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[2026] NSWCA 141
respondent. Appeal dismissed. The appellant is to pay the costs of the respondents ([99]).
Westwood sold a property to Portman for $100 million, but Portman did not pay the full deposit and faced substantial stamp duty obligations soon after contracting. Westwood tried to rely on a statutory defence that protects certain parties to voidable transactions, arguing that it had no reasonable grounds to suspect Portman's insolvency. The Court of Appeal held that Westwood had not proved that part of the defence. Westwood's case depended substantially on evidence that its principal had made inquiries and received reassuring information about Portman's funding. The trial judge rejected that evidence because of serious inconsistencies, and the Court of Appeal found no error in that assessment. The Court also clarified that it was not imposing a general duty on property vendors to investigate purchasers' finances. Because the defence failed on the insolvency-suspicion elements, the Court did not decide the disputed good-faith issue. It dismissed the appeal and left the primary orders in place.
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On 26 March 2020, Westwood Capital Pty Ltd agreed to sell the Punchbowl Property to Portman Securities Pty Ltd for $100 million. The price was payable under a contract requiring a $10 million deposit in three instalments. Portman paid $100 and a further $5 million, but did not pay the final $4,999,900 instalment, despite an extension to 30 September 2020. The contract also triggered stamp duty of $5,483,055, payable within 90 days ([2]-[3], [23]-[25]).
Westwood terminated the contract on 8 October 2020. Portman was later wound up, and its liquidator and Portman sought repayment of the $5,000,100 already paid and relief from Portman's remaining obligations. The primary judge found that the contract was an uncommercial transaction and voidable under the Corporations Act. Westwood's cross-claim for the unpaid deposit, including its claim against Mario Pamboris under an alleged personal guarantee, was dismissed ([4]-[6]).
On appeal, Westwood did not challenge the findings that the contract was uncommercial and voidable. Its central argument was that it qualified for the defence in s 588FG(2). It also challenged the dismissal of the guarantee claim ([7], [60]-[63]). The Court of Appeal, in reasons given by Free JA with Ball JA and Harrison AJA agreeing, dismissed the appeal and ordered Westwood to pay the respondents' costs ([1], [99]-[100]).
The financial evidence was important. The primary judge accepted evidence that Portman lacked sufficient funds and committed funding to pay both the remaining deposit and stamp duty. Portman had no income stream or relevant intangible assets capable of supporting borrowing. The primary judge also found it had no realistic capacity to raise the required funds and no realistic prospect of profiting by onselling the property ([26]-[28]). Those findings formed the factual context for the appeal.
A further central feature was the evidence of Bill Gertos, who controlled Westwood. Westwood's account depended on alleged inquiries about funding for an earlier proposed Portman purchase, the Annandale Property, and alleged reassurances from a person in Cyprus and a Westpac banker. The trial judge found Gertos had given irreconcilable accounts about what he knew of the alleged investors. The Court of Appeal upheld the relevant credibility assessment ([18]-[21], [69]-[73]).
Section 588FG(2) required Westwood to prove each of its elements. The parties accepted that Westwood had provided valuable consideration, satisfying paragraph (c). The appeal therefore centred on good faith under paragraph (a) and the two parts of paragraph (b) concerning reasonable grounds for suspecting insolvency ([40]-[41]).
The Court did not decide whether Westwood had acted in good faith. Free JA held that it was sufficient to resolve the appeal on paragraph (b), because failure to establish that element defeated the statutory defence. The Court considered the good-faith question potentially important but inappropriate to determine on the factual foundation of this appeal ([64]-[66]).
For s 588FG(2)(b)(i), the Court described a hybrid inquiry: the particular creditor's perspicacity, available information and actual analysis are relevant, but whether there were reasonable grounds for suspicion is judged objectively. Paragraph (b)(ii) separately asks whether a reasonable person in the creditor's circumstances would have had such grounds ([44], [47]). The assessment concerns circumstances existing when the person became a party to the transaction, and is not made with hindsight ([48]).
Suspicion is more than wondering whether a matter exists. The Court applied the formulation that it involves a “positive feeling of actual apprehension or mistrust” about whether the debtor can pay its debts ([81]). This does not mean that a single fact invariably proves suspicion. The assessment requires consideration of the cumulative effect of the circumstances apparent at the time, including any circumstances that might counter suspicion ([48]).
The obstacle for Westwood was that its account of why it considered Portman financially capable depended on the financing inquiries and reassurances attributed to Gertos. The trial judge rejected that evidence. On appeal, Westwood could not replace it with a coherent evidentiary account consistent with its own case at trial. Free JA described the resulting problem as a “forensic void” ([71]-[73], [81]).
The Court also rejected Westwood's contention that the primary judge had imposed a general obligation on a seller to investigate a purchaser's finances. The appeal was not decided on a free-standing vendor duty. Rather, the inquiries mattered because Westwood itself relied on alleged prior checks as the basis for its asserted confidence in Portman's capacity. Once those checks were not proved, their absence from the evidentiary record was important to the statutory onus ([78]-[81], [90]-[92]).
The financial obligations gave the rejected financing evidence significance. By late June 2020, Portman faced the balance of the deposit and more than $5.4 million in stamp duty. The Court considered the short time available, the lack of apparent financial backing or committed funds, and Westwood's knowledge of Portman's circumstances. Together, those facts supported the conclusion that Westwood had not proved the absence of reasonable grounds for suspicion, either for itself or for a reasonable person in its circumstances ([93]-[95]).
The judgment applied the statutory framework in s 588FG(2), rather than announcing a new statutory test. The primary judge's formulation of the hybrid and objective elements was not challenged as a matter of legal principle on appeal ([44]-[47]). The Court's contribution was principally to apply those established elements to the evidence and explain why the rejected financing evidence mattered to Westwood's burden of proof.
The decision reinforces that the two limbs in paragraph (b) are distinct. The first focuses on the particular person, including the information available and any analysis undertaken, while retaining an objective component. The second focuses on a reasonable person in that person's circumstances ([44], [47]). A party seeking the defence must prove both; a failure on paragraph (b) is sufficient even if the court does not decide paragraph (a) ([41], [65]).
