McCallum, in the Matter of Re Holdco Pty Ltd (Administrators Appointed) (No 2) [2021] FCA 377 - FCA 2021 case summary — Zoe

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McCallum, in the Matter of Re Holdco Pty Ltd (Administrators Appointed) (No 2) [2021] FCA 377

[2021] FCA 377

Federal Court of Australia|2021-04-21|Before: O'Bryan J

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Source facts

Court

Federal Court of Australia

Decision date

2021-04-21

Before

O'Bryan J

Source

Original judgment source is linked above.

Judgment (89 paragraphs)

[1]

ommercial Ltd [1997] 1 WLR 415 Barker v Cox (1876) 4 Ch D 464 Beale v Trinkler [2008] NSWSC 347 Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 233 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1994) 180 CLR 266 Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109; 210 LGERA 1 Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 Crawley v Short [2009] NSWCA 410; 262 ALR 654 Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 ET-China.com International Holdings v Cheung [2019] NSWSC 1874; 142 ACSR 121 Evans v McLean (No 2) [1987] WAR 110; (1985) 9 ACLR 796 Goold v Commonwealth (1993) 42 FCR 51 Hannam v Lamney (1926) 43 WN (NSW) 68 Hewett v Court (1983) 149 CLR 639 Jafari v 23 Developments Pty Ltd [2018] VSC 404 Langen & Wind Ltd v Bell [1972] Ch 685 Mackreth v Symmons (1808) 33 ER 778 McCallum, in the Matter of Re Holdco Pty Ltd (Administrators Appointed) [2020] FCA 666; 145 ACSR 243 McDonald v Federal Commissioner of Land Tax (1915) 20 CLR 231 MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167 Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; 277 FLR 337 Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 Rodney Jane Racing Pty Ltd v Monster Energy Company [2019] FCA 923; 370 ALR 140 State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549 Wossidlo v Catt (1934) 52 CLR 301

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[20]

The claim made by the plaintiffs in respect of items 11 and 12 of the plaintiffs' amended notice of claim is dismissed.
The claim made by the first interested party (Westpac) in the proceeding is upheld to the extent determined in the accompanying reasons of the Court, namely that Westpac is entitled to a proportionate share of the balance of the Retained Proceeds (after payment of all other amounts pursuant to previous orders of the Court) of 65.5%.
The claim made by the second and third interested parties (Sargon Capital and Taiping) in the proceeding is upheld to the extent determined in the accompanying reasons of the Court, namely that Sargon Capital is entitled to a proportionate share of the balance of the Retained Proceeds (after payment of all other amounts pursuant to previous orders of the Court) of 13.1%.
The claims made by the fourth interested party (GrowthOps) and the fifth and sixth interested parties (Diversa and OneVue) in the proceeding are dismissed.
The plaintiffs, Westpac, and Sargon Capital and Taiping have liberty to apply to the Court for: (a) a final order that gives effect to orders 1 to 4 herein by specifying the dollar amounts to be paid to each of them from the Retained Proceeds; (b) any other order consequential upon the accompanying reasons of the Court.
By 19 May 2021, any party (costs applicant) that seeks an order for the payment of the whole or part of its costs of the proceeding by another party (costs respondent) is to file and serve any evidence relied on and a written submission of no more than 5 pages which specifies the amount claimed in a lump sum.
By 16 June 2021, any costs respondent is to file and serve any evidence relied on and a written submission of no more than 5 pages in response.
Subject to further order, any costs awarded in the proceeding will be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth).
The Court will determine the award of costs on the papers unless any party gives notice in its written submission that it seeks a hearing on the question of costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE OF INTERESTED PARTIES First Interested Party Westpac Banking Corporation (ACN 007 457 141) Second Interested Party Sargon Capital Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (ACN 608 799 873) Third Interested Party Taiping Trustees Limited Fourth Interested Party GrowthOps Services Pty Ltd (ACN 626 208 777) Fifth Interested Party Diversa Pty Ltd (ACN 079 201 835) Sixth Interested Party OneVue Holdings Limited (ACN 108 221 870)

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A. INTRODUCTION [1] B. NOTIFIED CLAIMS [22] C. QUESTIONS TO BE DETERMINED [27] D. OVERVIEW OF THE EVIDENCE [30] E. JOINT STATEMENT OF AGREED FACTS [49] F. QUESTION 2: VALUATION DATE AND BASIS OF VALUATION [51] G. QUESTION 3: OWNERSHIP OF ASSETS [54] G.1 The claims to ownership of intellectual property assets made by or on behalf of Sargon Capital and Sargon Services [54] Overview [54] Findings of fact [60] Submissions of the parties [74] Consideration [80] G.2 GrowthOps' claims to the Developed IP [84] Overview [84] Findings of fact [85] Was the Developed IP sold as part of the Cloverhill Sale (including as part of the Sargon software systems) so as to generate part of the Retained Proceeds? [107] Was GrowthOps the owner of the Developed IP at the time of sale such that it is entitled to a proportion of the Retained Proceeds? [112] G.3 Diversa's claim to an equitable lien [140] Findings of fact [141] Submissions of the parties [154] Consideration [158] H. QUESTION 4: VALUATION AND ALLOCATION [181] H.1 Introduction [181] H.2 Purchase price allocation by the plaintiffs [190] H.3 The valuation methodologies of the expert valuers [197] Mr Hall's methodology [198] Mr Jaski's methodology [210] Mr Samuel's valuation methodology [219] H.4 Consideration of the valuation methodologies [226] The Cloverhill Sale was a distressed sale [230] Reduction in value should be applied proportionately [233] Conclusion [253] H.5 Fair market value of the BSA Assets [254] Intellectual property [257] Plant and equipment [277] Conclusion with respect to the fair market value of the BSA assets [279] GrowthOps' claim [281] H.6 Fair market value of the Sale Subsidiaries [284] Calculation of expenses and the resulting EBIT [287] The choice of EBIT multiple to be applied [303] The use of a revenue multiple [309] Surplus assets [312] Allocation of value between subgroups [313] Value of Sargon NZ [316] Conclusion on the fair market value of the Sale Subsidiaries [318] H.7 Relative values of the Sale Subsidiaries and BSA assets [320] I. CONCLUSIONS AND ORDERS [321]

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A. INTRODUCTION 1 The Sargon Group was a corporate group consisting of approximately 39 companies which conducted a series of financial planning, corporate trustee, responsible entity, superannuation and related financial services businesses. Sargon Capital Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 608 799 873 (Sargon Capital) was at all relevant times the ultimate holding company of the Sargon Group. The corporate structure of the Sargon Group as at 4 May 2020, as relevant to these proceedings, is set out in Appendix A to these reasons (which has been extracted from Annexure A to the Joint Statement of Agreed Facts tendered by the parties and which is reproduced below). 2 External administration of Sargon Group entities commenced on 29 January 2020 with the appointment of Mr Shaun Fraser and Mr Jason Preston of McGrathNicol as joint and several receivers and managers of Sargon Capital by secured creditor Taiping Trustees Limited (Taiping). Subsequently, on 8 March 2020, Joseph Hayes and Andrew McCabe of Wexted Advisors were appointed to act as administrators of Sargon Capital pursuant to s 436C of the Corporations Act 2001 (Cth) (Corporations Act) and, on 8 April 2020, Messrs Hayes and McCabe were appointed joint and several liquidators of Sargon Capital. 3 The plaintiffs in this proceeding, Stewart McCallum and Adam Nikitins of Ernst & Young, were appointed as joint and several voluntary administrators of the following Sargon Group entities on 4 February 2020: (a) Re Holdco Pty Ltd ACN 612 592 471 (Re Holdco); (b) RSE Holdco Pty Ltd ACN 612 586 893 (RSE Holdco); (c) Sargon Services Pty Ltd ACN 163 522 058 (Sargon Services); (d) Sargon CT Holdings Pty Ltd ACN 628 621 321 (Sargon CT Holdings); (e) SC International Holdings 2 Pty Ltd ACN 630 632 343 (SCIH2); (f) Sargon Superannuation Holdings Pty Ltd ACN 630 648 225 (Sargon SH); and (g) Sargon Superannuation Holdings SPV Pty Ltd ACN 633 509 494 (Sargon SPV), (which I will refer to collectively as the Sargon VA Entities). 4 The plaintiffs were also appointed as joint and several voluntary administrators of SC Australian Holdings 1 Pty Ltd (SCAH1). However, on 4 February 2020, Mr Daniel Walley and Mr Christopher Hill of PricewaterhouseCoopers were appointed as joint and several receivers and managers of SCAH1. As a result, the plaintiffs did not seek to deal with SCAH1 and it is not directly relevant to this proceeding. 5 Subsequently, on 14 May 2020, the plaintiffs were appointed as liquidators of the Sargon VA Entities. 6 Between the date of their appointment as administrators and the end of April 2020, the plaintiffs negotiated a sale of certain of the businesses and assets of the Sargon VA Entities to the Cloverhill Group (Cloverhill Sale). The sale was complicated by disputes over the ownership of, and security interests held over, certain of the assets to be sold. As a result of those disputes, on 30 April 2020 the plaintiffs sought urgent relief from the Court under ss 442C and 447A of the Corporations Act. Specifically, under s 442C(2)(c), the plaintiffs sought leave of the Court to dispose of: (a) all intellectual property used or in the possession of Sargon Services (including, but not limited to, intellectual property in relation to the software systems known as "Arcadia", "Sentinel", "Metropolis", "API Impact" and "Sargon Pay", and in relation to the trademarks and domain names set out in the annexure to the originating process); and (b) such property of the Sargon VA Entities as is (or may be) subject to a security interest (including under the Personal Property Securities Act 2009 (Cth)), in connection with, and as part of, the sale of the property of the Sargon VA Entities pursuant to the Cloverhill Sale. The plaintiffs also sought orders as to the treatment of the proceeds of the sale for the purposes of satisfying the requirement in s 442C(3) to make arrangements for the adequate protection of the interests of the owners of the intellectual property and the security interest holders. Under s 447A of the Corporations Act, the plaintiffs sought orders as to how Part 5.3A of the Corporations Act was to operate in relation to the proceeds of sale so as to preserve the rights of the owners of the intellectual property and the security interest holders as between themselves. 7 On 1 May 2020, I made orders under ss 442C and 447A to facilitate the Cloverhill Sale as sought by the plaintiffs. On 19 May 2020, I published reasons for making those orders: McCallum, in the Matter of Re Holdco Pty Ltd (Administrators Appointed) [2020] FCA 666; 145 ACSR 243 (Re Holdco). 8 One of the orders made at that time was an order that, upon the completion of the Cloverhill Sale, all proceeds of the Cloverhill Sale (excluding the sum of $400,000 representing consideration for the sale of ancillary assets belonging to the "Decimal Entities") (Retained Proceeds) were to be deposited into a separate controlled, interest-bearing monies account to be maintained by the plaintiffs and which could only be accessed or disbursed by the plaintiffs in accordance with an order or direction of the Court. The Retained Proceeds were to be retained for the purpose of meeting claims that any party had in respect of the property of the Sargon VA Entities directly or indirectly sold pursuant to the Cloverhill Sale including (but not limited to): (a) any claim by the plaintiffs to recover from the Retained Proceeds amounts in respect of remuneration, fees and expenses properly incurred in their capacity as voluntary administrators of the Sargon VA Entities; (b) claims of the first interested party, Westpac Banking Corporation (Westpac), including its rights under security interests registered on the Personal Property Securities Register prior to completion of the Cloverhill Sale; (c) any claim that the second and third interested parties, Sargon Capital and Taiping, and/or the fourth interested party, GrowthOps Services Pty Ltd (GrowthOps), may have to recover from the Retained Proceeds amounts by reference to a claimed interest in, or in respect of, the intellectual property that was sold; and (d) any claim that the fifth and sixth interested parties, Diversa Pty Ltd (Diversa) and its parent company OneVue Holdings Limited (OneVue), may have pursuant to any equitable lien or other security interest over the shares held by Sargon SH and Sargon SPV in Diversa Trustees Limited ACN 006 421 638 (DTL) and CCSL Limited ACN 104 967 964 (CCSL). 9 This proceeding concerns the resolution of the above claims. The task being undertaken by the Court is a task required by the orders made on 1 May 2020 pursuant to s 442C of the Corporations Act, which is to apply the Retained Proceeds for the purpose of meeting claims that any party has as owners of, or security holders in, the property that was sold. In meeting claims, the Court is carrying into effect the requirement of s 442C(3) to protect adequately the interests of such parties (to the extent the Court has found that they are owners or security holders in respect of the property that was sold). 10 The method of apportioning the sale proceeds across the various claims of the plaintiffs and interested parties was described in Re Holdco as follows (at [67]): Under the proposed arrangements, the retained sale proceeds would not simply be apportioned across claimants according to the amount of their respective claims. Rather, the retained proceeds would be apportioned across the different asset classes in respect of which parties claim interests by reference to the relative value of each asset class to the sale proceeds. Once that allocation has been done, all persons who have claims in respect of each asset class will have that claim determined and receive their entitlement to the apportioned sale proceeds. The properly incurred expenses of the administrators will be deducted rateably across the asset classes, and the reasonableness of the expenses will also need to be established. 11 In this proceeding, no party sought to contradict or vary that method of apportioning the sale proceeds. The relative values of different asset classes will ultimately be expressed as a percentage, so that the monetary entitlements of successful claimants can be calculated by applying the relevant percentage to the balance of the Retained Proceeds after deducting the plaintiffs' properly incurred expenses. The parties agreed that that method would give effect to the requirement stipulated in s 442C(3) to protect adequately the interests of each secured party. The dispute between the interested parties concerned the existence of ownership or security interests in different asset classes and the method by which the relative value of different asset classes should be determined. 12 The Cloverhill Sale was effected by the execution of a Business Sale Agreement dated 4 May 2020 (Business Sale Agreement) and separate Share Sale Agreements dated 4 May 2020 for the sale of all the shares in the following subsidiaries of the Sargon VA Entities: (a) Responsible Entity Partners Ltd (REP); (b) Tidswell Financial Services Ltd (Tidswell); (c) Mammatus Pty Ltd (Mammatus); (d) Sargon CT Pty Ltd (Sargon CT); (e) Sargon CT (NSW) Pty Ltd (Sargon CT NSW); (f) Sargon Limited (NZ) (Sargon NZ); (g) CCSL; and (h) DTL, (which I will refer to collectively as the Sale Subsidiaries). 13 The purchasers were Pacific Infrastructure Services Pty Ltd and Pacific Infrastructure Holdings Pty Ltd (collectively, Pacific Infrastructure). The overall total consideration for the Cloverhill Sale (paid pursuant to the Business Sale Agreement and the Share Sale Agreements) was $29,600,000 (being the $30,000,000 gross proceeds less $400,000 payable to the Decimal entities). 14 On 15 May 2020, the plaintiffs and each of the interested parties filed and served notices of their claims to the Retained Proceeds in accordance with the orders of the Court made on 1 May 2020. On 18 December 2020 (as an annexure to their written submissions), the plaintiffs served an amended notice of claim. 15 In accordance with the orders made on 1 May 2020, various deductions have been made from the Retained Proceeds from time to time, including: (a) $351,884 paid to the Australian Taxation Office pursuant to orders dated 4 August 2020; (b) $19,470 paid to the mediator for conducting the mediation of the proceeding pursuant to orders dated 4 August 2020; (c) $120,653.25 paid to the Victorian and New South Wales State Revenue Offices pursuant to orders dated 15 September 2020; and (d) $38,219.79 paid to Intralinks, Inc pursuant to orders dated 16 December 2020; (e) $14,492.84 paid to Gilbert + Tobin, solicitors to the plaintiffs, on account of disbursements pursuant to orders dated 16 March 2021; (f) $8,205.00 paid to the Federal Court of Australia on account of setting down and hearing fees pursuant to orders dated 16 March 2021; and (g) $3,625.57 paid to Gilbert + Tobin, solicitors to the plaintiffs, on account of disbursements pursuant to orders dated 19 April 2021. 16 On 27 August 2020, the plaintiffs filed an interlocutory application under paragraph 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act) seeking determination of the remuneration that the plaintiffs are entitled to receive for work performed in the voluntary administrations and liquidations of the Sargon VA Entities. That application was referred to a Registrar of the Federal Court for determination. 17 On 20 January 2021, I made an order by consent concerning the plaintiffs' notice of claim in this proceeding, which resolved almost the entirety of the plaintiffs' claim (other than items 11 and 12 of the plaintiffs' amended notice of claim). That order was as follows: The following amounts may be withdrawn by the Plaintiffs from the Retained Proceeds (as defined in the orders made in this proceeding on 1 May 2020 (1 May 2020 Orders)) and applied in full and final satisfaction of any claim by the Plaintiffs to the Retained Proceeds for reimbursement of the Plaintiffs' remuneration, costs and expenses including counsel fees (excluding any other costs and expenses, including counsel fees, of the Plaintiffs as agreed between the parties by consent or as approved by order of the Court to be paid from the Retained Proceeds): (a) such amount, up to a maximum of $1,259,721.80, as is determined by the Federal Court of Australia pursuant to the interlocutory process filed by the Plaintiffs on 27 August 2020 on account of the Plaintiffs' remuneration incurred in the voluntary administrations and liquidations of the Sargon VA Entities (as defined in the 1 May 2020 Orders); (b) the amount of $336,904.70 on account of the remuneration incurred in connection with the voluntary administration of Sargon Services Pty Ltd (In Liquidation) as approved by the creditors at the reconvened second meeting of creditors on 14 May 2020 (Reconvened Second Meeting); (c) the amount of $536,825.69 on account of the remuneration incurred in connection with the voluntary administration of Sargon CT Holdings Pty Ltd (In Liquidation) as approved by the creditors at the Reconvened Second Meeting; and (d) the amount of $2,653,570.97 on account of the Plaintiffs' reasonable costs and expenses incurred in the voluntary administrations and liquidations of the Sargon VA Entities. 18 The above consent order gives priority to the majority of the plaintiffs' claim out of the Retained Proceeds. As stated above, after deducting the plaintiffs' claim, the balance of the Retained Proceeds will be apportioned between the interested parties which are able to establish a claim to particular asset classes (by reason of an ownership or security interest) by reference to the relative value of that asset class (expressed as a percentage). 19 The conclusions I have reached are as follows: (a) the claim made by the plaintiffs in respect of items 11 and 12 of the plaintiffs' amended notice of claim is dismissed; (b) the claim made by Westpac is upheld and it is entitled to a proportionate share of the balance of the Retained Proceeds reflecting the relative value of the assets of Sargon Services sold pursuant to the Business Sale Agreement and the shares in REP, Tidswell, Mammatus, Sargon CT and Sargon CT NSW, which I have determined to be 65.5%; (c) the claim made by Sargon Capital and Taiping is upheld and they are entitled to a proportionate share of the balance of the Retained Proceeds reflecting the relative value of the assets of Sargon Capital sold pursuant to the Business Sale Agreement which I have determined to be 13.1%; and (d) the claims made by GrowthOps, and Diversa and OneVue, in the proceeding are dismissed. 20 For completeness, I have determined that the relative value of DTL and CCSL is 21.4% and the relative value of Sargon NZ is nil. 21 For the avoidance of doubt, the amounts payable to Westpac and Sargon Capital from the Retained Proceeds are to be calculated and paid only after the amounts due to the plaintiff have been paid in accordance with the order of the Court made on 20 January 2021 (including the final determination of amounts due in respect of paragraph 1(a) of that order).

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B. NOTIFIED CLAIMS 22 The plaintiffs filed a claim on 15 May 2020 and served an amended notice of claim on 18 December 2020. As stated above, almost the entirety of the plaintiffs' claim was resolved by the consent order made on 20 January 2021, including the plaintiffs' claim for their reasonable remuneration, costs and expenses. The unresolved claim, being items 11 and 12 of the amended notice of claim, is a claim for pre-appointment priority employee entitlements owing by Sargon Services under ss 556(1)(e)-(h) of the Corporations Act. The plaintiffs contend that, by reason of s 561 of the Corporations Act, those entitlements are required to be met from that proportion of the Retained Proceeds that reflects the value of Sargon Services' circulating assets that were sold pursuant to the Business Sale Agreement (and must be paid in priority to Westpac's security interests over those circulating assets). 23 Westpac filed a claim on 15 May 2020. Westpac claims to be owed some $32,000,000 under loan facilities granted to Re Holdco, RSE Holdco and Sargon CT Holdings and facilities for bank guarantees to Sargon Services. Those facilities were secured by general security agreements over the assets of those entities and Mammatus. The Mammatus general security agreement was released on 4 May 2020, but the rights of Westpac as against the Retained Proceeds were preserved in relation to security over the assets of Mammatus due to paragraph 6 of the orders made on 1 May 2020. Westpac therefore claims that proportion of the Retained Proceeds that reflects the value of: (a) the assets of Sargon Services sold pursuant to the Business Sale Agreement; and (b) the shares in REP, Tidswell, Mammatus, Sargon CT and Sargon CT NSW, up to the amounts owing to Westpac under each relevant facility. 24 Sargon Capital and Taiping filed a notice of claim on 15 May 2020. Sargon Capital claims an ownership interest in certain assets which were sold pursuant to the Business Sale Agreement comprising software, website, trade marks and domain names. Taiping has a registered security interest against Sargon Capital on the Personal Property Securities Register comprising a general security deed. Under that deed, Taiping holds a security interest over all of the present and after-acquired property of Sargon Capital including a charge over intellectual property. Sargon Capital and Taiping therefore claim that proportion of the Retained Proceeds that reflects the value of the intellectual property owned by Sargon Capital and sold pursuant to the Business Sale Agreement. As the interests of Sargon Capital and Taiping are aligned, references in these reasons to the interests and submissions of Sargon Capital should be understood as including Taiping. 25 GrowthOps filed a notice of claim on 15 May 2020. In the notice, GrowthOps claimed an interest in two categories of assets sold pursuant to the Business Sale Agreement. The first was an ownership interest in intellectual property created by GrowthOps under the Technology Master Services Agreement (having a commencement date of 1 July 2019) (Technology MSA) and the Master Services Agreement (Creative, Marketing, Coaching & Leadership) (having a commencement date of 2 September 2019) (Marketing MSA) and provided to Sargon Capital, but for which GrowthOps had not been paid (being an amount of $1,854,621.11 as at 13 May 2020 with costs and interest continuing to accrue in accordance with the terms of the Technology MSA and Marketing MSA). Such intellectual property is referred to in those agreements as the "Developed IP". The second category was an interest, as licensor, of the royalty free licence of "GrowthOps Background IP" granted to Sargon Capital pursuant to the Technology MSA. The claim for the second category of asset was not pressed by GrowthOps at the hearing. GrowthOps therefore claims that proportion of the Retained Proceeds that reflects the value of the Developed IP sold pursuant to the Business Sale Agreement (up to the total amount owing under the Technology MSA and Marketing MSA). 26 Diversa filed a notice of claim on 15 May 2020. In the notice, Diversa claims a vendor's equitable lien over the shares in CCSL and DTL to the extent that it has not been paid the purchase price for its sale of those shares to Sargon SH and Sargon SPV pursuant to a Share Purchase Agreement dated 20 December 2018. The total purchase price under the Share Purchase Agreement (as varied) was $43 million, to be paid by way of an initial purchase price of $12 million and then a deferred purchase price of $31 million. The initial purchase price has been paid. The deferred purchase price, which became immediately payable on 3 February 2020 when administrators were appointed to Sargon SH and Sargon SPV, remains largely unpaid. Diversa has undertaken to limit its claim as a secured creditor to no more than $8 million of the proceeds of the Cloverhill Sale. Diversa therefore claims that proportion of the Retained Proceeds that reflects the value of the shares in CCSL and DTL up to $8 million. As the interests of Diversa and OneVue are aligned, references in these reasons to the interests and submissions of Diversa should be understood as including OneVue.

