Squirrel Limited v Cadmon Advisory Pty Ltd

A. INTRODUCTION 1 There are two interlocutory applications before the Court. The first is an application by the respondent (Cadmon) to be released from an undertaking it gave to the Court on 15 April 2019. The second is an application brought by the applicant (Squirrel), against the contingency that the Court releases Cadmon from its undertaking, for an interlocutory injunction to the same effect as the undertaking given by Cadmon. I heard both applications together. The background is as follows. 2 On 11 April 2019, Squirrel made an urgent ex parte application to the Court seeking orders to restrain Cadmon from enforcing powers granted to Cadmon under a document titled Deed of Variation entered into by the parties on 21 January 2019. Justice Beach granted the injunction sought by Squirrel for a period of 4 days until 15 April 2019 to enable an originating application and supporting affidavit to be served on Cadmon. His Honour listed the matter for further hearing on an inter partes basis on 15 April 2019. 3 As discussed in more detail below, the Deed of Variation varied an earlier Deed of Settlement entered into by the parties on 19 October 2018. By the Deed of Settlement, the parties agreed terms to settle a commercial dispute that had arisen between them. A brief synopsis of the dispute and its settlement is as follows: (a) Squirrel is a public unlisted company that has developed and markets cloud-based self-managed superannuation fund (SMSF) administration software and services through its wholly owned subsidiary, Squirrel Superannuation Services Pty Ltd (Squirrel Superannuation). The software allows individuals to establish and manage their SMSF virtually by consolidating the services of an accountant, lawyer, financial advisor and auditor into one platform. Squirrel Superannuation administers approximately $240 million worth of SMSF members' funds. Squirrel Superannuation holds an Australian Financial Services Licence (AFSL), an Australian Credit Licence and is a Registered Tax Agent. (b) Cadmon provides corporate advisory services and capital to companies that are either listed or preparing to list on the Australian Securities Exchange (ASX). Cadmon also holds an AFSL. (c) On 9 April 2018, Squirrel executed a mandate letter appointing Cadmon to act as the sole lead manager of a private capital raising by way of the issue of convertible notes in two tranches totalling $4 million (referred to by the parties as the pre-IPO capital raising) which would be followed by an initial public offering (IPO) at a later date (I will refer to this mandate as the pre-IPO mandate). (d) By 3 May 2018, Cadmon had raised the first tranche of the pre-IPO capital raising in an amount of $2 million through the issue by Squirrel of convertible notes to clients of Cadmon. (e) On 11 May 2018, Squirrel executed a further mandate letter appointing Cadmon to act as the sole lead manager of the proposed IPO to raise $10 million through an offer of ordinary shares to the public and the listing of the shares on the ASX by the end of 2018 (I will refer to this mandate as the IPO mandate). (f) By 28 June 2018, Cadmon had raised the second tranche of the pre-IPO capital raising in an amount of $2 million through the issue by Squirrel of convertible notes to clients of Cadmon. (g) In early August 2018, a dispute arose between the parties relating to the pre-IPO mandate and the IPO mandate (collectively, the Cadmon mandates) and the planned IPO. (h) On 19 October 2018, Squirrel and Cadmon entered into the Deed of Settlement in settlement of the dispute. Pursuant to that Deed, Squirrel agreed to make offers to the holders of the convertible notes to redeem the notes by paying $1.05 per note (being 105% of the face value of each note and an aggregate amount of $4.2 million). (i) In accordance with the Deed of Settlement, Squirrel made the redemption offers to the convertible noteholders, all of which were accepted. Squirrel thereby became obligated to redeem the convertible notes by 1 January 2019. (j) It is not in dispute that Squirrel defaulted on its obligation to redeem the convertible notes by 1 January 2019. Following the default, the parties negotiated the Deed of Variation which was entered into on 21 January 2019. Pursuant to the Deed of Variation, the due date for payment to the convertible noteholders was extended to 31 March 2019. In consideration for that extension, Squirrel granted various forms of security in favour of Cadmon which were to be held by Cadmon on trust for the noteholders. Under the Deed of Variation, Cadmon has the right (amongst other rights) to appoint a receiver over the assets of Squirrel in the event of default. (k) It is not in dispute that Squirrel defaulted on its obligation to redeem the convertible notes by 31 March 2019. 4 On 12 April 2019, following the ex parte hearing on 11 April 2019, Squirrel filed an originating application seeking interlocutory and final relief restraining Cadmon from enforcing the rights and powers granted to it under the Deed of Variation, including in particular the right to appoint a receiver. Squirrel also filed an affidavit of its Director and Chief Executive Officer, Damien Stewart Linn, affirmed 11 April 2019. Those documents were served on Cadmon. 5 When the matter returned to court on 15 April 2019, there was no contested hearing and orders were made by Beach J by consent. Mutual undertakings were given by Squirrel and Cadmon to the Court until the hearing and determination of the final relief sought by Squirrel in the proceeding. Squirrel undertook to carry on its business in the ordinary and usual course and not in any way to dispose of, deal with, encumber or diminish the value of the whole or any part of its assets (including by increasing or incurring any liabilities), other than in the ordinary and proper course of its business or with the prior written consent of Cadmon. For its part, Cadmon undertook that it would not by itself, its servants or agents seek to enforce any power granted to it in the Deed of Variation. As a result of these mutual undertakings, Beach J dismissed Squirrel's application for interlocutory relief and made orders timetabling the proceeding for a final hearing which contemplated that: (a) Squirrel would file and serve any evidence and an outline of submissions relating to final relief by 25 April 2019; (b) Cadmon would file and serve any evidence and an outline of submissions relating to final relief by 8 May 2019; (c) Squirrel would file and serve any reply evidence and any reply outline of submissions relating to final relief by 15 May 2019; and (d) the matter was listed for a case management hearing on 22 May 2019. 6 On 29 April 2019, Squirrel filed a second lengthy affidavit of Mr Linn (which had been affirmed on 26 April 2019) and submissions pursuant to the orders made by Beach J on 15 April 2019 (albeit that the affidavit and submissions were filed late). 7 Cadmon then sought an urgent case management conference, which I listed on 2 May 2019. On 1 May 2019, and for the purposes of the case management conference, Cadmon filed an affidavit of Teresa Jane Ward and an outline of submissions. Those documents disclosed an informal application by Cadmon to be released from its undertaking given to the Court on 15 April 2019. The basis of the application was that there had been a change in circumstances since the undertaking had been given sufficient to warrant the discharge of the undertaking. The primary contention was that, when the undertaking had been given, Cadmon had acted on the understanding, caused by Squirrel's conduct, that Squirrel's claim was narrowly framed and could be determined by late May 2019; however, the submissions filed by Squirrel on 29 April 2019 showed that the claims proposed to be advanced by Squirrel in the proceeding were both broad and unclear and that there was no prospect of the claim being determined in a short timeframe. 8 It was not possible to determine Cadmon's application to be released from its undertaking on 2 May 2019, as Squirrel had not had sufficient notice of the application. Accordingly, I proposed a timetable for the hearing and disposition of the application. If Cadmon's application was granted, it was apparent that Squirrel might then wish to renew its application for an interlocutory injunction (which had been dismissed on 15 April 2019 by reason of the mutual undertakings that had been given). I determined that the most efficient course was to hear Cadmon's application to be released from its undertaking, and any consequential application by Squirrel for an interlocutory injunction in place of that undertaking, at the same time. The latter application was, of course, contingent on the outcome of the former. I made orders timetabling the filing of interlocutory applications by Cadmon and Squirrel, the filing of a statement of claim by Squirrel to enable its claims to be understood with more precision and the filing of evidence and submissions by the parties. 9 I heard the applications on 3, 5 and 6 June 2019. The parties relied on affidavit evidence which exhibited a large number of documents and the parties also tendered a small number of additional documents. Squirrel read 4 affidavits of Mr Linn affirmed 11 April 2019, 26 April 2019, 2 June 2019 and 5 June 2019. With respect to the last affidavit, only paragraphs 1 to 4 and 5 were read. Squirrel also read an affidavit of Squirrel's lawyer, Damin William Murdock of MurdockCheng Legal Practice (MCLP), affirmed 3 June 2019. Cadmon read 3 affidavits of its lawyer, Teresa Jane Ward of Arnold Bloch Leibler (ABL) affirmed 1 May 2019, 24 May 2019 and 5 June 2019. With respect to the last affidavit, only paragraphs 1 to 6, 11, 12, 16 to 18, 32, 35 and 36 were read. None of the deponents were cross-examined. There were no objections to the affidavit evidence, but both parties submitted that the affidavit evidence contained a large amount of opinion which should be given little weight. Those submissions are correct. The affidavits contained considerable opinion and assertion. They were also somewhat piecemeal, no doubt suffering from being prepared in haste, which made the task of establishing a chronology of relevant events more difficult. I have placed more weight on the documentary record than the unsupported assertions in the affidavits. 10 For the reasons that follow, I release both parties from the undertakings given to the Court on 15 April 2019 and I dismiss Squirrel's application for an interlocutory injunction.

B. CADMON'S APPLICATION TO BE RELEASED FROM ITS UNDERTAKING 11 By interlocutory application filed on 3 May 2019 (in accordance with the orders I made on 2 May 2019), Cadmon seeks an order that it be released from the undertaking recorded in the orders of Beach J made on 15 April 2019. 12 There is no doubt that the Court has power to discharge the undertakings given by the parties as part of the interlocutory orders made on 15 April 2019. As the High Court observed in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 178 (Adam P Brown Male Fashions): Just as an interlocutory injunction continues "until further order", so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust… Of course, the changed circumstances must be established by evidence… 13 As observed by Middleton J in H Lundbeck A/S v Commissioner of Patents [2019] FCA 535 at [14], the High Court in Adam P Brown Male Fashions was not setting out an exhaustive set of circumstances that must exist before a court may exercise its power to release a person from an undertaking. However, his Honour observed that normally there must be a sufficient basis to find material changed circumstances established by evidence and the overriding consideration will be whether the continuation of the undertaking would be unjust. 14 Cadmon relied on three changed circumstances: (a) First, the claims proposed to be made by Squirrel in the proceeding are much broader than those initially foreshadowed to the Court on 11 April 2019. As a result, the premise on which Cadmon gave the undertaking, that the issues in dispute could be determined expeditiously, is no longer correct. (b) Second, a factor that favoured the grant of interlocutory relief as at 11 April 2019, that Squirrel was party to a transaction that would enable it to raise sufficient funds to discharge its obligations under the Deed of Variation within a short period, no longer prevailed. (c) Third, an application had recently been made to this Court to wind up Squirrel for failing to pay a statutory demand.