The Court also reiterated that reasonable grounds are assessed contemporaneously and cumulatively, rather than through hindsight. In doing so, it cited Chicago Boot and Sydney Appliances on assessing the commercial circumstances as they stood at the time ([48]). It applied the suspicion formulation from Queensland Bacon and Chicago Boot ([81]).
The judgment does not establish that vendors generally must conduct due diligence on purchasers. The Court expressly rejected the suggestion that the primary judge's reasoning created such a general duty. It treated inquiry evidence as context-specific, particularly because Westwood relied on its alleged inquiries as proof of its own state of knowledge and the reasonableness of its position ([74]-[80], [90]-[92]).
Nor did the Court settle the scope of “good faith” in s 588FG(2)(a). Westwood's appeal raised whether taking advantage of an uncommercial transaction could itself indicate lack of good faith, but the Court left that question open ([64]-[66]). Accordingly, the judgment should not be read as deciding that issue.
At [41], the Court said Westwood had to establish each of paragraphs (a), (b) and (c) of s 588FG(2). In plain English, satisfying one or two parts of the defence does not compensate for failing to prove another. The valuable-consideration element was not in dispute, but the remaining elements still required proof.
At [47], the Court described the first part of paragraph (b) as asking whether the particular creditor, with its information and analysis, had reasonable grounds to suspect insolvency. In practical terms, the assessment is not confined to what the creditor actually thought, nor is it simply an abstract reasonable-person test. The creditor's actual informational position matters, assessed against an objective standard.
At [48], the Court said the assessment must be made by reference to circumstances existing at the time and without hindsight. It also endorsed the approach of considering the cumulative effect of factors pointing towards insolvency and any countervailing circumstances. Put simply, the question is what the information meant at the time, not what became obvious after the company failed.
At [81], Free JA explained that suspicion involves a positive feeling of apprehension or mistrust, not mere wondering. The Court then connected that idea to the case advanced by Westwood: if circumstances had prompted inquiries about Portman's financial backing, the answers to those inquiries could potentially have dispelled concerns. But the trial judge rejected the evidence about what those inquiries revealed, leaving Westwood without the factual basis for its asserted reassurance.
At [90]-[92], the Court clarified that it was not imposing a general inquiry obligation on vendors. Rather, given the circumstances of this transaction and Westwood's reliance on alleged inquiries, satisfactory evidence of reliable answers was relevant. The Court found no error in treating the absence of such evidence as important to whether Westwood had discharged its onus.
At [99], the formal orders were straightforward: the appeal was dismissed and Westwood was ordered to pay the respondents' costs. The result left the primary orders undisturbed.
The decision is most relevant where a party seeks the s 588FG(2) defence to an order concerning a voidable transaction and must prove that it lacked reasonable grounds to suspect insolvency. It highlights cases where the transaction creates substantial, near-term payment obligations, while the debtor appears to lack assets, committed borrowing or other evident financial support ([23]-[27], [93]-[95]).
It is particularly relevant where a creditor or counterparty asserts that prior inquiries or third-party reassurances explained why it considered the debtor financially capable. The case shows the evidentiary importance of proving what inquiries were made, what information was received and how that information addressed the obligations due. In Westwood's case, the alleged inquiries were central to its defence, but the evidence describing them was rejected as inconsistent ([71]-[73], [78]-[81]).
The case also matters where the parties have a substantial prior relationship. The Court considered Westwood's history with Portman and Pamboris relevant to the information and insight available to Gertos. It did not treat the parties as strangers in a typical arm's-length sale, notwithstanding Westwood's submission that the transaction was independent ([76]-[80], [84]-[85]).
However, the decision does not make a vendor's failure to investigate a purchaser conclusive, nor does it prescribe a universal investigative checklist. The Court's reasoning was tied to Westwood's own case, its knowledge and the short-term liabilities assumed by Portman. It expressly rejected the proposition that a general legal duty to inquire had been imposed ([90]-[92]).
The credibility aspect is also relevant where the statutory defence depends on evidence from a principal witness. If the party bears the onus and the evidence supporting its asserted state of knowledge is rejected, the party may be left unable to establish the negative proposition required by the statute. The Court upheld the trial judge's issue-specific assessment of Gertos's evidence rather than treating the adverse finding as an impermissible global rejection ([69]-[73]).
The supplied judgment contains no information about later judicial treatment of Westwood Capital Pty Ltd v Darin. It would therefore be unsupported to state whether subsequent courts have followed, distinguished, questioned or otherwise treated this decision.
Within this judgment, the Court relied on earlier authorities for the principles it applied. It cited Chicago Boot on the hybrid test and contemporaneous assessment, and applied the suspicion formulation drawn from Queensland Bacon and Chicago Boot ([47]-[48], [81]). It referred to Sims v Celcast on the statutory test and cited Sydney Appliances for the need to examine the commercial circumstances as they appeared at the relevant time ([47]-[48]).
The Court also referred to Sangha v Baxter in addressing the treatment of witness credibility. It used that authority to support the proposition that a witness may be unreliable on particular matters without requiring an undifferentiated rejection of all evidence ([70]). The good-faith question involving Cussen v Sultan was identified but left open ([64]-[66]). These relationships describe the authorities as treated in this judgment, not later treatment of this judgment itself.
The most direct unresolved issue is the scope of good faith under s 588FG(2)(a), particularly whether taking advantage of the uncommerciality of a transaction at a counterparty's expense is, without more, indicative of lack of good faith. The Court deliberately declined to decide that question because paragraph (b) disposed of the appeal and the relevant debate lacked a sufficiently firm factual foundation ([64]-[66]).
The judgment also leaves the application of s 588FG(2) to other commercial settings dependent on their facts. It accepts that a seller may in some transactions reasonably leave assessment of commercial prudence to the buyer, but says that framework was inapt here because of the prior relationship and the evidence Westwood chose to rely on ([74]-[80]). The decision does not specify the point at which a purchaser's obligations, asset position or lack of apparent funding will give rise to reasonable grounds for suspicion in other cases.
The guarantee dispute was not resolved as a necessary issue. The Court noted both the dependency of the guarantee claim on the underlying claim against Portman and the failure to prove that the alleged debt remained outstanding after the disputed Athenee payment ([96]-[98]). It did not finally determine whether the relevant executed contract included an effective guarantee clause.
Finally, the Court's account does not establish whether later courts have adopted or limited its reasoning. That question requires later decisions not included in the supplied judgment.