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C. QUESTIONS TO BE DETERMINED 27 In accordance with orders made on 31 August 2020, the parties filed a joint statement of the questions to be determined by the Court on the notified claims. As these reasons address each of the questions as framed by the parties, it is appropriate to set out that statement in full: JOINT STATEMENT OF QUESTIONS TO BE DETERMINED BY THE COURT 1. INTRODUCTION 1.1 On 4 May 2020, certain property of the Sargon Group (but some of which is claimed to have been owned by GrowthOps), was sold to Pacific Infrastructure Services Pty Ltd and Pacific Infrastructure Holdings Pty Ltd (Cloverhill Sale) pursuant to orders made under section 442C of the Corporations Act 2001 (Cth). 1.2 This document is filed in respect of paragraph 2(b) of the orders of the Federal Court of Australia made on 31 August 2020 which provided that the parties confer and seek to agree and file with the Court a joint statement of the questions to be determined on the Claims as defined in those orders. 1.3 In this document: (a) Developed IP has the meaning in paragraphs 15 and 19 of the McMenamin Affidavit. (b) McMenamin Affidavit means the affidavit of Craig McMenamin filed in this proceeding and dated 12 June 2020. (c) Marketing MSA, Quarterly Growth Plans, Statements of Work, Systems and Technology MSA all have the same meaning as in the McMenamin Affidavit. 2. VALUATION DATE AND BASIS OF VALUATION 2.1 On what basis should: (a) the shares; and (b) the assets sold under the Cloverhill Sale be valued; for example, a fair market value basis? 2.2 On what date should: (a) the shares; and (b) assets sold under the Cloverhill Sale be valued? 3. OWNERSHIP OF ASSETS Sargon Capital and Sargon Services 3.1 As at the date of the Cloverhill Sale (being 4 May 2020), did Sargon Capital Pty Ltd (Sargon Capital) or Sargon Services Pty Ltd (Sargon Services) own: (a) the domain name, www.sargon.com; (b) the business name, Good Super; (c) the trademarks listed in items 1 to 7 of part A of schedule 8 of the Business Sale Agreement [being the agreement dated 4 May 2020 between Sargon Services, Pacific Infrastructure Services Pty Ltd, Stewart McCallum, Adam Nikitins and the entities listed in schedule 2 of that agreement]; (d) the domain names listed in items 8 to 14 and 17 to 32 of part B of schedule 8 of the Business Sale Agreement; and (e) the domain names listed in items 15 and 16 and 33 to 35 of part B of schedule 8 of the Business Sale Agreement? Other intellectual property 3.2 How should any value attributed to the "Sargon Trustee Cloud Software", as referred to in the expert reports of Jeff Hall, be divided between Sargon Capital, Sargon Services and GrowthOps? 3.3 How should any value attributed to the "Software technology", as referred to in the expert reports of Antony Samuel, be divided between Sargon Capital, Sargon Services and GrowthOps? 3.4 What part, if any, of the Additional IP comprises intellectual property rights in software that GrowthOps developed in relation to the following systems: (a) Arcadia; (b) Pay; (c) Impact; (d) Sentinel; and (e) Metropolis, and which it describes as Developed IP? 3.5 As at the date of the Cloverhill Sale (being 4 May 2020), was the Developed IP (or any part of it) owned by Sargon Capital, Sargon Services or GrowthOps? 3.6 Was the Developed IP sold as part of the Cloverhill Sale so as to generate part of the Retained Proceeds? 3.7 To the extent (if any) to which GrowthOps does not own the Developed IP, is it entitled to any compensation with respect to its claim that it has granted a licence in favour of Pacific Infrastructure Services Pty Ltd for the Background IP, as referred to in paragraph 35 of the McMenamin Affidavit? 3.8 If the answer to question 3.7 is yes, is GrowthOps' claim to compensation for the Background IP secured by any asset that was sold as part of the Cloverhill Sale? Diversa 3.9 Does Diversa Pty Ltd have a vendor's equitable lien over the shares of CCSL Limited and Diversa Trustees Limited to the extent that it has not been paid the purchase price for the sale of those shares to Sargon Superannuation Holdings Pty Ltd and Sargon Superannuation Holdings SPV Pty Ltd? 4. VALUATION AND ATTRIBUTION 4.1 What is the proportion of the Retained Proceeds that should be attributed to each of: (a) the shares in each of: (i) the Responsible Entity Partners Limited; (ii) Tidswell Financial Services Ltd; (iii) Mammatus Pty Ltd; (iv) Sargon CT (NSW) Pty Ltd; (v) Sargon CT Pty Ltd; (vi) Sargon Limited (a company registered in New Zealand); (vii) Diversa Trustees Limited; and (viii) CCSL Limited; and (b) the assets sold under the Business Sale Agreement and, in particular: (i) the domain name www.sargon.com; (ii) the intellectual property comprising the computer programs Arcadia, Pay, Impact, Sentinel and Metropolis; (iii) intellectual property rights in software that GrowthOps claims to have developed in relation to the following systems: (a) Arcadia, (b) Pay, (c) Impact, (d) Sentinel and (e) Metropolis, and which it describes as Developed IP, (iv) the following two alternatives: (A) "Sargon Trustee Cloud Software", as referred to in the expert reports of Jeff Hall, including what proportion of this asset, if any, comprises Developed IP; or (B) the "Website" and "Software technology", as referred to in the expert reports of Antony Samuel, including what proportion of this asset, if any, comprises Developed IP; (v) the plant and equipment of Sargon Services; (vi) the business name, Good Super; (vii) the trademarks listed in items 1 to 7 of part A of schedule 8 of the Business Sale Agreement; (viii) the domain names listed in items 8 to 14 and 17 to 32 of part B of schedule 8 of the Business Sale Agreement; (ix) the domain names listed in items 15 and 16 and 33 to 35 of part B of schedule 8 of the Business Sale Agreement; and (x) any licence in respect of the Background IP with respect to which GrowthOps claims an entitlement to the Retained Proceeds? 4.2 What amount should be allocated to the Plaintiffs from the Retained Proceeds for their reasonable remuneration, costs and expenses, including in accordance with the principles set out in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171 and how should that be allocated to the shares and assets referred to in paragraph 4.1 above? 4.3 In light of the matters in paragraphs 4.1 and 4.2, what amounts should be allocated to each of the Interested Parties from the Retained Proceeds? 5. COSTS 5.1 What orders should be made in relation to costs? 28 For the reasons expressed earlier in respect of the notified claims, questions 3.7, 3.8, 4.1(b)(x) and 4.2 do not require answers in this proceeding. 29 In relation to the unresolved aspect of the plaintiffs' claim, being items 11 and 12 of the plaintiffs' amended notice of claim, the plaintiffs seek the Court to determine, in connection with question 4.1(b), the proportion of the Retained Proceeds that should be attributed to Sargon Services' receivables sold pursuant to the Business Sale Agreement.

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Expert valuation reports 38 Expert valuation reports were tendered on behalf of each of Westpac, Sargon Capital and Taiping, and Diversa. 39 Westpac tendered a report dated 24 July 2020 and a supplementary report dated 14 August 2020 of Jeffrey Lewis Hall. Mr Hall holds a B.Sc. (Summa Cum Laude) in Accounting from Kansas State University and a Master of Commerce in Finance from the University of New South Wales. He is a Chartered Financial Analyst and a member of the CFA Society, a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and a Chartered Accountant and member of the Australian Institute of Chartered Accountants. Mr Hall was a founder of Sumner Hall Associates Pty Ltd and has been a director since 2002 and is currently the Managing Director. Sumner Hall Associates is a specialist advisory firm providing corporate advisory services in relation to mergers and acquisitions, divestments, capital raisings, corporate restructuring and financial matters generally. One of the principal activities of the firm is the preparation of corporate and business valuations. Between 1989 and 2001, Mr Hall was Executive Director and shareholder of Grant Samuel & Associates Pty Limited, an investment banking firm. 40 Sargon Capital and Taiping tendered a report dated 24 July 2020 and a supplementary report dated 14 August 2020 of Antony Bryn Samuel. Mr Samuel holds a Bachelor of Commerce degree from the University of Western Australia and is a Chartered Accountant (Australia). He is Managing Director of Sapere Research Group Limited, leading Sapere's forensic accounting and valuation team, and is a former partner of PwC in London and Sydney with over 20 years of experience as an accountant. 41 Diversa tendered a report dated 24 July prepared by Campbell Jaski, a Partner in the Corporate Value Advisory practice at PwC. Mr Jaski has over 25 years of experience in corporate finance, valuation and business management. He studied corporate finance and valuation theory at the Stern School of Business, New York University and Melbourne Business School, Melbourne University. He is an accredited Business Valuation Specialist with Chartered Accountants Australia and New Zealand and is a Fellow of the Financial Services Institute of Australasia. He is also a Fellow of the Chartered Institute of Arbitrators. For the past 12 years, Mr Jaski has specialised in the valuation of businesses, shares, intangible assets, projects and financial instruments. Prior to this, Mr Jaski worked for Rio Tinto Limited. 42 In accordance with orders of the Court, the parties prepared a Joint Statement of Questions for Expert Valuers which was filed on 5 November 2020. The valuation experts conferred before trial and prepared a joint report dated 1 December 2020 (Joint Expert Report). The Joint Expert Report summarises the experts' areas of agreement and disagreement in relation to the Joint Statement of Questions for Expert Valuers and the basis of those opinions. 43 The expert valuers were cross-examined concurrently. None of the witnesses changed their opinions in the course of cross-examination, but the cross-examination helped to distil and explain the differences in approach that had been taken by each of the experts. 44 In my view, each of the experts is suitably qualified to express opinions on the relative values of the shares and assets sold as part of the Cloverhill Sale. Further, I consider that each of the experts had a reasoned basis for the opinions they expressed. While the conclusions reached by each expert as to relative value generally favoured the party that had called the expert, that circumstance did not cause me to doubt the sincerity with which the opinions were advanced. Many of the issues debated between the experts involved matters of judgment for which no answer could be said to be right or wrong in an absolute sense. Ultimately, though, I have formed the judgment that certain approaches to the issues in dispute are preferable, which I explain below.

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Business records 45 Various business records were tendered by the parties. I made rulings on evidentiary objections during the hearing. Only one objection was the subject of substantive argument, being the admissibility of an announcement published on the Sargon website following the Cloverhill Sale (Sale Announcement). The relevant parts of the Sale Announcement were as follows: Pacific Infrastructure Partners ('PIP'), a new entity formed for the purpose of investing in technology-enabled financial services, today announces the completion of the acquisition of key operating entities and assets of the Sargon Capital group of companies ('Sargon'). New York-based financiers Teddy Wasserman and Australian Matthew Kibble led the transaction through Cloverhill Group LLC and Kibble Holdings LLC respectively. They are joined as equity shareholders in PIP by Vista Credit Partners ('VCP'), who also provided financing for the transaction. VCP is a strategic credit investor and financing partner offering a variety of capital solutions to the enterprise software, data and technology market. VCP is the credit-lending arm of Vista Equity Partners ('Vista'), a leading global technology investor. Cloverhill Group Managing Partner, Teddy Wasserman said, "We believe the proprietary next-generation trustee infrastructure that Sargon has developed to be world-class technology. …" The cloud-based platform developed by Sargon delivers clients greater transparency over funds and reduces costs and complexity, while at the same time providing more scalable and reliable operations. David Flannery, President of Vista Credit Partners, said, "This is a tremendous asset class and Australia is recognised as having one of the best models of superannuation and retirement savings in the world. Vista and VCP have a long and proud track-record of backing companies like Pacific Infrastructure Partners, which are at the forefront of digital transformation and have the intellectual property capable of winning on a global stage. … Pacific Infrastructure Partners (PIP) is a new entity formed for the purpose of investing in the financial services industry to support the delivery of strong, independent, technology-enabled trustee solutions. In May 2020, PIP completed the acquisition of the key operating entities and assets of financial technology and infrastructure company, Sargon, including Sargon's trustee, corporate trust and responsible entity operations, and its proprietary technology infrastructure. … 46 Sargon Capital and Taiping sought to tender the Sale Announcement as evidence relevant to the assessment of the value of the intellectual property sold as part of the sale. The relevant facts asserted in the announcement include that the new owners of the Sargon business that was sold held the opinion that the trustee infrastructure (software) developed by Sargon is "world-class technology". 47 The evidence is hearsay under s 59 of the Evidence Act 1995 (Cth) (Evidence Act) and is inadmissible unless an exception applies. I allowed the evidence as a business record within s 69 of the Evidence Act. As I stated in Rodney Jane Racing Pty Ltd v Monster Energy Company [2019] FCA 923; 370 ALR 140 at [178], whether a webpage can be shown to be a business record within the meaning of s 69 depends upon the content of the webpage and what is able to be established (whether directly or by inference) about the content of the page. In the present case, I am satisfied that the Sale Announcement: (a) forms part of the records belonging to that part of the business of the Sargon Group that was sold (the sale included the Sargon website); (b) was made for the purposes of that business, to inform (amongst others) present and prospective customers of the sale; and (c) was made by a person who might reasonably be supposed to have had personal knowledge of the relevant facts asserted in the announcement because the statements were made by the representatives of the purchasers about their opinions of the assets that were purchased. 48 While the Sale Announcement is admissible evidence, I do not place significant weight on the evidence. The opinions expressed in the announcement are stated at a high level of generality and do not greatly assist in seeking to attribute a value to the software relative to the other assets sold in the Cloverhill Sale. The opinions must also be discounted to some extent in recognition that a purchaser of a business will likely wish to promote the acquisition that has been made.

