question for decision is any different in the case of a challenge to the exercise of a power by a mortgagee. The issue remains whether the power was exercised in good faith for the purpose for which it was given. They do however underscore the importance of distinguishing between a mortgagee’s purpose in exercising the power and its motive in doing so. In particular, the way in which a mortgagee assesses its interests in deciding to exercise a power should not be confused with its purpose in exercising it. In my view, these observations are equally relevant to the exercise of a power to appoint receivers under a charge. Like the mortgagee’s power of sale, that power is granted for the particular benefit of the donee.

Did Agrivision exercise the power in good faith and for a proper purpose?

154. There was no direct evidence of the first defendant’s purpose in appointing the Receivers. The plaintiff’s case instead requires the Court to draw inferences from the documents and from the overall course of events.

155. Mr Simonfi, the sole director of the first defendant, was available and could have given direct evidence as to its purpose in appointing the Receivers. However, he did not do so. That is a matter that increases my willingness to draw inferences from the evidence concerning matters on which he could have given evidence. I will proceed on the basis that his evidence would not have assisted the first defendant on those issues: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 at 308, 312, 320-321.

156. I nevertheless conclude that the first defendant did exercise the power to appoint the Receivers in good faith for the purpose for which the power was given. I reach that conclusion in the following way.

157. First and foremost, the power was exercised in circumstances where the plaintiff was in default, where the first defendant had a substantial interest in being repaid and where the first defendant had a contractual right to appoint receivers for the purpose of protecting its own interest. Although the plaintiff submitted that there was never any serious question about whether the first defendant would eventually be repaid, the fact is that it had not been and the default was continuing.

158. There was no evidence to show that the first defendant could not have had a serious concern about payment, which is how the plaintiff put its case. To the contrary, the evidence shows that the plaintiff had been late in meeting its payment obligations under the Landco Loan on a number of occasions. When the facility matured in February 2025, Mr Marsh followed the plaintiff up for repayment on 20 and 24 February, and Mr Ibrahim assured Mr Marsh on 25 February that it ‘would be repaid tomorrow or Thursday’. The facility was not repaid and a further nine-month extension was granted instead. The plaintiff had also defaulted on interest payments. The December 2024 interest instalment was not paid until 7 January 2025. On 1 and 4 December 2025, Mr Marsh emailed Mr Ibrahim noting that another interest payment was overdue.

159. I note that this history of non-compliance is consistent with what Mr Simonfi said to Mr Boulos in his email on the evening of 4 June 2026 (see paragraph [86] above) about his office being ‘repeatedly ignored’.

160. These circumstances strongly support the conclusion that the repayment of the Landco Loan was at least one of the purposes for which the power was exercised and that this was a proper purpose.

161. The plaintiff’s thesis as to the first defendant’s real – and improper – purpose in exercising the power depends to a significant degree on the 30 April email: paragraph [55] above. That document lays out a plan to appoint receivers in respect of both the Landco Loan and the IPG Loan in circumstances calculated to place maximum pressure on Mr Ibrahim and Mr Micalos to accede to Mr Simonfi’s demands concerning the SDR Project.

162. The content of the 30 April email and the timing of the appointment of the Receivers leave no room for doubt that Mr Simonfi’s main motivation for causing the Receivers to be appointed at the particular time that they were appointed concerned what was happening in relation to the SDR Project. If Mr Ibrahim had pledged allegiance to Mr Simonfi and shown his willingness to revisit the terms of the SDR Project in a way that excluded Mr Micalos, as Mr Simonfi had demanded, Mr Simonfi would not have caused the first defendant to appoint the Receivers to the plaintiff. I accept, therefore, that in causing the first defendant to appoint the Receivers at the time he did, Mr Simonfi was motivated by a belief that the appointment would place pressure on Mr Ibrahim to cooperate with him on the SDR Project.

163. The more difficult question is whether one of Mr Simonfi’s purposes in appointing the Receivers – as opposed to his general motivation for doing so – was to place pressure on Mr Ibrahim in this way.

164. The first defendant points out that Mr Simonfi did not ultimately do what he had foreshadowed in his 30 April email, which was to use the threat of receivership as a stick to persuade Mr Ibrahim and Mr Micalos to agree to his terms concerning the SDR Project. Even though there is no doubt that Mr Simonfi wanted Mr Ibrahim to support him in his efforts to exclude Mr Micalos from the SDR Project, and even though he demanded that Mr Ibrahim confirm that he supported him in relation to that matter, the first defendant points out that the appointment only came after Mr Simonfi’s deadline had passed. That is, by the time he caused the first defendant to appoint the Receivers, it had become clear that Mr Ibrahim was unwilling to cooperate. Thus, the first defendant submits that the appointment cannot have been designed to secure Mr Ibrahim’s cooperation.