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Westwood Capital Pty Ltd v Christopher Damien Darin in his capacity as liquidator of Portman Securities Pty Ltd [2026] NSWCA 141
Hearing dates: 27 May 2026
Date of orders: 21 July 2026
Decision date: 21 July 2026
Before: Ball JA at [1]
Free JA at [2]
Harrison AJA at [100]
Decision: (1) Appeal dismissed.
(2) The appellant is to pay the costs of the respondents.
Catchwords: CORPORATIONS – winding up – voidable transactions – uncommercial transactions - statutory defence under s 588FG(2) of the Corporations Act 2001 (Cth) – good faith – reasonable grounds for suspecting insolvency – subjective and objective elements of s 588FG(2)(b) – whether appellant established statutory defence – relevance of inquiries concerning purchaser's financial capacity
CORPORATIONS – winding up – voidable transactions – orders under s 588FF – contract for sale of land declared void – repayment of deposit – relief from contractual obligations
APPEALS – from finding of fact – credibility of witnesses – adverse credibility findings – whether trial judge erred in rejecting evidence of principal witness – inconsistent accounts – effect of adverse credibility findings where party bears onus of proof
GUARANTEE AND INDEMNITY – personal guarantee – conflicting executed versions of contract – whether guarantee formed part of contract – whether liability under guarantee established
Legislation Cited: Corporations Act 2001 (Cth), Ch 5 Pt 5.7B Div 2, ss 588FB, 588FE, 588FF, 588FG
Duties Act 1997 (NSW), ss 12, 17
Environmental Planning and Assessment Act 1979 (NSW)
Cases Cited: Chicago Boot Co Pty Ltd v Davies & McIntosh as Joint and Several Liquidators of Harris Scarfe Ltd (2011) 85 ACSR 309; [2011] SASCFC 92
Cussen v Sultan (2009) 74 ACSR 496; [2009] NSWSC 1114
Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; [1966] HCA 21
Re Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liq) [2016] NSWSC 428
Sangha v Baxter [2009] NSWCA 78; (2009) 52 MVR 492
Sims v Celcast Pty Ltd (1998) 71 SASR 142
Sydney Appliances Pty Ltd (in liq) v Eurolinx Pty Ltd (2001) 37 ACSR 477; [2001] NSWSC 230
Category: Principal judgment
Parties: Westwood Capital Pty Ltd (Appellant)
Christopher Damien Darin in his capacity as liquidator for Portman Securities Pty Ltd (First Respondent)
Portman Securities Pty Ltd (in Liq) (Second Respondent)
Mario Pamboris (Third Respondent)
Representation: Counsel:
M K Condon SC (Appellant)
N Bailey (First and Second respondents)
No appearance (Third respondent)
Solicitors:
Jordan Djundja Lawyers (Appellant)
Maddocks (First and second respondents)
File Number(s): 2025/475329
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
On 26 March 2020, the appellant, Westwood Capital Pty Ltd (Westwood), entered into a contract with the second respondent, Portman Securities Pty Ltd (in liq) (Portman), for the sale of a commercial property at Punchbowl for $100 million. Westwood was controlled by Mr Bill Gertos (Mr Gertos) and Portman was controlled by Mr Mario Pamboris (Mr Pamboris).
Under the contract, Portman was required to pay a deposit of $10 million in three instalments. Portman paid the first two instalments, totalling $5,000,100, but failed to pay the balance of $4,999,900. By entering into the contract, Portman also incurred a liability to pay stamp duty exceeding $5.4 million within three months. After Portman failed to pay the balance of the deposit, notwithstanding an extension of time, Westwood terminated the contract.
Portman was subsequently wound up, and the first respondent was appointed as its liquidator. The liquidator and Portman commenced proceedings against Westwood and other parties. As against Westwood, they sought repayment of the amount paid under the contract and relief from Portman’s remaining contractual obligations on the basis that the contract constituted an uncommercial transaction and a voidable transaction for the purposes of Ch 5 Pt 5.7B Div 2 of the Corporations Act 2001 (Cth) (Corporations Act).
Westwood cross-claimed for payment by Portman of the unpaid balance of the deposit. It also sought payment of the same amount from Mr Pamboris pursuant to a personal guarantee which Westwood alleged formed part of the contract.
The primary judge found that the contract was an uncommercial transaction within s 588FB of the Corporations Act and was voidable pursuant to s 588FE(3) of the Corporations Act. His Honour rejected Westwood’s reliance on the statutory defence in s 588FG(2) of the Corporations Act. His Honour was not satisfied that Westwood entered into the contract in good faith, that Westwood had no reasonable grounds for suspecting that Portman was insolvent or would become insolvent by entering into or giving effect to the transaction, or that a reasonable person in Westwood’s circumstances would have had no such grounds for suspicion. The primary judge made strong adverse credibility findings against Mr Gertos, whose evidence was central to Westwood’s attempt to establish the statutory defence.
The primary judge made orders under s 588FF of the Corporations Act requiring Westwood to repay the amount paid by Portman and relieving Portman from its remaining obligations under the contract. Westwood’s cross-claim was dismissed. The primary judge also found that Westwood had not established that the amount claimed under the alleged guarantee remained unpaid.
On appeal, Westwood did not challenge the findings that the contract was an uncommercial transaction or that it was a voidable transaction. Westwood challenged the rejection of its statutory defence under s 588FG(2). It also challenged the dismissal of its claim against Mr Pamboris under the alleged personal guarantee.
The Court held (Free JA; Ball JA and Harrison AJA agreeing), dismissing the appeal:
As to Good faith - s 588FG(2)(a) (Grounds 2 to 5)
Cussen v Sultan (2009) 74 ACSR 496; [2009] NSWSC 1114, cited.
As to Adverse credibility findings (Ground 5(c))
Sangha v Baxter [2009] NSWCA 78; (2009) 52 MVR 492, cited.
As to Reasonable grounds for suspecting insolvency - s 588FG(2)(b) (Grounds 6 to 8)
Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; [1966] HCA 21; Sims v Celcast Pty Ltd (1998) 71 SASR 142; Sydney Appliances Pty Ltd (in liq*) v* Eurolinx Pty Ltd (2001) 37 ACSR 477; [2001] NSWSC 230; Chicago Boot Co Pty Ltd v Davies & McIntosh as Joint and Several Liquidators of Harris Scarfe Ltd (2011) 85 ACSR 309; [2011] SASCFC 92; Re Alsfafe Security Products Pty Ltd atf the Alsafe Trust (in liq) [2016] NSWSC 428, applied.