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E. JOINT STATEMENT OF AGREED FACTS 49 The parties tendered a Joint Statement of Agreed Facts. It is convenient to reproduce that statement in full because it sets out the primary background facts which were not controversial. Annexures A and B to the Joint Statement of Agreed Facts, which contain diagrams of the corporate structure of the Sargon Group and security interests held or claimed by the parties, are reproduced at the end of these reasons. PROPOSED JOINT STATEMENT OF AGREED FACTS 1. INTRODUCTION 1.1 This document is filed in respect of paragraph 2(a) of the Orders of the Federal Court of Australia made on 31 August 2020 which provided that the parties confer and seek to agree and file with the Court a statement of agreed facts in relation to the Claims as defined in those orders. 2. THE SARGON GROUP 2.1 The Sargon Group was a corporate group consisting of approximately 39 companies which conducted a series of financial planning, corporate trustee, responsible entity, superannuation and related financial services businesses (Sargon Group). 2.2 Sargon Capital Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 608 799 873 (Sargon Capital) was at all relevant times, the ultimate holding company of the Sargon Group, but did not itself engage in any trading activities. 2.3 Sargon Capital was at all relevant times the sole shareholder of each of the following ten Intermediate Holding Companies: (a) RE Holdco Pty Ltd ACN 612 592 471 (RE Holdco); (b) RSE Holdco Pty Ltd ACN 612 586 893 (RSE Holdco); (c) Sargon Services Pty Ltd ACN 163 522 058 (Sargon Services); (d) Safewealth Realty Pty Ltd ACN 100 933 980 (Safewealth); (e) SC International Holdings 1 Pty Ltd ACN 621 160 101 (SCIH1); (f) SC Australian Holdings 1 Pty Ltd ACN 624 531 237 (SCAH1); (g) Sargon CT Holdings Pty Ltd ACN 628 621 321 (Sargon CT); (h) Sargon International Holdings 2 Pty Ltd ACN 630 632 343 (SIH2); (i) Sargon Superannuation Holdings Pty Ltd ACN 630 648 225 (SSH), which in turn was the sole shareholder of Sargon Superannuation Holdings SPV Pty Ltd ACN 633 509 494 (Sargon SPV); and (j) Decimal Software Pty Ltd ACN 009 235 956 (Decimal). 2.4 Each of the above Intermediate Holding Companies (with the exception of Safewealth) was in turn a parent company of at least one subsidiary entity. These subsidiary entities along with Sargon Services were the operating business entities of the Sargon Group (Operating Subsidiaries). 2.5 The diagram below provides an overview of the Relevant Operating Subsidiaries (as defined at 2.6 below) within the Sargon Group (shaded in blue). A larger and more detailed structure diagram of the Sargon Group is provided at Annexure A. 2.6 The Operating Subsidiaries that are the subject of the Cloverhill Proceedings and the Cloverhill Sale (defined below) are: (a) CCSL Ltd ACN 104 967 964 (CCSL) (a subsidiary of SSH ); (b) Diversa Trustees Ltd ACN 006 421 638 (DTL) (3,142,333 shares in which were owned by SSH and 2,000,000 shares in which were owned by Sargon SPV); (c) Mammatus Pty Ltd ACN 101 393 435 (Mammatus) (a subsidiary of Sargon Services); (d) Responsible Entity Partners Limited ACN 119 757 596 (a subsidiary of RE Holdco); (e) Sargon CT (NSW) Pty Ltd ACN 000 329 706 (Sargon CT (NSW)) (a subsidiary of Sargon CT); (f) Sargon CT Pty Ltd ACN 106 424 088 (a subsidiary of Sargon CT); (g) Sargon Ltd NZBN 9429047195639 (a subsidiary of SIH2); and (h) Tidswell Financial Services Ltd ACN 010 810 607 (a subsidiary of RSE Holdco). (Collectively, Relevant Operating Subsidiaries). 2.7 Sargon Services provided a number of the Operating Subsidiaries (save for SSH and its Relevant Operating Subsidiaries, CCSL and DTL, up until 1 January 2020) with labour and administrative services under various services agreements. Sargon Services provided labour and administrative services for SSH and its Relevant Operating Subsidiaries, CCSL and DTL, from 1 January 2020 onwards. 3. PROPERTY OF THE SARGON GROUP 3.1 The assets of each of the Sargon Group's operating businesses were held by the various Operating Subsidiaries or by Sargon Capital itself. 3.2 The property of the Sargon Group that is the subject of the Cloverhill Proceedings is as follows: (a) much of the business and general assets of the Sargon Group, including all of the assets of each of the Relevant Sargon Entities (defined at 7.2 below); (b) the share capital of the Relevant Operating Subsidiaries; and (c) the intellectual property associated with the Sargon Group (noting that GrowthOps claims an interest in a subset of the intellectual property). 3.3 As described in more detail in section 9 below, the above property was sold by a number of the Intermediate Holding Companies to Pacific Infrastructure Services Pty Ltd ACN 640 130 712 (Pacific Services) and Pacific Infrastructure Holdings Pty Ltd ACN 640 129 479 (Pacific Holdings) as part of a complete sale of the business to the Cloverhill Group (Cloverhill Sale). 4. THE PARTIES TO THE CLOVERHILL PROCEEDINGS 4.1 There are seven active parties in proceeding VID 285/2020 (Cloverhill Proceedings), being: (a) the Plaintiffs (Stewart McCallum and Adam Nikitins of Ernst & Young) (Administrators); (b) Westpac Banking Corporation ACN 007 457 141 (Westpac) (the First Interested Party); (c) Sargon Capital (the Second Interested Party); (d) Taiping Trustees Limited (A company registered in Hong Kong) (Trade Register number 0821942) (Taiping) (the Third Interested Party); (e) GrowthOps Services Pty Ltd ACN 626 208 777 (GrowthOps) (the Fourth Interested Party); (f) Diversa Pty Ltd ACN 079 201 835 (Diversa) (the Fifth Interested Party); and (g) OneVue Holdings Limited ACN 108 221 870 (OneVue) (the Sixth Interested Party). 4.2 The interests of the Second and Third Interested Parties are aligned such that there is no need to distinguish between them. The same applies to the Fifth and Six Interested Parties. 5. SECURITY INTERESTS 5.1 In this section, the facts relevant to the circumstances in which each of the parties came to have interests in the Cloverhill Proceedings are set out, in as close to a chronological order as is possible, except in the case of Westpac's loan facilities and security interests where they are set out according to the Operating Subsidiary, which is more convenient given Westpac had numerous lending arrangements with several entities. 5.2 An overview of the claimed security interests of the parties over the relevant entities to the Cloverhill Proceedings is set out in the following diagram. A larger and more detailed structure diagram of the structure of the Sargon Group is provided at Annexure B. Taiping's Secured Promissory Note, Guarantee and Indemnity and GSD 5.3 Taiping was incorporated on 15 November 2002 under the laws of Hong Kong. Taiping is a subsidiary of the China Taiping Group, of which China Taiping Insurance Group Limited is the ultimate holding company. China Taiping Insurance Group Limited is a Chinese state-owned financial and insurance group that is headquartered in Hong Kong and has been listed on the Hong Kong Stock Exchange since 2000. 5.4 Phillip Kingston was both a managing director of Sargon Capital and the sole director of Trimantium Investment Management Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 624 073 196 (TTIM). 5.5 On 9 February 2018, Taiping and TTIM entered into a Secured Promissory Note, under which Taiping agreed to advance to TTIM a total of HKD $500,000,000 (approximately AUD $81,000,000) (Secured Promissory Note). 5.6 The Secured Promissory Note was also executed by Sargon Capital as obligor. 5.7 To further secure the performance of the obligations of TTIM, Sargon Capital provided the following security documents in favour of Taiping: (a) a Guarantee and Indemnity dated 27 April 2018 (Sargon Capital Guarantee); and (b) a General Security Deed dated 27 April 2018 (Sargon Capital GSD). 5.8 The Sargon Capital GSD was registered on the Personal Property Securities Register (PPSR) (Registration Number 201804090021528) on 9 April 2018. 5.9 Under the terms of the Sargon Capital GSD, Taiping was granted a security interest over all of the present and after-acquired property of Sargon Capital. In particular, Taiping was granted a charge over any intellectual property, including: (a) a patent, trademark or service mark, copyright, registered design, trade secret or confidential information; or (b) a licence or other right to use or to grant the use of any of the above, or to be the registered proprietor or user of any of the above. Westpac RE Holdco 5.10 On or about 15 October 2018, Westpac provided a loan facility to RE Holdco with a limit of $5,000,000. The loan facility is secured by: (a) an unlimited guarantee and indemnity granted by Sargon Services in favour of Westpac dated 30 October 2018; (b) an unlimited interlocking guarantee and indemnity granted by RSE Holdco, RE Holdco and Sargon CT in favour of Westpac dated 30 October 2018 (Interlocking Guarantee and Indemnity); (c) an unlimited guarantee and indemnity granted by Mammatus in favour of Westpac dated 30 October 2018 which was released on 4 May 2020; (d) a general security agreement granted by Sargon Services in favour of Westpac dated 30 October 2018 with PPSR registration number 201811010064791 (Sargon Services GSA); (e) a general security agreement granted by RSE Holdco in favour of Westpac dated 4 July 2016 with PPSR registration number 201607080019959 (RSE Holdco GSA); (f) a general security agreement granted by RE Holdco in favour of Westpac dated 4 July 2016 with PPSR registration number 201607080019786 (RE Holdco GSA); (g) a general security agreement granted by Sargon CT in favour of Westpac dated 30 October 2018 with PPSR registration number 201811010067224 (Sargon CT GSA); and (h) a general security agreement granted by Mammatus in favour of Westpac dated 30 October 2018 formerly with PPSR registration number 201811010064988 (Mammatus GSA). The Mammatus GSA was released on 4 May 2020. RSE Holdco 5.11 On or about 15 October 2018, Westpac provided a loan facility to RSE Holdco with a limit of $600,000. The loan facility is secured by: (a) an unlimited guarantee and indemnity granted by Sargon Services in favour of Westpac dated 30 October 2018; (b) the Interlocking Guarantee and Indemnity; (c) an unlimited guarantee and indemnity granted by Mammatus in favour of Westpac dated 30 October 2018 which was released on 4 May 2020; (d) the Sargon Services GSA; (e) the RSE Holdco GSA; (f) the RE Holdco GSA; (g) the Sargon CT GSA; and (h) the Mammatus GSA. The Mammatus GSA was released on 4 May 2020. Sargon CT 5.12 On or about 15 October 2018, Westpac provided two loan facilities to Sargon CT with limits of $12,000,000 and $10,000,000 respectively. 5.13 On or about 24 December 2019, Westpac provided another loan facility to Sargon CT with a limit of $6,000,000. 5.14 The loan facilities provided to Sargon CT are secured by: (a) an unlimited guarantee and indemnity granted by Sargon Services in favour of Westpac dated 30 October 2018; (b) the Interlocking Guarantee and Indemnity; (c) an unlimited guarantee and indemnity granted by Mammatus in favour of Westpac dated 30 October 2018 which was released on 4 May 2020; (d) the Sargon Services GSA; (e) the RSE Holdco GSA; (f) the RE Holdco GSA; (g) the Sargon CT GSA; and (h) the Mammatus GSA. The Mammatus GSA was released on 4 May 2020. Sargon Services 5.15 Westpac provided the following facilities for bank guarantees in respect of Sargon Services: (a) on or about 7 June 2018, a bank guarantee in favour of Circuit Recruitment Group (Vic) Pty Ltd ACN 141 687 747 for the amount of $60,942.04; (b) on or about 5 July 2019, a bank guarantee in favour of BGH (287 Collins) Pty Ltd ACN 623 369 899 for the amount of $111,839.00; and (c) on or about 20 August 2019, a bank guarantee in favour of IPAR Rehabilitation Pty Ltd ACN 104 234 317 for the amount of $59,417.88. 5.16 The bank guarantees remain outstanding and therefore the full amounts (as specified above) were contingently owing. 5.17 These facilities are each secured by the Sargon Services GSA. Diversa Share Purchase Agreement 5.18 Diversa was incorporated in New South Wales on 3 July 1997 and provides superannuation trustee services. It is a wholly owned subsidiary of OneVue, an ASX listed company (ASX:OVH) that is a wholesale service provider to the wealth management industry. 5.19 Pursuant to a Share Purchase Agreement dated 20 December 2018 and its subsequent variations (Diversa SPA), Diversa sold: (a) all of the shares it held in CCSL to SSH; (b) 3,142,333 of the shares it held in DTL to SSH; and (c) 2,000,000 of the shares it held in DTL to Sargon SPV. 5.20 Pursuant to the Diversa SPA, the total consideration payable was $43 million to be paid by way of an Initial Purchase Price of $12 million and then a Deferred Purchase Price of $31 million, with the Deferred Purchase Price payable by SSH and Sargon SPV in proportion to the number of CCSL and DTL shares each received under the Diversa SPA. 5.21 Sargon Capital guaranteed to Diversa performance of the obligations of SSH and SPV under the Diversa SPA. 5.22 The Initial Purchase Price component of the consideration for the DTL and CCSL shares has been paid. However, taking into account realisations to date, $28,365,386.31 of the Deferred Purchase Price component of the consideration (and accrued interest owing under the Diversa SPA) remains outstanding. GrowthOps Technology MSA, Marketing MSA and invoices issued 30 July 2019 - 31 January 2020 5.23 GrowthOps was incorporated in Victoria on 17 May 2018. GrowthOps is a wholly owned subsidiary of the ASX listed company Trimantium GrowthOps Limited ACN 621 067 678 (ASX:TGO) (TGO). Both GrowthOps and TGO provide management consulting, technology, advertising, creative, coaching and leadership services. 5.24 On or around 30 August 2019, GrowthOps and Sargon Capital entered into a Technology Master Services Agreement, with a commencement date of 1 July 2019 (Technology MSA). Significant clauses include 7.1(a), (c) and (d). Clause 7.1(a) provided that "all Intellectual Property Rights in the Services and Deliverables (Developed IP), except any GrowthOps Background IP or its service methodology and knowledge, vests in Sargon immediately upon payment to GrowthOps for same, and GrowthOps hereby assigns, and must procure that its personnel assign, all Intellectual Property Rights in the Developed IP To Sargon. GrowthOps agrees to do all things which may be necessary for these ownership rights to pass to Sargon. At Sargon's request, GrowthOps must provide, and ensure that its personnel or sub-contractors provide consents to or waivers of any moral rights in specific Developed IP. This clause does not in any way derogate from the ability for GrowthOps to utilise the same service methodology for other clients" 5.25 On or around 2 September 2019, GrowthOps and Sargon Capital entered into a Master Services Agreement (Creative, Marketing, Coaching & Leadership), with a commencement date of 2 September 2019 (Marketing MSA). Significant clauses include 7.1(a), (c) and (d). Clause 7.1(a) provided that "all Intellectual Property Rights in the Services and Deliverables (Developed IP), except any GrowthOps Background IP or its service methodology and knowledge, vests in Sargon immediately upon payment to GrowthOps for same, and GrowthOps hereby assigns, and must procure that its personnel assign, all Intellectual Property Rights in the Developed IP To Sargon. GrowthOps agrees to do all things which may be necessary for these ownership rights to pass to Sargon. At Sargon's request, GrowthOps must provide, and ensure that its personnel or sub-contractors provide consents to or waivers of any moral rights in specific Developed IP. This clause does not in any way derogate from the ability for GrowthOps to utilise the same service methodology for other clients." 5.26 Between 30 July 2019 and 31 January 2020, GrowthOps issued 24 invoices to Sargon Capital totalling $1,649,402.85 (excluding GST). The invoices were described to relate to various technology, creative, marketing, coaching and leadership services to Sargon Capital under the Technology MSA and the Marketing MSA spanning the period 1 July 2019 to 31 January 2020. 5.27 To date, Sargon Capital has only paid two of those invoices, which amount to the sum of $314,128.50 (excluding GST). The balance of the invoices ($1,335,274.35) remains unpaid. Letters of demand and appointment of the Administrators 5.28 On 2 December 2019, Taiping's solicitors Ashurst issued a letter to TTIM and Sargon Capital stating that TTIM had committed an Event of Default (as defined in the Secured Promissory Note). 5.29 On 19 December 2019, Ashurst sent a further letter on behalf of Taiping to Mr Kingston in his capacity as the sole director of TTIM and as a director of Sargon Capital. The letter notified Mr Kingston that TTIM had failed to pay the interest that was due and payable to Taiping. 5.30 On 20 January 2020, Taiping's solicitors Ashurst issued letters of demand to TTIM and Sargon Capital stating that as at 20 January 2020, the amount of HKD $512,964,934.61 was immediately due and payable, pursuant to the terms of the Sargon Capital Guarantee and Sargon Capital GSD. Both TTIM and Sargon Capital failed to comply with the demands made by Taiping. 5.31 On 3 February 2020, the Administrators were appointed as voluntary administrators to eight of the Intermediate Holding Companies. 5.32 Between 3 February 2020 and 14 May 2020, the Administrators conducted the voluntary administration of the Relevant Sargon Entities (defined at 7.2 below), which culminated in the complete sale of the business to the Cloverhill Group (Cloverhill Sale). 5.33 Further detail about the Administrators' appointment and the Cloverhill Sale is set out in paragraphs 7.2 and 9.1 - 9.21 respectively. 5.34 On 23 April 2020, Clayton Utz (acting on behalf of Westpac) issued notices of demand to (i) Sargon CT for $20,492,044.83, (ii) RSE Holdco for $605,366.68 and (iii) Sargon Services for $20,492,044.83. On 28 May 2020, Clayton Utz issued further notices of demand to (iv) Sargon CT for $6,146,653.62, (v) RE Holdco for $5,074,393.95, (vi) Sargon Services for $60,942.04 and (vii) $111,839. Some of the amounts claimed overlap. 6. NOTICES OF CLAIM 6.1 On 15 May 2020, the active parties in this matter filed notices of claim. Each of the amounts claimed below are "as at" that date. 6.2 In its notice of claim, Taiping claims that the total amount owing to it is no less than $4,000,000. There is no dispute that this amount is owing. 6.3 In its notice of claim, GrowthOps claims compensation for the sale of intellectual property in which it claims an interest, in an amount equal at least to the unpaid invoices referred to at paragraphs 5.26 - 5.27, together with compensation for the perpetual, irrevocable and royalty free licence in respect of the GrowthOps Background IP (as defined in each of the Technology MSA and the Marketing MSA). GrowthOps claims $1,854,621.11 as at 13 May 2020, including GST, and interest and costs which continue to accrue. There is no dispute that this amount is owing. 6.4 In its notice of claim, Westpac claims that the amount owing to it in respect of the facilities referred to at paragraphs 5.10 - 5.17 is $32,019,961.81 (plus recovery costs and interest accruing after 30 April 2020). There is no dispute that this amount is owing. 6.5 In its notice of claim, Diversa claims that the total amount owing to it in respect of the Diversa SPA is $28,365,386.31. There is no dispute that this amount is owing. 6.6 In their notice of claim, the Administrators claim that the total amount owing to them is $4,255,562.67 (plus further amounts that are subject to quantification and Court approval), pursuant to remuneration, costs, expenses (both current and prospective) and pre-appointment priority employee entitlements owing by Sargon Services. The Administrators' notice of claim was revised in the third affidavit of Stewart McCallum dated 29 May 2020 and the Administrators', now Liquidators' remuneration, costs and expenses in connection with the liquidations of the Relevant Operating Subsidiaries, including in connection with the Cloverhill Proceedings, continues to accrue. 7. EXTERNAL ADMINISTRATION OF THE SARGON GROUP 7.1 On 29 January 2020, Shaun Fraser and Jason Preston were appointed by Taiping as joint and several receivers and managers of Sargon Capital (Sargon Capital Receivers), and a further two other related companies (Trimantium Capital Funds Management Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 602 329 902 (TCFM) and TTIM. 7.2 On 3 February 2020, Phillip Kingston in his capacity as the sole director of nine of the Intermediate Holding Companies passed resolutions pursuant to section 436A of the Corporations Act 2001 (Cth) (Corporations Act) appointing the Administrators as the voluntary administrators of the following seven Intermediate Holding Companies (plus an eighth Intermediate Holding Company, SCAH1, the assets of which were not sold as part of the Cloverhill Sale): (a) Re Holdco; (b) RSE Holdco; (c) Sargon Services; (d) SCIH1; (e) Sargon CT; (f) SIH2; and (g) SSH. (Collectively, Relevant Sargon Entities). 7.3 Safewealth was not placed into administration. 7.4 As a result of their appointment, the Administrators took control of all of the shares owned by the Sargon Group in the Operating Subsidiaries and all of the employees and documents of the Sargon Group. 7.5 On 3 and 4 February 2020, Matthew Byrnes and David Hodgson of Grant Thornton were appointed as joint and several voluntary administrators of: (a) Decimal; (b) Decimal Technology and Systems Pty Ltd ACN 118 370 291; (c) Decimal Pty Ltd ACN 135 979 743; and (d) Simpla Pty Ltd ACN 159 982 671. (Collectively, Decimal Entities). 7.6 On 4 February 2020, Daniel Walley and Christopher Hill of PricewaterhouseCoopers were appointed as joint and several receivers and managers of SCAH1 by Diversa. SCAH1 and its assets do not form part of the Cloverhill Proceedings. 7.7 On 8 March 2020, Joseph Hayes and Andrew McCabe of Wexted Advisors were appointed as joint and several administrators of Sargon Capital, TTIM and TCFM pursuant to section 436C of the Corporations Act. 7.8 On 10 March 2020, Mr Byrnes and Mr Hodgson were appointed as the liquidators of the Decimal Entities. 7.9 On 8 April 2020, at the second meeting of the creditors of Sargon Capital, it was resolved to wind up Sargon Capital, and Mr Hayes and Mr McCabe were appointed as liquidators pursuant to section 446A of the Corporations Act. 7.10 On 14 May 2020, at the second meeting of creditors of the Sargon Entities, it was resolved to wind up the Relevant Sargon Entities and Mr McCallum and Mr Nikitins were appointed as liquidators (defined in this document as the Administrators: see paragraph 4.1(a) above) pursuant to section 446A of the Corporations Act. 8. SARGON SERVICES 8.1 Sargon Services employed many of the employees who worked for the Sargon Group, including employees who provided services to the Intermediate Holding Companies and the Operating Subsidiaries. Sargon Services also rented offices that were used by other entities in the Sargon Group. 8.2 The services provided by Sargon Services to Responsible Entity Partners Limited, Tidswell Financial Services Ltd, Sargon CT and Sargon CT (NSW) (for the period of five years starting on 8 May 2019) were in the following categories: (a) governance, risk and compliance; (b) human resources; (c) finance; (d) information technology; (e) legal; (f) product; and (g) corporate trustee. 8.3 The services provided by Sargon Services to DTL and CCSL (for the period of one year starting on 19 January 2020, subject to a three-month extension) were in the following categories: (a) governance, risk and compliance; (b) human resources; (c) finance; (d) information technology; (e) legal; and (f) product. 8.4 From 28 June 2019 to 31 December 2019, DTL and CCSL received services of the following kind from OneVue Services Pty Ltd (OneVue Services) pursuant to a Transitional Services Agreement dated 28 June 2019 instead of Sargon Services. DTL and CCSL paid a monthly fee to OneVue Services for those services. The services provided under the Transitional Services Agreement included: (a) accounting and financial management (for which DTL and CCSL paid $20,000 per month); (b) human resources; (c) information technology and cyber security (for which DTL and CCSL paid $20,000 per month); (d) legal and litigation support; and (e) product development and marketing. 8.5 DTL and CCSL paid $20,000 per month under the Transitional Services Agreement for the services provided by OneVue Services other than accounting and financial management services and information technology and cyber security services (for which the separate monthly fees identified above were paid). 8.6 The total monthly fee paid by DTL and CCSL from July to September was $60,000 (ex GST) per month. In October, November and December 2019, OneVue Services did not provide information technology and cyber security services to DTL and CCSL, so DTL and CCSL paid $40,000 (ex GST) for each of those months. 8.7 After and before the Administrators were appointed: (a) on 18 February 2020, Sargon Services entered into an agreement with DTL and CCSL, pursuant to which Sargon Services agreed to provide services to DTL and CCSL in exchange for a fee of $92,000 per month for one year from 19 January 2020 subject to a three-month extension; and (b) on 8 May 2019, Sargon Services, Tidswell, Sargon CT (NSW), Sargon CT and REP entered into an agreement pursuant to which Sargon Services agreed to provide each other party to that agreement with services in exchange for a fee fixed at the cost incurred by Sargon Services in providing those services plus a margin of 10% for a period of 5 years, subject to early termination. 8.8 For the period July 2018 to December 2019, Sargon Services incurred the following expenses (as recorded on its profit and loss statement): (a) $14,267,649.36 in salary package costs; (b) $2,187,131.05 in staff expenses; (c) $793,794.11 in professional services expenses; and (d) $962,937.72 in occupancy costs; totalling $18,211,512.24. The total of all of Sargon Services' expenses for that period was $20,215,913.87. 9. CLOVERHILL SALE 9.1 Following their appointment on 3 February 2020, the Administrators commenced a sale process in which they advertised all of the shares owned by the Intermediate Holding Companies in the Operating Subsidiaries (other than SCAH1's shares). 9.2 On 10 February 2020, the Administrators provided the Sargon Capital Receivers with a copy of Sargon Capital's balance sheet as at the end of December 2019, which stated that Sargon Capital held, amongst other things, the following assets: (a) intercompany loans (with a book value of AUD$115,991,605.11); (b) "Intangible tech - Sargon" (with a book value of AUD$5,797,293.90); and (c) domain name (with a book value of AUD$237,696.49). 9.3 The balance sheet for Sargon Services as at the end of December 2019 recorded $1,037,554.95 for "Intangible tech - Sargon" which comprised $549,583 for Sargon Technology, $1,053,694.39 for "Website" and -$565,722.44 for "Amortisation of Website". 9.4 Between 17 February 2020 and 10 March 2020, substantial correspondence was exchanged and various conversations occurred between the Sargon Capital Receivers and the Administrators concerning the sale process. 9.5 Between 4 February 2020 and 25 March 2020, the Sargon Capital Receivers made several requests of the Administrators to provide access to Sargon Capital's books and records, and information relevant to the proposed Cloverhill Sale. The majority of the information requested was not provided to the Sargon Capital Receivers, in part, due to a confidentiality agreement between the Administrators and the Cloverhill Group. 9.6 On or around 18 February 2020, the Cloverhill Group made an offer to the Administrators to purchase all of the assets of some of the Relevant Sargon Entities (among other entities), including the share capital in the Relevant Operating Subsidiaries (among other entities). 9.7 On or about 4 March 2020, a written offer dated 4 March 2020 was made by the Cloverhill Group to purchase all of the assets of each of the Relevant Sargon Entities (among other entities), including the share capital in the Relevant Operating Subsidiaries (among other entities), subject to the fulfilment of various conditions precedent. 9.8 On 10 March 2020, the Sargon Capital Receivers sought confirmation from the Administrators that the proposed sale did not include any assets or property of Sargon Capital, in particular, any intellectual property. 9.9 On 28 March 2020, GrowthOps and the Administrators reached an in-principle agreement that GrowthOps would transfer any rights that it had in the Developed IP (as that term is defined in the Technology MSA and Marketing MSA) to the Cloverhill Group for an agreed payment contingent on the completion of the Cloverhill Sale (Administrators' Proposed Agreement). 9.10 On 29 March 2020, the Administrators informed the Sargon Capital Receivers by letter that at that point in time, Cloverhill Group did intend for the "Sargon Cloud (Software)" to be included in the Cloverhill Sale. 9.11 Between 1 April 2020 and 21 April 2020, the Sargon Capital Receivers and the Administrators engaged in negotiations in relation to the sale of the assets to the Cloverhill Group including the relevant intellectual property. 9.12 On 22 April 2020, Diversa/OneVue and the Administrators reached an in-principle agreement, conditioned on the agreement of Sargon Capital being procured, that Diversa/OneVue would settle its claims in respect of SSH and Sargon SPV for the sum of $2,500,000, to be paid from the purchase price upon completion of the Cloverhill Sale (Diversa Agreement). 9.13 On 22 April 2020, the Administrators sent a letter to the Sargon Capital Receivers that outlined each of the Administrators' Proposed Agreement and Diversa Agreement, and set out what was described to be the final terms upon which Sargon Capital could participate in the sale to the Cloverhill Group. Under the terms of that offer, Sargon Capital would receive approximately $5.1 million for the following assets (of the approximately $30 million being paid by the Cloverhill Group in connection with the Cloverhill Sale): (a) $4 million for the IP assets; (b) $400,000 for the Intercompany Loans; and (c) $722,000 for the estimated dividends payable from the Intermediate Holding Companies' estates (the Sargon Capital Offer). 9.14 As part of the Sargon Capital Offer, the balance of $30 million (less an amount of $400,000 payable to Decimal) was to be distributed to the other creditors, namely the remaining Interested Parties and the Administrators (for their remuneration and expenses). 9.15 An explanation for the proposed commercial settlement of $4 million for the intellectual property given by the Administrators and contained within the Sargon Capital Offer is given within the 22 April 2020 letter. In particular, annexure A to that letter provided for six estimated outcome scenarios that estimated the total amount of return to Sargon Capital, which ranged from approximately $4.4 million to $5.9 million with "IP and other assets" having the proposed commercial settlement amount of $4 million in each scenario. 9.16 On and from 22 April 2020, there was further communication between the Sargon Capital Receivers and the Administrators. 9.17 On 24 April 2020, negotiations between the Sargon Capital Receivers and the Cloverhill Group resulted in a proposed agreement by which Sargon Capital would assign any rights that it had in the intellectual property rights used in Sargon Services' business, free of Taiping's security interest, to Cloverhill for a sum of $4 million. 9.18 On 28 April 2020, the Sargon Capital Receivers advised the Administrators that it may no longer be possible to secure the release of Taiping's security interest, and that the Sargon Capital Receivers were no longer prepared to agree to an assignment of the interests in the intellectual property that may be held by Sargon Capital. 9.19 On 29 April 2020, the solicitors for the Administrators sent a letter to Ashurst. In this letter, the Administrators encouraged Taiping to accept "the very generous [Sargon Capital Offer] of $4 million to transfer its rights (whatever they may be) in the Sale IP to Cloverhill", and provided views as to the value of the intellectual property. 9.20 Taiping did not accept the Sargon Capital Offer. Neither the Administrators' Proposed Agreement or the Diversa Agreement were ultimately executed. 9.21 On 30 April 2020, the further communications between the Sargon Capital Receivers and the Administrators with respect to the Cloverhill Sale concluded, in conjunction with the commencement of proceedings in the Federal Court (as described in the following section). 10. CLOVERHILL PROCEEDINGS 10.1 On 30 April 2020, the Administrators filed an application in the Federal Court of Australia pursuant to sections 442C and 447A of the Corporations Act, seeking leave of the Court to complete the Cloverhill Sale. 10.2 On 1 May 2020, Justice O'Bryan made orders approving the completion of the Cloverhill Sale. However, in order to protect the secured parties, the Court ordered that the proceeds of the sale be retained in a separate account (Retained Proceeds), and provided a mechanism for the various claims over the assets of the Sargon Group to be determined by the Court. 10.3 On or about 4 May 2020, the Cloverhill Sale was effected by the execution of: (a) the Business Sale Agreement in respect of Sargon dated 4 May 2020 (Business Sale Agreement); (b) the following Share Sale Agreements (Share Sale Agreements): (i) Share Sale Agreement in respect of Responsible Entity Partners Ltd dated 4 May 2020; (ii) Share Sale Agreement in respect of Tidswell Financial Services Ltd dated 4 May 2020; (iii) Share Sale Agreement in respect of Mammatus Pty Ltd dated 4 May 2020; (iv) Share Sale Agreement in respect of Sargon CT (NSW) Pty Ltd dated 4 May 2020; (v) Share Sale Agreement in respect of Sargon CT Pty Ltd dated 4 May 2020; (vi) Share Sale Agreement in respect of Sargon Limited (NZ) dated 4 May 2020; (vii) Share Sale Agreement in respect of CCSL Limited dated 4 May 2020; (viii) Share Sale Agreement in respect of Diversa Trustees Limited to Pacific Infrastructure Holdings Pty Ltd dated 4 May 2020; and (ix) Share Sale Agreement in respect of Diversa Trustees Limited to Diversa Holdco Pty Ltd dated 4 May 2020. 10.4 The overall total consideration for the Cloverhill Sale was $29,600,000 (being the $30,000,000 gross proceeds less $400,000 payable to Decimal). That amount comprised: (a) $5,463,836 consideration under the Business Sale Agreement; and (b) $24,136,164 consideration under the Share Sale Agreements. 10.5 In the Business Sale Agreement, the intellectual property of the Sargon Group is defined and addressed by way of the following: (a) Pursuant to Schedule 1: (i) "Assets" is defined to include Additional IP and the Business Intellectual Property; (ii) "Additional IP" refers to the Sale IP as defined in Order 1 of the orders made on 1 May 2020 and includes the Intellectual Property Rights (including those set out in Schedule 8 to the Business Sale Agreement) but Excludes Business Intellectual Property; (iii) "Business Intellectual Property" means all Intellectual Property Rights owned by the Seller and used in the Business, including as set out in Schedule 5, but excludes any rights in or relating to the Sargon name or trademark (other than the Domain Name); (iv) "Intellectual Property Rights" means all industrial and intellectual property rights and interests of whatever nature throughout the world conferred under statute, common law or equity, whether existing now or at any time in the future, and includes rights in respect of or in connection with copyright, inventions (including patents), formulae, databases, business processes and methods, circuit layouts, plant varieties, trademarks, service marks, business names, trade names, domain names, designs, confidential information, trade secrets and know-how and similar industrial and intellectual property rights, whether or not registered or registrable, and includes the right to apply for or renew the registration of such rights; (b) Pursuant to Schedule 5, the Business Intellectual Property includes the Domain Name (www.sargon.com) registered by Sargon Services; (c) Pursuant to Schedule 8: (i) Part A sets out seven trademarks, including the trademark "SARGON" with IP Australia registration number 1927649; and (ii) Part B sets out 28 domain names, all registered to Sargon Capital. (d) There was no specific attribution of the value of the "Additional IP" or "Business Intellectual Property" in the Business Sale Agreement. 10.6 Following the completion of the Cloverhill Sale, an announcement was released on the Sargon website, which stated (amongst other things): Cloverhill Group Managing Partners, Teddy Wasserman said, "We believe the proprietary next-generation trustee infrastructure that Sargon has developed to be world-class technology". … The cloud-based platform developed by Sargon delivers clients greater transparency over funds and reduces costs and complexity, while at the same time providing more scalable and reliable operations. The parties agree that this announcement was released but do not agree that any of its contents is necessarily correct. 10.7 On 15 May 2020, pursuant to the orders of Justice O'Bryan dated 1 May 2020, the Interested Parties and the Administrators each filed Notices of Claim with respect to the Retained Proceeds, as addressed in section 6 above. 10.8 On 19 May 2020, Justice O'Bryan delivered written reasons for the orders made on 1 May 2020. 10.9 Various deductions have been made from the Retained Proceeds from time to time, being: (a) $351,884 paid to the Australian Taxation Office pursuant to the Orders of Justice O'Bryan dated 4 August 2020; (b) $19,470 paid to the mediator, Manny Garantziotis QC, in respect of fees charged for conducting the mediation of the Cloverhill Proceedings on 19 August 2020; and (c) $120,653.25 paid to the Victorian and New South Wales State Revenue Offices pursuant to the Orders of Justice O'Bryan dated 15 September 2020. 10.10 As at 21 October 2020, the balance of the Retained Proceeds was $29,093,527.40. 10.11 On 27 August 2020, the Administrators made an application under paragraph 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) (Schedule 2 to the Corporations Act) to have the certain remuneration, referred to in paragraph 6.6 above be determined by the Court. 50 During the hearing, the parties confirmed that, in paragraph 2.3(h), the reference to "Sargon International Holdings 2 Pty Ltd" should be a reference to "SC International Holdings 2 Pty Ltd" (and that change should also be made to the corporate diagrams in the Annexures to these reasons) and that, in paragraph 7.2(d), the reference to "SCIH1" should be a reference to "Sargon SPV".

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Overview 54 Questions 3.1 to 3.6 concern the intellectual property assets that were sold pursuant to the Business Sale Agreement. Westpac claims that part of those assets were owned by Sargon Services (over which Westpac holds security interests). Sargon Capital and Taiping claim that part of those assets were owned by Sargon Capital. GrowthOps claims that part of those assets were owned by it by reason that it developed software and other materials which are the subject of copyright and retained ownership of the copyright pending payment for its development. 55 The intellectual property assets sold pursuant to the Business Sale Agreement are defined in that agreement. Those definitions are referred to below. By way of overview, the assets can be divided into three broad categories: Sargon software systems (known as "Arcadia", "Sentinel", "Metropolis", "API Impact", and "Sargon Pay"); the Sargon website (which was treated by the parties as a separate species of software); and numerous trading and domain names. 56 Those assets were the subject of the order of the Court made on 1 May 2020 empowering the plaintiffs (as administrators of Sargon Services) to dispose of the assets (as part of the Cloverhill Sale) notwithstanding that the interested parties may have held ownership or security interests in the assets. Those assets were defined as the "Sale IP" in the Court's order. 57 Question 3.1 concerns the trading and domain names and asks whether Sargon Services or Sargon Capital was the owner of those assets as at the date of the Cloverhill Sale. Questions 3.2 and 3.3 concern the Sargon software systems and the Sargon website and asks how the value of those software assets should be divided between Sargon Services, Sargon Capital and GrowthOps. 58 Questions 3.4 to 3.6 focus specifically on GrowthOps' claims to ownership of the Developed IP (being intellectual property developed pursuant to the Technology MSA and the Marketing MSA). In effect, the questions ask whether the Developed IP was sold as part of the Cloverhill Sale (including as part of the Sargon software systems) so as to generate part of the Retained Proceeds and whether GrowthOps was the owner of the Developed IP at the time of sale such that it is entitled to a proportion of the Retained Proceeds. 59 It is convenient to consider the competing claims by Sargon Services and Sargon Capital to ownership of the intellectual property assets sold pursuant to the Business Sale Agreement before considering the claims of GrowthOps. The remainder of this section G.1 addresses that question.

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Findings of fact 60 The evidence concerning the ownership of the intellectual property assets (as between Sargon Services and Sargon Capital) was sparse. It primarily consisted of the Business Sale Agreement (to which Sargon Services, but not Sargon Capital, was a party) and the financial accounts of Sargon Services and Sargon Capital. The financial accounts are admissible in evidence and are prima facie evidence of the matters stated or recorded in the accounts: Corporations Act s 1305. 61 Under the Business Sale Agreement, Sargon Services (as Seller) sold the Assets (as defined) to the purchaser. It did so with the authority given to the plaintiffs (as administrators) by the Court on 1 May 2020. Relevantly, the Assets are defined to include the Additional IP (as defined) and the Business Intellectual Property (as defined). 62 The Additional IP is defined as the Sale IP (as defined in the Court's order of 1 May 2020), including the rights set out in Schedule 8 to the agreement but excluding the Business Intellectual Property. Schedule 8 contains a list of 7 trade marks (including the registered mark SARGON and applications for registration in respect of arcadia, Impact, Sentinel and Metropolis) and 28 domain names (each of which is stated to be registered in the name of Sargon Capital). 63 The Business Intellectual Property is defined as follows: Business Intellectual Property means all Intellectual Property Rights owned by the Seller and used in the Business, including as set out in Schedule 5 (Business Intellectual Property) but excluding any rights in or relating to the Sargon name or trade mark (other than the Domain Names). 64 The term Intellectual Property Rights is defined in broad terms as follows: Intellectual Property Rights means all industrial and intellectual property rights and interests of whatever nature throughout the world conferred under statute, common law or equity, whether existing now or at any time in the future, and includes rights in respect of or in connection with copyright, inventions (including patents), formulae, databases, business processes and methods, circuit layouts, plant varieties, trade marks, service marks, business names, trade names, domain names, designs, confidential information, trade secrets and know-how and similar industrial and intellectual property rights, whether or not registered or registrable, and includes the right to apply for or renew the registration of such rights. 65 The object of separating the definition of intellectual property assets into Additional IP and Business Intellectual Property appears to be to ensure that all intellectual property assets owned by Sargon Services (which may include assets outside those defined by the Court's order of 1 May 2020) were sold pursuant to the Business Sale Agreement. 66 As can be seen, the definition of Business Intellectual Property makes express reference to the rights listed in Schedule 5 to the Business Sale Agreement. The assumption appears to be that those rights are owned by Sargon Services. Schedule 5 lists two items only: the domain name www.sargon.com and the Australian Business Name "Good Super". The Schedule states that both are registered in the name of Sargon Services. 67 The latest balance sheet for Sargon Capital in evidence was dated 31 December 2019. The intangible asset account 1-2300 included two subsidiary accounts: 1-2305 (Intangible tech - Sargon) and 1-2375 (Intangible Other). 68 Subsidiary account 1-2305 (Intangible tech - Sargon) had a balance of $5,797,293.90 and included the following accounts: 1-2350 Software API 0.1 $301,747.94 1-2355 Amortisation of API 0.1 -$151,465.61 1-2360 Software API 1.0 $215,761.64 1-2380 Sargon Technology $6,663,030.82 1-2385 Amortisation of Sargon Technology -$1,231,780.89

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Submissions of the parties 74 Sargon Capital submitted that it is the owner of the trading and domain names listed in Schedule 8 of the Business Sale Agreement because it is the holder of the registration. While Sargon Services is the registrant of the Sargon domain name (www.sargon.com), Sargon Capital submitted that it was the beneficial owner. In support of that submission, it relied on: (a) the fact that, of the 28 domain names registered within the Sargon Group, 27 are registered to Sargon Capital; (b) the fact that Mr Kingston's ROCAP also indicates that Sargon Capital held that domain name; and (c) an assertion that the asset is listed on Sargon Capital's balance sheet. 75 Sargon Capital also submitted that, while Sargon Services is the registrant of the "Good Super" business name, Sargon Capital is the beneficial owner. In support, it asserted that the asset was listed on Sargon Capital's balance sheet. 76 In respect of the software assets, Sargon Capital submitted that ownership should be recognised in accordance with the balance sheet accounts of Sargon Capital and Sargon Services. 77 Westpac acknowledged that Sargon Capital is the owner of the trading and domain names listed in Schedule 8 of the Business Sale Agreement (other than items 15, 16 and 33 to 35) because it is the holder of the registration. In relation to items 15, 16 and 33 to 35 (being various "Hong Kong trustee company" domain names), Westpac submitted that the evidence shows that no-one is recorded as the registrant of those domain names. 78 Westpac submitted that Sargon Services is the owner of the Sargon domain name (www.sargon.com) and the "Good Super" business name because it is the registrant. Westpac disputed that Sargon Capital's balance sheet affords contrary evidence (as the balance sheet does not identify those specific assets). 79 In respect of the software assets, Westpac also submitted that ownership should be recognised in accordance with the balance sheet accounts of Sargon Capital and Sargon Services.