B.1 Change in scope of Squirrel's claims 15 At the ex parte hearing on 11 April 2019, Squirrel relied on written and oral submissions. The legal basis for Squirrel's claims were not stated with clarity. The written submissions referred to two alternative claims: the first being that the Deed of Variation is void; the second, stated in the alternative, being that the appointment of a receiver by Cadmon would not be in good faith. The claim that the Deed of Variation is void was not explained in the written submissions. The lack of good faith argument was developed to some extent. In oral submissions, the potential claims were not articulated with any clarity but ranged from lack of good faith through to potential claims of unconscionability and illegality on the part of Cadmon. 16 Following the ex parte hearing on 11 April 2019, the lawyers for Squirrel, MCLP, served the orders made by the Court and the first Linn affidavit on Cadmon. The next day, on 12 April 2019, Squirrel filed its originating application which was also served on Cadmon. On 14 April 2019, MCLP sent draft consent orders to the lawyers for Cadmon, ABL. The draft orders contained mutual undertakings by the parties, largely in the form that were ultimately given to the Court, and a timetable for the hearing of Squirrel's claims in the proceeding on a final basis that contemplated a trial at the end of May 2019 on an estimate of 2-3 days. 17 By a responding letter dated 14 April 2019, ABL proposed variations to the proposed orders that accelerated the timetable to trial and stated that Cadmon would agree to give the proposed undertaking provided that the proceeding was heard and determined in an expeditious fashion (which, from Cadmon's alternative orders, contemplated a final hearing in mid-May 2019 on an estimate of 1-2 days). 18 The Court made orders by consent on 15 April 2019 which timetabled the preparation of the case for final hearing through to 15 May 2019 and listed the matter for a further case management hearing on 22 May 2019. 19 The first of the orders made on 15 April 2019 required Squirrel to file and serve any further evidence and an outline of submissions relating to final relief by 25 April 2019. The further evidence and submissions were not filed until 29 April 2019. The submissions stated that Squirrel was applying to set aside the Deed of Settlement and the Deed of Variation and, in the alternative, it was seeking a declaration that it had not breached the Deed of Variation because the offers it had made to redeem the convertible notes were not enforceable. The submissions stated numerous bases for that relief including: (a) that Cadmon had no authority to enter into the Deed of Settlement; (d) that Cadmon had misled the noteholders in connection with redemption offers that were made to them by Squirrel pursuant to the Deed of Settlement; (e) that Cadmon had misled Squirrel in connection with the entry into the Deed of Settlement; (f) that there was no consideration flowing from the noteholders to Squirrel in respect of the redemption of the convertible notes; (g) that Cadmon had no authority to enter into the Deed of Variation and Squirrel was misled as to Cadmon's authority; (h) that by negotiating and entering into the Deed of Variation with Squirrel, Cadmon took advantage of Squirrel's disadvantage, thereby engaging in unconscionable conduct; and (i) by enforcing the Deed of Variation, Cadmon would be acting in conflict of interest. 20 As noted earlier, on 2 May 2019 I ordered Squirrel to file a statement of claim by 24 May 2019 so that its claims could be understood with greater precision. Squirrel did so, but not until 30 May 2019. An amended statement of claim, correcting typographical errors, was filed on 7 June 2019. The allegations made in the statement of claim differ considerably to those contained in Squirrel's submissions filed on 29 April 2019. In the statement of claim, Squirrel made 4 primary claims (which are considered in more detail in connection with Squirrel's application for an interlocutory injunction): (a) The first claim is that, in negotiating and entering into the Deed of Settlement, Cadmon took advantage of Squirrel's special disadvantage and engaged in unconscionable conduct rendering the Deed of Settlement void. (b) The second claim is that, in communicating with noteholders about Squirrel's redemption offer, Cadmon failed to advise noteholders of various matters and thereby breached an implied term of the Deed of Settlement, or alternatively Cadmon engaged in misleading and deceptive conduct, which breaches caused Squirrel loss and damage (being the total amount it promised to pay to noteholders). (c) The third claim is that, in negotiating and entering into the Deed of Variation, Cadmon took advantage of Squirrel's special disadvantage and engaged in unconscionable conduct rendering the Deed of Variation void. (d) The fourth claim is that any exercise of the power to appoint a receiver under the Deed of Variation would be capricious and not in good faith because the inevitable result of an appointment would be that Squirrel Superannuation would forfeit its AFSL, its business would become worthless and noteholders would not receive any funds, entitling Squirrel to an order restraining the appointment of a receiver. Squirrel also alleges that Cadmon does not have authority to appoint a receiver under the Deed of Variation, with the result that Squirrel is entitled to an order restraining the appointment. 21 Cadmon contended that there has been a change in circumstances since it gave the undertaking on 15 April 2019 because of the expansion of Squirrel's case, which raises numerous new legal and factual issues. Cadmon argued that it gave the undertaking on the basis that the proceeding would be heard and determined in or about May 2019 or as soon thereafter as could be accommodated by the Court. However, it is now apparent that the trial is likely to take significantly longer than two days and may require a number of additional witnesses and will require the determination of numerous legal and factual issues. 22 It is clear that the claims raised by Squirrel in this proceeding cannot be determined by the Court in the timeframe originally contemplated by the parties. In my view, a final hearing on the issues raised by the statement of claim will require several months of preparation. I have some doubt as to whether the timetable originally contemplated by the parties for the trial of the proceeding was in any sense realistic. Nevertheless, the evidence shows that the parties agreed to the mutual undertakings on the basis that the proceeding could be determined on a final basis in a relatively short period of time. The premise for the giving of those undertakings, which was a mutual premise, has been shown to be incorrect. I consider it to be a changed circumstance. I will return to the question whether it would be unjust to keep Cadmon to its undertaking below.

B.2 The ISL Heads of Agreement 23 In its written and oral submissions to the Court on the ex parte application on 11 April 2019, Squirrel referred to and relied upon a Heads of Agreement entered into between Squirrel and Integer Securities Limited (ISL) on 4 April 2019. Squirrel informed the Court that the agreement would enable Squirrel to pay all monies due to Cadmon pursuant to the Deed of Variation, including interest, by 15 June 2019. Squirrel also informed the Court that it was entitled to enforce the agreement as against ISL. Squirrel relied on those asserted facts on the question of the balance of convenience. 24 A copy of the Heads of Agreement was exhibited to the first affidavit of Mr Linn. The Heads of Agreement was an agreement by which ISL agreed to purchase 100% of the shares in Squirrel for a purchase price that, ostensibly, would enable Squirrel to repay the amounts owing to noteholders pursuant to the Deed of Variation. The mechanism by which that would occur was not clearly stated in the Heads of Agreement; in that respect, I observe that the Agreement provided for an acquisition of shares in Squirrel which would not, in the ordinary course, put Squirrel into funds to be able to repay noteholders. Regardless of that difficulty, completion of the acquisition was conditional on a number of conditions precedent including that Cadmon and the noteholders agreed to vary the repayment date of the notes to 15 June 2019 and to stay the enforcement of any rights that they might have pursuant to the Deed of Variation and associated security. The Heads of Agreement provided that if those conditions were not satisfied or waived by 14 April 2019 (or such later date as may be agreed), the Heads of Agreement would be at an end. 25 Cadmon and the noteholders did not agree to vary the repayment date of the notes to 15 June 2019 or to stay the enforcement of the Deed of Variation and associated security. In his evidence given on the ex parte application, Mr Linn stated that he had received confirmation from ISL that they would waive the condition precedent concerning Cadmon so long as a court order was made restraining Cadmon and the noteholders from exercising their rights pursuant to Deed of Variation and associated security. 26 From 15 April 2019, ABL sent numerous requests to MCLP seeking updated information concerning the ISL transaction. Squirrel remained silent about the status of the ISL transaction until Mr Linn filed a third affidavit on 2 June 2019 prior to the interlocutory hearing. At the interlocutory hearing on 3 June 2019, Counsel for Squirrel informed the Court that the ISL transaction was not going to proceed in its previous form, if at all. Counsel for Squirrel also conceded that that was a change of circumstances since the hearing of the original interlocutory application by Beach J. In my view, the concession was rightly made. At the original ex parte hearing, significant reliance was placed upon the existence of the ISL transaction as providing a reason for the Court to restrain the appointment of a receiver. That circumstance no longer prevails. Indeed, it seems likely that that circumstance has not prevailed for a considerable period of time, but no disclosure about that was made by Squirrel until the filing of Mr Linn's affidavit on 2 June 2019. In my view, the failure of the ISL transaction provides a further basis for the Court to exercise its power to release Cadmon from its undertaking.

B.3 The winding up application 27 On 17 May 2019, DCF Asset Management Pty Ltd (DCF) filed an application in this Court under s 459P of the Corporations Act 2001 (Cth) (Corporations Act) to wind up Squirrel for failing to comply with a statutory demand. The statutory demand was dated 16 April 2019 and was for two amounts of $275,000, totalling $550,000 in aggregate. The debts claimed to be owing were transaction fees allegedly agreed to be paid by Squirrel to DCF pursuant to two mandate agreements entered into between Squirrel and DCF on 29 June 2018 and 2 August 2018 respectively. 28 It appears from the evidence that the statutory demand for payment of the transaction fees was served on Squirrel on either 16 or 17 April 2019. Under s 459G of the Corporations Act, a company may apply to the Court to set aside the demand within 21 days after the demand is served. Although Squirrel contends that there is a genuine dispute with respect to DCF's claim, Squirrel did not make an application under s 459G to set aside the demand within the prescribed period, which has resulted in DCF applying to wind up Squirrel. 29 Squirrel did not inform Cadmon of the receipt of the statutory demand; nor did it inform Cadmon of the winding up application. In her affidavit of 24 May 2019, Ms Ward gave evidence that ABL first became aware of the winding up application by conducting a search of the Commonwealth Courts portal. In his affidavit dated 2 June 2019, Mr Linn gives ambiguous evidence about his knowledge of the winding up application. He refers to the "discovery of a statutory demand issued by DCF Asset Management Pty Ltd which was missed whilst I was in Melbourne", but provides no evidence as to the date on which Squirrel received and became aware of the statutory demand or the winding up application to which it relates, nor any explanation as to why their existence was not disclosed to Cadmon. 30 The statutory demand and the winding up application both post-date the ex parte hearing on 11 April 2019 and the giving of the undertaking on 15 April 2019. In my view, the winding up application is a material change in circumstances affecting the position of Cadmon and the noteholders whom it represents as creditors of Squirrel. Mr Murdock gave evidence of his confidence that the winding up application would be resolved and dismissed. Mr Murdock referred to without prejudice negotiations occurring with DCF. If they were unsuccessful, Mr Murdock said that Squirrel would pay DCF the amount it claims under protest and then commence a separate proceeding to recover that amount from DCF. Mr Murdock gave evidence that Squirrel had secured a $550,000 facility from Fifo Capital for that purpose. 31 In my view, Mr Murdock's evidence does not provide any justification for Squirrel failing to inform Cadmon of the winding up application and does not alter the fact that the winding up application is a material change in circumstances affecting the position of Cadmon. The evidence shows that Fifo Capital (being the trading name of Antra Group Pty Ltd) is a secured creditor of Squirrel. Accordingly, Squirrel's proposal to borrow funds from Fifo Capital in order to pay the amount claimed by DCF will have the effect of increasing its liability to a prior secured creditor, which disadvantages the position of Cadmon and the noteholders.

B.4 Is the continuation of the Cadmon undertaking unjust? 32 As noted earlier, the overriding consideration is whether there has been a material change in circumstances since the Cadmon undertaking was given that renders the continuation of the undertaking unjust. In my view, the continuation would be unjust for the following reasons. 33 First, the effect of the undertaking is highly prejudicial to the commercial position of Cadmon and the noteholders it represents. They have a claim for payment of approximately $4.2 million plus interest and hold security for that claim, but cannot act on that security while the undertaking is in place. It is commercially understandable that Cadmon agreed to give an undertaking not to enforce its security on the assumption that Squirrel's claims could be determined expeditiously. That agreement avoided the need for a costly and time consuming interlocutory hearing and enabled the parties to prepare for a final hearing which each party assumed could occur within a matter of weeks. It is unfortunate, but the assumption on which the parties acted has been shown to be unrealistic. It is clear that the claims now made by Squirrel cannot be determined on a final basis within the period of time originally contemplated by the parties. As noted earlier, the assumption on which the parties acted may always have been unrealistic. Nevertheless, there is no reason to doubt the bona fides with which Cadmon gave the undertaking in an effort to resolve the proceeding on a final basis as expeditiously as possible. In my view, given the changed scope of Squirrel's claims and the likely timeframe to a final hearing, it would be unjust to hold Cadmon to its undertaking provided that Squirrel's interests can be appropriately protected by allowing it to make its case for an interlocutory injunction. 34 Second, the financial circumstances of Squirrel have changed since the undertaking was given. It is now clear that the ISL transaction will not proceed and there is no present likelihood that Squirrel will be able to raise the monies claimed to be due by Cadmon from ISL. Further, the winding up application that has been brought by DCF causes prejudice to Cadmon's position, acting for the noteholders, as creditors of Squirrel. 35 Third, Squirrel has not identified any prejudice that it would suffer by reason of the undertaking being discharged and being required to make out its case for an interlocutory injunction. There was no evidence that Squirrel, in reliance on the undertaking, had taken actions that would cause it prejudice if the undertaking were to be discharged. The giving of the undertaking on 15 April 2019 avoided the time and cost of an interlocutory hearing at that point in time. Accordingly, the release of the undertaking and the hearing of Squirrel's application for an interlocutory injunction will not cause any wasted costs. 36 For those reasons, the interests of justice are best served by releasing both parties from their undertakings and hearing Squirrel's application for an interlocutory injunction.