As to the Vendor’s inquiries into purchaser’s financial capacity (Grounds 4(a), 5(b) and 8)
As to the Application of s 588FG(2)(b) (Grounds 6 to 8)
Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; [1966] HCA 21; Chicago Boot Co Pty Ltd v Davies & McIntosh as Joint and Several Liquidators of Harris Scarfe Ltd (2011) 85 ACSR 309; [2011] SASCFC 92, applied.
As to the Personal guarantee (Grounds 10 to 11)
BALL JA: I agree with Free JA.
FREE JA: On 26 March 2020 the appellant, Westwood Capital Pty Ltd (Westwood), entered into a contract (Contract) with the second respondent, Portman Securities Pty Ltd (in liq) (Portman), to sell a property at 921-925 Punchbowl Road, Punchbowl (Punchbowl Property) for $100 million. Westwood was controlled by Bill Gertos (Mr Gertos) and Portman was controlled by Mario Pamboris (Mr Pamboris). Mr Gertos and Mr Pamboris had been professional acquaintances for many years. They had been involved in development activities together in relation to a number of properties including the Punchbowl Property.
Under the Contract, Portman was obliged to pay a deposit of $10 million, comprised of $100 on the date of the Contract, $5 million on or before 31 March 2020 and $4,999,900 on or before 30 June 2020. By entering into the Contract Portman also became obliged to pay stamp duty, exceeding $5.4 million, within 90 days. Portman paid the first two instalments of the deposit. It did not pay the third, despite being granted an extension of time to 30 September 2020. After issuing a demand for the overdue instalment, Westwood issued a notice of termination of the Contract on 8 October 2020. On the application of Westwood, Portman was wound-up pursuant to an order of the Supreme Court of New South Wales on 20 September 2021. The first respondent, Christopher Darin (Liquidator) was appointed as liquidator of Portman.
The Liquidator and Portman brought proceedings against a number of parties including Westwood. As against Westwood Portman relevantly sought to recover the $5,000,100 that had been paid as part of the deposit under the Contract (plus interest), and to be relieved of its other obligations under the Contract. Orders to this effect were sought on the basis that the Contract was a voidable transaction for the purposes of Ch 5 Pt 5.7B Div 2 of the Corporations Act 2001 (Cth) (Corporations Act). Westwood cross-claimed seeking an order that Portman pay the $4,999,900 said to be due as the final instalment of the deposit. Westwood also sought an order that the same amount be paid by Mr Pamboris, pursuant to a guarantee that he was alleged to have given under the Contract.
The Liquidator and Portman were successful at first instance. The trial judge found that the Contract was an uncommercial transaction, applying the definition in s 588FB of the Corporations Act, and a voidable transaction pursuant to s 588FE(3). Westwood failed in its attempt to rely on the statutory defence in s 588FG(2). The trial judge was not satisfied that Westwood had established that it entered into the Contract in good faith. Nor had Westwood established that at the time of the Contract it had no reasonable grounds for suspecting that Portman was insolvent or would become insolvent as a result of entering into or giving effect to the transaction, or that a reasonable person in Westwood’s circumstances would have had no such grounds for so suspecting. In reaching these conclusions the trial judge made strong adverse credibility findings against Mr Gertos, whose evidence was central to the statutory defence raised by Westwood.
A corporation controlled by Mr Gertos called Marsden Development Pty Ltd owned a property at 166-172 Parramatta Road, Annandale (Annandale Property). In June 2016 Portman entered into an agreement with Marsden Development Pty Ltd to purchase the Annandale Property for $68 million. In the course of negotiations relating to that agreement, Mr Gertos made a number of inquiries about the capacity of Portman to pay any agreed sum in respect of the Annandale Property. This has some significance when it comes to the approach adopted by Mr Gertos to the subsequent transaction concerning the Punchbowl Property, which in turn impacts on the application of the statutory defence in s 588FG(2).
According to his affidavit evidence, at some point prior to settlement of the sale of the Annandale Property, Mr Gertos spoke to Mr Pamboris about his capacity to complete the purchase. This led Mr Pamboris to organise a discussion between Mr Gertos and a person in Cyprus who said he worked for a large financial institution and who was described as one of the “equity partners” of Mr Pamboris. The person told Mr Gertos that the institution would provide “most of the funds” for Portman’s acquisition of the Annandale Property and that the rest of the funds would be borrowed from Westpac.
Mr Gertos described then speaking with the banker at Westpac who had been identified in this conversation, namely Graeme Smith (Mr Smith), in order to “verify the conversation” with the man from Cyprus. Mr Gertos said in his affidavit that after these conversations he was satisfied that Portman would be able to complete the purchase of the Annandale Property. Mr Savell gave affidavit evidence that in the course of providing accounting services to Westwood he also spoke with Mr Smith about possible funding for Mr Pamboris to acquire the Annandale Property.
As explained below, the accounts given at different times by Mr Gertos in relation to these matters were inconsistent. Further detail of the evidence concerning the negotiations over the sale of the Annandale Property is set out below.
The sale of the Annandale Property did not proceed to settlement because of the intervention of Transport for New South Wales (TfNSW), which in 2018 acquired the Annandale Property compulsorily for the purposes of the WestConnex project. As a result, Portman received approximately $8 million in compensation for the acquisition of its interest in the Annandale Property.
As of 2014, the Punchbowl Property was the site of the Croatian Club. In December 2014 Westwood entered into a Call Option Deed with the owners of the property to acquire it for $26 million. From July 2017 Westwood undertook a number of steps with a view to redevelopment of the Punchbowl Property, including by seeking a rezoning of the land. This involved seeking what is referred to as a gateway approval, being a step required under the Environmental Planning and Assessment Act 1979 (NSW) where amendment of a planning instrument is sought. In December 2019 Westwood exercised its option and entered into a contract to purchase the Punchbowl Property for $26 million, with an extended settlement date. Settlement eventually occurred in August 2021.
Westwood engaged Waldron Hill Projects Pty Ltd (Waldron Projects), a company controlled by Mr Pamboris, to perform project development services in respect of the Punchbowl Property.