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Consideration 80 Ultimately, there was no real dispute between the parties that ownership of the software assets should be recognised as being held by both Sargon Capital and Sargon Services, reflecting the fact that the balance sheets of both companies record (as an asset) capitalised expenditure on the software. While the relevant balance sheet accounts contain only a broad description of the software assets, they are the best evidence available to the Court as to the ownership of those assets. Based on those balance sheet accounts, as reproduced above, in my view the Sargon software systems (known as "Arcadia", "Sentinel", "Metropolis", "API Impact", and "Sargon Pay") are owned in part by Sargon Capital and in part by Sargon Services, as reflected in: (a) the Sargon Capital account 1-2305 (Intangible tech - Sargon) and its subsidiary accounts: 1-2350 (Software API 0.1), 1-2355 (Amortisation of API 1.0), 1-2360 (Software API 1.0), 1-2380 (Sargon Technology) and 1-2385 (Amortisation of Sargon Technology); and (b) the Sargon Services subsidiary account 1-2380 (Sargon Technology). 81 The Sargon website software is owned by Sargon Services, as reflected in its balance sheet subsidiary accounts 1-2310 (Website) and 1-2315 (Amortisation of Website). 82 I find that the trade marks and domain names listed in Schedule 8 to the Business Sale Agreement are owned by Sargon Capital, as the available evidence suggests that it is the registrant of those trade marks and domain names. As to items 15, 16 and 33 to 35, the evidence relied on by Westpac does not establish that Sargon Capital was not the registrant of those names; the evidence only established that searches had failed to reveal the registrant of those names. In circumstances where Sargon Services executed the Business Sale Agreement implicitly recognising Sargon Capital as the owner of those names, and there being no contrary evidence, I find that Sargon Capital is the owner. 83 As to the domain name www.sargon.com and the business name "Good Super", the parties acknowledge that they are registered in the name of Sargon Services. The matters relied on by Sargon Capital to establish that it is the beneficial owner of those names are not persuasive. The fact that other trading and domain names are registered to Sargon Capital is entirely neutral. The balance sheets of Sargon Capital and Sargon Services do not provide a definitive answer because each has an asset account designated 1-2320 (Domain Names), and there is no evidence as to the domain names included within the account. While Mr Kingston's ROCAP lists the Sargon domain name as an asset of Sargon Capital, I do not regard the ROCAP as a reliable source of information. Mr Kingston did not give evidence and accordingly there is no evidence as to the basis on which Mr Kingston included that asset as an asset of Sargon Capital. The value attributed to the asset in the ROCAP is the same as the value recorded in the Sargon Capital balance sheet in respect of the account 1-2320 (Domain Names), which suggests that Mr Kingston assumed that that account related to the Sargon domain name. In the absence of other evidence, I find that Sargon Services, as registrant, is the owner of the domain name www.sargon.com and the business name "Good Super".

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The Technology MSA 86 GrowthOps and Sargon Capital were parties to the Technology MSA which commenced 1 July 2019. 87 Clause 3 of the agreement governed the services to be provided by GrowthOps pursuant to the agreement. Under that clause, GrowthOps agreed to provide Planning Services (as defined) in order to prepare a suitable Quarterly Growth Plan (as defined) for Sargon. The template Quarterly Growth Plan attached to the agreement indicated that the plans would define the scope of services to be provided and the fees payable. Sargon Capital could elect to proceed with a Quarterly Growth Plan or not proceed. If it proceeded with a Quarterly Growth Plan, Sargon Capital agreed to pay fees to GrowthOps for the services performed by the successful delivery of each agreed Scope (as defined). Clause 1.1 defined "Scope" as "each and any subset of agreed services to be performed by GrowthOps for Sargon pursuant to a Quarterly Growth Plan, detailing certain outcomes, Deliverables and Fees payable as against (draw down against) the Quarterly Growth Budget in accordance with Schedule B". "Deliverables" were defined as the deliverables provided to Sargon Capital by GrowthOps as set out in accordance with a Scope and/or Quarterly Growth Plan, which may include software. 88 Clause 7.1 of the Technology MSA relevantly provided as follows: 7.1 Intellectual Property Rights (a) All Intellectual Property Rights in the Services and Deliverables (Developed IP), except any GrowthOps Background IP or its service methodology and knowledge, vests in Sargon immediately upon payment to GrowthOps for same, and GrowthOps hereby assigns, and must procure that its personnel assign, all Intellectual Property Rights in the Developed IP To [sic] Sargon. GrowthOps agrees to do all things which may be necessary for these ownership rights to pass to Sargon. At Sargon's request, GrowthOps must provide, and ensure that its personnel or sub-contractors provide consents to or waivers of any moral rights in specific Developed IP. This clause does not in any way derogate from the ability for GrowthOps to utilise the same service methodology for other clients. (b) GrowthOps agrees to provide Sargon with a statement of account on a quarterly basis demonstrating invoices paid and outstanding to date, whilst reflecting the vesting of ownership of Developed IP contemplated by 7.1(a). … 89 Intellectual Property Rights was defined as: …any rights in or to any patent, copyright (including rights in computer software), database rights, registered design or other design right, utility model, trade mark (whether registered or not and including any rights in get up or trade dress), brand name, logo, service mark, trade or business name, domain name, eligible layout right, chip topography right and any other rights of a proprietary nature in or to the results of intellectual activity in the industrial, commercial, scientific, literary or artistic fields, whether registrable or not and wherever existing in the world, including all registrations, applications, renewals, extensions, continuations, divisions and reissuances associated with, and all rights to apply for, any such rights. 90 Mr McMenamin deposed that GrowthOps prepared two Quarterly Growth Plans under the Technology MSA. The first was for the quarter commencing 1 July 2019 and the second was for the quarter commencing 1 October 2019. Copies were in evidence. Each was a detailed document describing the "Scopes", being software improvements or modifications to Sargon's software systems. Each Scope specified a timeframe for delivery and the fee payable. GrowthOps provided the Court with an aide memoire linking each item in the Scopes with particular Sargon software systems (Arcadia, Sentinel, Metropolis, API Impact and Pay). The aide memoire was not the subject of dispute by any party. 91 Mr McMenamin deposed that the following invoices were issued by GrowthOps to Sargon Capital under the Technology MSA: Invoice date Invoice number Amount excl GST 30/07/2019 INV/GOS/00112 $107,000.00 31/07/2019 INV/GOS/00072 $157,723.27 30/08/2019 INV/GOS/000113 $107,000.00 30/08/2019 INV/GOS/00094 $156,405.23 30/09/2019 INV/GOS/00110 $321,957.00 31/10/2019 INV/GOS/00129 $372,637.30 30/11/2019 INV/GOS/00142 $ 286,361.05 Total $1,509,083.85

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92 The aggregate value of the above invoices (excl GST), $1,509,083.85, is materially the same as the amount by which the subsidiary account 1-2380 (Sargon Technology) in the Sargon Capital balance sheet increased in value from June 2019 (at which time it was valued at $5,153,947.00) to December 2019 (at which time it was valued at $6,663,030.82). 93 In the above table, and in what follows, I have referred to the amounts invoiced by GrowthOps to Sargon Capital exclusive of GST. The reason for using the GST exclusive figures is that the task is to determine GrowthOps' proportionate ownership interest in the intellectual property assets sold under the Business Sale Agreement. The proportionate ownership interest must be based on the asset value and that part of the asset value that should be regarded as being owned by GrowthOps. The expenditure on the development of the software assets was capitalised in the balance sheets of Sargon Capital and Sargon Services, but only in respect of the GST exclusive amounts (no doubt because the GST payments made by Sargon Capital in respect of the development of the software would have been offset against GST payments received by Sargon Capital for tax purposes). The use of GST exclusive figures is consistent with the evidence of Mr McMenamin and the valuation methodology adopted by Mr Hall (and neither Mr Samuel nor Mr Jaski suggested otherwise). Conversely, the task is not to determine how much GrowthOps is owed as an unpaid creditor (which would include the unpaid amounts of the invoices, including GST, as well as interest due on unpaid amounts). 94 In its written submissions and aides memoire provided to the Court, GrowthOps did not press any claim in respect of the first four invoices being INV/GOS/00112, INV/GOS/00072, INV/GOS/00113 and INV/GOS/00094. GrowthOps' claim in respect of services provided under the Technology MSA was confined to invoices INV/GOS/00110, INV/GOS/00129 and INV/GOS/00142 which totalled $980,955.35 (excl GST). In relation to invoices INV/GOS/00072 and INV/GOS/00094, Mr McMenamin deposed that the invoices had been paid by Sargon Capital. Accordingly, no claim was made for those amounts. However, no clear explanation was provided in the evidence or submissions in relation to invoices INV/GOS/00112 or INV/GOS/00113. The notations on those invoices indicate that they relate to consulting fees provided by GrowthOps, and the amounts invoiced were deducted from INV/GOS/00072 and INV/GOS/00094 respectively. I can only infer from the fact that no claim was pressed by GrowthOps in respect of those invoices and the notation on those invoices that they did not relate to the development of software but other consultancy services (despite the coincidence between the (GST exclusive) gross value of the invoices and the increase in the "Sargon Technology" asset in the Sargon Capital balance sheet between June 2019 and December 2020). 95 GrowthOps provided the Court with an aide memoire linking invoices INV/GOS/00110, INV/GOS/00129 and INV/GOS/00142 with the Quarterly Growth Plans and each delivered Scope. Again, the aide memoire was not the subject of dispute by any party. 96 Ultimately, there was no dispute concerning the fact that the work performed by GrowthOps pursuant to the Technology MSA, and invoiced under invoices INV/GOS/00110, INV/GOS/00129 and INV/GOS/00142, involved software improvements or modifications to Sargon's software systems as identified above. Nor was there any dispute that the invoices were unpaid. 97 I therefore find that the value of the Sargon software systems recorded in the Sargon Capital balance sheet as at 31 December 2019 included the (GST exclusive) cost of software development performed by GrowthOps under the Technology MSA as reflected in invoices INV/GOS/00110, INV/GOS/00129 and INV/GOS/00142, being an amount of $980,955.35.

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The Marketing MSA 98 GrowthOps and Sargon Capital were also parties to the Marketing MSA which had a commencement date of 2 September 2019. 99 Under clause 3.1 of the Marketing MSA, GrowthOps agreed to provide Sargon Capital with (a) Retainer Services (as defined) and (b) Project Services (as defined) as required by Sargon Services throughout the term of the agreement. Retainer Services were defined (by reference to Item 1A of Schedule B) as follows (together with incidental services): The following services will be performed by GrowthOps in exchange for the Retainer Fees: • Creative • Marketing • Coaching / Leadership • Marketing advice in relation to the Max Super Fund 100 The Retainer Fees were defined (by reference to Item 1B of Schedule B) as $500,000 per month from the commencement date until expiry of the sixth calendar month and $350,000 per month from the seventh calendar month until the expiry date. 101 The Project Services were defined as services specified by Sargon Capital in a Project Brief and an Approved Quotation under clause 3.2 (together with incidental services). Clause 3.2 stipulated that, if Sargon Capital required Project Services, it would provide a Project Brief to GrowthOps which would specify the scope of the services and GrowthOps would provide a quote for the Project Services. Under clause 3.3, Sargon Capital agreed to pay fees in relation to services performed by GrowthOps pursuant to the successful delivery by GrowthOps of each agreed Statement of Works and/or Project Brief (applicable to the relevant service) during the Term. Schedule D contained a pro forma Statement of Works. Although not stated expressly in the agreement, it is implicit that Project Services to be provided by GrowthOps to Sargon Services would be detailed in a Statement of Works. 102 Clause 5 governed the fees, invoicing and payment for the Retainer Services and Project Services. 103 Clause 7 (Intellection Property) and clause 9.2 (Consequences of Termination) were in identical terms to those clauses in the Technology MSA (reproduced above). 104 Mr McMenamin deposed that GrowthOps issued 11 Statements of Works under the Marketing MSA between September 2019 and December 2019. Copies of the Statements of Works were in evidence. They specified a range of services to be provided by GrowthOps concerning marketing strategies, some of which related to online marketing activities. The services included various search engine optimisation services; quantitative market research including consumer surveys; image strategy; design of marketing flyers and brochures; review of brand and product position; communications strategy; and other marketing-related activities. 105 Mr McMenamin also deposed that 17 invoices were issued by GrowthOps to Sargon Capital under the Marketing MSA between 30 September 2019 and 31 January 2020. In its written submissions and aides memoire provided to the Court, GrowthOps only pressed its claim in respect of 15 of those invoices (it excluded INV/GOS/00146 and INV/GOS/150) which it submitted related to the Statements of Works under the Marketing MSA. The 15 invoices totalled $131,819 (excl GST). GrowthOps provided the Court with an aide memoire linking relevant invoices with the Statements of Work under the Marketing MSA. 106 Ultimately, there was no dispute concerning the fact that the work performed by GrowthOps pursuant to the Marketing MSA was the work defined by the Statements of Work. Nor was there any dispute as to the value of unpaid invoices in respect of that work.

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Was the Developed IP sold as part of the Cloverhill Sale (including as part of the Sargon software systems) so as to generate part of the Retained Proceeds? 107 GrowthOps submitted that, in the course of performing services for Sargon Capital pursuant to the Technology MSA and the Marketing MSA, GrowthOps developed software and other items in which intellectual property (copyright) subsists. It further submitted that the intellectual property comprised a key asset that was sold under the Business Sale Agreement. In relation to the work performed under the Technology MSA, GrowthOps submitted that it developed software improvements to Sargon's software systems, as evidenced by the Quarterly Growth Plans and Scopes. In relation to the work performed under the Marketing MSA, GrowthOps submitted that it produced "deliverables" as described in the Statements of Works and that it may be inferred that the deliverables were sufficiently connected with the creation of intellectual property rights because the invoices relating to the "deliverables" were capitalised on the balance sheet of Sargon Capital. In that regard, GrowthOps argued that the value of the "Sargon Technology" asset in the Sargon Capital balance sheet increased in value from June 2019 to December 2019 by $1,509,083.85 and that the GST inclusive value of the invoices issued by it under the Technology MSA and the Marketing MSA, for which it made a claim, totalled $1,569,593.13. 108 Westpac acknowledged that the Developed IP, so far as it comprised part of the Sargon software systems, was sold as part of the Cloverhill Sale and generated part of the Retained Proceeds. In relation to any Developed IP that was created under the Marketing MSA, Westpac submitted that it did not generate any part of the Retained Proceeds. Westpac argued that the invoices issued under the Marketing MSA were of relatively modest value and related to marketing services, not software development, and that the evidence did not show that the services resulted in the creation of any intellectual property, let alone intellectual property that had value in the context of the Cloverhill Sale. 109 I am satisfied on the evidence that, under the Technology MSA, GrowthOps developed software modifications or additions to the Sargon software systems that were sold as part of the Cloverhill Sale so as to generate part of the Retained Proceeds. The developed software was a literary work within the meaning of the Copyright Act 1958 (Cth). A literary work is defined in s 10 of the Copyright Act 1958 (Cth) as including "a computer program or compilation of computer programs". A computer program is defined in s 47AB to include any literary work that is (a) incorporated in, or associated with, a computer program; and (b) essential to the effective operation of a function of that computer program. Ownership of a literary work vests in the author: see s 35(2) of the Copyright Act 1958 (Cth). Subject to exceptions that are not presently relevant, where the literary work is made by the author in pursuance of the terms of his or her employment, the employer is the owner of the copyright: see s 35(6) of the Copyright Act 1958 (Cth). Westpac submitted that there is no evidence that the software developed pursuant to the Technology MSA was authored by employees of GrowthOps. In the absence of any evidence suggesting that GrowthOps sub-contracted the work under the Technology MSA, I infer that the software was authored by employees of GrowthOps. 110 As set out earlier, the Sargon software systems that were sold as part of the Cloverhill Sale were recorded as assets in the following accounts in the balance sheets of Sargon Capital and Sargon Services: the Sargon Capital account 1-2305 (Intangible tech - Sargon) and its subsidiary accounts and the Sargon Services subsidiary account 1-2380 (Sargon Technology). The software development undertaken by GrowthOps was done for Sargon Capital. As explained above, the (GST exclusive) amounts invoiced by GrowthOps to Sargon Capital under the Technology MSA were capitalised on Sargon Capital's balance sheet in the subsidiary account 1-2380 (Sargon Technology). It follows that part of the value of the Sargon Capital account 1-2305 (Intangible tech - Sargon) is attributable to the software development performed by GrowthOps under the Technology MSA in the amount of $980,955.35. 111 Conversely, I am not satisfied on the evidence that, under the Marketing MSA, GrowthOps developed intellectual property that was sold as part of the Cloverhill Sale so as to generate part of the Retained Proceeds. The Statements of Works under the Marketing MSA do not support a conclusion that the works included software development (whether relating to the Sargon software systems or the Sargon website) or the development and registration of trading and domain names. Rather, the Statements of Works indicate that the services related to marketing activities. It may be that, in the course of providing those services, GrowthOps created literary or other works in which copyright subsisted. However, no such assets were identified in evidence. Nor were any such assets identified by reference to the balance sheets of Sargon Services or Sargon Capital. While the Business Sale Agreement transferred all intellectual property used or in the possession of Sargon Services (based on the Court's order of 1 May 2020), there is no evidence to support a finding that any copyright work created by GrowthOps under the Marketing MSA was considered by Sargon Services or Pacific Infrastructure to have value in the context of the sale.