C. SQUIRREL'S APPLICATION FOR AN INTERLOCUTORY INJUNCTION 37 As I will relieve Cadmon of its undertaking, it is necessary to determine Squirrel's application dated 6 May 2019 for an interlocutory order restraining Cadmon, until the hearing and determination of the proceeding, from seeking to enforce any power granted to it in the Deed of Settlement and the Deed of Variation. 38 The test for an interlocutory injunction was stated by the High Court in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 per Gleeson CJ and Crennan J at [19] and Gummow and Hayne JJ at [65]-[72]. There are two principal questions. The first is whether the plaintiff has made out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that at the trial of the action the plaintiff will be entitled to relief. The second is whether the inconvenience or injury which the plaintiff would be likely to suffer were an injunction refused outweighs or is outweighed by the injury which the defendant would suffer were an injunction granted. The Court explained that the phrase "prima facie case" does not mean that the plaintiff must show that it is more probable than not that at trial it would succeed. It is enough that the plaintiff shows a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. The requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.

C.1.1 Overview of statement of claim 39 Squirrel's case is stated in an amended statement of claim. As summarised earlier, there are 4 primary claims. The claims relate to different events at different points in time which occurred sequentially. 40 The first claim concerns the entry into the Deed of Settlement on or about 19 October 2018. Squirrel alleges that Cadmon's demand, reflected in the Deed of Settlement, that Squirrel make a redemption offer to all noteholders was unconscionable in breach of s 21 of the Australian Consumer Law (ACL), ss 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the unwritten law. Squirrel seeks a declaration that the relevant provisions of the Deed of Settlement are void. 41 The second claim concerns the actions taken pursuant to the Deed of Settlement. The Deed of Settlement required Squirrel to make redemption offers to the noteholders. Squirrel alleges that the Deed of Settlement contained an implied term that, when communicating with noteholders about the redemption offer, Cadmon would advise noteholders of various matters relating to the dispute between Squirrel and Cadmon. Squirrel alleges that Cadmon failed to do so in breach of the implied term. Squirrel further alleges that, had Cadmon advised noteholders of those matters, the noteholders would not have accepted the redemption offer and Squirrel would not be obligated to pay them the redemption amount. Squirrel alleges that, as a consequence, Cadmon's breach of the implied term has caused Squirrel to suffer loss and damage, being the redemption amount payable to the noteholders. Squirrel made an alternative claim that Cadmon's failure to advise the noteholders of the various matters constituted misleading and deceptive conduct in breach of s 18 of the ACL, ss 12DA and 12DB of the ASIC Act and the unwritten law. Squirrel made the same claim for damages as a consequence of the alleged breaches. 42 The third claim concerns the entry into the Deed of Variation. Squirrel alleges that Cadmon took unconscionable advantage of Squirrel's disadvantage in demanding that Squirrel enter into the Deed of Variation, thereby contravening s 21 of the ACL, ss 12CA and 12CB of the ASIC Act and the unwritten law. Squirrel seeks a declaration that the Deed of Variation is void by reason of Cadmon's breaches. 43 The fourth claim concerns the future exercise by Cadmon of the power to appoint a receiver to Squirrel following Squirrel's default under the Deed of Variation. Squirrel alleges that there is an implied term of the Deed of Variation that such power must be exercised in good faith and not arbitrarily or capriciously. Squirrel alleges that if a receiver is appointed to it, it will forfeit its AFSL, it will lose all of its customers, its business will be worthless and the noteholders will not receive any funds. In those circumstances, Squirrel alleges that the exercise of a power by Cadmon to appoint a receiver is capricious and not in good faith. I interpolate that Squirrel's allegation must be understood as referring to Squirrel's wholly owned subsidiary, Squirrel Superannuation, forfeiting its AFSL and losing its customers, as the evidence shows that that company holds the AFSL and conducts the operating business. I will proceed on the basis that the statement of claim will be amended in due course to correct that error. Squirrel also alleges that Cadmon does not have the authority or approval from all of the noteholders to exercise the power to appoint a receiver. Squirrel seeks an order restraining Cadmon from appointing a receiver. 44 The claims made by Squirrel in the amended statement of claim fall to be considered in light of the evidence adduced at the interlocutory hearing. As each claim concerns sequential events, it is convenient to consider the evidence relating to each claim in turn.