At some point following the acquisition of the Annandale Property by TfNSW in 2018, Mr Gertos and Mr Pamboris began negotiating over the possibility of Portman purchasing the Punchbowl Property from Westwood. Mr Gertos gave evidence that he initially indicated that Portman would need to pay $145 million to secure the property. According to him, Mr Pamboris said that an overseas contact would be providing the funds for the purchase. Mr Pamboris made a counter-offer at a lower amount, and negotiations led to the parties agreeing upon a sale price of $100 million. Mr Gertos said the following in his affidavit evidence:
I was satisfied that Pamboris and his partners would be able to afford the purchase price based on the previous discussions I had with Graham Smith from Westpac, Pamboris himself, and Pamboris’ equity partner from Cyprus.
The trial judge did not accept the evidence of Mr Gertos about this purported state of satisfaction regarding the financing of the transaction. The trial judge made strong adverse findings about the credibility of Mr Gertos. Those findings were informed by a number of observations about Mr Gertos and the evidence that he gave. His Honour found that under cross-examination Mr Gertos was generally not prepared to respond to questions in a direct way and preferred to give speeches that he thought would advance the interests of Westwood. He also claimed to have no recollection of various matters. The trial judge had “no doubt that Mr Gertos’ claimed recollection or lack of recollection reflected his perception as to matters which would or would not advance Westwood’s case”.
Mr Gertos was also found to have given “several radically inconsistent accounts of events”. One of the matters about which Mr Gertos gave inconsistent evidence concerned his knowledge of the sources of finance for the proposed acquisition by Portman of the Annandale Property. Mr Gertos gave three very different explanations in this regard. As explained above, in his affidavit at trial, Mr Gertos said that he had spoken with a Cypriot man in 2016 who was described as an “equity partner” of Mr Pamboris. On this account Mr Gertos knew the identity of the proposed funder. In his affidavit Mr Gertos said that he could not recall the person’s name. Under cross-examination he proceeded to identify the person by name.
However, in June 2020 Mr Gertos had sworn an affidavit in proceedings in the Land and Environment Court of New South Wales in which he deposed that Mr Pamboris had said that he had a contact in Cyprus with substantial money, but Mr Pamboris had refused to divulge to Mr Gertos the name of the person, who was said to be part of a “very conservative and private family”. On this account, Mr Pamboris had become connected with the family in Cyprus because of the family’s involvement in the hotel business of the nephew of Mr Pamboris.
In August 2022 Mr Gertos was the subject of a liquidator’s examination. He was asked in the course of that examination what he knew of the identity of the investors behind Mr Pamboris. He said that he knew “nothing”. When pressed on whether Mr Pamboris had ever told him anything about the investors he said, “I never ask … When you sell something, you shut up. Never talk beyond the sale”. He went on to say that he and Mr Pamboris “never discussed his investors”. As the trial judge fairly observed, these various accounts were irreconcilable with each other.
The trial judge was satisfied that the evidence of Mr Gertos on these matters was deliberately false. His Honour concluded that he should not give any weight to the evidence of Mr Gertos on this matter or generally, unless corroborated by third party documentary evidence.
It is convenient at this point to record some of the other propositions advanced by Mr Gertos in the course of the Liquidator’s examination of him in August 2022. Mr Gertos said that Mr Pamboris, through his company Waldron Hill Projects, had acted incompetently in relation to the project development of the Punchbowl Property. In the words of Mr Gertos, Waldron Hill Projects had made an “absolute abortion” of the first application for development approval. This had resulted in Waldron Hill Projects owing Westwood Capital at least $1.5 million and possibly as much as $2.5 million, apparently by way of compensation. The precise timing of these events was not made clear at the examination, although the account given by Mr Gertos indicated that it was prior to the time of the TfNSW acquisition of the Annandale Property (which occurred in 2018). This affects the assessment of how Mr Gertos regarded Mr Pamboris by the time they were negotiating over the sale of the Punchbowl Property.
The Contract was formed on or about 26 March 2020. As noted above, a deposit of $10 million was required to be paid by Portman under the Contract. This had three components – $100 payable on the date of the Contract, $5 million payable on or before 31 March 2020 and $4,999,900 payable on or before 30 June 2020. The first two instalments were paid on time (with the $5 million amount having already been paid around 25 March 2020).
By entering into the Contract Portman became obliged to pay stamp duty of $5,483,055. This was due within three months of the Contract: ss 12 and 17 of the Duties Act 1997 (NSW).
On 19 June 2020 Portman and Westwood agreed to vary the date for payment of the balance of the deposit (being $4,999,900) to 30 September 2020. Portman did not pay that amount and Westwood terminated the Contract on 8 October 2020 on the basis of the breach by Portman.
The Court received evidence, including expert evidence, about the financial position of Portman at the time of the Contract. Geoff Green, an expert in corporate finance and lending, gave evidence that Portman did not have an income stream and did not have intangible assets capable of providing collateral for a loan. He also opined that, even having regard to the private assets of Mr Pamboris (which would be available if he were to offer a guarantee), Westwood would not have been able to arrange security at the level required to obtain funding for the deposit.
The trial judge accepted that evidence. His Honour found that at the time it entered into the Contract Portman did not have sufficient funds to pay either the balance of the deposit due on 30 June 2020 or stamp duty (due at around the same time), or any committed funding for those payments. His Honour found that Portman had “no realistic capacity of raising funds to pay the balance of the amount due under the Contract to purchase the [Punchbowl] Property and no realistic prospect of profiting from an onsale of that property to a third party”. Portman therefore had no realistic basis to expect it could complete the purchase of the property.
His Honour’s conclusion about the likely unprofitability of the transaction was informed by his finding that the Contract involved the purchase of the Punchbowl Property at a substantial over-value. The Court heard evidence from expert valuers. The experts gave valuations of the Punchbowl Property, as at 26 March 2020, ranging from $38 million to approximately $50 million. The trial judge observed that little turned on the difference between the experts in this regard, in circumstances where even on the highest value suggested by this range Portman agreed to acquire the Punchbowl Property at almost twice its true value.