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Was GrowthOps the owner of the Developed IP at the time of sale such that it is entitled to a proportion of the Retained Proceeds? 112 The dispute between the parties with respect to ownership of the Developed IP focused on the meaning and effect of clause 7.1(a) of each of the Technology MSA and the Marketing MSA in light of s 267 of the PPSA. As I have found that only the Developed IP under the Technology MSA was sold as part of the Cloverhill Sale so as to generate part of the Retained Proceeds, the remainder of this section focusses on the Technology MSA. However, the same reasoning would apply to the Marketing MSA. 113 It is convenient to reproduce clause 7.1(a) of the Technology MSA: All Intellectual Property Rights in the Services and Deliverables (Developed IP), except any GrowthOps Background IP or its service methodology and knowledge, vests in Sargon immediately upon payment to GrowthOps for same, and GrowthOps hereby assigns, and must procure that its personnel assign, all Intellectual Property Rights in the Developed IP To [sic] Sargon. GrowthOps agrees to do all things which may be necessary for these ownership rights to pass to Sargon. At Sargon's request, GrowthOps must provide, and ensure that its personnel or sub-contractors provide consents to or waivers of any moral rights in specific Developed IP. This clause does not in any way derogate from the ability for GrowthOps to utilise the same service methodology for other clients. 114 Westpac and Sargon Capital contend, among other things, that the effect of clause 7.1(a) was to grant a security interest over the Developed IP in favour of GrowthOps (being a retention of title clause) within the meaning of s 12 of the PPSA. They argued that the security interest was not perfected by GrowthOps (the interest was not registered under the PPSA) and that, by virtue of s 267 of the PPSA, the security interest vested in Sargon Capital. 115 Section 12 of the PPSA relevantly provides as follows: (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secure payment or performance of an obligation: … (d) a conditional sale agreement (including an agreement to sell subject to retention of title); ... (5) A security interest does not include: (a) a licence; or (b) an interest of a kind prescribed by the regulations for the purposes of this section. 116 Section 267(1) of the PPSA provides that the section applies if, relevantly: (a) an administrator of a company is appointed (whether under ss 436A, 436B or 436C of the Corporations Act); and (b) a security interest granted by the company is unperfected at a time when, on a day, the event occurs by virtue of which the day is the section 513C day for the company within the meaning of the Corporations Act. 117 Section 267(2) of the PPSA provides as follows: The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs. 118 An administrator was appointed to Sargon Capital on 8 March 2020, prior to it being wound up. Accordingly, the section 513C day for Sargon Capital is 8 March 2020. There was no dispute between the parties that, if clause 7.1(a) conferred a security interest on GrowthOps, that security interest was unperfected as at 8 March 2020. GrowthOps did not have possession or control over the Developed IP as the software had been made available to Sargon Capital (on GrowthOps' admission, pursuant to an implied licence) and the security interest had not been registered by GrowthOps (see s 21 of the PPSA). Thus, the relevant question is whether clause 7.1(a) conferred a security interest. 119 GrowthOps submitted that, under clause 7.1(a), GrowthOps owned the Developed IP on its creation and agreed to transfer ownership to Sargon Capital after GrowthOps had completed providing all the services to Sargon Capital under the agreement and Sargon Capital had paid all of the fees relating to those services. Despite that, GrowthOps contended that clause 7.1(a) did not create a security interest within the meaning of s 12 of the PPSA. In support of that contention, it advanced the following submissions. 120 First, it submitted that, pending payment of the fees due, there was an implied licence for Sargon Capital to use the Developed IP. GrowthOps submitted that, in circumstances where ownership of the Developed IP had not been transferred but Sargon Capital was permitted to use the Developed IP, it was necessary to imply a licence to govern the relationship: BP Refinery (Westernport) Pty Ltd v Hastings Shire (1994) 180 CLR 266. It argued that a security interest under the PPSA does not include a licence (see s 12(5)(a) of the PPSA). 121 The first submission is misconceived. Assuming there was an implied licence between GrowthOps and Sargon Capital, and accepting that the implied licence is not a security interest within the PPSA, the argument does not address the relevant question. The asset sold as part of the Business Sale Agreement was not the implied licence. The relevant asset is the copyright in the Developed IP. The relevant question is whether the Technology MSA was an agreement to sell the copyright in the Developed IP subject to retention of title within the meaning of s 12(2)(d) of the PPSA. 122 Second, GrowthOps submitted that the rights and entitlements of GrowthOps under the Technology MSA do not amount to a security interest at general law, relying on Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86 (Dura Constructions) at [37]. The submission was not developed in writing or orally. 123 The second submission is also misconceived. In Dura Constructions, the relevant question was whether the alleged security interest was a charge within the meaning of s 12 of the PPSA. Santamaria JA (with whom the other members of the Victorian Court of Appeal agreed), reasoned that that question should be answered by ascertaining "from the language which the parties have used the nature of the rights and obligations which they intended to create" and then to consider whether, as a matter of law, those rights and obligations give rise to a charge (within the meaning of the PPSA) (at [37]). The relevant issue remains construction of the statute, albeit the statute may use terms that have well-defined meanings at law. 124 Third, GrowthOps submitted that s 3 of the PPSA recognises that personal property includes many different kinds of tangible and intangible property. Goods are defined in s 10 of the PPSA as personal property that is tangible property. While copyright is personal property (see s 196 of the Copyright Act 1968 (Cth) (Copyright Act)), it is intangible property and, therefore, is not a "good" for the purposes of the PPSA. GrowthOps submitted that the expression "conditional sale agreement" in s 12(2)(d) is implicitly confined to goods and therefore did not apply to the Developed IP (which is copyright). In support of the submission, GrowthOps argued that such a limitation to s 12(2)(d) is implicit because it sits in a list of expressions (in s 12(2)) which can only relate to goods. It further argued that the expression "conditional sale agreement" is familiar in the context of a sale of goods and, in s 6 of the Goods Act 1958 (Vic), there is a reference to a sale of goods being conditional or unconditional. Further, s 19(5) of the PPSA refers to a conditional sale agreement of goods. 125 I reject the third submission. None of the arguments advanced by GrowthOps affords any basis for reading down the plain meaning of the text of s 12(2)(d) of the PPSA such that it only applies to goods. It can be accepted that copyright is personal property that is intangible and, therefore, is not a "good" for the purposes of the PPSA. However, as acknowledged by GrowthOps, the PPSA applies to personal property whether it is tangible or intangible. There is no reason in law why a retention of title clause can only relate to personal property that is tangible. There is no contextual or purposive reason to exclude intangible property from the reach of the expression. The Goods Act 1958 (Vic) is wholly irrelevant and s 19 of the PPSA addresses a separate question of when the security interest attaches to the collateral. Many of the examples of security interests listed in s 12(2) are capable of applying to personal property that is intangible. Furthermore, the structure of s 12 is that the primary definition of "security interest" appears in s 12(1) which refers generally to "an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation". The primary definition is applicable to personal property and draws no distinction between tangible and intangible property. The examples of security interests listed in s 12(2) are listed inclusively and are not stated to be exhaustive of the security interests in s 12(1). The fact that some of the examples in s 12(2) may only be applicable to goods does not support a conclusion that other examples should be implicitly limited to goods. GrowthOps was unable to advance any reason why the purposes of the PPSA would be advanced by its construction of s 12(2)(d). 126 In my view, the purposes of the PPSA would be undermined by the limitation sought to be imposed by GrowthOps on s 12(2)(d). The Outline to the Explanatory Memorandum that accompanied the enactment of the PPSA states (at p 10) that the purpose of introducing the PPSA was to achieve "more certain, consistent, simpler and cheaper arrangements for personal property securities." The Outline explains that the legislation takes a functional approach to the determination of a security interest. As the Court of Appeal for British Columbia said in 674921 BC Ltd v Advanced Wing Technologies Corp (2006) 9 PPSA (d) 43; 263 DLR (4th) 290 at [1] in respect of the equivalent Canadian law, the statutory scheme: "swept away various statutory, common law and equitable rules dealing with secured transactions involving personal property… This patchwork of rules relating to constructive and actual knowledge, title, registration, crystallization, realization and priorities had developed over many years in response to changing exigencies and without any overall rationale. The new unified statutory scheme ('PPSA') applies to all interests that 'in substance' create security interests on personal property. 127 It is well established that jurisprudence developed abroad remains important to the interpretation of the PPSA domestically, as the PPSA was modelled on New Zealand, Canadian and United States legislation: see e.g. Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; 277 FLR 337 at [32]. 128 Fourth, GrowthOps submitted that, on the proper construction of the Technology MSA, there was no conditional sale agreement because there was no "sale". Rather, there was a provision of services for a fee, incidental to which there was creation of intellectual property which was transferred upon payment of the fee. 129 I reject that submission. It can be accepted that, at the time the Technology MSA was entered into, the Developed IP did not then exist. The agreement was for the provision of services to develop improvements or additions to the Sargon software, and the software was developed over time. However, the terms of the Technology MSA expressly contemplated that, once the software was developed pursuant to the agreement, ownership would vest in Sargon Capital upon payment of all fees owing to GrowthOps. Clause 3.3(a) of the agreement stipulated that Sargon Capital agreed to pay fees for each agreed Scope "including any Services and Deliverables detailed in a Scope". The expression "Deliverables" was defined to include software. Clause 7.1(a) stipulated that all intellectual property rights in the Services and the Deliverables vests in Sargon Capital upon payment. Thus, the Technology MSA was an agreement both for the provision of services (which included the development of software) and the sale of the developed software to Sargon Capital. It is artificial to characterise the agreement as only an agreement for the provision of services; the sale of the developed software was an integral part of the agreement. 130 Fifth, GrowthOps submitted that, on the proper construction of clause 7.1(a), there was no transaction that, in substance, secured payment or performance of an obligation. GrowthOps argued that clause 7.1(a) did not 'secure' payment of the fees but merely spelled out the time for title in the Developed IP to pass to Sargon Capital. Unlike clause 5.4(c), which provided for the charging of interest and suspension of performance of services if the fees were unpaid, clause 7.1(a) did not create an incentive for Sargon Capital to pay the fees or a disincentive to delay or to avoid payment. That is because, even if the fees remained unpaid, Sargon Capital nevertheless continued to enjoy the use of the Developed IP through the implied licence. 131 I reject that submission. Any implied licence granted by GrowthOps to Sargon Capital to use the Developed IP pending contractual payments did not remove the incentive, created by clause 7.1(a), to pay for the Developed IP. That is because any implied licence, required to give business efficacy to the agreement, would only constitute a licence until termination of the agreement. Under clause 9.1 of the agreement, a party was entitled to terminate the agreement upon default by the other party which is not remedied within 90 days of a demand being made. If payments were not made by Sargon Capital following demand for payment and GrowthOps elected to terminate the agreement, it would follow that any implied licence would be at an end and Sargon Capital would be required to cease using the Developed IP (for which it had not paid). It follows that clause 7.1(a) secured payment of the fees because Sargon Capital would not become entitled to use the Developed IP on a permanent basis unless it paid the fees owing. 132 In my view, clause 7.1(a) is properly characterised as a retention of title clause and created a security interest within the meaning of s 12 of the PPSA. The clause related to software that would be created under the agreement. As discussed above, copyright subsists in software and the copyright is personal property (s 196 of the Copyright Act). The clause effected an assignment of such future created copyright in compliance with the requirements of s 197 of the Copyright Act, but the assignment was conditional. The copyright would not vest in Sargon Capital until payment was made by Sargon Capital. Such an arrangement is a textbook example of a retention of title clause: Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676. Clause 7.1(a) was designed to protect GrowthOps from the consequences of Sargon Capital's insolvency by the simple expedient of providing that GrowthOps would retain title in the Developed IP until it was paid for: Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 at 352-3. This very proceeding, by which GrowthOps is seeking to have its retained ownership interest in the Developed IP recognised by the Court in circumstances where Sargon Capital has become insolvent and has not paid for the Developed IP demonstrates the function of clause 7.1(a). 133 It follows that, by the operation of s 267 of the PPSA, the security interest created by clause 7.1(a) (being the retained ownership of the Developed IP) vested in Sargon Capital immediately before 8 March 2020. 134 I note for completeness that Sargon Capital advanced an alternative argument that, on its proper construction, clause 7.1(a) effected an immediate assignment of copyright (upon its creation) to Sargon Capital (allowing it to use those rights as an assignee), whilst stipulating that the copyright would not vest in Sargon Capital until payment had been made (at which time the copyright would permanently vest in Sargon Capital). Sargon Capital argued that s 197 of the Copyright Act distinguishes between the "vesting" and "assignment" of copyright. It argued that the vesting of property carries with it a notion of permanency whereas an assignment may be limited or conditioned and is capable of being revoked or ended by the assignor. 135 I reject the alternative argument advanced by Sargon Capital. To the extent that there is a difference between the words "assign" and "vest" in the context of copyright, the word "assign" may be understood as the act of assigning the copyright and the word "vest" may be understood as the effect of the assignment. Under ss 196 and 197 of the Copyright Act, an assignment of existing and future copyright must be in writing signed by or on behalf of the assignee. Section 197(1) stipulates that (emphasis added): Where, by an agreement made in relation to a future copyright and signed by or on behalf of the person who would, apart from this section, be the owner of the copyright on its coming into existence, that person purports to assign the future copyright (wholly or partially) to another person (in this subsection referred to as the assignee), then if, on the coming into existence of the copyright, the assignee or a person claiming under him or her would, apart from this subsection, be entitled as against all other persons to have the copyright vested in him or her (wholly or partially, as the case may be), the copyright, on its coming into existence, vests in the assignee or his or her successor in title by force of this subsection. 136 It can be seen that, in s 197(1), the words "assign" and "vest" have related meanings - the assignment results in vesting. 137 Section 196(2) of the Copyright Act provides that an assignment of copyright may be limited in any way, including temporally, geographically and by reference to the scope of the rights conferred. However, it does not follow that the word "vest" refers to the entirety of the copyright. Section 197(1) also contemplates that future copyright may be assigned wholly or partially and it is the rights assigned that "vest" in the assignee upon the copyright coming into existence. 138 Read in light of s 197 of the Copyright Act, in my view clause 7.1(a) constitutes an agreement by which GrowthOps assigned the whole of the future copyright in software created under the agreement to Sargon Capital, but on the condition that the copyright would not vest in Sargon Capital until it had paid for the software. 139 In conclusion, Sargon Capital, and not GrowthOps, was the owner of the Developed IP created under the Technology MSA at the time of the Cloverhill Sale.

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Findings of fact 141 By a Share Purchase Agreement dated 20 December 2018 between Diversa as vendor, OneVue as vendor guarantor, Sargon SH as purchaser and Sargon Capital as purchaser guarantor, Diversa agreed to sell to Sargon SH all of the shares in DTL and CCSL (Diversa SPA). The purchase price was $45 million, comprising an Initial Purchase Price of $37 million to be paid on the date of completion (subject to adjustment based on completion accounts to be prepared) and a further payment of a Deferred Purchase Price of $8 million. The payment of the Deferred Purchase Price was governed by clause 10.8 which stipulated that, subject to certain conditions being satisfied, Sargon SH was to pay the Deferred Purchase Price within 10 business days of the date that was 12 months after completion. The purchaser's obligations under the Diversa SPA were guaranteed by Sargon Capital under clauses 22 which provided as follows: 22 Purchaser Guarantee and Indemnity 22.1 Guarantee In consideration of the Vendor entering into this Agreement with the Purchaser at the request of the Purchaser Guarantor, the Purchaser Guarantor irrevocably and unconditionally guarantees to the Vendor the due and punctual performance of all present and future obligations and the payment of all present and future Liabilities of the Purchaser under this Agreement and must on demand by the Vendor perform those obligations or pay those Liabilities in the manner specified in this Agreement if the Purchaser fails to do so on the due date. 22.2 Indemnity As a separate and independent obligation from that contained in clause 22.1, the Purchaser Guarantor indemnifies the Vendor against, and must pay to the Vendor on demand the amount of, any Liability suffered or incurred by the Vendor arising out of or in connection with any failure of the Purchaser to perform any obligation or pay any Liability under this Agreement on the due date. 22.3 Nature and preservation of liability The Purchaser Guarantor acknowledges and agrees that each of its obligations under this clause 22: (a) is a principal and continuing obligation and will not be affected by any principle of law or equity which might otherwise reduce or limit in any way the liability of the Purchaser Guarantor under this clause 22; and (b) continues notwithstanding any amendment of this Agreement or any waiver, consent or notice given under this Agreement by any party to another. 22.4 Waiver of rights The Purchaser Guarantor must not exercise any right of indemnity or subrogation which it might otherwise be entitled to claim and enforce against or in respect of the Purchaser and irrevocably waives all those rights of indemnity or subrogation it may have. 22.5 Restrictions on Purchaser Guarantor's dealings The Purchaser Guarantor irrevocably appoints the Vendor as its attorney to prove in the insolvency of the Purchaser for all money to which the Purchaser Guarantor may be entitled from the Purchaser up to an amount which does not exceed the amount which may be payable by the Purchaser Guarantor under this Agreement. The Purchaser Guarantor acknowledges that the Vendor may, subject to the terms of this Agreement, retain any money which the Vendor may receive from any proof on account of the Purchaser Guarantor's liability under this clause 22. 142 Completion was originally due to occur on or before 31 March 2019, being the "Sunset Date" under the Diversa SPA (I note that the definition of Sunset Date in the agreement refers to 31 March 2018 rather than 31 March 2019, but that is an obvious typographical error given that the agreement was dated 20 December 2018). 143 On 29 March 2019, Diversa and Sargon SH agreed to vary the Diversa SPA by deferring the Sunset Date to 30 April 2019 (First SPA Variation). Sargon SH also agreed to pay $1 million into a bank account nominated by Diversa on the date of the agreement as a deposit towards the Initial Purchase Price. On completion, the Initial Purchase Price would be reduced by $1 million to reflect that deposit and the deposit would be retained by Diversa. 144 On 30 April 2019, Diversa and Sargon SH agreed to vary the Diversa SPA by deferring the Sunset Date by another month to 31 May 2019 (Second SPA Variation). 145 On 31 May 2019, Diversa and Sargon SH agreed to vary the Diversa SPA by deferring the Sunset Date to 21 June 2019 (Third SPA Variation). Sargon SH also agreed to pay a further deposit of $1 million into a bank account nominated by Diversa by 4 June 2019 as a deposit towards the Initial Purchase Price. On completion, the Initial Purchase Price would be reduced by the further amount of $1 million to reflect that deposit and the deposit would be retained by Diversa. 146 On 28 June 2019, each of the parties to the Diversa SPA as well as Sargon SPV (as a second purchaser) agreed to vary the Diversa SPA in a number of ways (Fourth SPA Variation). Relevantly, those parties agreed as follows: (a) Sargon SH agreed to purchase all of the 531,747 CCSL shares and 3,142,33 of the DTL shares and Sargon SPV agreed to purchase the balance of 2,000,000 DTL shares; (b) each reference to "Purchaser" in the Diversa SPA was amended to "Purchasers", which was a reference to Sargon SH and Sargon SPV; (c) the completion date was set at 27 June 2019 (although completion did not in fact occur until the Fourth SPA Variation had been entered into on 28 June 2019); (d) the Initial Purchase Price was reduced to $12 million (from $37 million in the original Diversa SPA), with the parties acknowledging that $2 million had already been paid; (e) the Deferred Purchase Price was increased to $31 million (from $8 million) and would be due on 30 November 2019 (rather than the date falling 12 months after the completion date); (f) the total amount of the Initial Purchase Price and Deferred Purchase Price would be paid by Sargon SH and Sargon SPV on a pro rata basis determined by reference to the number of shares they were each acquiring; and (g) Clause 10.8 of the Diversa SPA (which concerned the Deferred Purchase Price) was amended to provide as follows: (a) Purchaser 1 and Purchaser 2 must pay their respective pro-rata allocation of the Deferred Purchase Price based on their Respective Number of Sale Shares to the Vendor on the Deferred Payment Date. (b) With effect from Completion and without prejudice to any other rights of the Purchasers under this Agreement, the Purchaser Guarantor assumes the obligations of Purchaser 1 and Purchaser 2 to pay the Deferred Purchase Price to the Vendor (but no other obligations) and following Completion: (i) the Vendor and Diversa Holdings will have no recourse to Purchaser 1 and Purchaser 2 in respect of the obligation to pay the Deferred Purchase Price; and (ii) the Vendor's and Diversa Holdings' sole recourse in respect of payment of the Deferred Purchase Price will be to the Purchaser Guarantor. (c) Notwithstanding any other provision of this Agreement, in the event that an "Event of Default" (as defined in the General Security Deed between SC Australian Holdings 1 Pty Ltd ACN 624 531 237 and the Vendor dated on or around the date of this Agreement) is subsisting, the Vendor may by notice to the Purchaser Guarantor declare that any part or all of the Deferred Purchase Price is due and payable on the date stated in the notice, such date not to be earlier than 2 Business Days from the date of that notice. (d) In the event that the Purchaser Guarantor fails to pay to the Vendor in cleared funds any part of the Deferred Purchase Price (Shortfall Amount) on the date which it is or becomes due and payable (Due Date), then the Purchaser Guarantor must pay to the Vendor on demand interest on the Shortfall Amount accruing daily at the rate of 12% per annum from the Due Date up to and including the date of payment. (e) A payment made pursuant to this Agreement with respect to the Shortfall Amount is to be treated as an increase of the Purchase Price. 147 Also on 28 June 2019, Diversa (as secured party) and SCAH1 (as grantor) entered into a General Security Deed (Diversa GSD). Under the Diversa GSD, SCAH1: (a) agreed to pay to Diversa the Secured Money (which was defined as the Deferred Purchase Price and any interest payable under the Diversa SPA) and indemnified Diversa in respect of Sargon Capital's non-payment of the Secured Money as required under the Diversa SPA; and (b) granted to Diversa a security interest in the Collateral (defined broadly as all of SCAH1's "rights, property and undertaking" whether "present or after-acquired", including SCAH1's shares in AdviceNet Pty Ltd, WealthPortal Pty Ltd, Madison Financial Group Pty Ltd and Pro Active Portfolios Pty Ltd) to secure payment of the Secured Money. 148 Clause 12.1 of the Diversa GSD stipulated that various events would be "Events of Default" including that Sargon Capital does not pay any part of the Secured Money or Sargon Capital or SACH1 become insolvent or an application is made to a court for their winding up or for the appointment of a receiver or liquidator. 149 Clause 19.9 of the Diversa GSD provided that the Diversa GSD did not merge with or adversely affect any Encumbrance (defined to include a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect) or other right, power or remedy to which Diversa is entitled and that Diversa remained entitled to "exercise its rights, powers or remedies under [the GSD] as well as under the … other Encumbrance or the right, power or remedy". 150 On the same day, 28 June 2019, completion under the Diversa SPA occurred. Diversa transferred the shares in DTL and CCSL to Sargon SH and Sargon SPV and Sargon SH and Sargon SPV paid to Diversa the remaining $10 million of the Initial Purchase Price. 151 On or about 22 November 2019, OneVue, Diversa, Sargon SH, Sargon SPV, Sargon Capital and SCAH1 agreed to vary the Diversa SPA (Fifth SPA Variation) and the Diversa GSD (First GSD Variation). Relevantly, those parties agreed as follows: (a) the date for payment of the Deferred Purchase Price (now the "Final Deferred Purchase Date") would be 29 May 2020; and (b) clause 10.8 of the Diversa SPA was further amended to provide as follows: (a) Subject to clauses 10.8(b), (c) and (d), Purchaser 1 and Purchaser 2 must pay their respective pro-rata allocation of the Deferred Purchase Price based on their Respective Number of Sale Shares to the Vendor on the Final Deferred Payment Date. (b) In the event that prior to the Final Deferred Purchase Date the Purchaser Guarantor or any of its Subsidiaries completes any financing or fundraising transaction (including any debt, equity, convertible security, asset sale or other similar transaction or any drawdown under the TIM Facility which is not immediately applied in repayment of an Existing Debt Agreement (as defined below)) except for drawdowns of the TIM Facility for working capital purposes in respect of obligations or liabilities incurred after 20 November 2019 in the ordinary course of business (and excluding any payments to Affiliates of the Purchaser Guarantor), then to the extent that making such payment is not in breach of the terms of the existing debt agreements of the Purchaser Guarantor or any of its Subsidiaries as at 20 November 2019 (Existing Debt Agreements), the Purchaser Guarantor must pay to the Vendor within 5 Business Days of completion of such financing or fundraising transaction the amount by which the total funds raised exceed any amount which the Purchaser Guarantor or any of its Subsidiaries is legally obliged to repay as at that date under the terms of any Existing Debt Agreements which terms are in place as at 20 November 2019 (Free Cash Amount). Any such payments made to the Vendor under this clause 10.8(b) will be in part payment of the Deferred Purchase Price and the outstanding amount of the Deferred Purchase Price will be adjusted accordingly. (c) If: (i) Purchaser 1, Purchaser 2 or the Purchaser Guarantor becomes Insolvent; or (ii) an application is made to a court for an order to appoint a receiver, receiver and manager, provisional liquidator, liquidator, trustee for creditors or in bankruptcy or analogous person to Purchaser 1, Purchaser 2 or the Purchaser Guarantor or any of their respective assets, which application is not stayed, withdrawn or dismissed within 15 Business Days of being made, unless that application is frivolous or vexatious and is capable of being set aside, the Deferred Purchase Price is immediately due and payable. (d) The Purchaser Guarantor agrees to transfer for no consideration all of its marketable securities ("SEQ Shares") in Sequoia Financial Group Limited (ACN 097 744 884) (being 21,154,157 fully paid ordinary shares) to SC Australian Holdings 1 Pty Ltd (ACN 624 531 237) ("SC 1") by 8 December 2019 and provide the Vendor with a copy of the holding statement or other reasonably satisfactory documentary evidence showing SC 1 as the holder of the SEQ Shares. If the Purchaser Guarantor fails to comply with the obligation in the preceding paragraph, the Deferred Purchase Price shall be immediately due and payable on 9 December 2019. (e) With effect from Completion and without prejudice to any other rights of the Purchasers under this Agreement, the Purchaser Guarantor assumes the obligations of Purchaser 1 and Purchaser 2 to pay the Deferred Purchase Price to the Vendor (but no other obligations) and following Completion: (i) the Vendor and OneVue Holdings will have no recourse to Purchaser 1 and Purchaser 2 in respect of the obligation to pay the Deferred Purchase Price; and (ii) the Vendor's and OneVue Holdings' sole recourse in respect of payment of the Deferred Purchase Price will be to the Purchaser Guarantor. (f) Notwithstanding any other provision of this Agreement, in the event that an "Event of Default" (as defined in the General Security Deed between SC Australian Holdings 1 Pty Ltd ACN 624 531 237 and the Vendor dated on or around the date of this Agreement) is subsisting, the Vendor may by notice to the Purchaser Guarantor declare that any part or all of the Deferred Purchase Price is due and payable on the date stated in the notice, such date not to be earlier than 2 Business Days from the date of that notice. (g) In the event that the Purchaser Guarantor fails to pay to the Vendor in cleared funds any part of the Deferred Purchase Price (Shortfall Amount) on the date which it is or becomes due and payable (Due Date), then the Purchaser Guarantor must pay to the Vendor on demand interest on the Shortfall Amount accruing daily at the rate of 12% per annum from the Due Date up to and including the date of payment. The Purchaser Guarantor agrees to pay interest in cash on the outstanding balance of the Deferred Purchase Price at a rate of 8.0% p.a., payable monthly in arrears on the last day of each month. Interest will commence on the date of this deed and the first interest payment will be payable on 31 December 2019. (h) A payment made pursuant to this Agreement with respect to the Shortfall Amount is to be treated as an increase of the Purchase Price. 152 Under clause 10.8(d), the shares owned by Sargon Capital in Sequoia Financial Group Ltd were to be transferred to SCAH1 so that they would form part of the collateral over which Diversa had security by reason of the Diversa GSD. The Diversa GSD was also amended to include reference to those shares as part of the collateral. 153 As stated earlier, on 29 January 2020, Shaun Fraser and Jason Preston of McGrath Nicol were appointed as receivers and managers of Sargon Capital. On 31 January 2020, pursuant to cl 10.8(c) of the Diversa SPA (as amended), Diversa served on Sargon Capital a notice stating that the Deferred Purchase Price (as defined in the SPA) was immediately due and payable. On 10 February 2020, Diversa served a creditors' statutory demand for payment on Sargon Capital, demanding payment of $31,261,935.28 (which included interest from 1 January 2020 to 6 February 2020). On 5 March 2020, Diversa lodged proofs of debt with the plaintiffs in their capacities as administrators of Sargon SH and Sargon SPV claiming: (a) the amount of $19,695,000 from Sargon SH; and (b) the amount of $11,567,000 from Sargon SPV.

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Submissions of the parties 154 Diversa asserts a vendor's equitable lien over the shares of CCSL and DTL, and the proceeds of their sale, to the extent of the unpaid purchase price (being the Deferred Purchase Price) and thereby makes claim to that proportion of the Retained Proceeds that is attributable to the shares in CCSL and DTL as a secured creditor of Sargon SH and Sargon SPV. 155 Diversa submitted that the lien arises by operation of law on the principle that "a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration": Mackreth v Symmons (1808) 33 ER 778 (Mackreth) at 782 cited in Hewett v Court (1983) 149 CLR 639 (Hewett) at 645 (Gibbs CJ). The principle applies to a vendor's lien over shares where the parties have agreed that the property is sold and transferred subject to payment of the purchase price (including by instalments): Langen & Wind Ltd v Bell [1972] Ch 685 (Langen) at 691-692 (Brightman J), referring to Albert Life Assurance Co, Ex parte Western Life Assurance Society (1870) LR 11 Eq 164 at 178 (Bacon V-C). 156 Diversa acknowledged that the lien may not arise where the agreement evinces a contrary intention or where the lien has been waived by the vendor (for example, where the vendor has agreed to alternative security being provided to it). In the present case, Diversa submitted that the Diversa SPA (as amended) did not show a contrary intention to the existence of the lien and there had been no waiver. The fact that Diversa agreed to take additional security from SCAH1 was not fatal to the lien, relying on Barclays Bank v Estates & Commercial Ltd [1997] 1 WLR 415 (Barclays Bank) at 421 (Millett LJ). Further, clause 19.9 of the Diversa GSD expressly maintained Diversa's extant 'encumbrances', including liens. In relation to clause 10.8(b) as inserted in the Diversa SPA by the Fourth SPA Variation, Diversa argued that the clause did not extinguish the liability of Sargon SH and Sargon SPV to Diversa with respect to the Deferred Purchase Price but merely prevented recourse by Diversa against those entities. While the clause might prevent Diversa from bringing proceedings against either Sargon SH or Sargon SPV for the Deferred Purchase Price, it did not prevent Diversa from claiming in this proceeding an entitlement to the proceeds of an asset (the DTL and CCSL shares) over which Diversa has a lien. (While clause 10.8(b) of the Diversa SPA was renumbered 10.8(e) by the Fifth SPA Variation, I will refer to it as clause 10.8(b) because the time at which it was inserted into the Diversa SPA, by the Fourth SPA Variation, has some significance for the resolution of the issues.) 157 Sargon Capital took issue with Diversa's submissions in the preceding paragraph. It submitted that a vendor's lien is denied by clause 10.8(b) of the Diversa SPA as inserted in the Diversa SPA by the Fourth SPA Variation because a lien is inconsistent with the contractual intention of the parties. Alternatively, Diversa must be taken to have abandoned any lien that may otherwise have arisen on the basis that it has taken other security (under the Diversa GSD) for the same debt owed, relying on Mackreth at 785.