C.1.2 First claim: the Deed of Settlement is unconscionable 45 The first claim made by Squirrel concerns the entry into the Deed of Settlement on 19 October 2018. The relevant events commence in about February 2018. The evidence adduced at the interlocutory hearing establishes the following facts. 46 As stated earlier, Squirrel is a public unlisted company that has developed and markets cloud-based SMSF administration software and services. At all relevant times, Squirrel's directors have been Damien Stewart Linn, Stuart Iain Adamson and Steven Anthony Fornasaro. Its issued share capital comprises 169,479,002 ordinary shares with paid up capital of approximately $5.8 million. The evidence concerning the financial position of Squirrel at the interlocutory hearing was far from complete. The audited financial statements for Squirrel Superannuation for the financial year (FY) ended 30 June 2018 disclose a loss of approximately $115,000 and net assets of approximately $710,000. An investor presentation prepared for Squirrel in about March 2018 shows losses of approximately $185,000 in FY2015, $1.9 million in FY2016 and $2.6 million in FY2017, with accumulated losses in the period July to January 2018 of approximately $1.4 million. I infer that those figures are presented on a consolidated basis. 47 Also as stated earlier, Cadmon provides corporate advisory services and capital to companies that are either listed or preparing to list on the ASX. At all relevant times, the Managing Director of Cadmon was Cameron Low. The Legal Director was Lily Zhang. 48 In or about February 2018, Squirrel engaged Bletchley Park Capital (Bletchley) to assist it with raising capital through an issue of shares in Squirrel. The relevant contact at Bletchley was George Gabriel. Squirrel worked with Bletchley to prepare an investor presentation for that purpose and a data room was established containing information about Squirrel for the benefit of potential investors. A number of drafts of the investor presentation were exchanged between Squirrel and Bletchley, the final version of which was included in the data room. Although Mr Linn's affidavits were far from clear in many respects, it appears that the version of the investor presentation that was included in the Squirrel data room was titled "Pre-IPO Capital Raising Squirrel SMSF - Working capital balance for expected revenue growth" (Squirrel investor presentation). 49 The Squirrel investor presentation contained information concerning Squirrel's existing SMSF business and its desire to raise capital and ultimately conduct an IPO. The presentation stated that Squirrel wished to raise $4 million by way of a pre-IPO capital raising, to be followed by an IPO capital raising targeted for the third quarter of the 2018 calendar year. From the pre-IPO capital raising, $2 million would be expended on customer acquisition marketing costs, approximately $900,000 would be used as general working capital, approximately $850,000 would retire existing debt and the balance would be used to cover the capital raising costs. The presentation also disclosed Squirrel's intention to commence a new business offering residential property loans to existing Squirrel SMSF customers and indicated that Squirrel proposed to launch the property loan program by 1 July 2018. Appendix C to the presentation provided further information concerning the proposed property loan program and disclosed that Squirrel wished to undertake a further capital raising of $5 million in a single equity tranche to support the proposed property loan program. 50 Mr Linn gave evidence that Bletchley introduced Squirrel to Cadmon. In his first affidavit, Mr Linn stated that the introduction occurred in February 2018. However, in his second affidavit, he stated that he had first met with Cadmon on 13 March 2018. Following the establishment of the Squirrel data room in mid-March 2018, Bletchley arranged access to the data room for various persons including Cameron Low and Douglas Loh. As noted earlier, Mr Low was the Managing Director of Cadmon. The evidence indicates that Mr Loh represented some of the investor clients of Cadmon who ultimately invested in the convertible notes issued by Squirrel. Mr Loh played a significant role with Cadmon in conducting due diligence on Squirrel and performing the capital raising mandate. 51 Mr Linn says that the data room contained the Squirrel investor presentation. Although the evidence is unclear, I infer that that is likely. In any event, the evidence shows that at some point Bletchley provided the Squirrel investor presentation to Cadmon and Cadmon used it to produce its own version to present to potential investors in Squirrel's convertible notes. Mr Linn also says that the data room contained another document titled "SMSF Property Lending Portfolio" which disclosed Squirrel's intention to enter into debt facilities through which it would offer property loans and to undertake a $5 million capital raising to provide equity for the proposed property loan program. The data access log for the data room shows that Mr Loh reviewed that document. In short, the evidence suggests that it is likely that, in March 2018, Cadmon (and Mr Loh) were aware of Squirrel's plans with respect to the property loan program, including Squirrel's intention to raise $5 million in equity to support the program. This intention ultimately became the principal source of dispute between Squirrel and Cadmon which resulted in the Deed of Settlement. 52 On 9 April 2018, Squirrel and Cadmon entered into the pre-IPO mandate. Under the mandate, Squirrel exclusively engaged Cadmon to act as sole lead manager in respect of: (a) a pre-IPO capital raising in the form of a convertible note issue to raise a minimum of $2 million within 10 business days of the date of the agreement (tranche 1) and a further $2 million to be raised by 29 June 2018 (tranche 2); and (b) a proposed IPO and listing on the ASX within 14 months of the completion of the pre-IPO capital raising. 53 The mandate stated that the exact timing and structure of the proposed IPO and listing on the ASX would be determined by mutual agreement, business performance and market conditions. 54 In consideration for the services to be provided by Cadmon under the mandate, Squirrel agreed to pay fees to Cadmon as follows: (a) for the pre-IPO capital raising, a management fee of 2% of the gross proceeds, a selling fee of 2% of the gross proceeds and an option over 4% of the fully diluted equity of the company; and (b) for the IPO, a management fee of 3% of the gross proceeds, a selling fee of 3% of the gross proceeds and an additional 1% underwriting fee if an underwriter was engaged for the IPO. 55 The pre-IPO mandate included, as clause 12, the following provision (errors in original): On and from the date of this letter, until the Engagement is terminated as defined in clause 11 is completed (the Exclusivity Period), the Company [Squirrel] must not without Cadmon's written consent: (a) sell, offer to sell, or commence negotiations with a view to selling: • any asset or business conducted by the Company or a related body corporate of the Company; or • any shares in the Company or a related body corporate of the Company (b) issue, offer to issue or commence negotiations with a view to issuing any shares in the Company or any of its related body corporates; or (c) subject to Cadmon's prior written consent, provide any information concerning the Company or its related body corporates to any prospective purchaser or investor. 56 The agreed term sheet for the issue of the convertible notes contained the following terms: (a) the notes would be unsecured; (b) save in the event of specified events of default or insolvency, the notes were not redeemable and would only be converted into equity on the terms specified in the term sheet; (c) the notes would be convertible into fully paid ordinary shares in Squirrel, or another company in substitution if Squirrel and the other company entered into a transaction that resulted in the other company being listed on the ASX (referred to in the term sheet as an "Alternative Transaction") on the happening of the following events: (i) if Squirrel was listed on the ASX within 14 months after the date of the term sheet, the notes would convert into ordinary shares in Squirrel at a conversion price equivalent to the lower of (A) a 20% discount on the issue price of shares offered through the IPO and (B) $16 million divided by the total number of issued shares on a fully diluted as-converted basis; (ii) if Squirrel undertook an Alternative Transaction with another company and the shares in that other company were listed on the ASX within 14 months after the date of the term sheet, the notes would convert into ordinary shares in the other company at a conversion price equivalent to a 20% discount on the issue price of the shares in the other company offered through an IPO or, if no shares were offered, the average trading price of those shares in the 30 days immediately preceding the announcement of the Alternative Transaction; or (iii) if neither (i) nor (ii) occurred, the notes would convert into ordinary shares in Squirrel at a conversion price equivalent to the lower of (A) a 20% discount on Squirrel's next capital raising and (B) $16 million divided by the total number of issued shares on a fully diluted as-converted basis. (d) If Squirrel's shares were listed on the ASX, or an Alternative Transaction proceeded which resulted in a listing of shares, within 14 months after the date of the term sheet, no interest would be payable on the convertible notes. However, if that did not occur, Squirrel would pay 10% interest per annum on the principal amount of the convertible notes, applied retrospectively from the date of issue of the notes. (e) If a specified event of default or insolvency occurred prior to conversion, the noteholder would be entitled to demand immediate redemption of the notes. 57 On 10 April 2018, Mr Linn sent an email to Mr Low, Mr Loh and Mr Gabriel which, in part, discussed the draft prospectus for, and the timing of, the proposed IPO. Mr Linn stated that Squirrel had engaged lawyers in November 2017 to establish a due diligence committee which had been meeting monthly since that time to prepare the company for listing on the ASX. As to the timing of the IPO, Mr Linn stated that there needed to be a discussion between Cadmon and Squirrel once the pre-IPO capital raising had been completed, but that Mr Linn was "quite keen on launching the offer around the time the AFR Fast 100 List comes out this year". Ms Ward gave evidence that the AFR Fast 100 List comes out in October or November each year. 58 Cadmon completed tranche 1 of the pre-IPO capital raising on 3 May 2018. A total of 36 investors subscribed for the convertible notes issued by Squirrel, raising $2 million. Ms Ward gave evidence that she was informed by Ms Zhang that the noteholders were clients of Cadmon. 59 On 7 May 2018, Mr Loh sent an email to Mr Linn enclosing a copy of a presentation concerning Squirrel that Cadmon had prepared for the purposes of the pre-IPO capital raising. The presentation was very similar in format and content to the Squirrel investor presentation (and shared the same title "Pre-IPO Capital Raising | Squirrel SMSF - Working capital balance for expected revenue growth"). On the Cadmon version, Cadmon was identified as lead manager. There was one principal difference between the Squirrel investor presentation and the Cadmon version. In the Cadmon version, in Appendix C (which described the proposed property loan program), the page which described the proposed capital raising of $5 million to provide equity to support the property loan program had been removed. In her evidence, Ms Ward of ABL stated that Ms Zhang had informed her that Appendix C of the Squirrel investor presentation had been removed from the Cadmon version because Cadmon had understood that it had been agreed between the parties that any funding for the property loan program would be provided post-IPO. Both Ms Ward and Ms Zhang are mistaken about the removal of Appendix C: Appendix C had not been removed but the page describing the proposed capital raising to fund the property loan program had been removed. Nevertheless, Ms Ward's evidence provides an explanation of the removal of that page. 60 Mr Loh's email of 7 May 2018 also attached a summary of the terms and conditions of the convertible notes. The summary contained an indicative timeline for the IPO which contemplated a prospectus being lodged with ASIC in September 2018, the IPO offer opening in October 2018 and Squirrel shares being traded on the ASX in November 2018. The document noted that the timeline might push out to early 2019 due to the holiday periods. I observe that that timeline was consistent with the Squirrel investor presentation. 61 Mr Linn gave evidence that he was "in disbelief" about the contents of the Cadmon version of the Squirrel investor presentation and raised his concerns with Mr Loh at a breakfast meeting on 8 May 2018. The two concerns purportedly raised by Mr Linn were that the Cadmon version of the Squirrel investor presentation did not refer to additional capital being raised as an equity tranche for the property loan program and the timeline for the IPO. Mr Linn's evidence is unsupported by any contemporaneous records and is difficult to reconcile with the immediately following events. On 10 May 2018, Mr Low sent an email to Mr Linn, copied to Mr Loh (amongst others), attaching a proposed mandate for the IPO (signed by Mr Low) and stating that (i) the existing pre-IPO mandate would continue to apply to tranche 2 of the pre-IPO capital raising and (ii) Cadmon would raise approximately $10 million through an IPO with shares being listed on the ASX by the end of 2018. The attached mandate also referred to the IPO occurring by the end of 2018. Mr Linn provided comments on the IPO mandate the following day on 11 May 2018 and raised no objection to the proposed listing by the end of 2018. 62 On 11 May 2018, the Board of Squirrel resolved to approve the mandate for Cadmon to act as lead manager for the IPO and the IPO mandate was countersigned by Squirrel. The mandate stated that Cadmon would act as sole lead manager in respect of a proposed IPO for Squirrel to be listed on the ASX by the end of 2018 to raise approximately $10 million. However, the mandate stated that the exact timing and structure of the transaction would be determined by mutual agreement, business performance and market conditions and the transaction was subject to completion of due diligence. Cadmon's role was to manage the IPO, including coordinating the IPO timetable and to provide advice and recommendations with respect to the structure of the IPO, pricing and marketing. Various fees were payable to Cadmon including a management fee of 4% of the gross proceeds, a selling fee of 2% of the gross proceeds and various other benefits. The mandate also included clause 12 which was in similar terms to clause 12 of the pre-IPO mandate. Clause 12 provided as follows: On and from the date of this letter, until the Engagement is terminated as defined in clause 11 is completed (the Exclusivity Period), the Company [Squirrel] must not without Cadmon's written consent: (a) sell, offer to sell, or commence negotiations with a view to selling: • any asset or business conducted by the Company or a related body corporate of the Company; or • any shares in the Company or a related body corporate of the Company (b) issue, offer to issue or commence negotiations with a view to issuing any shares in the Company or any of its related body corporates; or (c) subject to Cadmon's prior written consent, provide any information concerning the Company or its related body corporates to any prospective purchaser or investor. 63 An IPO planning meeting was held on 31 May 2018 attended by Mr Linn, Mr Low, Ms Zhang and Mr Loh. The unsigned minutes of the meeting record that an "IPO team was to be appointed as soon as practicable to commence the IPO process with Squirrel to list in October 2018". Various tasks relating to the IPO were allocated. The minutes also record that the aim was for the first draft of the prospectus to be completed by the end of June 2018. The minutes also refer to the proposed property loan program and record that it was proposed to commence in one month's time via a special purpose vehicle (SPV), but noted that it was unlikely there would be any activity until mid-September 2018. The minutes also recorded that the "SPV proposes to fund 1.5% of the loan book at 800bp/BBSW" and that "Damien confirmed that there was currently no commitment by Squirrel to fund the 1.5% and it was agreed that Squirrel would not fund the 1.5% pre-IPO". The minutes then record the following three action items: • [Damien] to engage third parties to fund the 1.5%; • [Damien] to provide Lily with copy of the agreement with UOB to confirm no funding commitments had been given by Squirrel; and • [Lily] to draft waiver letter excluding the loan book funding from Cadmon's mandate with Squirrel. 64 The references to Damien are references to Mr Damien Linn and the references to Lily are references to Ms Lily Zhang. It is common ground that Cadmon did not provide Squirrel with a waiver of clause 12 of the pre-IPO mandate or the IPO mandate with respect to Squirrel raising capital for the property loan program. 65 In his evidence, Mr Linn's version of events is that it was understood by the parties that the IPO would follow the launch of the property loan program so that the initial earnings from the property loan program could be reflected in the IPO prospectus. Squirrel's statement of claim alleges that, at the meeting on 31 May 2018, Cadmon agreed that it would waive clause 12 of the Cadmon mandates in respect of the proposed capital raising for the property loan program. In contrast, Ms Ward gave evidence that she was informed by Ms Zhang that Mr Linn never provided Cadmon with the confirmation, referred to in the minutes, that Squirrel had not incurred funding commitments and therefore did not issue the waiver letter. As noted earlier, Squirrel's pursuit of funding for the property loan program ultimately became the principal source of dispute between the parties. 66 On the state of the evidence before me on this interlocutory application, it is not possible to resolve the competing interpretations of what was contemplated or agreed between the parties with respect to funding for the property loan program as at 31 May 2018. Nor is it necessary to do so. It is sufficient to note that the unsigned minutes record various assurances by Squirrel that it had not made any commitment to fund the property loan program and would not do so pre-IPO, which is consistent with Cadmon's evidence. At the highest, the minutes indicate an undertaking by Cadmon to draft a waiver letter, but do not establish a promise by Cadmon to grant the waiver. 67 On 15 June 2018, Mr Loh attended Squirrel's office and met with Mr Linn, Mr Murdock and Squirrel staff. Mr Linn gave evidence that, at that meeting, Mr Loh pressed for an IPO in around September 2018 and Mr Linn had responded that that proposed timeline was absurd. A contemporaneous email sent by Ms Zhang to Mr Low gave a different version of events. The email stated that Ms Zhang had spoken with Linn, Murdock and Loh by telephone while Mr Loh was at Squirrel's office. Ms Zhang said that, during that telephone call, they had discussed the timing of the IPO in October or November 2018 as compared with March or April 2019 and that, currently, they were still aiming for an October or November 2018 listing. 68 Cadmon completed the second tranche of the pre-IPO capital raising on 28 June 2018. In that tranche, convertible notes were issued by Squirrel to 42 investors, raising a further $2 million from which $88,000 was paid to Cadmon for fees due under the pre-IPO mandate. Again, the evidence indicates that the noteholders were clients of Cadmon. 69 On 5 July 2018, Mr Linn sent an email to Mark Jones at Dinimus Capital (DCF) marking up revisions to a proposed facility term sheet. Under the facility, DCF would make various secured loan facilities available to Squirrel. Tranche 1 was a facility of $15 million, tranche 2 was a facility of $20 million and tranche 3 was a facility of $50 million. The term sheet stipulated that tranche 1 was to be used to fund working capital ($3 million), to fund the launch and establishment costs of the proposed property loan program through a SPV, Squirrel Capital ($2 million), and to subscribe for equity and mezzanine notes for the purposes of the property loan program ($10 million). Tranche 2 was to subscribe for equity and mezzanine notes in Squirrel Capital for the property loan program. Tranche 3 was for a contemplated acquisition called "Project Dorothy". Under the term sheet, DCF would receive a 3 year call option to be issued 5% of Squirrel's ordinary shares. 70 On 5 July 2018 about an hour after Mr Linn sent the email to Mr Jones noted above, Mr Linn sent an email to Mr Low, Ms Zhang and Mr Loh (amongst others) advising them that the property loan program was nearing the final stages of completion and that Squirrel had achieved formal and final approval for the borrowing facilities for the program. Mr Linn described them as "huge outcomes". The email also stated that Mr Linn considered that it was not possible to achieve a calendar 2018 ASX listing and that he proposed a listing by the end of May 2019. The email did not disclose the call option granted to DCF. 71 On 9 July 2018, Mr Loh replied to Mr Linn, congratulating him on getting the required approvals for the property loan program but expressing reservations about the impact that the program would have on Squirrel's financial returns for FY19 and requesting financial projections. 72 On 16 July 2018, Ms Zhang sent an email to Mr Linn (amongst others) stating that the two tranches of the pre-IPO capital raising had closed and provided a link to a dropbox folder containing the convertible note agreements between Squirrel and each of the noteholders. 73 On 2 August 2018, Mr Howell of DCF sent Mr Linn further draft documents in respect of the DCF facility, including a mandate agreement, term sheet and heads of agreement. Under the draft mandate, DCF would provide a facility to Squirrel for the purposes of working capital, an investment into the property loan program and the proposed Project Dorothy acquisition. Various fees were proposed to be paid to DCF. The draft term sheet proposed the grant of a 3 year call option in favour of DCF to be issued 5% of Squirrel's ordinary shares. 74 At about this time, the commercial relationship between Squirrel and Cadmon broke down. The evidence adduced by Squirrel does not include an executed copy of the final DCF facility agreement. However, I infer that an agreement was entered into at some stage because it was central to the dispute between Squirrel and Cadmon and it is also the basis for DCF's extant winding up application against Squirrel, referred to earlier. 75 On 6 August 2018, Mr Low sent a letter to the Board of Squirrel. The letter was headed "without prejudice" but neither party objected to the letter being adduced in evidence. The letter said that Cadmon had become aware that Squirrel was currently undertaking steps to raise additional capital in the form of equity and debt from various third parties, including DCF, without Cadmon's involvement or consent. The letter asserted that Squirrel was acting in breach of clause 12 of each of the pre-IPO mandate and the IPO mandate. The letter also asserted numerous other breaches of the Cadmon mandates, including: (a) the funds raised through the pre-IPO capital raising had not been deployed as required by the mandate: Squirrel had used the funds to set up a UK office without consulting Cadmon; (b) financial information provided to Cadmon in the Squirrel investor presentation and the data room did not align with the audited financial accounts of Squirrel for FY17; (c) Cadmon had learned that, in early 2018, legal proceedings had been issued against Squirrel regarding an alleged breach of a loan and option agreement which remained current but Cadmon had not been informed of the dispute; and (d) Cadmon had learned that certain shareholders of Squirrel who had participated in a previous capital raising intended to take legal action against Squirrel for misleading and deceptive conduct by Squirrel and its directors but Cadmon had not been advised of that threat. 76 Mr Low's letter of 6 August 2018 invited the Board to contact Cadmon in an effort to resolve these matters and stated that if Cadmon did not receive a response within 7 days it would seek injunctive relief from the Court to prohibit Squirrel from raising additional capital without Cadmon's consent. 77 It appears that Squirrel made no substantive response to Mr Low's letter between 6 August and 25 September 2018. On the latter date, Mr Low sent a further letter to the Board of Squirrel. The letter was again marked "without prejudice" but no objection was taken to the letter being adduced in evidence. The letter referred to the earlier letter of 6 August 2018 and stated: Despite our continued attempts to resolve the matters set out in the Initial Letter with the Board in good faith and to cooperate with the Board to seek a good outcome for the Company and its investors as evidenced in the timeline below, we have not yet received any response from the Board to the matters set out in the Initial Letter. 78 The letter discloses that Mr Low had followed up his letter dated 6 August 2018 on 13 August 2018. In response, Mr Adamson (a director of Squirrel) said that the Board of Squirrel would meet on 6 September and respond after that meeting. Mr Low sought an undertaking that Squirrel would not undertake any further actions in breach of the Cadmon mandates. Squirrel made no response to that request. On 22 August 2018, Cadmon received a letter from MCLP stating that it was preparing a response to Mr Low's letter. That response was never sent. Mr Low followed up again on 6 September 2018. Mr Linn replied the next day stating that Squirrel would reply on 12 September 2018; however, on 12 September 2018, Squirrel sent a further holding email. On 18 and 19 September, Mr Low sent further requests to Squirrel for a response to the 6 August 2018 letter. 79 Mr Linn gave evidence that, on 27 September 2018, Mr Murdock provided a without prejudice response to Cadmon's letters. A copy of that response was not in evidence. 80 Mr Linn gave evidence that, on 4 October 2018, he travelled to Melbourne to meet with Mr Low in an attempt to resolve the dispute between Squirrel and Cadmon. Mr Linn stated that he and Mr Low discussed a number of options, however it seemed that the dispute would best be resolved through the termination of the Cadmon mandates. Mr Linn's evidence was that Cadmon would only agree to terminate the Cadmon mandates if Squirrel agreed to offer the noteholders an opportunity to redeem their notes. Mr Linn stated that eventually it was agreed that the Cadmon mandates would be terminated, but on the condition that Squirrel offered to redeem the notes, plus 4% interest. The interest payment of 4% was calculated as being the pro rata amount of interest the noteholders would have been entitled to receive if Squirrel had not listed on the ASX within 14 months. 81 On 8 October 2018, Mr Linn sent an email to Mr Low stating "Following on from our discussions and meetings I've held with Squirrel stakeholders, we intended to repay [convertible] note investors in full and terminate the agreement between Squirrel and Cadmon". The letter indicated that Squirrel's "funder" would be in a position to provide a formal commitment within the next 48 hours. Mr Linn also proposed terms for the redemption of the convertible notes. 82 On 9 October 2018, Cadmon's lawyers, ABL, sent a letter to Squirrel's lawyers, MCLP. The letter stated that Cadmon had recently obtained a copy of a letter dated 2 August 2018 sent from DCF to Squirrel in relation to a contemplated facility to be provided to Squirrel by DCF, which was signed by Linn on behalf of Squirrel. The facility letter required Squirrel to issue call options in favour of DCF over 5% of Squirrel's ordinary shares. ABL's letter asserted that the DCF facility letter was a breach of clause 12 of the Cadmon mandates entered into by Squirrel with Cadmon. The ABL letter stated that Cadmon sought a written undertaking from Squirrel that it would not issue securities in Squirrel, whether by way of the call option or otherwise without Cadmon's prior written consent, as required by the Cadmon mandates. 83 On 11 October 2018, Squirrel received a letter from Sanguine Capital Advisory Limited (Sanguine), executed by both Sanguine and Growth Investment Guild Pty Ltd (GIG), containing a commitment from GIG to subscribe for ordinary shares in Squirrel, which would be underwritten by Sanguine, to facilitate the buyback of the convertible notes (Sanguine funding commitment). Mr Linn gave evidence that, at that time, GIG held a 6.74% shareholding in Squirrel and a total investment of $1.4 million. The commitment was for a minimum investment of $3 million and a maximum investment of $4.5 million. The commitment was subject to the following conditions: (a) Cadmon entering into a deed of release from its mandate; (b) Cadmon procuring a minimum of $3 million of convertible notes to be redeemed; and (c) Squirrel paying Sanguine an underwriting fee of 2.5% plus GST. 84 At the interlocutory hearing, Counsel for Squirrel confirmed that Squirrel's belief was that the Sanguine funding commitment was a legally binding commitment given by Sanguine and GIG and that the conditions to that commitment were ultimately satisfied. However, as noted below, Sanguine and GIG ultimately defaulted on their funding commitment causing Squirrel to default on its obligations under the Deed of Settlement. 85 On 12 October 2018, MCLP replied to ABL's letter. The letter contained a number of counter-allegations, including that: (a) the parties were in disagreement as to whether an IPO ought to proceed in the 2018 calendar year; (b) the IPO mandate was merely an "agreement to agree" and was not legally binding on the parties; and (c) Squirrel had always intended to raise capital to fund the proposed property loan program prior to the IPO. 86 The MCLP letter acknowledged the DCF facility, including the call option granted to DCF to subscribe for Squirrel shares, but rejected the allegation that Squirrel was in breach of clause 12 of the Cadmon mandates. The letter concluded by stating that Squirrel wished to resolve the matter amicably and, in order to do so and to save the cost, time and effort of proceeding to court, MCLP was instructed to make an offer whereby Squirrel and Cadmon would enter into a deed of release containing the following terms: (a) Squirrel would make a written offer of redemption to all noteholders within 7 days of the execution of the deed. (b) If the noteholders wished to accept the redemption offer, the redemption would occur within 60 days from the date of the offer. (c) The noteholders would be repaid the full face value of their notes plus 5% of the face value. (d) The redemption payment would be funded by Sanguine (and MCLP enclosed a copy of the Sanguine funding commitment). (e) The redemption offer was subject to and conditional on Cadmon procuring 75% of the noteholders to accept the redemption offer as the minimum commitment stated in the Sanguine funding commitment was $3 million. (f) Upon Cadmon procuring the minimum commitment, the redemption payment would be paid to Cadmon as agent of the noteholders and Cadmon would distribute the payment to noteholders within seven days of receipt. (g) If Cadmon did not procure the minimum commitment within 14 days of the offer, Cadmon would be required to refund all of the fees received by it under the Cadmon mandates and Squirrel would remain bound by the terms of the convertible notes. (h) The deed would be prepared and executed by no later than 15 October 2018. (i) Upon execution of the deed, the Cadmon mandates would immediately be terminated and Squirrel and Cadmon would release each other from all claims, suits and demands. 87 The MCLP letter stated that the offer was open for acceptance until 12pm on 15 October 2018 (being a period of less than three days). 88 On 19 October 2018, Squirrel and Cadmon entered into the Deed of Settlement. The recitals to the Deed recorded the background to the dispute between the parties, including the alleged contravention of clause 12 of the Cadmon mandates. The recitals further recorded that "To avoid the costs, inconvenience and uncertainty of litigation, the Parties have agreed to settle the disputes between them arising from the Cadmon Mandate and the entry by Squirrel into the DCF Agreement (Dispute) on the terms set out in this Deed without any admission of liability by any party". The Deed of Settlement contained the following provisions: (a) (clause 2.1(a)) Squirrel was required to make the redemption offer to all noteholders in a form specified in an annexure to the Deed within seven business days. (b) (clause 2.1(c)) All noteholders who accepted the redemption offer would be repaid the full face value of the convertible notes plus a break free equivalent to 5% of the full face value. (c) (clause 2.1(d)) The redemption offers would be open for a period of not less than 14 days. (d) (clause 2.1(e)) Cadmon would take all reasonable steps to engage with noteholders and recommend the redemption offer to noteholders. (e) (clause 2.2(a)) If a noteholder accepted the offer, subject to the minimum commitment (referred to below), the redemption was required to occur on or by the date which was 60 days from the expiry of the offers. (f) (clause 2.2(b)) Cadmon held the promise to make the redemption payment for the benefit of accepting noteholders who had the right to enforce the terms of the Deed as though they were a party to the Deed. (g) (clause 2.3(a)) Squirrel was entitled to terminate the redemption offer by written notice to Cadmon and noteholders if less than 50% of the noteholders by value accepted the offer within the first 7 days or less than 75% of the noteholders by value accepted the offers by the expiry of the offer period (the minimum commitment conditions). (h) (clause 2.3(b)) Each party was required to use all reasonable endeavours to ensure that the minimum commitment conditions were satisfied. (i) (clause 2.3(d)) If Squirrel terminated the offer because the minimum commitment conditions were not satisfied, the accrued rights and remedies of the parties would not be affected and, other than for irrelevant matters, the parties were released from further performing their obligations under the Deed including granting the releases. (j) (clause 3) Squirrel would procure that Mr Linn executed a deed of guarantee and indemnity in a form annexed to the Deed, such deed of guarantee and indemnity to be executed at the same time as the Deed. (k) (clause 5.1) If Squirrel defaulted in payment of the redemption payment, Cadmon and/or the noteholders would be entitled, and Squirrel consented, to the immediate commencement of proceedings by Cadmon and/or the noteholders against Squirrel and to enter judgment by consent for such amount as remained unpaid together with interest from the date of default until judgment. (l) (clause 6.1) On and from the satisfaction of the minimum commitment conditions, the Cadmon mandates were terminated and each party was released and discharged the other from all claims arising out of the matters in dispute including the Cadmon mandates. (m) (clause 9.12) The parties agreed that they had had a full and proper opportunity to consider the terms of the Deed, they had had a full and proper opportunity to obtain independent legal advice in respect of the terms of the Deed and they had freely entered into the Deed. 89 Under the Deed of Guarantee and Indemnity, Mr Linn guaranteed to Cadmon and the noteholders the due and punctual payment, performance and observance of Squirrel's obligations under the Deed of Settlement. 90 By its first claim, Squirrel seeks a declaration that clauses 2 to 5 of the Deed of Settlement are void. The basis of that claim, as alleged in the statement of claim, is that Cadmon's demand that Squirrel make a redemption offer to the noteholders was unconscionable because Squirrel was at a special disadvantage in that its obligations to its shareholders required it to proceed with the property loan program which could not proceed if Cadmon refused to consent. Squirrel alleges that Cadmon's conduct was in breach of s 21 of the ACL, ss 12CA and 12CB of the ASIC Act or the unwritten law. 91 In my view, Squirrel has failed to show a prima facie case of unconscionable conduct on the part of Cadmon, whether under statute or in equity (referred to as the unwritten law in the statement of claim). As it has some relevance to the balance of convenience, I also record that I find Squirrel's first claim to be wholly unmeritorious. The reasons for those conclusions are as follows. 92 In relation to the equitable doctrine of unconscionable conduct (and its statutory equivalent in s 12CA of the ASIC Act), it is necessary to show that a party to the impugned transaction was under a special disadvantage in dealing with the other party, with the consequence that there was an absence of any reasonable degree of equality between them and that the other party exploited that special disadvantage in a manner that is regarded as unconscionable: Louth v Diprose (1992) 175 CLR 621 at 637. A person will be under a special disadvantage if there are circumstances seriously affecting the ability of the person to make a judgment in his or her own best interests: Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447. A person is not under a special disadvantage simply because of inequality of bargaining power: ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [11] per Gleeson CJ; Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [118]; Thorne v Kennedy (2017) 350 ALR 1 at [113] per Gordon J; 91 ALJR 1260. 93 None of the evidence adduced at the interlocutory hearing supports a finding that Squirrel was at a special disadvantage vis-à-vis Cadmon. Squirrel was and is a commercial corporation, conducting an ongoing business, able to source capital and was preparing to list its shares on the ASX. It entered into a commercial agreement with Cadmon, giving Cadmon a mandate to facilitate a pre-IPO capital raising and the ultimate IPO. Under those mandates, Squirrel made contractual commitments not to offer or issue securities to any other person without Cadmon's prior written consent. Despite that contractual promise, Squirrel entered into a facility agreement with DCF which appears to breach the contractual promises made by Squirrel to Cadmon. That gave rise to a dispute. The parties negotiated a resolution of the dispute, with the assistance of legal advice, and ultimately entered into the Deed of Settlement. 94 The "special disadvantage" alleged by Squirrel in the statement of claim is that it had an obligation to its shareholders to proceed with the property loan program. The allegation has no merit. While Squirrel's directors have an obligation to act in the best interests of its members as a whole, that obligation is subject to other legal constraints affecting Squirrel. Squirrel's obligations to its shareholders do not constitute a licence to breach an agreement entered into with a third party. Squirrel no doubt considered the property loan program to be in the best interests of its shareholders. However, the manner in which it progressed the property loan program brought it into a contractual dispute with Cadmon. There is no basis to the allegation that, in negotiating the settlement of that dispute, Squirrel was at a special disadvantage. 95 Nor does the evidence establish any basis for the allegation that Cadmon's conduct was unconscionable within the separate statutory prohibitions in s 21 of the ACL or s 12CB of the ASIC Act (which I will refer to as statutory unconscionability, to differentiate those prohibitions from the equitable doctrine and its statutory equivalent in s 20 of the ACL and s 12CA of the ASIC Act). In the recent decision of the High Court in ASIC v Kobelt [2019] HCA 18, Kiefel CJ and Bell J (at [14]) approved the statement of Allsop CJ in Paciocco v Australian and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [296] that the values that inform the standard of conscience fixed by statutory unconscionability include certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made and the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage. In the same decision, Gageler J observed that conduct proscribed by the statutory provisions as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience (at [92]). 96 The values and norms that inform the concept of statutory unconscionability are guided by the factors required to be taken into account by the applicable statutory provisions. These include matters such as: the relative strengths of the bargaining positions of the parties concerned; whether one party insisted on requirements that were not reasonably necessary for the protection of their legitimate interests; and whether any undue influence or pressure was exerted on, or any unfair tactics were used by, one party against another. 97 Again, there is nothing in the evidence that supports a conclusion that Cadmon engaged in unconscionable conduct in negotiating the terms of the Deed of Settlement. There was no obvious disparity in bargaining power. There was no undue influence or unfair tactics used. On the evidence, there was a legitimate legal basis for Cadmon's allegation that Squirrel had breached the Cadmon mandates. The alleged breach by Squirrel of clause 12 of the Cadmon mandates had the potential to cause financial harm to the noteholders, whose interests Cadmon wished to protect. The Deed of Settlement constituted a reasonable compromise that protected the interests of Cadmon and the noteholders. It also restored commercial certainty to the parties.