On appeal Westwood takes issue with the weight that the trial judge was said to have attached to the purchase price having substantially exceeded the true value of the Punchbowl Property, as indicated by the expert evidence at trial. As Westwood correctly submits, there was no finding that the companies and individuals involved in the negotiations for the Contract were aware of such a discrepancy at the time. Nor had it been part of Portman’s pleaded case that the transaction was uncommercial because the parties agreed that Portman would pay more than the Punchbowl Property was known to be worth. The relevant allegation in Portman’s amended statement of claim as to the uncommercial nature of the transaction was as follows:
46 It may be expected that a reasonable person in the Company’s circumstances would not have entered into the Transaction having regard to:
(a) the lack of benefit to the Company of entering into the Transaction;
Particulars
(i) The Transaction was of no benefit to the Company because the Company was unable to pay the balance of the deposit and, at the time of entering the Transaction, had no reasonable prospects of doing so.
(ii) The Plaintiffs repeat the particulars to paragraph 48 below.
(b) the detriment suffered by the Company of entering into the Transaction; and
Particulars
The detriment suffered by the Company was at least $10,000,000, consisting of $5,000,100 paid to Westwood Capital and the $4,999,900 debt to Westwood Capital for the unpaid balance of the deposit.
(c) the benefits to Westwood Capital of entering into the Transaction.
Particulars
The benefit to Westwood Capital was at least $5,000,100, being that part of the deposit paid by the Company to Westwood Capital.
The particulars at paragraph 48 of the amended statement of claim set out a series of allegations about Portman’s lack of assets and revenue at the time of the Contract, the absence of any committed finance to fund the balance of the deposit and the absence of any reasonable prospect of Portman securing funding from any third party as would allow it to pay the balance of the deposit.
In submissions at trial for the purposes of establishing the uncommercial nature of the transaction Portman did place reliance on the fact that it had overpaid for the Punchbowl Property by many millions of dollars: see, for example, the submission recorded at J[81]. Westwood appears to have engaged with the substance of those submissions: see, for example, at J[85] and J[102]. Given the limited nature of the pleading there may be some basis for Westwood’s complaint that the discrepancy between the agreed price and the true value of the Punchbowl Property (as indicated by valuation evidence at trial) should not have featured in the analysis of the uncommercial character of the transaction or the rejection of the statutory defence. That in turn would suggest that, as urged by Westwood, the focus in applying the s 588FG(2) defence should be upon knowledge that the company would or might become insolvent by dint of entry into the Contract.
It is unnecessary to resolve the pleading issue. That is because, for the reasons developed below, the proposition that Portman overpaid for the property based on the valuation evidence at trial is not a matter of any ultimate significance when it comes to the decisive issues in applying s 588FG(2). Westwood’s appeal fails even if attention is confined, as Westwood submits it should be, to the question of whether there were reasonable grounds for suspecting that Portman would become insolvent by entering into the Contract.
In that context it is nevertheless relevant to observe that Mr Gertos was plainly aware that Portman had agreed to pay almost four times as much for the Punchbowl Property as Mr Gertos had recently paid to acquire it from the owners of the Croatian Club, pursuant to an option entered into several years prior. That is a relevant circumstance when considering whether there were reasonable grounds for Mr Gertos to have suspicions about the viability of Portman obtaining the necessary financing to fund its obligations under the Contract.
A significant issue at trial was whether the Contract included the grant of a personal guarantee by Mr Pamboris in respect of the obligations of Portman. There was a discrepancy in this regard between different copies of the Contract held by different parties. The executed copies of the Contract held by Portman and at least one of the copies produced by Westwood did not feature a guarantee clause. The relevant guarantee clause in each of those executed copies had been struck out. By contrast, Westwood relied on a further executed copy of the Contract in which the clause was not struck out.
In May 2025 Mr Pamboris entered into an agreement with Athenee by which he agreed to grant mortgages to Athenee over properties owned by Mr Pamboris in Brown Street Paddington and Livingstone Road Marrickville. Athenee was incorporated on 25 March 2025. The director and sole shareholder of Athenee was Ms Susan Polios, the wife of Mr Gertos. A significant and ultimately unresolved question was whether Athenee had, at the direction of Mr Pamboris, given $5 million to Westwood by way of discharge of a liability owed to Westwood by Mr Pamboris.
Mr Pamboris did not read evidence at the trial, but he was represented at the trial by a solicitor. Mr Pamboris was the third respondent to the appeal. By the time of the hearing of the appeal, the legal representatives of Mr Pamboris had ceased to act. Mr Pamboris did not appear at the hearing of the appeal. Nor did he file written submissions.
A transaction is an uncommercial transaction for the purposes of that section if it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction, having regard to the benefit and detriment to the company in entering the transaction, the benefit to other parties to the transaction and any other relevant matter.
The trial judge was also satisfied that Portman’s entry into the Contract caused the company to become insolvent “where it had insufficient funds to pay the whole of the deposit at the time of the Contract and Mr Pamboris had no apparent plan as to how the Company could fund the balance of the deposit within the short time it was due and no commitment from a lender in that regard”: J[91].
In terms of the claim against Westwood, the trial judge was satisfied that in circumstances where the transaction was voidable it was appropriate to make orders against Westwood pursuant to s 588FF requiring the repayment of the money paid by Portman, and a release from the balance of obligations under the Contract, subject only to resolution of the good faith defence pleaded by Westwood under s 588FG(2).
As noted above, on appeal Portman does not seek to challenge any of these findings. The only issue agitated on appeal concerns the resolution of the good faith defence. Section 588FG of the Corporations Act relevantly provides:
588FG Transaction not voidable as against certain persons
…
If transaction entered into for valuable consideration in good faith without grounds for suspecting insolvency
(2) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director-related transaction of the company, and it is proved that:
(a) the person became a party to the transaction in good faith; and
(b) at the time when the person became such a party:
(i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and
(ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and
(c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction.
In order to take the benefit of s 588FG(2), it was necessary for Westwood to demonstrate that each of (a), (b) and (c) was established. It was common ground that Westwood bore the onus in this regard. There was no issue at trial or on appeal about Westwood having provided valuable consideration under the Contract, thus satisfying s 588FG(2)(c). The controversy was instead about whether or not sub-pars (a) and (b) were satisfied.