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Consideration 158 Diversa asserts a vendor's equitable lien over the shares of CCSL and DTL which were sold by Sargon SH and Sargon SPV as part of the Cloverhill Sale. If those shares had not been sold as part of the Cloverhill Sale, the vendor's equitable lien asserted by Diversa, if established, would have entitled it to bring proceedings against Sargon SH and Sargon SPV for the sale of the shares by court order. As observed by Deane J in Hewett (at 663, citations omitted): An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness (see In re Beirnstein; In re Bond Worth Ltd; Snell's Principles of Equity, 28th ed. (1982), pp. 450-451). Though called a lien, it is, in truth, a form of equitable charge over the subject property (see Landowners West of England and South Wales Land Drainage and Inclosure Co. v. Ashford) in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout (Bowles v. Rogers; In re Stucley; Davies v. Littlejohn; Seton's Judgments and Orders, 7th ed. (1912), vol. 3, pp. 2220-2225). Equitable lien differs from traditional mortgage in that it does not transfer any title to the property and therefore cannot be enforced by foreclosure. While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties (Davies v. Littlejohn; In re Bond Worth. It can exist over land or personalty or both (Davies v. Thomas; In re Stucley). 159 The nature of a vendor's equitable lien was also discussed by Debelle J in Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 (at 221): It is well established that an unpaid seller of personal estate has a lien for the unpaid purchase money in the same way as an unpaid vendor of real estate has a lien for the unpaid purchase money, and that lien gives rise to an equitable interest in the personalty: Davies v Thomas [1900] 2 Ch 462 and In Re Stucley (1996) 1 Ch 67. The lien is not a mere personal equity but creates a charge upon and an interest in the property sold in the same manner as if that charge had been in writing: Rose v Watson (1864) 10 HLC 672 at 683 (11 ER 1187 at 1192) and Re Stucley (supra) 79 at 83. 160 By the orders of the Court made on 1 May 2020, the plaintiffs (as administrators of Sargon SH and Sargon SPV) were authorised to sell the shares in CCSL and DTS notwithstanding any equitable lien held by Diversa. The same orders preserved the rights of Diversa to claim, on the basis of the asserted equitable lien, such proportion of the Retained Proceeds of the sale that reflected the relative value of the shares in CCSL and DTS. The question for determination is whether an equitable lien arose in the circumstances of the Diversa transaction. 161 The circumstances in which an equitable lien arises were summarised by Gibbs J in Hewett (at 645-646) as follows: Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity 'as part of a scheme of equitable adjustment of mutual rights and obligations'; those words of Isaacs J were used in Davies v Littlejohn (1923) 34 CLR 174 at 185, in relation to the doctrine of equity's lien, but they have a general application. It would be difficult, if not impossible, to state a general principle which would cover the diversity of cases in which an equitable lien has been said to be created. A vendor's lien for unpaid purchase money has been said to be founded on the principle that 'a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration': Mackreth v Symmons (1808) 15 Ves 329 at 340; 33 ER 778 at 782. The lien of a purchaser for the purchase money that he has paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a purchase price will not be allowed to keep the price if he fails to make the conveyance. At all events, the rule has been said to be founded on 'solid and substantial justice': Rose v Watson (1864) 10 HL Cas 672 at 684; 11 ER 1187 at 1192. In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor (cf Combe v Swaythling (Lord) [1947] Ch 625 at 628) - the lien is the security for the money which is justly due. 162 The right to a vendor's equitable lien is not limited to land but extends to personal property including choses in action such as shares: Hewett at 646 (Gibbs CJ), 654 (Wilson and Dawson JJ) and 663 (Deane J); Barker v Cox (1876) 4 Ch D 464; Hannam v Lamney (1926) 43 WN (NSW) 68; and ET-China.com International Holdings v Cheung [2019] NSWSC 1874; 142 ACSR 121 at [486] (Stevenson J), referring to Evans v McLean (No 2) [1987] WAR 110; (1985) 9 ACLR 796 at WAR 115 (Wallace J). 163 A vendor's equitable lien can apply in circumstances where it has been agreed that the purchase price will be paid in instalments: Langen at 691. 164 Once a vendor's equitable lien is created, absent waiver or abandonment, it continues until the full purchase price is paid: Wossidlo v Catt (1934) 52 CLR 301 (Wossidlo) at 307 (Rich J); Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 (Reliance Finance) at 477-478 (Hope JA, with Glass and Mahoney JJA agreeing); Jafari v 23 Developments Pty Ltd [2018] VSC 404 (Jafari) at [463]. If only part of the purchase price is paid, the lien is only extinguished to the extent the purchase price has been paid: Jafari at [463]. 165 Though a vendor's equitable lien arises at the point of the exchange of contracts whenever there is a valid contract of sale of property and the purchase money is not duly paid, such a lien will not arise in circumstances where the intention of the parties, objectively ascertained through the relevant transaction documents, is that no equitable lien should arise in those circumstances: Wossidlo at 307-308; Reliance Finance at 478; Jafari at [461]. A contrary intention may appear where the contract provides for the satisfaction of the purchase price by some other means than payment on completion: Reliance Finance at 478. Taking security that is totally distinct and independent of the lien can also be seen as constituting evidence of an intention that no lien is intended to arise, depending on the facts of the individual case: Mackreth at 785. In Barclays Bank, Millett LJ (with whom Waite and Thorpe LJJ agreed) observed (at 420) that a lien: …is excluded where its retention would be inconsistent with the provisions of the contract for sale or with the true nature of the transactions as disclosed by the documents. It is also excluded where, on completion, the vendor receives all that he bargained for: Capital Finance Co. Ltd. v. Stokes [1969] I Ch. 261 and Congresbury Motors Ltd. v. Anglo-Beige Finance Co. Ltd. [1971] Ch. 81. In each of those cases the vendor took a legal charge to secure payment. and (at 421): …the intention of the parties is to be objectively ascertained from the documents they have executed and that what is required to exclude the lien is that there should be a clear and manifest inference that it was the parties' intention to exclude it. 166 The person denying the existence of the lien bears the onus to disprove it: Jafari at [462]. 167 In my view, a vendor's equitable lien would have arisen under the original Diversa SPA. The nature of the transaction, involving the sale of shares for deferred consideration, supports the existence of a lien. 168 However, completion of the transfer of the shares in CCSL and DTL by Diversa did not occur under the original Diversa SPA, but only occurred upon the parties entering into the Fourth SPA Variation. The Fourth SPA Variation amended the agreement between the parties in four significant ways. 169 First, the balance between the Initial Purchase Price and the Deferred Purchase Price was altered, with the Initial Purchase Price being reduced from $37 million to $12 million and the Deferred Purchase Price being increased from $8 million to $31 million. 170 Second, clause 10.8(b) was introduced which stipulated that: (a) Sargon Capital assumes the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price to Diversa (but no other obligations); (b) following completion, Diversa and OneVue will have no recourse to Sargon SH and Sargon SPV in respect of the obligation to pay the Deferred Purchase Price; and following completion, Diversa's and OneVue's sole recourse in respect of payment of the Deferred Purchase Price will be to Sargon Capital. 171 Third, clause 10.8(d) was introduced which stipulated that, if Sargon Capital failed to pay any part of the Deferred Purchase Price on the due date, it must pay interest on the shortfall at the rate of 12% per annum. 172 Fourth, Diversa and SCAH1 entered into the Diversa GSD by which SCAH1 gave security for the obligation of Sargon Capital to pay the Deferred Purchase Price and any interest payable under the Diversa SPA. 173 The question that arises in these circumstances is whether those contractual provisions constitute a "clear and manifest inference that it was the parties' intention to exclude" an equitable lien (as per Barclays Bank at 421). In my view, they do. 174 The contractual stipulation in clause 10.8(b), that Diversa will have no recourse to Sargon SH and Sargon SPV in respect of the obligation to pay the Deferred Purchase Price, may take one of two meanings. The first (narrower) meaning is to prevent any legal proceeding being brought against Sargon SH and SPV for payment of the Deferred Purchase Price as a debt due. Under that meaning, Diversa would be permitted to bring proceedings for enforcement of an equitable lien by way of order for sale of the shares in CCSL and DTL and payment of the proceeds. The second (broader) meaning is to prevent any legal proceeding being brought against Sargon SH and Sargon SPV which relates to the obligation to pay the Deferred Purchase Price. Under that meaning, an equitable lien would be excluded because the asserted lien is in respect of, or relates to, the obligation to pay the Deferred Purchase Price. As stated by Gibbs J in Hewett, the lien is the security for the money which is due (at 645). 175 The choice of meaning depends, in part, on the width to be given to the phrase "in respect of" in clause 10.8(b). Typically, the phrase "in respect of" conveys a connection or relation between two-subject matters, the width of which depends upon the context in which the phrase is used: State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549 at 553-4 per Stephen J and at 561 per Mason J (with whom Gibbs and Aickin JJ agreed). The contractual context in which clause 10.8(b) was agreed between the parties as part of the Fourth SPA Variation indicates that the clause was intended by the parties to exclude all forms of legal redress against Sargon SH and Sargon SPV in respect of payment of the Deferred Purchase Price. 176 It is significant that, under clause 22 of the original Diversa SPA, Sargon Capital guaranteed the obligation of Sargon SH to pay the Deferred Purchase Price (which at that time was $8 million). The Fourth SPA Variation greatly increased the Deferred Purchase Price to $31 million. The function of clause 10.8(b), introduced at that time, was not merely to make Sargon Capital an obligor in respect of the Deferred Purchase Price. It was already a guarantor of the payment under clause 22. The language of clause 10.8(b), that Sargon Capital assumes the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price to Diversa, indicates that the intention of the parties was to make Sargon Capital the sole obligor in respect of the Deferred Purchase Price in place of Sargon SH and Sargon SPV. The word "assumes" means to take responsibility for. The effect of that aspect of clause 10.8(b) was to render redundant the guarantee in clause 22 in so far as the guarantee related to the payment of the Deferred Purchase Price. As Sargon Capital assumed that obligation from Sargon SH and Sargon SPV, the obligation ceased to be an obligation of Sargon SH and Sargon SPV to be guaranteed. Clause 22 would continue to operate, though, in respect of all other obligations under the Diversa SPA. 177 Having stipulated that Sargon Capital assumes the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price to Diversa, clause 10.8(b) then added the following additional contractual stipulations: that Diversa and OneVue will have no recourse to Sargon SH and Sargon SPV in respect of the obligation to pay the Deferred Purchase Price and that Diversa's and OneVue's sole recourse in respect of payment of the Deferred Purchase Price will be to Sargon Capital. If the parties' contractual intention was merely that Sargon SH and Sargon SPV would not be liable to pay the Deferred Purchase Price, there was probably no need to go beyond the stipulation that Sargon Capital assumes the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price to Diversa. Even if there were the possibility of ambiguity in that stipulation (as to the possible concurrent liability of Sargon SH and Sargon SDPV to pay the Deferred Purchase Price), the parties might have simply stipulated "and Sargon SH and Sargon SPV have no liability to pay the Deferred Purchase Price to Diversa". However, the parties went further and stipulated that Diversa and OneVue will have no recourse to Sargon SH and Sargon SPV in respect of the obligation to pay the Deferred Purchase Price, and the only recourse will be against Sargon Capital. The language chosen by the parties is the broadest possible language to indicate that Diversa and OneVue would have no rights of action against Sargon SH and Sargon SPV in respect of any non-payment of the Deferred Purchase Price. 178 It is part of the context in which clause 10.8(b) is to be construed that, at the time of the Fourth SPA Variation (and immediately prior to completion), security was given to Diversa by SCAH1 in respect of the obligation to pay the Deferred Purchase Price in the form of the Diversa GSA. The security included the shares in various companies owned by SCAH1. The grant of separate security does not, of itself, necessarily deny the existence of a vendor's equitable lien. Further, clause 19.9 of the Diversa GSD stipulated that the deed did not adversely affect any Encumbrance (defined to include a lien) or other right, power or remedy to which Diversa was entitled. In light of that clause, I would not regard the Diversa GSD of itself as indicating an intention to exclude the equitable lien. However, the grant of security by the Diversa GSD is part of the contractual context in which clause 10.8(b) was agreed between the parties. The overall contractual arrangements contemplated that Sargon Capital would assume the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price and SCAH1 would give security over different shares to Diversa. The grant of security over different shares reinforces the view that, by clause 10.8(b), the parties intended that Diversa would have no recourse to Sargon SH and Sargon SPV in respect of any non-payment of the Deferred Purchase Price, including by way of equitable lien over the shares in CCSL and DTL. 179 One further contextual matter raised by Diversa should be addressed. Diversa placed reliance on clause 22.5 of the Diversa SPA. It will be recalled that clause 22 contained a guarantee given by Sargon Capital of the obligations of the "Purchaser" (which, by the Fourth SPA Variation, was amended to "Purchasers", referring to Sargon SH and Sargon SPV). Clause 22.5 provided that Sargon Capital appointed Diversa as its attorney to prove in the insolvency of the "Purchasers" for all money to which Sargon Capital may be entitled from the "Purchasers" up to an amount which does not exceed the amount which may be payable by Sargon Capital under the Diversa SPA. In my view, clause 22.5 does not assist Diversa on the question of the equitable lien for two reasons. First, clause 22.5 afforded Diversa rights of subrogation to claims that Sargon Capital may have against Sargon SH and Sargon SPV as guarantor of their obligations under the Diversa SPA. The clause does not bear upon the question whether Diversa has a vendor's equitable lien over the shares in CCSL and DTL. Second, for the reasons given earlier, once Sargon Capital assumed the obligations of Sargon SH and Sargon SPV to pay the Deferred Purchase Price, the guarantee given by Sargon Capital in clause 22.1 necessarily ceased in respect of that obligation (because it creased to be an obligation of Sargon SH and Sargon SPV). Therefore, clause 22.5 had no operation in respect of the payment of the Deferred Purchase Price. 180 For those reasons, I conclude that Diversa does not have a vendor's equitable lien over the shares of CCSL and DTL (which were sold as part of the Cloverhill Sale).

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H.1 Introduction 181 As noted earlier, the task being undertaken by the Court is a task required by the orders made on 1 May 2020 pursuant to s 442C of the Corporations Act, which is to apply the Retained Proceeds of the Cloverhill Sale for the purpose of meeting claims that any party has as owners of, or security holders in respect of, the property that was sold. The method to be applied is to apportion the sale proceeds ($29.6 million) across the different asset classes in respect of which interested parties claim ownership or security interests by reference to the relative value of each asset class to the sale proceeds. In that way, a proportionate interest in the Retained Proceeds will be calculated for each interested party who has an ownership or security interest in the property that was sold. The properly incurred expenses of the administrators will be deducted rateably across the asset classes, and each interested party who has an ownership or security interest will receive their relevant apportionment of the balance of the sale proceeds. 182 The determination of the relative value of the property sold as part of the Cloverhill Sale is complicated by a number of factors. 183 The first factor is that the Sale Subsidiaries comprised only part of the Sargon Group and the operations of those companies used services and facilities provided by other members of the Sargon Group, particularly Sargon Services and Sargon Capital. The costs associated with the provision of such services and facilities were not fully charged as expenses in the accounts of the Sale Subsidiaries. To determine the historical earnings of the Operating Subsidiaries, it is necessary to allocate certain costs of Sargon Services and Sargon Capital to the Operating Subsidiaries. Two categories of costs are significant: (a) First, Sargon Services incurred staff and administration costs on a centralised basis on behalf of Sargon Group companies. In their valuation, Ernst & Young concluded that the costs that should be allocated to the Sale Subsidiaries totalled $14,764,003 for the calendar year ending 31 December 2019 (CY19) and that those costs should be allocated to the various Sale Subsidiaries on a pro rata basis to revenues (but only for the companies that had a positive EBIT, with no allocation being made to the other companies). The appropriateness of that total cost and the method of allocation to the Sale Subsidiaries was considered by the expert valuers. (b) Second, intellectual property used by the Sargon Group (software, website, trade marks and domain names) were recognised as assets in the balance sheets of Sargon Capital and Sargon Services, but no charge was made to the Sale Subsidiaries for the use of those assets. An appropriate charge for each subsidiary was considered by the expert valuers. 184 The second factor is that the available financial information concerning the Sargon Group, including the Sale Subsidiaries, was largely limited to historical information as at 31 December 2019. The financial information was not updated to the valuation date (the date of sale, being 2 May 2020) and there was no information concerning estimated future earnings. 185 The third factor is that the sale comprised property of different kinds, being shares in the Sale Subsidiaries, intellectual property, plant and equipment and other assets (such as receivables). As discussed below, different types of property require different valuation methodologies. It is necessary to ensure that the application of different valuation methodologies nevertheless generates a fair and reasonable assessment of the relative value of each category of property. 186 The fourth factor is that the Cloverhill Sale was transacted under circumstances that can be described as distressed. As discussed further below, in the period preceding the sale, the Sargon VA Entities faced the real risk that they would be required to cease business by reason of various regulatory licences being withdrawn by APRA and lack of required funding for working capital. It is necessary to consider whether the distressed nature of the Cloverhill Sale may have affected each of the categories of property that was sold differently, thereby affecting the relative value of each category of property. 187 The fifth factor is that each of the expert valuers gave evidence that the information available to them was limited. Not only was there no information concerning estimated future earnings of the Sale Subsidiaries, but they did not have access to employees within the Sargon Group who may have been able to provide additional relevant information concerning the businesses and assets being sold. In their Joint Report, the experts stated: The Experts have discussed and agree that the available information is limited and not of the quality ordinarily expected when performing a valuation engagement. A number of issues are open to interpretation given the absence of information. Consequently, the Experts have had to rely upon their expertise and judgement where appropriate. 188 For the reasons explained below, I have not accepted any of the valuations propounded by the expert valuers in its entirety. I consider that aspects of the methodologies applied by each of the expert valuers to be preferable. That has forced me to take undertake some calculations where the relevant calculation have not been done by any of the experts (because they had adopted a different methodology). Furthermore, in undertaking certain calculations, I have had to make some estimations and approximations, consistently with the approach applied by the Court in connection with the assessment of damages: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 per Mason CJ and Dawson J, 124-126 per Deane J and 152-154 per Gaudron J. 189 Recognising that the valuation of the assets sold under the Business Sale Agreement (BSA assets) and the Sale Subsidiaries involves estimation and judgment, I will ultimately express the values to the nearest thousand dollars. This is consistent with the approach generally adopted by the expert valuers.

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192 Mr McCallum stated that the amounts notionally allocated for the intellectual property of Sargon Capital and GrowthOps were based on an offer that had been made to those entities during the sale process, but which was not accepted by them. 193 Mr McCallum also stated that the amounts allocated to the shares in each of the Sale Subsidiaries were largely based on a valuation of those shares performed by Ernst & Young, with some adjustments to that valuation. It is not necessary to describe the Ernst & Young valuation methodology in any detail, save to note that the valuation used a capitalisation of earnings methodology but with significant weight given to the value based on revenue multiples (rather than EBIT multiples). 194 Mr McCallum said that the plaintiffs determined that it was appropriate for the purchase price to be allocated under the various sale agreements in accordance with the above valuations because the purchaser had no objection to that allocation and the division of the Retained Proceeds was to be determined in these proceedings. Mr McCallum therefore described the allocation under the various sale agreements as "representative only". 195 Ultimately, the plaintiffs informed the Court that they did not seek to make any submissions about the relative values of the shares and assets sold pursuant to the Cloverhill Sale, in recognition of the fact that all parties who had an interest in that issue were before the Court and three of the parties had adduced expert valuation evidence. In particular, the plaintiffs did not put forward the allocation of the purchase price under the sale agreements as valuations that should be adopted by the Court. It should also be noted that each of the expert valuers disagreed with the valuation methodology adopted by Ernst & Young for the purposes of purchase price allocation. 196 In the circumstances, in answering question 4, I have placed no weight on the valuation of the shares and assets that is reflected in the purchase price in each sale agreement. Instead, I have relied primarily on the valuations undertaken by the expert valuers who gave evidence.

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Mr Hall's methodology 198 Mr Hall's approach was to value the shares and other assets at fair market value and then apportion the individual values across the total sale proceeds of $29.6 million on a pro rata basis using the individual fair market values as the apportionment metric. In determining the fair market value, Mr Hall assumed that each of the Sale Subsidiaries was a going concern and the other assets were owned by companies that were going concerns. Mr Hall defined fair market value as the price that would be negotiated in a hypothetical transaction between a knowledgeable and willing but not anxious buyer and a knowledgeable and willing but not anxious seller acting at arm's length within a reasonable time frame. 199 Mr Hall grouped certain of the Sale Subsidiaries together for the purpose of valuing the shares in those companies because, in his view, the particular companies formed part of a single business operation rather than being individual and separable business operations. The companies that he grouped together were: (a) Tidswell and Mammatus; (b) Sargon CT and Sargon CT-NSW; and (c) Diversa and CCSL. 200 Mr Hall concluded that Tidswell and Mammatus should be treated as a combined business for valuation purposes because the principal business activity of Mammatus was to act as promoter for the Max Super and Good Super superannuation funds and one of the principal business activities of Tidswell was to act as trustee for the Max Super superannuation fund, of which the Good Super superannuation fund formed part. Mr Hall considered that Sargon CT and Sargon CT-NSW should be treated as a combined business for valuation purposes because the companies were both wholly owned subsidiaries of Sargon CT Holdings, the principal business activities of both companies were corporate trustee services, and the accounts of Sargon CT-NSW consist of trustee service revenues but no costs other than bank charges. Mr Hall concluded that DTL and CCSL should be treated as a combined business for valuation purposes because the companies were acquired together from Diversa in 2019 and the principal activities of both companies were Registrable Superannuation Entity services. 201 In valuing the Sale Subsidiaries, Mr Hall adopted a capitalised earnings valuation methodology, using EBIT as the valuation metric for his primary valuation methodology and a revenue multiple as a secondary valuation approach. The methodology was as follows: (a) an EBIT multiple of 10 times EBIT for the twelve months ended 31 December 2019 (after allocation of shared services costs and a notional licensing fee for the use of intellectual property) was applied to value all of the businesses in the first instance; (b) if the value arrived at in (a) was less than 1.5 times revenue for the twelve months ended 31 December 2019, and provided that the business had a positive EBIT prior to allocation of shared services costs, then a revenue multiple of 1.5 times revenue for the twelve months ended 31 December 2019 was applied to value that business; and (c) for any business that had a negative EBIT for the twelve months ended 31 December 2019 prior to allocation of shared services costs, a revenue multiple of 1.0 times revenue for the twelve months ended 31 December 2019 was applied to value that business. 202 Mr Hall selected the above multiples on the basis of his analysis of the EBIT and revenue multiples implied by share market prices for what he considered to be comparable listed companies and merger and acquisition transactions involving the acquisition of comparable companies and businesses. 203 As noted earlier, in valuing the Sale Subsidiaries, it was necessary to allocate staff and administration costs incurred by Sargon Services on behalf of various businesses in the Sargon Group. Based on his analysis of the available financial information, Mr Hall concluded that the appropriate annual total for centralised staffing and administration costs that needed to be allocated to the Sale Subsidiaries was $10,136,341 (rather than $14,764,003 as calculated by Ernst & Young). Mr Hall then allocated the costs on two alternative bases and then calculated an average of the resulting EBIT. The two bases were: (a) pro rata based on revenue; and (b) a fixed allocation of 25% to each of REP, Tidswell/Mammatus, Sargon CT and DTL/CCSL). 204 Mr Hall made a further adjustment to EBIT to reflect the notional cost to each business of licensing intellectual property from Sargon Services and/or Sargon Capital (as the case may be). He adopted a notional licence fee of 2.5% of revenue for this purpose (which, as discussed below, he also used to derive a separate value for the intellectual property). 205 Applying the above methodology (and deducting $5,000 from the aggregate valuation of Tidswell/Mammatus to remove the assumed value for the "Good Super" business name, which is separately valued below), Mr Hall derived the following fair market valuations of the Sale Subsidiaries (calculated from Annexure F of his first report): Sale Subsidiary Valuation REP $2,594,759.50 Tidswell $14,228,883.00 Mammatus $1,051,414.00 Sargon CT-NSW $851,232.00 Sargon CT $33,220,027.00 Sargon NZ $0 CCSL $807,014.00 DTL $14,251,036.00 Total $67,004,365.50

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206 In relation to the additional BSA assets, Mr Hall applied different methodologies depending on the asset. With respect to the principal intellectual property assets (software, website and Sargon domain name), Mr Hall applied a valuation methodology which he referred to as the "relief from royalty" or "notional licensing fee" methodology. Mr Hall explained that the concept behind this valuation methodology is that a company that owns the intellectual property that it uses in its business is "relieved" of the need to license that intellectual property from a third party and to pay fees to that third party as consideration for the licence. Mr Hall valued the principal intellectual property assets by estimating the revenue stream that the owner would be able to generate from a notional licensing of this intellectual property to the Sale Subsidiaries and then discounting that notional revenue stream (after allowing for estimated costs and taxes) to a net present value. The principal financial inputs used by Mr Hall in this methodology were: (a) a licensing fee of 2.5% of revenue (per annum) for each Sale Subsidiary; (b) expenses of $100,000 per annum; (c) income tax at a 30% tax rate; and (d) a discount rate of 8% would be applied to the net after tax cash flows over a 20 year period. 207 Applying this methodology, Mr Hall derived a fair market valuation of the principal intellectual property assets of $3,770,508. Mr Hall then allocated that value to individual items of intellectual property pro rata based on their book values (after deducting a nominal $5,000 in respect of each of the other Sargon trade marks and domain names), which resulted in the following valuations: Asset Valuation Sargon cloud software and website $3,131,398.00 Developed IP $543,503.00 Domain name www.sargon.com $85,607.00 Sargon trade marks $5,000.00 Other Sargon domain names $5,000.00 Total $3,770,508.00