C.1.3 Second claim: breach of implied term and misleading and deceptive conduct 98 The second claim made by Squirrel concerns the period immediately following the execution of the Deed of Settlement. The relevant facts are very confined. On 19 October 2018, Ms Ward sent an email to Mr Murdock attaching a spreadsheet containing contact details of the noteholders for the purpose of creating the redemption offers to be addressed to each noteholder. Later that day, Mr Murdock sent an email to Ms Ward attaching the redemption offers for distribution to noteholders, which included each noteholder's email address. On 1 November 2018, Ms Zhang sent an email to Samantha Molyneux of Squirrel confirming that all of the noteholders had accepted the redemption offer. 99 Under the second claim, Squirrel alleges that there was an implied term of the Deed of Settlement that, when engaging with the noteholders, Cadmon would advise the noteholders of "material proposed programs of Squirrel", the reasons for the redemption offer and any conduct of Cadmon that gave rise to Squirrel making the offer. Squirrel further alleges that, in breach of that implied term, Cadmon failed to advise the noteholders: (a) as to the existence of the proposed property loan program; (b) Squirrel's desire to establish the property loan program before conducting the IPO; (c) the need for funding to launch the property loan program prior to the IPO; (d) the DCF facility agreement; (e) that if the property loan program proceeded, the shares in Squirrel would be worth more; (f) that Cadmon had failed to waive clause 12 of the Cadmon mandates and thereby breached an agreement with Squirrel; (g) that that breach by Cadmon had led to the termination of its mandate; (h) that Squirrel needed to secure financing in order to make the payment pursuant to the redemption offers; and (i) that if Squirrel did not receive the required financing, the noteholders would be unlikely to receive any monies. 100 Squirrel further alleges that, if Cadmon had advised the noteholders of those matters, the noteholders would not have accepted the redemption offer. As a consequence, Squirrel claims to have suffered loss and damage being the amount owing under the redemption offer. It makes the same claim on the basis of misleading and deceptive conduct under s 18 of the ACL, ss 12DA and 12DB of the ASIC Act and the (unspecified) unwritten law. 101 In my view, Squirrel has failed to show a prima facie case in respect of its second claim, whether by way of breach of an implied term or breach of the prohibitions against misleading and deceptive conduct. As it has some relevance to the balance of convenience, I also record that I find Squirrel's second claim to be wholly unmeritorious. The reasons for those conclusions are as follows. 102 The law with respect to implied terms is well established. In relation to formal contracts, complete on their face, a term will only be implied if the following conditions are satisfied: the term must be reasonable and equitable; the term must be necessary to give business efficacy to the contract; the term must be so obvious that it goes without saying; the term must be capable of clear expression; and the term must not contradict any express term of the contract: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283. 103 In my view, the evidence adduced on the interlocutory hearing does not establish any basis for the implication of the term propounded by Squirrel. Nor is there any basis to the claim that Cadmon engaged in misleading and deceptive conduct by failing to make the asserted disclosures to the noteholders. 104 The matters that Squirrel alleges should have been disclosed by Cadmon to the noteholders represent Squirrel's commercial views or position on its dispute with Cadmon. In effect, Squirrel's allegation is that, having attempted to settle its dispute with Cadmon by entering into the Deed of Settlement, pursuant to which Squirrel had promised to make a redemption offer to noteholders, Cadmon had a legal obligation to inform noteholders of Squirrel's commercial position on the issues in dispute, thereby dissuading them from accepting the redemption offers. The allegation is not only commercially absurd; it is also contrary to the express terms of the Deed of Settlement. Under the Deed of Settlement: Squirrel agreed to make a redemption offer to the noteholders; Squirrel expressly required Cadmon to take all reasonable steps to engage with noteholders and to recommend the redemption offer to noteholders; and Squirrel imposed a minimum commitment condition that required at least 75% of noteholders by value to accept the offer (otherwise the obligations under the Deed would fall away, including the termination of the Cadmon mandates and the mutual releases). Accordingly, the resolution of the dispute between Squirrel and Cadmon depended upon the redemption offers being made, Cadmon recommending them and at least 75% of noteholders accepting the offers. 105 At the interlocutory hearing, Counsel for Squirrel propounded an alternative construction of the Deed of Settlement and amended Squirrel's statement of claim to advance the alternative construction. The alternative construction was that the minimum commitment condition in the Deed only affected Squirrel's obligation to make a redemption payment to noteholders and did not otherwise affect the releases given pursuant to the Deed, including the termination of the Cadmon mandates. In my view, that construction of the Deed of Settlement is not open. Clause 2.3(d) of the Deed states that if Squirrel terminates the redemption offer by reason of the failure of the minimum commitment condition, the accrued rights and remedies of a party are not affected and the parties are released from further performing their obligations under the Deed including, for the avoidance of doubt, granting the releases set out in clause 6. It is under clause 6 that the Cadmon mandates were terminated and the parties released each other from further claims. Accordingly, if the minimum commitment condition was not satisfied, the Cadmon mandates would not have been terminated and the releases would have not have been operative, reinstating the dispute between the parties.