On the question of good faith for the purposes of sub-par (a), the trial judge identified the following governing principles (at J[96]):
… the requirement of “good faith” in an uncommercial transaction case will focus attention on the defendant’s “purpose motive and intention” in entering the transaction including the defendant’s appreciation of the uncommercial or possible uncommercial nature of the transaction: Cussen v Sultan (2009) 74 ACSR 496; [2009] NSWSC 1114 at [34]–[36]. In Cussen as liquidator of Akai Pty Ltd (In Liq) v Commissioner of Taxation (2004) 51 ACSR 530; [2004] NSWCA 383, Spigelman CJ at [123] also observed that:
“It may well be that a failure to make inquiries will, in some cases, be of considerable significance when determining the good faith element of the defence under s 588FG(2)(a). It may also be the case that the absence of information, including the failure of the debtor to proffer such, will be of significance in determining whether a reasonable person would have had reasonable grounds for suspicion under (b)(ii).”
I am not satisfied that Westwood’s good faith is established, where it must have been apparent to Mr Gertos that there was at least a prospect the Property was being sold at overvalue, given the difference between the price for which Westwood would acquire the Property (albeit with the benefit of the option) and the sale price under the Contract; he knew that the Company was a proprietary company that had paid $5 million as the first part of the deposit; he knew the Company was assuming a liability to pay a little short of that amount as the second part of the deposit within three months, and substantial stamp duty; he knew the Company was assuming liability to pay $100 million within two years; and, on his own evidence, he made no inquiry to determine whether there was even a slight prospect that it could do so, prior to any difficulties arising from COVID-19.
… The test under s 588FG(2)(b)(i) is hybrid in character, since it is directed to whether the particular creditor, with its perspicacity, the information available to it, and with any analysis of that information that it had made, had “no reasonable grounds” for suspecting insolvency at the relevant time, and the requirement for “no reasonable grounds” is objective in character: Sims v Celcast Pty Ltd (1998) 71 SASR 142 at 146 (“Sims v Celcast”); Cook’s Constructions Pty Ltd v Brown (2004) 49 ACSR 62; [2004] NSWCA 105 at [45]; Chicago Boot above at [21]. The test under s 588FG(2)(b)(ii) is objective in character, and is directed to whether a reasonable person in the creditor’s circumstances, using the information reasonably available in those circumstances and making the analysis of that information which a reasonable person would make, would have had reasonable grounds to suspect the debtor’s insolvency: Sims v Celcast at 146; Chicago Boot at [21]–[22]. That matter will be determined by reference to a person who has the knowledge and experience of an average businessperson: Harkness v Commonwealth Bank of Australia Ltd (1993) 12 ACSR 165 at 167–169: Sutherland (as liquidator of Sydney Appliances Pty Ltd (in liq*)) v* Eurolinx Pty Ltd (2001) 37 ACSR 477; [2001] NSWSC 230 at [43]. In Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 at 658, Doyle CJ observed that the requirement to establish the negative under s 588FG(2)(b)(ii) was a fairly demanding test.
… [T]he concept of “suspect” used in s 588FG(2)(b) requires more than wondering whether a matter exists or not, and involves a “positive feeling of actual apprehension or mistrust” that the debtor will be able to pay its debts: Queensland Bacon Pty Ltd v Rees [1966] HCA 21; (1966) 115 CLR 266 at 303; Chicago Boot above at [20]. Ms Tovey also submits that instalment payments are not, by themselves, a reason to suspect insolvency and also noted that lateness of payments were not necessarily indicia of insolvency, and refers to the relevance of common industry practice: Pegulan Floor Coverings Pty Ltd v Carter above; Kel Builders (Qld) Pty Ltd (in liq) v Brett Nash Electrics Pty Ltd [2001] QSC 178. I recognise that, in Pegulan Floor Coverings Pty Ltd v Carter above, Doyle CJ noted that instalment payments did not, in themselves, necessarily indicate insolvency where they were industry practice, although his Honour there held that such payment and other factors were together sufficient to establish a suspicion of insolvency. In Wily (in his capacity as liquidator of Goltep Constructions (NSW) Pty Ltd (in liq)) v Eastern Elevators Pty Ltd [2003] NSWSC 377; (2003) 45 ACSR 261 at [35], Dunford J also noted that the use of instalment payments would not necessarily be crucial, where they are a practice in an industry. However, that proposition depends upon evidence of such an industry practice. The evidence in this case did not establish the existence of any industry practice consistent with the accumulation of debt and lengthy delays of payment in respect of the Company to which I have referred above.
On appeal Westwood does not take issue with the statement of applicable principles given by the trial judge. There was no material difference between the parties about the principles to be applied in applying s 588FG(2)(b).
The hybrid subjective and objective test under s 588FG(2)(b)(i) requires consideration of whether “the particular creditor, with its perspicacity, the information available to it, and with such analysis (if any) of that information as it had made, had reasonable grounds to suspect the debtor’s insolvency”: Chicago Boot Co Pty Ltd v Davies & McIntosh as Joint and Several Liquidators of Harris Scarfe Ltd (2011) 85 ACSR 309; [2011] SASCFC 92 at [21], citing with approval Sims v Celecast Pty Ltd (1998) 71 SASR 142.
In relation to both subpars (2)(b)(i) and (ii), the existence or absence of reasonable grounds to suspect insolvency must be assessed by reference to all of the circumstances which existed at the time of the transaction and without the wisdom of hindsight: Chicago Boot at [23]. In Sydney Appliances Pty Ltd (in liq*) v* Eurolinx Pty Ltd (2001) 37 ACSR 477; [2001] NSWSC 230 Santow J said at [43]:
The case law illustrates that there is no single factor whose presence invariably establishes that there was, or should have been, the requisite suspicion. Rather it is a question of looking not in hindsight but through the contemporary eyes of the parties, at the commercial circumstances then prevailing between them. This is to identify in that context those factors pointing towards insolvency of the debtor. This in turn is in order to ascertain which of those factors were apparent to the payee, and then the cumulative impact that knowledge of them should have had, or did have, upon the payee. There will also be potentially countervailing factors and circumstances to be weighed in the balance which could have tended to dispel suspicion at the time. …
The trial judge found that Westwood could not discharge its onus in respect of either limb of s 588FG(2)(b). His Honour found there to be an “obvious risk of [Portman’s] insolvency” arising from the requirement to pay the balance of the deposit and stamp duty by June 2020. His Honour rejected the submission that Mr Gertos had been reassured by the information previously said to have been provided in connection with the Annandale Property about funding being available from overseas equity partners and Westpac, in circumstances where the adverse credibility findings meant that this had not been substantiated on the evidence. Westwood also submitted that Portman had demonstrated a “track-record of engaging in large-scale property transactions”, but the trial judge rejected that submission finding that, as Mr Gertos plainly knew, Portman had never been required to complete the Annandale purchase. Westwood drew attention to the fact that (on its case) Mr Pamboris provided a personal guarantee of Portman’s obligations. The trial judge found that this did not assist Westwood in making out the elements of the defence in s 588FG(2)(b), given that the guarantee would only be engaged in circumstances where Portman had failed to comply with the obligations that it owed under the Contract.