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Mr Jaski's methodology 210 In his report, Mr Jaski valued the shares in the Sale Subsidiaries but not the BSA assets. Like Mr Hall, Mr Jaski's approach was to value the shares at market value and then apportion the individual values across the total sale proceeds for the shares on a pro rata basis using the individual market values as the apportionment metric. For those purposes, Mr Jaski defined market value as: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. 211 Mr Jaski used two methodologies to determine the market value of the shares in the Sale Subsidiaries: (a) in respect of companies that were profit-making (Tidswell, Sargon CT and DTL and CCSL), the capitalisation of future maintainable earnings methodology; and (b) in respect of companies that were loss-making (REP, Mammatus and Sargon NZ), the net asset methodology. 212 Mr Jaski explained that the capitalisation of future maintainable earnings methodology requires the valuer to estimate the future maintainable earnings of the business (in this case, also having regard to the shared services costs incurred in Sargon Services), capitalise those earning by an appropriate multiple and adjust the resulting enterprise value for non-operating assets and liabilities. Mr Jaski assessed the future maintainable earnings at an EBIT level (to remove the impact of financing structures and tax structures) and applied an EBIT multiple. 213 Mr Jaski estimated the relevant future maintainable earnings based on the normalised EBIT achieved in calendar year 2019 using two different methodologies to determine the appropriate amount of shared services costs incurred in Sargon Services that should be allocated between the entities: (a) the first method was based on the actual consumption of Sargon Services costs where those could be identified, followed by the allocation of the remaining Sargon Services costs to each of the Sale Subsidiaries in line with each entities' relative level of revenue (excluding DTL and CCSL, which had agreements in place that specified the costs to be charged); and (b) the second method was based on the historically achieved cost structure of the Sale Subsidiaries prior to their acquisition by the Sargon Group (on the basis that each entity was able to operate with those costs structures prior to their acquisition by the Sargon Group and therefore would likely be operated under similar costs structures following their sale). 214 In respect of the first method, Mr Jaski noted that an agreement entered into between Sargon Services and DTL and CCSL provided that Sargon Services would charge the latter companies $92,000 (inclusive of GST) per month for services. Mr Jaski allocated that cost to DTL and CCSL and then allocated the balance of the Sargon Services costs between the other Sale Subsidiaries based on relative revenue. However, Mr Jaski observed that the outcome of that approach was that the other Sale Subsidiaries were allocated costs that were not consistent with their historical cost structures, and therefore not reflective of likely future earnings under new ownership. The application of that method resulted in the understatement of market value attributable to some of the Sale Subsidiaries and, consequently, the relative overstatement of others. For that reason, Mr Jaski prepared the second method of estimating future maintainable earnings, which was based on the cost structures of the Sale Subsidiaries prior to their acquisition by the Sargon Group. 215 In relation to the determination of an appropriate EBIT multiple, Mr Jaski had regard to the earnings multiples paid by Sargon Group when it acquired each of the Sale Subsidiaries. Mr Jaski calculated that those multiples were in the range of 6 to 9, which he considered are consistent with the general range of multiples he would expect for unlisted, small to medium sized entities operating in the financial services sector in Australia. 216 Finally, Mr Jaski expressed the view that Sargon CT had surplus assets of $18,364,322 and Diversa/CCSL had surplus assets of $2,105,000. 217 In relation to the net asset methodology, Mr Jaski explained that the method was usually relevant when valuing a company that, amongst other things, is loss making or not a going concern, and the method can be used as a cross-check for values derived from other methodologies because it will generally provide a floor value for a profitable company. Mr Jaski also explained that a limitation of the net asset methodology is that it does not recognise the value of intangible assets such as intellectual property, customer relationships and goodwill. 218 Based on the above methodologies, Mr Jaski derived the following valuations using each method with his adopted valuation also shown: Sale Subsidiary CFME Value (method 1) CFME Value (method 2) Net Assets Value Adopted Value REP $2,837,884 - $6,478,769 $6,478,769.00 Tidswell $14,521,082 $17,156,291 $9,646,844 $17,156,291.00 Mammatus $1,181,903 - $334,947 $334,947.00 Sargon CT - $50,982,632 $8,601,661 $50,982,631.00 Sargon NZ - - $188,995 $188,995.00 DTL and CCSL $30,552,831 $28,065,148 $9,311,116 $28,065,146.00 Total $103,206,779.00

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222 Mr Samuel concluded that it was not appropriate to allow for depreciation or amortisation of the costs of software as the utility of the software is a consequence of all the programming time required to put it in its current state at 30 April 2020. Mr Samuel concluded that the replacement costs for: (a) the software technology is $7,731,000 in total; (b) the website value would be between $488,000 (the depreciated value) and $1,054,000 (the cost value) (Mr Samuel was unable to say whether the website functionality reflects all the capitalised costs that had been incurred); and (c) the domain names is $250,000, giving a total replacement cost for the intellectual property of between $8,469,000 and $9,035,000. 223 In relation to plant and equipment, Mr Samuel applied a depreciated replacement cost methodology, starting with the depreciation schedule for the plant and equipment which was included as a schedule to the Business Sale Agreement, rolling forward the depreciation to 30 April 2020, and assessing whether any adjustment for inflation was required (to determine an appropriate replacement cost). Mr Samuel derived a value of $214,339. 224 In relation to the shares in the Sale Subsidiaries, Mr Samuel concluded that they should be valued, in aggregate, as the difference between the total sale proceeds ($29.6 million) and the value of the BSA assets. This generated a range of $20,351,000 to $20,917,000. Mr Samuel then allocated that value range to each of the Sale Subsidiaries based on their relative profitability (at the EBIT level). In doing so, Mr Samuel uses the EBIT figures for each Sale Subsidiary calculated by Ernst & Young. As Mr Samuel explained in his report, this methodology assumes that a constant EBIT multiple should be applied to each of the Sale Subsidiaries in determining their relative values. Mr Samuel expressed the view that this is appropriate because he did not have sufficient information to assess the growth prospects of each company on a standalone basis and there appeared to be a degree of interdependency between the various companies. 225 Mr Samuel's valuations using that method are as follows (in thousand dollars, with totals affected by rounding): Company EBIT Low valuation High Valuation REP 283 1,326 1,363 Tidswell 1,420 6,646 6,831 Mammatus nil - - Sargon CT 2,282 10,678 10,975 Sargon NZ nil - - CCSL 77 360 370 DTL 287 1,341 1,378 Total 4,349 20,351 20,917

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H.4 Consideration of the valuation methodologies 226 As outlined in the preceding section, there is a material difference in the valuation methodology applied by the experts. Mr Hall and Mr Jaski separately valued the Sale Subsidiaries and the BSA assets at fair market value and apportioned the individual values across the total sale proceeds of $29.6 million on a pro rata basis. In contrast, Mr Samuel first valued the BSA assets at fair market value and then apportioned the balance of the total sale proceeds between the Sale Subsidiaries based on their relative profitability at the EBIT level adopting Ernst & Young's calculations. 227 In the Joint Expert Report, Mr Samuel gave two principal reasons for adopting his methodology. First, he considered that there was no apparent basis for assuming that the plaintiffs did not realise a market value for the bundle of assets that was sold, being $29.6 million. Second, the appropriate methodology for valuing the intellectual property is a replacement cost methodology and there is no basis for adjusting that value once determined because (a) the acquirer considered the technology assets to be an important (if not the most important) component of the bundle, (b) AASB 136 (Impairment of Assets) requires any impairment to the value of assets to be made, firstly, to goodwill and (c) all the goodwill resided in the Sale Subsidiaries and, accordingly, all adjustments should be made to the value of the shares in the Sale Subsidiaries. In oral evidence, Mr Samuel expressed the view that such an approach was supported by valuation "common sense". Mr Samuel also made clear in oral evidence that the second reason given for his approach applies even if the sale is considered a distressed sale (with the plaintiffs being an anxious seller) and, as a result, the sale proceeds did not meet the definition of fair market value. 228 In the Joint Expert Report, each of Mr Hall and Mr Jaski expressed the view that, in assessing the relative value of assets, it was necessary to use the same standard of value for each asset and the most appropriate standard of value is fair market value as a going concern, independent of the circumstances of the administration and sale. In oral evidence, Mr Hall and Mr Jaski expressed the view that, in determining the relative value of assets that have been sold in a distressed sale and, therefore, at a price that is less than market value, the implicit reduction in value caused by the circumstances of sale should be applied across the assets on a pro rata basis. They disagreed with Mr Samuel's reliance on AASB 136 to reduce the value of goodwill before reducing the value of other assets such as intellectual property. That was for two reasons. First, the relevant assets being valued were shares in the Sale Subsidiaries as going concerns, not the implicit goodwill in their respective businesses. Secondly, AASB 136 addresses the accounting treatment of goodwill that appears on a company's balance sheet and the circumstances in which the value of that balance sheet asset is to be regarded as impaired and adjusted in the accountants accordingly. The accounting standard is not concerned with the relative valuation exercise required in this case. 229 I accept the opinions of Mr Hall and Mr Jaski for the following reasons.

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The Cloverhill Sale was a distressed sale 230 First, the evidence establishes that the Cloverhill Sale was a distressed sale. The chronology of events is as follows: (a) Sargon Capital and various of its subsidiaries entered external administration in late January and early February 2020 by reason of loan defaults. (b) On 10 February 2020, the plaintiffs wrote to entities expressing interest in acquiring the Sargon entities inviting indicative offers by 26 February 2020 and stating that: As the Group has administrators appointed, any sale will be subject to the conditions which are typical for such distressed transactions. These include, but may not be limited to: • Assets being sold on an "as is" "where is" basis • No indemnities being provided by the Administrators • No representations or warranties being provided by the Administrators • Sales consideration to be paid in immediately available funds on completion • The Recipient accepting that the Administrators act as agents of the Group only, with no personal liability (c) On 17 February 2020, the plaintiffs received a "show cause letter" from APRA which stated, among other things: 1. APRA is issuing this show cause letter to Diversa, CCSL and TFSL [Tidswell] (RSE Licensees) together as all of them form part of the Sargon Group and share the ultimate holding company, Sargon Capital Pty Ltd (Sargon Capital). 2. APRA is concerned about the RSE Licensees' ability to properly perform the duties of a trustee in respect of each registrable superannuation entity (RSE). 3. As a result, APRA is considering suspending the RSE Licensees as trustees of each of their respective RSEs listed in Schedule A and appointing KM Trustee Services Pty Ltd (ABN 12 156 404 723) (KM) as acting trustee. This letter provides the RSE Licensees with notice of APRA's preliminary views. 4. If the RSE Licensees wish to respond to this letter, each of them may do so in writing by 3:00 pm on Tuesday, 18 February 2020. Mr McCallum gave evidence that the APRA letter put considerable pressure on the sale process and contributed to the plaintiffs revising the timetable for the sale process. (d) On 18 February 2020, the plaintiffs received an initial offer from the Cloverhill Group. (e) By 24 February 2020, the plaintiffs had taken the decision to deal with the Cloverhill Group exclusively in respect of the sale. 231 Mr McCallum gave evidence that the plaintiffs were concerned that if the sale to the Cloverhill Group did not proceed, the Sale Subsidiaries would breach their Responsible Superannuation Entity licences, Australian Financial Services Licences and credit licences, which would result in APRA suspending those licences and transferring the superannuation fund customers to another trustee. Mr McCallum expressed the view that, if that occurred, Tidswell, DTL and CCSL would be unsaleable and there would be very little likelihood of a return to the creditors of several of the entities in administration. Mr McCallum described the Cloverhill Sale as "an extremely complex distressed transaction". 232 The above evidence satisfies me that the plaintiffs were an anxious seller, the Cloverhill Sale can appropriately be described as a distressed sale and the total sale proceeds cannot be regarded as "fair market value" in those circumstances. The sale proceeds were less than fair market value by reason of the exigencies then facing the companies in administration and the need for the plaintiffs to conclude a speedy sale in order to prevent the loss of all value in those companies. When taken to the above evidence, Mr Samuel appropriately conceded that it showed that the plaintiffs were anxious sellers and that, as a consequence, the total sale proceeds are not a reliable indicator of market value.

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Significance of the intellectual property 234 The first justification given by Mr Samuel is that the acquirer (the Cloverhill Group) considered the technology assets to be an important (if not the most important) component of the bundle of assets that were acquired. In my view, there is an insufficient evidentiary basis for that asserted fact. Even if there were an evidentiary basis for the asserted fact, the fact is stated at such a high level of generality that it can provide no assistance in assessing the relative value of the assets sold. In oral testimony, Mr Samuel conceded that the asserted fact was not significant in his analysis and acknowledged that the acquisition of personnel was likely important to the acquirer. Nevertheless, as Sargon Capital placed considerable emphasis on the asserted fact, I will set out my reasons for not accepting that the asserted fact has been established. 235 In support of the asserted fact, Sargon Capital relied on the following categories of evidence. 236 The first category comprised statements made by Sargon about its technology on its website or in company presentations. Reliance was placed on the following statement that appeared on the Sargon website as at 30 March 2020: Sargon provides financial institutions and entrepreneurs with the technology and infrastructure they need to successfully build and grow investment funds and financial products. Through a powerful combination of financial licences, industry experts and modern technology, we help our clients navigate regulatory complexity, security and compliance, so that they can focus on what matters most: building a better future. 237 The statement is a high level description of Sargon's business. In addition to mentioning technology, the statement also refers to Sargon's financial licences and industry experts. 238 Reliance was also placed on a Sargon presentation titled "Sargon Trustee Cloud Technology Overview". It was common ground that the document was sourced from the data room established by the plaintiffs in the course of selling the Sale Subsidiaries and BSA assets. However, there was no other evidence concerning the provenance or purpose of the document. I accept that it is a business record of the Sargon Group. It appears to be a presentation given to third parties, probably for the purposes of raising debt or equity capital (the document states that it is confidential, must not be distributed outside Australia and New Zealand and the recipients are required to warrant that they are the holders of an Australian financial services licence and are "professional investors" or "sophisticated investors"). The document contains high level statements such as "Technology is one of Sargon's key competitive advantages" and "Technology is driving revenue opportunities, tangible outcomes for our clients and the future of Sargon". In my view, the document provides no assistance in assessing the relative value or importance of the assets sold. 239 Sargon Capital also emphasised the Sale Announcement which appeared on the Sargon website following the Cloverhill Sale, referred to earlier. The Sale Announcement quotes the Cloverhill Group Managing Partner, Teddy Wasserman, stating: "We believe the proprietary next-generation trustee infrastructure that Sargon has developed to be world-class technology. …" and continues with the statement that: "The cloud-based platform developed by Sargon delivers clients greater transparency over funds and reduces costs and complexity, while at the same time providing more scalable and reliable operations". The statements support a conclusion that the Cloverhill Group considered the technology assets to be an important component of the bundle of assets that were acquired, but do not support a conclusion that they were the most important. The Sale Announcement also refers to the fact that the acquisition included the "key operating entities and assets of financial technology and infrastructure company, Sargon, including Sargon's trustee, corporate trust and responsible entity operations, and its proprietary technology infrastructure" (i.e. the entire bundle of assets). For the reasons given earlier, I place little weight on the Sale Announcement. 240 The second category of evidence relied on by Sargon Capital was the transaction negotiations and documents. They submitted that the transaction negotiations and documents showed that the intellectual property was integral to the Cloverhill Sale in a causative sense: but for the intellectual property forming part of the assets sold, the sale would not have gone ahead. In that respect, Sargon Capital placed particular emphasis on the following events preceding the issue of these proceedings: (a) During March 2020, the receivers appointed to Sargon Capital sought confirmation from the plaintiffs that the Cloverhill Sale would not include any assets or property of Sargon Capital and, in particular, any intellectual property. On 29 March 2020, the plaintiffs indicated that the purchaser intended the intellectual property to be included in the sale. (b) On 22 April 2020, following further negotiations, the plaintiffs sent the receivers to Sargon Capital a letter in which they set out the "final terms" upon which Sargon Capital could participate in the sale, which included an offer for Sargon Capital to be paid $4,000,000 for the intellectual property (and GrowthOps to receive a further $800,000). (c) Following further negotiations, on 28 April 2020, the receivers to Sargon Capital indicated that they were not prepared to sell the intellectual property for $4,000,000. (d) On 29 April 2020, the plaintiffs sent another letter reiterating the offer of $4,000,000 for the intellectual property. (e) On 30 April 2020, the plaintiffs made this application for relief under s 442C of the Corporations Act to enable the sale of the intellectual property owned by Sargon Capital. 241 It is certainly the case that the Cloverhill Group required the intellectual property to be sold as part of the Cloverhill Sale. However, it is equally true that the Cloverhill Group required the Sale Subsidiaries to be sold as part of the Cloverhill sale. The sale was for the entire bundle of assets. Completion of the purchase of the intellectual property under the Business Sale Agreement was conditional on completion of the Share Sale Agreements. Mr McCallum gave evidence that the Cloverhill Group would walk away from the transaction unless it was able to acquire all of the assets. The letter of offer dated 4 March 2020 by which the Cloverhill Group offered to acquire the Sargon assets was subject to a large number of conditions concerning the operations of the Sale Subsidiaries, including that: (a) the Sale Subsidiaries continued to operate as a going concern; (b) the regulatory licences held by the Sale Subsidiaries were not suspended, withdrawn or terminated; (c) the employees of Sargon Services accepted employment by the Cloverhill Group; (d) APRA confirmed that the Cloverhill Group was an acceptable ultimate holder of the regulatory licences held by the Sale Subsidiaries; and (e) the Sale Subsidiaries had not suffered a reduction in revenues since 29 January 2020 of more than 10%. 242 Accordingly, the transaction negotiations and documents do not support a conclusion that the intellectual property was more valuable or more important to the acquirer than the Sale Subsidiaries. 243 On the general issue of whether the acquirer (the Cloverhill Group) considered the technology assets to be an important (if not the most important) component of the bundle of assets that were acquired, I place little weight on the offer made by the plaintiffs to the receivers of Sargon Capital to pay $4 million for the intellectual property owned by it as part of the proposed Cloverhill Sale. The evidence shows that the figure of $4 million was not based on a valuation of the intellectual property and was not a figure arrived at by the Cloverhill Group. It was the product of commercial negotiations reflecting the perceived bargaining positions of the plaintiffs and the Sargon Capital receivers respectively. The plaintiffs had no power to compel Sargon Capital to agree to sell the intellectual property absent an application to the Court (which ultimately was made). Mr McCallum gave evidence, which I accept, that he considered the offer of $4 million to be "very generous", but was made in circumstances in which the plaintiffs were concerned that if the Cloverhill Sale was not effected quickly there was a real risk that the Sale Subsidiaries would lose their regulatory licences, rendering them worthless. 244 The third category of evidence relied on by Sargon Capital is the values attributed to the intellectual property in the balance sheets of Sargon Capital and Sargon Services as at 31 December 2019 and in the ROCAP of Mr Kingston dated 21 February 2020, who was then managing director of Sargon Capital. The balance sheet values are referred to earlier and were adopted by Mr Samuel. In the ROCAP, Mr Kingston stated that the "Sargon Trustee Cloud (software)" and Sargon website were valued at $10,000,000 and $237,000 respectively. I place no weight on the value stated in the ROCAP because it is not supported by a reasoned valuation. 245 Taken as a whole, the evidence establishes the relatively uncontroversial facts that the intellectual property owned by Sargon Capital (and Sargon Services) was an important part of the assets that were sold in the Cloverhill Sale, together with the Sale Subsidiaries. The evidence does not establish that the intellectual property was the most important asset. Nor does the evidence provide any basis upon which to value the intellectual property relative to the Sale Subsidiaries. The evidence does not support a valuation methodology, for the purposes of this proceeding, by which a fair market value is applied to the intellectual property while the reduction in value brought about by the distressed circumstances of the Cloverhill Sale is applied to the Sale Subsidiaries.

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Accounting standards and valuation "common sense" 246 The second justification given by Mr Samuel for his methodology is that both accounting standards and valuation "common sense" require any impairment to the value of assets to be made to goodwill before other identifiable assets and all of the goodwill resided in the Sale Subsidiaries. In his second report, Mr Samuel referred to paragraph 104 of AASB 136 (Impairment of assets) which states as follows: Impairment loss for a cash-generating unit An impairment loss shall be recognised for a cash-generating unit (the smallest group of cash-generating units to which goodwill or a corporate asset has been allocated) if, and only if, the recoverable amount of the unit (group of units) is less than the carrying amount of the unit (group of units). The impairment loss shall be allocated to reduce the carrying amount of the assets of the unit (group of units) in the following order: (a) first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units); and (b) then, to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units). These reductions in carrying amounts shall be treated as impairment losses on individual assets and recognised in accordance with paragraph 60. 247 Both Mr Hall and Mr Jaski disagreed with Mr Samuel's methodology and reasoning. In oral testimony, they expressed the view that Mr Samuel's reliance on AASB 136 was misplaced for two reasons. First, the task being undertaken was a valuation exercise, not an accounting exercise (involving the preparation of accounts for an entity as a going concern). Second, the assets being valued were all identifiable: shares in the Sale Subsidiaries and intellectual property. The task did not involve the valuation of goodwill and, in valuing the shares in the Sale Subsidiaries, it was unnecessary and inappropriate to attribute part of their value to goodwill. 248 I accept the opinions expressed by Mr Hall and Mr Jaski. 249 The task being undertaken by the Court is to determine the relative value of the different categories of property sold as part of the Cloverhill Sale. For the reasons expressed above, the Cloverhill Sale was a distressed sale and I accept that the total sale proceeds were less than the fair market value (within the formal definition of that expression) for the property sold. In my view, the reduction in value of the property sold brought about by the distressed sale should be apportioned pro rata across the categories of property based on their fair market values. That approach best carries into effect the requirement of s 442C(3) of the Corporations Act to protect adequately the interests of the owners of, or security holders in, the property that was sold. 250 AASB 136 does not address the task being undertaken by the Court and the accounting principles that underlie AASB 136 do not require the Court to adopt a different approach. The objective of AASB 136 (as stated in paragraph 1 of the standard) is to prescribe the procedures that an entity applies to ensure that its assets are carried (in its accounts) at no more than their recoverable amount (the amount to be recovered through use or sale of the asset). If the carrying amount exceeds the recoverable amount, the asset is described as impaired and the standard requires the entity to recognise an impairment loss. Paragraph 104 addresses the manner in which an impairment is to be recognised within a cash-generating unit (the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets). The task before the Court does not involve an assessment of either carrying amounts or recoverable amounts for particular assets within a cash-generating unit. It involves an assessment of the relative values of the assets that were sold, comprising shares in the Sale Subsidiaries and the various BSA assets. 251 The expert valuers also made reference to AASB 3 (Business combinations) which addresses the accounting principles to be applied in recognising assets and liabilities as a result of a "business combination" (a transaction or other event in which an acquirer obtains control of one or more businesses). Paragraph 10 states that, as of the acquisition date, the acquirer shall recognise, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquisition. Identifiable assets are defined as follows: An asset is identifiable if it either: (a) is separable, ie capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or (b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. 252 Mr Hall and Mr Jaski expressed the opinion that the shares in the Sale Subsidiaries acquired by the Cloverhill Group were identifiable assets and that AASB 3 and accounting principles require the shares to be valued. I accept their opinions that neither the accounting standards nor valuation "common sense" require the shares in the Sale Subsidiaries to be discounted in preference to the BSA assets to reflect the effect of the distressed sale.