C.1.4 Third claim: the Deed of Variation is unconscionable 106 The third claim concerns the entry into the Deed of Variation. The facts established at the interlocutory hearing are as follows. 107 On 5 December 2018, Ms Zhang sent an email to Mr Linn noting that, pursuant to the Deed of Settlement, Squirrel was required to make the redemption payment to each noteholder by 1 January 2019. Ms Zhang requested confirmation by reply email that Squirrel was still on track to make the payments. On 13 December 2018, Mr Low sent a further email to Mr Linn repeating the request for confirmation that Squirrel was on track to make the redemption payment. On 17 December 2018, Mr Linn replied to Mr Low and Ms Zhang stating that Squirrel was "well and truly on track to complete as agreed". 108 Mr Linn gave evidence that, on 29 December 2018, he received a telephone call from Chris Leach, the CEO and Managing Partner of Sanguine, advising him that Sanguine was unable to fund the redemption payment. Mr Linn gave evidence that, at that time, he was required to travel to the United Kingdom as Squirrel had entered into a preliminary agreement to acquire a business called BlueZest. Mr Linn sought advice from MCLP but stated that that was difficult because Mr Murdock was on annual leave in Florida at the time and he was in London. Nevertheless, on 30 December 2019, MCLP sent a letter to ABL stating that Squirrel would be unable to meet its commitments under the Deed of Settlement and required an extension of time to make the redemption payment to noteholders. 109 On 31 December 2018, Ms Zhang sent an email to noteholders informing them that Cadmon had been advised by Squirrel that it would not be able to make the redemption payment by the due date in accordance with the redemption offer. The email stated that Squirrel was therefore in breach of the redemption offer and the Deed of Settlement and the noteholders and Cadmon had rights against Squirrel to enforce payment. The email noted, though, that any such enforcement would result in noteholders ranking behind Squirrel's secured creditors. The email stated that Squirrel had proposed a compromise by which it would seek alternative funding to make the payment and had requested an extension for payment until 30 April 2019 to allow them to finalise the alternative funding. 110 Mr Linn gave evidence that between 1 and 8 January 2018 he had a number of conversations with Mr Low about the default and an extension of time. On 8 January 2019, Mr Low sent an email to Mr Linn proposing an extension of time with the following conditions: (a) an extension would be granted to 31 March 2019; (b) noteholders would be granted security over the assets of Squirrel; (c) Squirrel would pay interest of 2% per month on the principal amount owing of $4.2 million, payable monthly in advance with the first interest payment to be paid immediately upon noteholders agreeing to the extension; (d) 5% of ordinary equity in Squirrel would be granted to noteholders on a pro rata basis; (e) Mr Linn would grant a direct charge over his shareholding in Squirrel in favour of noteholders and provide details of his personal assets for the purposes of a personal guarantee; (f) if Squirrel failed to make the redemption payment in full by 31 March 2019: (i) Mr Linn's shares in Squirrel would be transferred to noteholders on a pro rata basis; (ii) noteholders would have the right to replace the Board of Squirrel; (iii) the redemption payment would continue to be owing to noteholders; and (iv) Mr Linn would agree to stay on as an executive director of Squirrel (at the noteholders' discretion) for up to two years for nominal consideration. 111 On 9 January 2019, Mr Linn replied to Mr Low stating that he thought the majority of what Mr Low had proposed would work, save for the "equity piece" (which I infer relates to the proposed issue of 5% of the equity in Squirrel to noteholders) and that Mr Linn would speak to the Board in London that day. The email concluded with the statements "Otherwise everything seems to make sense to me. Thanks for spending your time on this - appreciated." Later that day, Mr Low replied saying "If the equity piece doesn't work, then let's find an alternative." Mr Linn replied that day stating that he had sent instructions through to Sydney. Mr Low replied that day asking Mr Linn to let him know the Board's response because Mr Low needed to provide noteholders with a satisfactory update by Friday, 11 January 2019. 112 On 10 January 2019, Mr Low sent a number of emails to Mr Linn asking for an update. On Friday, 11 January 2019, Mr Linn replied to Mr Low stating (errors in original): Board meeting went well, we are getting some rapid advice (which should come through by lunchtime Friday Sydney time) to make sure what we agree to is legal and aligned with the constitution. I asked our lawyers to double check, as I am genuine that given the work you're doing for us, I want to ensure that at agreement you and the note holders have an agreement that's solid and can't be undone. A couple of the proposed terms would breach corps act (for Public Companies v Private Pty Ltd) as they currently are so we're exploring alternatives. One of the issues is the Board spill, our lawyer has suggested the way to do this might be to have the Squirrel Directors provide resignations that are held in escrow so they can be effected if this don't work out. 113 On Monday, 14 January 2019, Mr Low sent an email to Mr Linn stating that Cadmon had not received any update regarding its extension proposal and asked Mr Linn to respond to the email promptly upon receipt. The email set out Cadmon's final extension proposal which contained the following conditions (which were largely the same as the previous conditions, save for the deletion of the proposed issue of 5% of the equity in Squirrel): (a) an extension would be granted to 31 March 2019; (b) noteholders would be granted security over all of Squirrel's assets; (c) Squirrel would pay interest of 2% per month on the total principal outstanding of $4.2 million (being 105% of the total face value of the convertible notes as per the Deed of Settlement); (d) Mr Linn would grant a charge in favour of noteholders over any shares in Squirrel that he holds in his name or beneficially through an associated entity; and (e) if Squirrel failed to make the redemption payment in full by 31 March 2019: (i) Mr Linn's shares would be immediately transferred to noteholders on a pro rata basis; (ii) all of the directors of Squirrel would resign and be replaced by directors nominated by the noteholders; (iii) the redemption payment plus any outstanding interest would continue to be owing; and (iv) at the noteholders' request, Mr Linn would stay on as a responsible manager/executive director of Squirrel for up to two years for nominal consideration. 114 The email stated that Cadmon would finalise a Deed of Variation with its legal advisors on the stated terms and Cadmon would then send the Deed to Squirrel's legal advisors for execution by Squirrel. 115 On Wednesday, 16 January 2019, Ms Ward emailed Mr Murdock on a without prejudice basis attaching a copy of the proposed Deed of Variation. At 9.57am on Friday, 18 January 2019, Ms Ward received a response from Mr Murdock, which was also expressed to be on a without prejudice basis, stating that he was out of the office and had not received instructions but that he would be in the office over the weekend and would endeavour to reply on the following Monday. 116 Mr Linn gave evidence that, between 16 and 18 January 2019, he flew from London to Hong Kong for an urgent meeting and then from Hong Kong to Singapore. He says that, during that time, he did not have access to email on a device that enabled him to read the proposed Deed of Variation. Mr Linn contacted Mr Low who agreed to extend the time by which Cadmon required the Deed to be signed. 117 On Friday, 18 January 2019, Mr Low sent an email to Mr Linn and the other directors of Squirrel stating: We are willing, in good faith, to grant Squirrel a final extension to 5pm Monday 21 January 2019 to accept our proposed extension terms as set out in the Deed of Variation that was sent to Squirrel's board of directors on 16 January 2019 and pay Cadmon's invoices for its legal and administrative fees. We are not willing to entertain further negotiations in respect of our proposed extension terms, which we think are reasonable in the circumstances. We will also notify your legal advisors of the above. If Squirrel does not accept our proposed extension terms by the above deadline, then Cadmon and the noteholders will exercise their rights under the Deed of Settlement and immediately commence proceedings in relation to Squirrel's default against both Squirrel and Damien and enter judgment for the outstanding redemption payments. 118 Later that day, Mr Linn replied to Mr Low in an email that expressed exasperation with the troubles that were now circling Squirrel. Mr Linn painted a bleak picture of the company's financial position. In essence, Mr Linn conveyed that if Squirrel was placed into liquidation, there would be no return for noteholders or equity investors. The email contained a counter proposal. 119 Mr Linn gave evidence that he arrived back in Sydney on Sunday, 20 January 2019 and attended Squirrel's office on Monday, 21 January 2019 where he reviewed the Deed of Variation to the best of his ability. A board meeting of Squirrel was held at 12pm that day. Mr Linn stated that he believed the appointment of a liquidator by Cadmon was pending and imminent and that there was therefore no other option but to sign the documents. Mr Linn acknowledged that he signed the documents as a director of Squirrel and also in his personal capacity and on behalf of his superannuation fund, Hay SMSF Pty Ltd. Mr Linn also gave evidence that the Board of Squirrel did not have time to seek any legal advice. Later that day, Mr Linn sent an email to Mr Low attaching executed documents which comprised the Deed of Variation and the accompanying securities documents. Mr Linn identified alterations that he had made and initialled on the documents which were relatively immaterial. 120 The parties to the Deed of Variation were Cadmon, Squirrel and Mr Linn. The recitals recorded the background to the document, referencing the Deed of Settlement, Squirrel's obligation under that Deed to make a redemption payment to the noteholders, Squirrel's default in making that payment and the parties' agreement to vary the date of payment on the terms of the Deed of Variation. The Deed contained the following provisions: (a) (clause 2.1) The due date for the redemption payment to noteholders was extended to 31 March 2019. (b) (clause 2.2) If Squirrel defaulted in making the redemption payment, Cadmon and/or the noteholders would be entitled to commence proceedings against Squirrel or Mr Linn as guarantor and to obtain judgment by consent. (c) (clause 3.1) In consideration for the extension, Squirrel granted security in favour of Cadmon (to be held by Cadmon on trust for each noteholder) over all of its assets to secure the obligation to make the redemption payment. (d) (clause 3.3(b)) In further consideration for the extension, Mr Linn agreed to grant security in favour of Cadmon (to be held by Cadmon on trust for each noteholder) over all of his assets and over the shares in Squirrel held in his name and any shares that he held beneficially through Hay SMSF Pty Ltd. (e) (clause 3.4(a)) Squirrel was required to deliver to ABL executed letters of resignation from each of the directors of Squirrel, excluding Mr Linn, to be held in escrow by ABL pending discharge of Squirrel's obligation to make the redemption payment. (f) (clause 4.1) Squirrel agreed to convene a general meeting of shareholders in order to approve the various forms of security granted over shares in Squirrel to enable the shares to be transferred under the security arrangements if required. (g) (clause 5.1) Squirrel agreed to reimburse Cadmon for its external legal and administrative expenses in relation to the Deed of Settlement and the Deed of Variation. (h) (clause 6) Squirrel agreed to pay noteholders interest at a rate of 2% per month in respect of the redemption payments owed to the noteholders, monthly in advance. (i) (clause 8(e)) In the event of default in making the redemption payment, and if requested by the noteholders, Mr Linn agreed to continue in his role as an executive director and responsible manager of Squirrel for a transition period of up to two years at the national minimum wage. (j) (clause 9) In respect of provisions that are intended to benefit noteholders, the Deed would operate as a deed poll in their favour. 121 Cadmon and Squirrel also executed a General Security Deed. Under clause 8 of that Deed, Cadmon had the right to appoint a receiver over the assets of Squirrel in the event that Squirrel defaulted on its obligations under the Deed of Settlement and the Deed of Variation. 122 Mr Linn gave evidence that he has now had an opportunity to review the Deed of Variation and the associated documents and is shocked to discover that Hay SMSF Pty Ltd and he are required to transfer all of their shares in Squirrel for no consideration and, even after the shares had been transferred, the noteholders would continue to be entitled to the redemption payment. As Mr Linn was not cross-examined, there was no challenge to his evidence concerning his understanding of the terms of the Deed of Variation and the associated security documents. Nevertheless, the evidence shows that Mr Low communicated the primary commercial terms to Mr Linn in his emails dated 8 and 14 January 2019. The terms of the Deed of Variation reflect the terms set out in those emails, including terms which provide for the taking of security over shares in Squirrel held by Mr Linn and any associated entity, and terms which provide for the transfer of those shares to the noteholders upon any default in payment of the redemption amount to noteholders. In reply to the email dated 8 January 2019, Mr Linn stated that he thought the majority of what Mr Low had proposed would work, signifying that he had read and understood the email. The emails sent by Mr Linn during this period indicate that he understood the principal commercial terms and that he had access to legal advice. 123 Squirrel's third claim is that it is entitled to a declaration that the Deed of Variation is void because Cadmon's reliance upon the Deed is unconscionable in contravention of s 21 of the ACL, ss 12CA and 12 CB of the ASIC Act and the unwritten law. Squirrel alleges that, at the time of entering into the Deed of Variation: Squirrel did not have the capacity to make the redemption payment; Squirrel had not made the redemption payment to noteholders due to the breach by Sanguine of its funding commitment; Squirrel did not receive legal advice; and Squirrel was being threatened by Cadmon (the consequence of which would be that Squirrel's business would be destroyed and many jobs lost). Squirrel further alleges that, at the time of entering into the Deed of Variation, Cadmon knew that: Squirrel could not make the redemption payment; Squirrel had not received legal advice; Squirrel's business would be destroyed if Cadmon took any action; Squirrel only needed to make the redemption payment because it entered into the Deed of Settlement at the demand of Cadmon; and Squirrel's liability for the redemption payment had only arisen upon the acceptance by noteholders of the redemption offer, the acceptance of which Squirrel claims resulted from Cadmon's failure to disclose information to them. Squirrel alleges that, by reason of those matters, Cadmon took unconscionable advantage of Squirrel's disadvantage in demanding that it enter into the Deed of Variation. 124 In my view, the evidence adduced at the interlocutory hearing does not establish a prima facie case that Cadmon took unconscionable advantage of Squirrel in negotiating and entering into the Deed of Variation. None of the circumstances relied on by Squirrel lead to a conclusion that Cadmon's conduct in negotiating or entering into the Deed of Variation was unconscionable. On the evidence presently before me, I consider the claim is bound to fail for the following reasons. 125 First, in so far as Squirrel seeks to rely on the circumstances the subject of the first and second claims (entry into and adherence to the Deed of Settlement), those circumstances provide no support for Squirrel's claims for the reasons previously expressed. The Deed of Settlement recorded the terms of an agreement properly entered into between Squirrel and Cadmon to resolve a commercial dispute between them. Pursuant to that agreement, Squirrel made redemption offers to the noteholders, triggering the termination of the Cadmon mandates and the mutual releases. Squirrel thereby became obligated to make the redemption payment. At the time of entry into the Deed of Settlement and upon acceptance of the redemption offers by all noteholders, Squirrel was the beneficiary of a promise by Sanguine and GIG to subscribe for shares in Squirrel to fund the redemption payment. 126 Second, it may be accepted that, when negotiating the Deed of Variation, Cadmon knew that Squirrel had defaulted on the redemption payment and, at that point in time, was unable to make the redemption payment. But that is only to recognise the difficult circumstance that both Squirrel and Cadmon (representing the noteholders) found themselves in. Squirrel could not make the payment and Cadmon and the noteholders could not receive the payment. Those circumstances presented the parties with a choice - either recovery action could be taken against Squirrel, potentially leading to a receivership, administration or liquidation, or the obligation could be extended for a further period. The parties negotiated the latter option. That is a commercially reasonable choice in the circumstances, involving risks and benefits for each party. 127 Third, Squirrel's allegation that Cadmon knew that Squirrel had not received legal advice is contrary to the evidence. As noted earlier, Mr Linn's email of 11 January 2019 stated that Squirrel was obtaining legal advice. Further, Cadmon's lawyers, ABL, had sent the Deed of Variation to Squirrel's lawyers, MCLP, and had received a reply suggesting that MCLP would be advising on the Deed. 128 Fourth, Squirrel's allegation that Cadmon knew that Squirrel's business would be destroyed if it took any action to recover the redemption payment is not established by the evidence. In any event, if and to the extent that Cadmon knew that there was a risk that Squirrel would cease to trade if Cadmon took enforcement action, that would not render any enforcement action taken unconscionable, far less cause the negotiation of the Deed of Variation to be unconscionable. Immediate enforcement action was a possibility, but it was uncertain whether Squirrel's financial position would improve or worsen over time. In those circumstances, there is nothing unconscionable in Cadmon (and the noteholders) electing not to take immediate enforcement action and to negotiate an extension of time, but requiring additional security as the quid pro quo for the extension. 129 Fifth, the terms of the Deed of Variation cannot be described as unconscionable vis-à-vis Squirrel. As already noted, upon default of its obligation to make the redemption payment, Cadmon (on behalf of the noteholders) or the noteholders themselves were entitled to take steps to recover monies owing to them. In a short space of time, that may have placed Squirrel into liquidation. Cadmon and the noteholders were entitled to pursue their legitimate interests to recover the monies owing by that means. The grant of a 3 month extension of time in which to make the redemption payment was a valuable benefit to Squirrel which staved off the threat of liquidation. In exchange, Squirrel granted Cadmon security over its assets and agreed to pay interest to the noteholders. There is nothing unconscionable in Cadmon seeking those benefits in exchange for granting the extension of time. 130 In its statement of claim, Squirrel also places reliance on those terms of the Deed of Variation by which Mr Linn and his personal superannuation fund, Hay SMSF Pty Ltd, granted security in favour of the noteholders and, in the event of default by Squirrel, Mr Linn agreed to continue in his role as executive director and responsible manager of Squirrel for 2 years on the minimum wage. In my view, those provisions are irrelevant to the claims made by Squirrel in this proceeding. Neither Mr Linn nor Hay SMSF Pty Ltd are parties to the proceeding. The proceeding has been brought in the name of Squirrel only and the relevant question is whether Squirrel has established a prima facie case of unconscionable conduct affecting its rights and obligations under the Deed of Variation. The question whether Mr Linn or Hay SMSF Pty Ltd have a legal basis on which to avoid their individual obligations under the Deed of Variation does not arise in the present proceeding and need not be considered.