165. Although there is force in that submission, I am unable to accept it. The evidence as a whole supplies a sound basis to infer that one of Mr Simonfi’s purposes in appointing the Receivers was to place pressure on Mr Ibrahim to cooperate with his plans concerning the SDR Project. Even apart from the 30 April email there would be a basis to infer that that was at least one of Mr Simonfi’s purposes in appointing the Receivers. The fact that the events of 2, 3 and 4 June were not exactly prefigured in the 30 April email is therefore not to the point. Either way, Mr Simonfi did make demands in connection with the SDR Project and he did time the appointment of the Receivers by reference to those demands. I infer that the proposed appointment of the Receivers was what Mr Simonfi was referring to in his 2 June email when he said he was willing to ‘stall [his] own actions’: paragraph [71] above. I am all the more willing to draw this inference about the first defendant’s purpose by reason of Mr Simonfi’s unexplained failure to give evidence.

166. I therefore find that the first defendant had multiple purposes in causing the Receivers to be appointed, one of which was unrelated to the purpose for which the power was given. I find that this purpose was to place pressure on Mr Ibrahim in relation to the SDR Project.

167. I am not, however, persuaded that the existence of this improper purpose means that the power was exercised in bad faith. In my view, the ‘substantial object’ which Mr Simonfi had in mind in causing the defendant to appoint the Receivers was to secure repayment of the Landco Loan.

168. The parties were enmeshed in two separate disputes, one concerning the repayment of the Landco Loan and the other concerning the SDR Project. Mr Simonfi was entitled to take his position concerning the SDR Project into account in determining whether and, if so, when it was in his interests to cause the first defendant to recover the Landco Loan and it was inevitable that he would do so. His position is not altogether different from that of the mortgagee in the example given by Sir George Jessel MR in Nash v Eads (paragraph [150] above) or in the example given by Campbell J in Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (paragraph [152] above).

169. To the extent Mr Simonfi had an actual purpose of seeking to place pressure on Mr Ibrahim in connection with the SDR Project, I consider that his purpose was incidental to the purpose of seeking to recover the Landco Loan. It was a purpose that followed as a natural incident of the purpose of recovering the Loan. This is not a case where the existence of a default was manufactured or contrived in order to allow it to be taken advantage of. Mr Ibrahim had inexplicably allowed the Landco Loan to fall into default precisely at a time when he and Mr Simonfi were in dispute concerning the direction of the SDR Project. It was inevitable that Mr Simonfi would not only find that circumstance to be very motivating but that he would go further and actually form an intention of seeking to capitalise on it. But, critically so far as I am concerned, Mr Simonfi was only willing to do so where he had a proper basis to appoint the Receivers in the first place, which he undoubtedly did. I do not regard his other antics surrounding the appointment, such as the timing of the notice of default (which was not required to be sent in order to enliven the power to appoint the Receivers) and the staging of the Grant Thornton meeting to make it appear as though he had just discovered Mr Micalos’s ‘misappropriation’, to detract from this proposition.

170. The plaintiff particularly relied on the fact that Mr Simonfi instructed the Receivers not to take steps to notify creditors, banks and ASIC of their appointment. In the plaintiff’s submission, this instruction reveals that the first defendant was not seriously seeking to recover the loan but that it must have had some other impermissible purpose in mind.

171. Although Mr Simonfi’s instruction to the Receivers was unusual, it was not at all inconsistent with an intention to protect the security. Mr Simonfi clearly believed that it was possible to hold the appointment of the Receivers in abeyance before instructing them to start the process of realising assets or taking other steps to effect repayment. At least so far as the notification to ASIC was concerned, he was wrong about that. But the strategy was not inconsistent with a desire to protect the security and to secure repayment through the threat of further steps being taken by the Receivers in the future.

172. Finally, it is relevant but not decisive to note that from the first defendant’s point of view, the appointment secured nothing other than the repayment of the Landco Loan which was something it had a very real and immediate interest in achieving. From the first defendant’s point of view, the appointment did not otherwise bring about some advantageous state of affairs unrelated to recovery of the loan.

173. I therefore do not accept that the power to appoint the Receivers was exercised other than in good faith and for the purpose for which it was given. It follows that the power was validly exercised.

ORDERS

174. The summons will be dismissed with costs.

**********

[2016] FCA 1552