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Intellectual property 257 I have concluded earlier that the intellectual property assets are owned by Sargon Capital and Sargon Services. The various software assets include the "Developed IP" which was created by GrowthOps and which GrowthOps claims to own. However, I have concluded earlier that the Developed IP is deemed to be owned by Sargon Capital by virtue of s 267 of the PPSA. 258 As a preliminary point, Sargon Capital submitted that the offer made by the plaintiffs to the receivers of Sargon Capital to pay $4 million for the intellectual property owned by it as part of the proposed Cloverhill Sale establishes a lower boundary for the assessment of the relative value of the intellectual property. In response, Westpac submitted that binding authority establishes that evidence of an offer for property that is not accepted is not evidence of the value of the property, relying upon McDonald v Federal Commissioner of Land Tax (1915) 20 CLR 231 (McDonald) at 239-240 and Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 (Cordelia) at [121]-[128]. In McDonald, the High Court observed (at 239-240): When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. … But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted. 259 Sargon Capital submitted that McDonald does not lay down an absolute rule and that "a lattice of decisions subsequent to both McDonald and Cordelia have identified a number of circumstances in which offer evidence may properly have weight placed upon it, including as providing evidence of value, setting a lower limit for the value of property, and operating as a check upon the methodology of experts", referring to Goold v Commonwealth (1993) 42 FCR 51 at 57-60; Beale v Trinkler [2008] NSWSC 347 at [31]-[37]; Baiyai Pty Ltd v Guy [2009] NSWCA 65 at [22] (Handley JA, Beazley and Giles JJA agreeing); Auxil Pty Ltd v Terranova [2009] WASCA 163; 260 ALR 164 at [45]-[50] (Buss JA; Miller JA agreeing on this point); Crawley v Short [2009] NSWCA 410; 262 ALR 654 at [218] (Young JA; Allsop P and Macfarlan JA agreeing on this point); Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109; 210 LGERA 1 at [22]-[34] (Biscoe J); Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 233 at [123]-[128]; MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167 at [84]-[100]. 260 I accept Sargon Capital's submission that neither McDonald nor Cordelia establishes an absolute rule in relation to the admissibility of evidence of an offer to sell or acquire property in proof of the value of that property. However, the authorities make clear that the probative value of evidence of an offer will depend on the issue to be determined and the circumstances in which the offer is made. For example, if the issue to be determined is the fair market value of property (being the price that would be paid by a willing but not anxious buyer to a willing but not anxious seller), evidence of an offer made by an anxious seller would have little, if any, relevance. 261 For that reason, I attach no significance to the $4 million offer made by the plaintiffs to Sargon Capital prior to the sale in assessing either the fair market value or the relative value of the intellectual property. The offer was not made in the context of negotiations between a willing but not anxious buyer and seller, but was made in circumstances of a distressed seller. The plaintiffs were seeking to preserve value in the Sale Subsidiaries and needed to secure the sale of the intellectual property which was used by the Sale Subsidiaries in their businesses in order to effect the sale of those companies. The sale needed to be completed quickly because the Sale Subsidiaries were at risk of losing their regulatory licences and, as a consequence, losing their businesses. The offer was not a "fair market offer" but a distressed offer. For the same reason, I do not consider that the offer reflects the value of the intellectual property owned by Sargon Capital relative to the value of the other assets that were sold in any objective sense; rather, it reflects an amount that the plaintiffs considered might be sufficient to persuade Sargon Capital to participate in the sale given their respective bargaining positions at that time. 262 For those reasons, I will determine the fair market value of the intellectual property assets on the basis of the evidence of the expert valuers. 263 Only Mr Hall and Mr Samuel valued the intellectual property assets in their primary reports, although Mr Jaski expressed opinions about their respective approaches in the Joint Report. 264 There is a material difference in the valuation methodologies applied by Mr Hall and Mr Samuel in respect of the intellectual property assets. Mr Hall used a "relief from royalty" or "notional licensing fee" methodology, whereas Mr Samuel used a depreciated replacement cost methodology (albeit principally based on historical cost as recorded in the balance sheets of Sargon Capital and Sargon Services). 265 In the Joint Report, Mr Jaski expressed the opinion that both the depreciated replacement cost method (adopted by Mr Samuel) and the relief from royalty valuation method (adopted by Mr Hall) are generally accepted valuation methodologies to value intellectual property, but both methodologies have limitations. Mr Jaski considered that income and market-based valuation methodologies are technically preferred approaches and that a replacement cost methodology is primarily used in circumstances where it is not possible to use an income or market-based valuation methodology. Mr Jaski considered that, in this matter, both methodologies had limitations and he considered that a mid-point between Mr Hall's valuation and Mr Samuel's valuation would be a reasonable estimate of fair market value. 266 I accept the general point made by Mr Jaski that an income or market-based valuation methodology is to be preferred over a replacement cost methodology when valuing intellectual property. As Mr Jaski observed, unlike the income approach, the replacement cost methodology does not have regard to the future earnings that could be generated by the intellectual property, either internally or externally; and, unlike the market approach, the replacement cost methodology does not have regard to the value at which similar assets might transact in the market. However, in the circumstances of this case, I consider the methodology adopted by Mr Samuel to be more robust. While each of the experts acknowledged the limited information available to value the intellectual property assets, I consider that the income methodology adopted by Mr Hall is less reliable due to a lack of information. 267 Applying Mr Hall's methodology, the intellectual property is valued by estimating the revenue stream that the owner of the intellectual property would be able to generate from a notional licensing of the intellectual property to the Sale Subsidiaries and then discounting that notional revenue stream (after allowing for estimated costs and taxes) over a 20 year period to a net present value. The estimated revenue stream is calculated as the royalty rate multiplied by the aggregate revenue of the Sale Subsidiaries. It follows that the key assumptions used in Mr Hall's methodology are the assumed royalty rate and the assumed revenue earned by the Sale Subsidiaries over the cash flow period used in the calculation, being 20 years. 268 In relation to the royalty rate, Mr Hall assumed that a royalty of 2.5% of revenue was appropriate. Mr Hall explained the selection of that royalty rate in his first report as follows: 161. My selection of a notional licensing fee of 2.5% of revenue is based on my experience in the preparation of numerous intangible asset and intellectual property valuations over the course of my professional career. Data regarding licensing and royalty rates is largely anecdotal and is often based on agreements reached between non arm's length parties. Outliers in the form of licensing and royalty rates that appear unusually high are sometimes cited. That said, my experience is that genuine commercial arm's length licensing and royalty rates fall into two broad categories: i) licensing rates of 1-4% of revenue for business names and business systems such as Bunnings Hardware or Subway Restaurants; and ii) royalty rates of 2.5-7.5% of revenue for consumer product brand names such as "Speedo" or "Gucci" (with "luxury" brands such as "Gucci" that are presumed to be able to command premium prices for the attached products justifying royalty rates at the top of the range and lesser known or more "ordinary" brands obtaining royalty rates at the bottom of the range - but not if they are so ordinary as to be unworthy of a royalty payment at all). 162. My selected notional licensing rate of 2.5% is at the low to medium end of the rates set out above. I regard this as appropriate considering the relatively new and unproven stature of the Sargon Trustee Cloud software (and the other intellectual property items involved) compared to other well-known business names and business systems and the incomplete nature of the development of the Sargon Trustee Cloud software. 163. I also regard it as important to consider a "reality check" or cross check on the rates adopted in this type of intangible asset valuation relative to the level of profitability that the licensees generate. Based on the revenue and EBIT figures that I have used in my valuations of the various companies using this intellectual property, the notional licensing fee would have totalled $648,621 for the twelve months ended 31 December 2019 and this would have been equivalent to approximately 10% of the EBIT (pre-license fee) for those companies. I regard this as a reasonable outcome that does not overly impinge on the notional licensees' ability to generate sufficient profits relative to, and after payment of, the notional licence fees. 269 Mr Samuel disagreed with Mr Hall's methodology and the choice of royalty rate. Mr Samuel considered that the intellectual property owned by the Sargon Group was not a product that was commercialised by way of sale to third parties, such as Microsoft software products or a brand or franchise such as Gucci or Subway. For that reason, royalty rates typically charged in those contexts are not an appropriate analogue. If a royalty methodology were to be used, Mr Samuel considered that the appropriate approach would be to consider how profits would usually be allocated between licensor and licensee. Mr Samuel stated that, in his experience, a widely used starting point for allocating profits is to attribute a 25% share of profits to the licensor. Based on Mr Hall's calculations, a 25% share of profits represents a royalty rate of approximately 6.5%. The resulting value of the intellectual property would be approximately $9.5 million (exceeding Mr Samuel's valuation using a replacement cost methodology). 270 While supporting Mr Hall's methodology, Mr Jaski observed that Mr Hall's selected royalty rate of 2.5% was based on his experience and anecdotal evidence and is not supported by any specific market evidence. In Mr Jaski's experience, it is difficult to obtain comparable royalty rates for software and intellectual property. However, Mr Jaski expressed the view that royalty rates or licence fees for the use of intellectual property (e.g. comprising use of brand, proprietary software and systems etc) often fall in the range of 1-5% of revenue. Mr Jaski also expressed the view that Mr Hall should have considered the cost to create the intellectual property, which, based on the costs recorded on the balance sheets of Sargon Capital and Sargon Services, is significantly higher than Mr Hall's valuation. Ultimately, Mr Jaski concluded that: …given the limitations of both methodologies and the lack of detailed information concerning historic spending (in respect of the depreciated replacement cost methodology) and the lack of market information to specifically support a 2.5% royalty rate (in respect of the relief from royalty methodology), I consider the mid-point between Mr Samuel's valuation (ie $8.752m) and Mr Hall's valuation (ie $3.781m) to be a reasonable estimate of the Market Value of the Sargon IP (ie $6.266m). 271 I do not accept that there is a sufficient evidentiary basis to support an assumed royalty rate of 2.5% of revenue in this case. As acknowledged by each of the valuers, information concerning royalty rates for intellectual property licences is anecdotal and the range of potential royalty rates is wide. Anecdotal evidence is, by its nature, unreliable. That is particularly the case where the evidence concerns commercial matters which are likely to be specialised and idiosyncratic. Intellectual property rights have very different characteristics and value. For that reason, licences of patents, copyright and trade marks are not in any sense analogous or comparable. While Mr Hall gave anecdotal evidence concerning royalty rates charged for business names and business systems such as Bunnings Hardware or Subway Restaurants, and brand names such as Speedo and Gucci, it is not possible to assess that evidence, and apply it in this case, without a closer examination of the bundle of rights that was licensed in each such transaction. 272 In relation to the assumed revenue of the Sale Subsidiaries, Mr Hall adopted the aggregate revenue for CY19. As Mr Hall's methodology used a discounted cash flow (DCF) model over 20 years, the effect was to assume constant revenue throughout the 20 year period (being the CY19 aggregate revenue). To some extent, that approach is understandable because no forward looking estimates were available to the valuers. However, as Mr Samuel stated in his first report, there are practical difficulties in adopting a DCF methodology where reliable cash flow projections are not available in respect of an asset or business. None of the valuers used a DCF methodology to value the Sale Subsidiaries, but generally used a capitalisation of earnings methodology. Despite that (and the absence of forecast revenues for the Sale Subsidiaries), Mr Hall used a DCF methodology for the intellectual property. That inconsistency was not the subject of comment by the other valuers. Nevertheless, I consider it a further difficulty in the application of Mr Hall's methodology for valuing the intellectual property. 273 Having regard to the foregoing, I reject Mr Hall's approach to the valuation of the intellectual property. I consider that Mr Samuel's methodology for valuing the intellectual property is more appropriate and should be adopted. 274 As set out earlier, Mr Samuel gave two valuations for the intellectual property. The difference between the two valuations was the value to be attributed to the Sargon website (an asset of Sargon Services), and specifically whether the value should be based on the historic cost, or amortised value, shown in the Sargon Services balance sheet as at 31 December 2019. In respect of the Sargon software, Mr Samuel expressed the opinion that it is not appropriate to allow for depreciation or amortisation of the costs of software as the utility of the software is a consequence of all the programming time required to put it in its current state at 30 April 2020. However, in respect of the website, Mr Samuel stated that he was unable to say whether the website functionality reflected all the capitalised costs that had been incurred and therefore concluded that the website value would be between $488,000 (the depreciated value) and $1.054 million (the cost value). In my view, it is appropriate to adopt the higher of the two figures proposed by Mr Samuel. I consider that his reasoning with respect to the Sargon software should be applied to the Sargon website in the absence of evidence showing that the website functionality does not reflect all the capitalised costs. 275 Mr Samuel also valued the trade marks and domain names at the combined book values of those assets in the balance sheets of Sargon Capital and Sargon Services, being $250,000. Earlier in these reasons, I concluded that the domain name www.sargon.com and the business name "Good Super" were owned by Sargon Services and the other trade marks and domain names sold pursuant to the Business Sale Agreement (listed in Schedule 8 to that agreement) were owned by Sargon Capital, based on the registrations of those names. The experts generally considered that only the domain name www.sargon.com had material value. Despite that, the asset account 1-2320 (Domain Name) in the Sargon Services balance sheet as at 31 December 2019 had a balance of $12,000, whereas the asset account 1-2320 (Domain Name) in the balance sheet of Sargon Capital as at 31 December 2019 had a balance of approximately $238,000. Those balances are difficult to reconcile with the opinions of the experts that only the domain name www.sargon.com had material value and my finding that that domain name was owned by Sargon Services. There is little in the evidence that sheds light on the basis of those book values, particularly the value recorded in the Sargon Capital balance sheet. A document recording monthly balances in Sargon Capital's asset account 1-2320 from July 2018 showed that, until October 2018, the balance was approximately $26,000. The balance increased to approximately $238,000 in November 2018. The single increase in value suggests that the increase may have resulted from an acquisition. In that regard, the evidence showed that, in November 2018, the Sargon Group acquired the AET Corporate Trust which became Sargon CT (the acquisition is referred to in the plaintiffs' Section 439A Report to Creditors dated 28 February 2020 and Mr Jaski's expert report). It is equally possible that the increase in value related to other transactions or the capitalisation of other expenses. 276 Ultimately, on the available evidence, the only conclusions that I am able to draw are that Sargon Services recorded the business and domain names owned by it on its balance sheet at $12,000, and Sargon Capital recorded the trade marks and domain names owned by it on its balance sheet at $238,000. I consider it reasonable to infer that those assets had value to the businesses that used them, and the best evidence of their value is the book values.

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GrowthOps' claim 281 As already noted, I have concluded earlier that the Developed IP is deemed to be owned by Sargon Capital by virtue of s 267 of the PPSA and, accordingly, GrowthOps has no entitlement to receive any part of the Retained Proceeds that represents the value of the Sargon software sold under the Business Sale Agreement. If I had reached the conclusion that GrowthOps owned the Developed IP, I would have found that the fair market value of the Developed IP was the GST exclusive value of unpaid invoices issued by GrowthOps to Sargon Capital for work done pursuant to the Technology MSA, being $980,955.35, and I would have reduced the fair market value of the Sargon software owned by Sargon Capital by a corresponding amount. The reasons for that conclusion can be briefly stated as follows. 282 It is not disputed that GrowthOps supplied services to Sargon Capital under the Technology MSA between July and December 2019, and under the Marketing MSA between September 2019 and January 2020 and has issued many invoices for those services which remain unpaid. For the reasons expressed earlier, I have found that the services supplied under the Marketing MSA did not relate to the development of the Sargon software and did not create assets (whether intellectual property or otherwise) that were recognised as having value in the Cloverhill Sale. For that reason, I would not allocate any part of the Retained Proceeds that relates to the BSA assets to anything created pursuant to the Marketing MSA. 283 Each of the expert valuers supported the apportionment of the fair market value of the Sargon software between Sargon Capital and GrowthOps based on the costs incurred by each of them in developing the software. Accordingly, if I had found that GrowthOps was the owner of the Developed IP, I would have attributed a fair market value to the Developed IP of $980,955.35 and I would have reduced the fair market value of the Sargon software owned by Sargon Capital (being the book value as recorded in its balance sheet) by the same amount.

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Calculation of expenses and the resulting EBIT 287 As noted earlier, the Sale Subsidiaries used services and facilities provided by other members of the Sargon Group, particularly Sargon Services and Sargon Capital, but the costs associated with the provision of such services and facilities were not fully charged as expenses in the accounts of the Sale Subsidiaries. The two principal categories of such expenses were (a) the staff and administration costs incurred by Sargon Services on a centralised basis on behalf of Sargon Group companies and (b) the costs of the intellectual property used by the Sargon Group (software, website, trade marks and domain names), which costs were capitalised on the balance sheets of Sargon Capital and Sargon Services. It was necessary for the valuers to determine the earnings (EBIT) of the Sale Subsidiaries having regard to those shared costs. 288 As noted earlier, Mr Jaski used two different methodologies to determine the earnings of the Sale Subsidiaries to be capitalised for the purposes of his valuation. While the first method was based on an allocation of the shared services costs incurred by Sargon Services, the second method was based on the historically achieved cost structure of the Sale Subsidiaries prior to their acquisition by the Sargon Group. I do not consider that the second method is reasonable in the circumstances of this case. The method substitutes the costs that were actually incurred in CY19 with an historical costs figure from a time before the relevant company was acquired by the Sargon Group. Mr Jaski acknowledged in oral testimony that this method assumed that there had been no change in the structure of the businesses and the state of the industry in which they were operating since their acquisition by Sargon Group, but Mr Jaski had not undertaken any analysis to determine whether that assumption was correct. 289 I therefore consider that the more reasonable approach, adopted by Mr Hall and by Mr Jaski in his first method, is to allocate the shared services costs incurred by Sargon Services between the Sale Subsidiaries. This too presents difficulties due to the absence of reliable information as to the use of the shared services by each of the Sale Subsidiaries. 290 As a preliminary point, Mr Hall examined the costs incurred by Sargon Services and formed the view that the costs that should be allocated to the Sale Subsidiaries was $10,136,341 and not $14,764,003 as assessed by Ernst & Young. Mr Hall explained the reason for the exclusion of certain costs as follows: (a) a reduction of $3,467 for an interest expense that should not be included in an EBIT calculation; (b) a reduction of $813,727 was made to adjust for abnormally high expenses in November and December 2019 that appeared to be due, at least in large part, to non-recurring redundancy costs; (c) a reduction of $1,573,878 to reclassify a portion of the staffing costs to Sargon CT (that, in Mr Hall's view, should have been allocated to Sargon CT as a direct expense rather than as part of a centralised cost allocation; and (d) a reduction of $2,236,590 to account for shared expense amounts that had already been allocated from Sargon Services to particular individual entities through intercompany accounting entries. 291 Neither Mr Samuel nor Mr Jaski took issue with items (a) or (b). In relation to items (c) and (d), Mr Samuel stated that he was not persuaded of the errors identified by Mr Hall while Mr Jaski stated that Mr Hall's adjustments were one method to allocate the shared services costs. In both written and oral testimony, Mr Hall provided a detailed explanation of the adjustments by reference to the underlying accounting records that were available. I am satisfied that Mr Hall's adjustments have a reasonable basis and I accept them for the purposes of this proceeding. 292 Recognising the difficulties in allocating the shared services costs between the Sale Subsidiaries, Mr Hall adopted two methods to the allocation. The two methods were (i) pro rata based on revenue and (ii) a fixed allocation of 25% to each of REP, Tidswell/Mammatus, Sargon CT and DTL/CCSL. Mr Hall reasoned that allocating costs pro rata based on revenue assumes that those costs are variable based on revenue, whereas allocating costs as a fixed allocation assumes that those costs are fixed. Mr Hall concluded as follows: In the absence of an objective, detailed assessment of the proportion of time that individual staff members devoted to each business and an objective, detailed assessment of the administrative and overhead costs other than staffing that were expended specifically on behalf of each business, I have no reason to regard one of these methods or the other as superior or to be preferred to the exclusion of the other and I regard both cost allocation methods as appropriate to consider for valuation purposes. … The practical effect of my approach, in terms of the choice of cost allocation methods, is that the combined percentage of costs that is allocated to each business is neither pro rata to revenue nor "4x25" but is instead: i) 15% for REP; ii) 28% for Tidswell/Mammatus; iii) 31% for Sargon CT/Sargon CT-NSW; and iv) 26% for [DTL]/CCSL. I regard these implied cost allocations to be reasonable and I have adopted them in the absence of an objective, detailed assessment of the specific fixed and variable cost categories that make up the shared services costs. 293 Having calculated EBIT for the Sale Subsidiaries on the basis of the two cost allocation methods stated above, it might have been expected that Mr Hall would then calculate an average of the resulting EBIT. Adopting such an approach would have been consistent with Mr Hall's statement, quoted above, that the practical effect of his approach is to derive a "combined percentage of costs that is allocated". However, Mr Hall did not do that. Instead, he calculated the value of the Sale Subsidiaries using the alternative EBIT figures, and then calculated the average of the resulting values. There is a material difference in the two approaches. The difference is caused by the fact that Mr Hall did not calculate the value of the Sale Subsidiaries simply by applying a multiple to the EBIT. If he had, the value derived from capitalising an average of the EBIT figures would have been arithmetically the same as the value derived from averaging the capitalised EBIT figures. Rather, Mr Hall applied a four step capitalisation approach: (a) first, he capitalised each EBIT figure using a multiple of 10; (b) second, if the value in (a) (using each EBIT figure) was less than 1.5 times revenue, he applied the latter value; (c) third, if the value in (a) (using each EBIT figure) was negative (i.e. there was negative EBIT), he applied a value of 1 times revenue; and (d) fourth, Mr Hall calculated an average of the two valuations arrived at from each EBIT figure. 294 Both Mr Samuel and Mr Jaski considered that Mr Hall's second method of allocation for the shared services costs (fixed allocation) is arbitrary. In response, Mr Hall argued that both the revenue allocation method and the fixed allocation method have an element that is arbitrary because it is not known to what extent each Sale Subsidiary used the shared services (and thereby incurred the underlying costs) and to what extent the shared services costs are fixed or variable. While I accept that, in one sense, both the revenue allocation method and the fixed allocation method have an arbitrary element, I prefer the views of Mr Samuel and Mr Jaski that the revenue allocation method has a more reasonable basis in the circumstances of this case, where costs are assumed to vary with revenue. 295 Mr Samuel made the further criticism that Mr Hall's valuation methodology, using two EBIT figures, exacerbates the arbitrariness of his approach by reason of the "rules" that he applied to determine value (being a mixture of EBIT and revenue multiples). As explained above, Mr Hall did not calculate an average of the resulting EBIT figures from his two cost allocation methods to achieve the result, using Mr Hall's words, of a combined percentage of costs that is allocated. Rather, he calculated two different EBIT figures to which his valuation rules (including the use of revenue multiples) were then applied. As discussed further below, I accept the view of Mr Samuel and Mr Jaski that revenue multiples are not a reliable basis on which to determine value for the Sale Subsidiaries and that, if an entity has a negative EBIT, it is preferable to use a net asset methodology for valuation. 296 Accordingly, I accept Mr Hall's approach to the calculation of the total shared services costs and the allocation of those costs on a revenue basis, but I do not accept the allocation of those costs on a fixed basis. 297 I also consider that Mr Hall's approach using a revenue allocation is preferable to Mr Jaski's alternative approach, being his first method of allocation. That is for two reasons. First, Mr Jaski's calculations assume that the shared services costs to be allocated for CY19 were $14,764,003, whereas I have accepted Mr Hall's opinion that the figure should be $10,136,341. Second, I consider that the adjustments to the revenue allocation made by Mr Jaski are less likely to produce a reasonable allocation of the shared costs. 298 Mr Jaski's first method of allocation was to estimate the actual consumption of Sargon Services costs by the Sale Subsidiaries where those could be identified, followed by the allocation of the remaining Sargon Services costs pro rata based on revenue other than in respect of DTL and CCSL (which were only allocated a fixed component). Mr Jaski explained his approach as follows: I have reviewed certain information from the Administrators, which shows that a number of staff within Sargon Services appear to have a role dedicated to a specific entity (eg REPL, TFSL, Sargon CT and DTL), while other staff have a more general role belonging to more general shared services (refer Appendix C8) I have also sighted an agreement between Sargon Services, DTL and CCSL which outlines the actual contracted amount of the Sargon Services Costs that are required to be paid as set out in Schedule 2 Fees and Expense Recovery: For the provision of the services under this Agreement, SS will charge the Trustees $92,000 (including GST) per month, or such further or other amount for any particular period of time as the Trustees and SS may (each acting in their sole and absolute discretion) agree in writing. This information is very helpful to determine an appropriate allocation of the Sargon Services Costs for DTL and CCSL as it appears to represent an arm's length agreement between the parties. Although the document is dated 12 days after the Valuation Date of 6 February 2020, I cannot see any reason why it should be ignored, given the material impact on the valuation outcome. 299 In estimating the actual consumption of Sargon Services costs by the Sale Subsidiaries, Mr Jaski relied on work undertaken by the plaintiffs and Ernst & Young in February 2020, in connection with seeking further funding for Sargon Services (in order to continue to provide services to the entities in administration). While that work involved consultation with senior management of the Sale Subsidiaries in relation to the employment costs that could be allocated to the Sale Subsidiaries, Mr McCallum's evidence (on which Mr Jaski's estimate was based) did not go so far as to suggest that the work done provided a reliable basis on which to identify the actual consumption of costs by the Sale Subsidiaries. In relation to DTL and CCSL, Mr Jaski relied on a services agreement entered into between those companies and Sargon Services on 18 February 2020 for the supply of services (including governance, human resources, finance information technology, legal and product) from 19 January 2020 at a charge of $1,104,000 per annum. I consider that it is not reasonable to rely on that agreement to determine the shared services cost incurred by DTL and CCSL in CY19 for the reason that the agreement relates to the next calendar year (CY20). 300 Mr Hall makes one further adjustment to his calculation of EBIT, which is to allocate a charge for the use of the intellectual property assets owned by Sargon Capital and Sargon Services. Consistently with his valuation of the intellectual property, Mr Hall considered that a charge of 2.5% of revenue was appropriate. Each of Mr Samuel and Mr Jaski agreed that, if the Sale Subsidiaries were to be valued on the basis of a capitalisation of earnings, it was appropriate to charge as an expense an amount in respect of the use of the intellectual property owned by Sargon Capital and Sargon Services. 301 Mr Hall's notional licensing fee of 2.5% of revenue results in a valuation of the intellectual property assets of $3,770,508, which I have concluded under-values those assets. I have accepted the book values of the intellectual property assets which total $9,033,213. Mr Samuel gave evidence that a licensing fee of 6.25% of revenue results in a valuation of the intellectual property assets of $9,426,270 (using a DCF valuation methodology), which exceeds the valuation I have accepted by a modest amount. Having regard to those figures, I consider that it is reasonable to allocate a charge for the use of the intellectual property assets owned by Sargon Capital and Sargon Services to the Sale Subsidiaries calculated as 6% of revenue. 302 Accordingly, the calculation of CY19 EBIT using: (a) revenue and operating expenses from the financial statements of each entity for CY19 (taken from paragraph 25 of Mr Hall's first report); (b) Mr Hall's revenue approach to the allocation of shared service costs (taken from paragraph 29 of Mr Hall's first report); and (c) an intellectual property licence fee of 6% of revenue, is shown in the following table (in thousand dollars): Table 3: EBIT Estimate REP Tidswell/ Mammatus Sargon CT/ CT NSW DTL/ CCSL Sargon NZ Revenue 1,390 8,430 9,357 6,768 310 Operating expenses 502 3,893 2,621 2,504 3,321 Shared costs allocation 543 3,293 3,656 2,644 0 IP licence fee 83 506 561 406 19 EBIT 262 738 2,519 1,214 (3,030)

[87]

I. CONCLUSIONS AND ORDERS 321 The matter to be determined in this proceeding is the distribution of the balance of the Retained Proceeds, after deduction of the amounts payable to the plaintiffs and other persons in accordance with previous orders of the Court, to the interested parties who have established that they held relevant ownership or security interests in respect of the property that was sold pursuant to the Cloverhill Sale. 322 The conclusions I have reached are as follows: (a) The claim made by the plaintiffs in respect of items 11 and 12 of the plaintiffs' amended notice of claim is dismissed. (b) The claim made by Westpac is upheld to the extent determined in these reasons, namely that it is entitled to a proportionate share of the balance of the Retained Proceeds reflecting the relative value of the assets of Sargon Services sold pursuant to the Business Sale Agreement and the shares in REP, Tidswell, Mammatus, Sargon CT and Sargon CT NSW, up to the amounts owing to Westpac under each relevant facility. I have determined that the relative value of that property is 65.5%. (c) The claim made by Sargon Capital and Taiping is upheld to the extent determined in these reasons, namely that Sargon Capital is entitled to a proportionate share of the balance of the Retained Proceeds reflecting the relative value of the assets of Sargon Capital sold pursuant to the Business Sale Agreement. I have determined that the relative value of that property is 13.1%. (d) The claims made by GrowthOps and Diversa and OneVue in the proceeding are dismissed. 323 For completeness, I note that I have determined that the relative value of DTL and CCSL is 21.4% and the relative value of Sargon NZ is nil. 324 Following from those conclusions, it will be necessary for the Court to approve the distribution of the Retained Proceeds to the persons and in the amounts that reflect the conclusions reached. As the amounts payable to the plaintiffs must be determined first, the parties have leave to seek final orders from the Court once that has occurred, including any order consequential upon these reasons. 325 Each of the parties asked the Court to reserve the question of costs until after this judgment. I will therefore make orders for the filing of evidence and submissions on the issue of costs. However, I will make two initial observations. First, the majority of time in the proceeding concerned the determination of the relative value of the property sold pursuant to the Cloverhill Sale, including the consideration of expert evidence. On that issue, the parties had mixed success. Barring other considerations, that would suggest that each party should bear their own costs on that issue. Second, a much smaller part of the proceeding was taken up on the determination of ownership and security interests over the property. It may be accepted that, on those issues, GrowthOps and Diversa failed. Any party seeking payment of their costs should keep those observations in mind. The approach I intend to take on the issue of costs is to make a lump sum award pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth). Accordingly, any party seeking payment of their costs should adduce sufficient evidence to enable an order in a lump sum to be made. I certify that the preceding three hundred and twenty-five (325) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.