C.1.5 Fourth claim: appointment of receiver not in good faith 131 Squirrel's fourth claim concerns the possible appointment of a receiver to Squirrel by Cadmon following default by Squirrel on its obligations under the Deed of Settlement as varied by the Deed of Variation. The facts established at the interlocutory hearing are as follows. 132 In his evidence, Mr Linn admitted that Squirrel has defaulted on almost all of its obligations under the Deed of Settlement as varied by the Deed of Variation. It has defaulted in its financial obligations: it has not paid all of the interest for the month of March 2019; it has not paid all of the legal expenses incurred by the noteholders; and most importantly, it has failed to make the redemption payment due on 31 March 2019. In addition, Squirrel has defaulted on its obligations to provide or perfect (through shareholder approvals) the security promised to Cadmon and the noteholders. 133 As discussed earlier, on 4 April 2019, Squirrel executed a heads of agreement with ISL which provided for the sale of all of the shares in Squirrel to ISL. The agreement contemplated that part of the consideration to be paid by ISL would be used to discharge the amounts owing to the noteholders. At the time that Squirrel sought an ex parte injunction against Cadmon in this proceeding, it relied upon the ISL transaction as evidence that Squirrel may soon be in a position to repay the amounts owing to the noteholders. However, the conditions precedent for the ISL transaction were not satisfied and the ISL transaction is no longer relied on by Squirrel. 134 On 8 April 2019, Ms Zhang sent an email to Mr Linn and others expressing disappointment that Squirrel had again defaulted on its payment obligations and recorded that Cadmon had attempted to negotiate a further extension of time with Squirrel. Ms Zhang stated that the discussions with Squirrel had not been satisfactory and did not provide Cadmon and the noteholders with comfort that Squirrel would not default again if a further extension was agreed. In order to continue negotiations for a further extension, Ms Zhang requested an immediate payment of the outstanding interest for March 2019, immediate payment of the outstanding amounts owing for Cadmon's legal expenses and a further payment of $55,000 for additional legal expenses that would be incurred in negotiating a further extension. Ms Zhang stated that if those payments were not made by 10 April 2019, Cadmon would have no choice but to issue a formal notice of default and appoint a receiver to take control of Squirrel. 135 It is not in dispute that Cadmon wishes to be free to exercise the rights available to it under the Deed of Variation and associated security in order to protect and further the interests of the noteholders. The powers available to it include the power to appoint a receiver under clause 8 of the General Security Deed. Ms Ward gave evidence that Ms Zhang had informed her that, if Cadmon were not restrained, it would: (a) seek the consent of noteholders before it takes any steps to appoint a receiver to Squirrel; (b) before seeking noteholders' consent, it would take further steps to consider the options available to it including engaging an investigating accountant to analyse Squirrel's financial accounts, confer with specialist receivers and ASIC with the aim of preserving Squirrel's business and AFSL and consider recapitalisation proposals; and (c) give consideration to enforcing its other rights under the Deed of Variation, including the possible restructuring of the Board of Squirrel. 136 Squirrel's fourth claim is that there is an implied term of the Deed of Variation that the power to appoint a receiver must be exercised in good faith and not arbitrarily or capriciously. It alleges that the appointment of a receiver to Squirrel would inevitably lead to Squirrel's AFSL being forfeited, Squirrel losing all of its customers, Squirrel's business becoming worthless and noteholders not receiving amounts due to them. It follows, according to Squirrel, that any appointment of a receiver by Cadmon would be capricious and not in good faith (because noteholders would not receive anything). In the alternative, Squirrel alleges that Cadmon does not have the authority or approval from all noteholders to exercise the power to appoint a receiver. I note that Squirrel's statement of claim mistakenly states that clause 8 of the Deed of Variation grants Cadmon the power to appoint a receiver to Squirrel; that power is contained in clause 8 of the General Security Deed entered into at the same time as the Deed of Variation. 137 It is unnecessary to determine whether and to what extent the Deed of Variation contains an implied term that the power to appoint a receiver (I interpolate, under clause 8 of the General Security Deed) must be exercised in good faith and not arbitrarily or capriciously. Even if such a term were to be implied, the evidence before the Court does not establish a prima facie case that the exercise of that power by Cadmon in the present circumstances would be capricious and not in good faith. On the evidence presently before me, I consider the claim is bound to fail for the following reasons. 138 First, while Mr Linn asserted in his evidence that Squirrel's AFSL would be forfeited if a receiver were appointed, the legal and factual basis for that assertion was not established by the evidence. As noted earlier, the AFSL is held by Squirrel Superannuation. The AFSL contains no express provision that it would terminate or be forfeited if a receiver were appointed to Squirrel (or indeed to Squirrel Superannuation). 139 Counsel for Squirrel relied upon clause 9 of the AFSL. Relevantly, clause 9 provides that Squirrel Superannuation must: (a) be able to pay all its debts as and when they become due and payable; (b) have total assets that exceed total liabilities as shown in its most recent balance sheet lodged with ASIC and have no reason to suspect that its total assets would currently not exceed its total liabilities; and (c) meet the cash needs requirement by complying with "Option 2" which is defined as a contingency-based projection where Squirrel Superannuation is required to prepare a projection of its cash flows over at least the next three months based on its estimate of what would happen if its ability to meet its liabilities over the three month term was adversely affected by commercial contingencies and demonstrate that it would have access as needed to enough financial resources to meet its liabilities over the projected term. 140 Counsel for Squirrel submitted that, if a receiver were appointed to Squirrel, Squirrel Superannuation would no longer be able to satisfy the cash needs requirement specified as "Option 2". No evidence was adduced by Squirrel in support of the submission beyond a bare assertion by Mr Linn. In the absence of any financial evidence showing the manner in which Squirrel has complied with the obligation in the past and projections about future compliance based on assumptions proved by evidence, I am not prepared to accept Mr Linn's bare assertion about compliance. 141 Second, and more importantly, there is no basis in the evidence for a finding that Cadmon would exercise any powers granted to it to appoint a receiver capriciously and not in good faith. I infer from the evidence summarised in these reasons that: (a) Cadmon accepted a mandate from Squirrel to facilitate a pre-IPO capital raising through the issue of convertible notes which would be converted into ordinary shares in Squirrel upon its listing on the ASX at a conversion price that would deliver an attractive return to the noteholders; (b) Cadmon performed the retainer by recommending the Squirrel convertible notes to its clients; (c) a dispute arose between Cadmon and Squirrel about an issue that Cadmon regarded as important to the proposed Squirrel IPO and listing on the ASX, and which would therefore affect the interests of the noteholders (whose interests Cadmon wished to protect, having recommended the notes to them); (d) the dispute between Cadmon and Squirrel was a legitimate commercial disagreement which was resolved through entry into the Deed of Settlement under which Squirrel agreed to offer to redeem the notes, which offer was accepted by all noteholders; and (e) Squirrel has since defaulted on its redemption obligation. 142 In those circumstances, there is no basis for an allegation that Cadmon would exercise a power to appoint a receiver to Squirrel capriciously or in bad faith. There is nothing in the evidence to suggest that Cadmon has acted in bad faith toward Squirrel to date. Cadmon's sole interest appears to be to protect and advance the interests of noteholders, no doubt because Cadmon recommended the investment in Squirrel to them. It is not in bad faith for Cadmon to take steps to protect and advance the noteholders' interests by exercising powers granted to Cadmon under agreements entered into with Squirrel. 143 Further, the evidence indicates that Squirrel is in a financially precarious position. It has failed on two occasions to raise funds in order to discharge its obligations to the noteholders. Its assets are secured in favour of other lenders. Most recently, a winding up application has been made in respect of amounts claimed to be owed by Squirrel to DCF. All of these circumstances create commercial risks for the noteholders and it is commercially understandable that Cadmon wishes to exercise whatever rights and powers are available to it with the object of protecting the position of noteholders. 144 As to Squirrel's claim that Cadmon does not have the authority or approval from the noteholders to appoint a receiver, Squirrel has failed to establish a prima facie case that Cadmon requires such authority or approval as a matter of law in order to exercise that power. There is nothing in the Deed of Variation or General Security Deed that requires any such authority or approval to be obtained. Further, Squirrel has failed to establish a prima facie case that Cadmon does not have such authority or approval.

C.1.6 Conclusion on the question of a prima facie case 145 In conclusion, on the evidence adduced at the interlocutory hearing, Squirrel has failed to establish a prima facie case on any of the claims made in the amended statement of claim. As noted earlier, I consider that the first and second claims are wholly unmeritorious and, on the evidence presently before me, I consider that the third and fourth claims are bound to fail.

C.2 Balance of convenience 146 Given my findings on the question of a prima facie case, it is not necessary for me to consider the balance of convenience. However, I should record that I am not satisfied that the balance of convenience favours the grant of an interlocutory injunction in the present circumstances. 147 Squirrel contends that it would suffer irreparable prejudice if an injunction were not granted. That contention is based on the submission that the appointment of a receiver to Squirrel would result in the destruction of its business (through the loss of the AFSL). For the reasons given earlier, I am not satisfied on the evidence that that is a necessary result of the appointment of a receiver to Squirrel. Further, Cadmon has given evidence that, before appointing a receiver, it would consult with ASIC and others in an effort to avoid unintended adverse consequences for the business of Squirrel. I accept that evidence because there is every reason for Cadmon to protect the assets and business of Squirrel in order to protect the interests of the noteholders. 148 Squirrel also submitted that the appointment of a receiver would cause irreparable damage to its commercial reputation. The courts have recognised that the appointment of a receiver may be commercially damaging. However, I consider that the risk of such harm in the present case is diminished by the fact that Squirrel is currently facing an application for winding up. In any event, I consider that the prejudice faced by Cadmon from the grant of an injunction would outweigh any damage to Squirrel's reputation caused by the appointment of a receiver. 149 I consider that the grant of an injunction preventing Cadmon from exercising its powers under the Deed of Settlement and the Deed of Variation would be likely to cause Cadmon and the noteholders substantial prejudice. Although the noteholders are third parties to this proceeding, the effect of an injunction on the interests of third parties is a relevant consideration when assessing the balance of convenience: Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 at [66]. The evidence discloses that the financial position of Squirrel is precarious and it is likely that its position will worsen over time. Squirrel has made losses in each of four successive financial years FY15-FY18. In evidence was a consolidated financial forecast for Squirrel, apparently prepared as at March 2019, which disclosed a forecast loss for FY19 of approximately $2 million. The evidence shows that Squirrel has twice failed to raise funds to enable the redemption of the convertible notes. Recently, a winding up application has been filed. Mr Linn gave evidence that, at present, Squirrel has liabilities of approximately $7.8 million including approximately: $1.2 million for accounts payable; $870,000 for debt facilities; $1.4 million in liabilities owing to regulatory bodies; and $4.3 million owing to the noteholders. An injunction restraining Cadmon from exercising rights granted to it by Squirrel under the Deed of Settlement and the Deed of Variation would be highly prejudicial to the commercial interests of Cadmon and the noteholders.

D. CONCLUSION 150 In conclusion, I will release both parties from the undertakings given to the Court on 15 April 2019 and I will dismiss Squirrel's application for an interlocutory injunction. I will also make orders for the parties to file short submissions on the question of the costs of both applications. Cadmon's application to be released from its undertaking was necessitated by its decision to give the undertaking on 15 April 2019. Although it has been successful on its application to be relieved of the undertaking, a question arises whether costs should lie where they fall. Squirrel has been unsuccessful on its application for an interlocutory injunction. My overall assessment is that the costs of Cadmon's application were a lesser part of the overall costs of the interlocutory hearing. I certify that the preceding one hundred and fifty (150) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.