Westwood also submitted that Mr Gertos had no knowledge of the internal financial position of Portman, nor was he reasonably required to have such knowledge in circumstances where there were no external indications of insolvency at the time of exchange. The trial judge rejected that submission. His Honour found, at [100], that:
… Westwood at least knew the Company was a proprietary company that had assume[d] obligations to pay in the order of $10 million in three months and that was sufficient to indicate insolvency, absent reason to think that it had the capacity to make those payments.
Westwood made related submissions directed to the objective aspects of s 588FG(2). It submitted that a reasonable businessperson would rely on representations made by Portman regarding funding arrangements, would regard such representations as credible and would not conduct a detailed forensic investigation of the purchaser’s financial position in the absence of any “red flag or warning sign or at all”.
The trial judge rejected those submissions, at J[104]:
I am not satisfied either that Westwood did not have reasonable grounds for suspecting that the Company was insolvent or would become insolvent by reason of entering the Contract and making the payment or that a reasonable person in its circumstances would not have had reasonable grounds for such a suspicion. Westwood’s knowledge of no more than the fact that a proprietary company, without apparent financial backing, was assuming liability to pay the balance of the deposit within three months and an obviously substantial amount of stamp duty raised the risk of the Company’s insolvency, and Mr Gertos made no inquiry that was capable of displacing that risk. The relevant matters were known to Westwood, through Mr Gertos, at the relevant time, where they arise from the obvious disconnect between the magnitude of the contractual obligations assumed by the Company and its financial and borrowing capacity, which was self-evident to Mr Gertos. I am satisfied that Westwood cannot establish a defence because the matters which gave rise to the Company’s insolvency were known to it, through Mr Gertos, at the relevant time and Westwood had plainly had reasonable grounds to know, and not merely suspect, that the Company would become insolvent by its entry into the Contract.
His Honour proceeded to dismiss Westwood’s cross-claim seeking judgment against Mr Pamboris and Portman for the outstanding deposit amount of $4,999,900. It had been conceded by Westwood at trial that as the cross-claim was the converse of Portman’s claim against Westwood, it was bound to fail if Portman succeed in its claim.
In relation to the claim under the guarantee against Mr Pamboris, the trial judge identified additional reasons why the claim would have failed in any event. Westwood claimed that a clause of the Contract was special condition 22, under which Mr Pamboris guaranteed the obligations of Portman. Westwood relied at trial on a copy of the Contract which contained that clause. However, as noted above, special condition 22 was deleted in the copies of the Contract held by Portman. In response to a notice to produce Westwood had also produced from its files a copy of the Contract signed by Mr Gertos in which special condition 22 had been deleted.
Westwood sought to rely on a file note purportedly taken by Mr Gertos at the time the Contract was signed which referred to Mr Gertos insisting on special condition 22 being included. The trial judge refused to accept that this was a contemporaneous or accurate record of events: [111]. Mr Savell gave evidence that he observed Mr Pamboris signing the guarantee. Although Mr Savell was not cross-examined (because of his unavailability on health grounds), the trial judge was unable to accept his evidence, noting that it was inconsistent with the account of the signing of the documents otherwise put forward by Mr Gertos. Although the trial judge rejected the evidence of Mr Gertos, the inconsistency was such as to leave his Honour with “no confidence that Mr Savell’s account is correct”. Mr Savill’s affidavit was also, in this respect, inconsistent with answers he had given at an examination by the Liquidator.
On the pleadings, Mr Pamboris had largely admitted the allegations against him, including that pursuant to the personal guarantee he was liable to pay the balance of the deposit. However, the trial judge was not satisfied that there was a proper basis to order relief against Mr Pamboris. Westwood pleaded that the amount of $4,999,900 was, upon termination of the Contract, due to it and neither Portman, the Liquidator nor Mr Pamboris had paid that amount. His Honour found that Westwood failed to substantiate the claim that the relevant sum remained unpaid. There was inconsistent evidence on this matter as between Westwood and Athenee. Documentary evidence suggested that Athenee had, at the direction of Mr Pamboris, paid $5 million into an account in Westwood’s name: J[123]. Three possibilities were left open. One was that Athenee had, as it claimed, paid out the sum of $4,999,900 to Westwood at the direction of Mr Pamboris. Another possibility was that this had not occurred and Westwood remained unpaid. The third possibility was that the true position was different again and undisclosed by the evidence. His Honour considered the third possibility to be “plainly open given the inconsistencies and implausibilities in Westwood’s evidence and the absence of evidence from Athenee”.
- The primary judge erred in concluding that the appellant did not act in good faith for the purposes of s 588FG(2), and in that respect erred in finding that:
a. the appellant knew the transaction was uncommercial because it knew that there was at least a prospect that the property was being sold to it at overvalue;
b. the appellant's knowledge that the second respondent (the Company) was a proprietary company which had paid $5m of the deposit and was liable to pay the balance of the purchase price justified rejection of the defence;
c. the appellant's failure to make inquiries of the Company's financial position also justified that course.
- The primary judge erred in finding that the appellant knew that the Company lacked financial backing to complete the contract to purchase the Property.
- The primary judge should have held that it was not incompatible with it acting in good faith for the appellant:
a. to know that it was selling the Property for a significant profit; and
b. not to make enquiries of the Company's financial position.
- The primary judge should have held that the appellant entered into the contract in good faith in circumstances where:
a. the sale constituted an arm's length transaction with an independent purchaser which the appellant knew had earlier contracted to purchase a property at Annandale for $68 million;
b. it was under no obligation to make enquiries of the Company's financial position;
c. the evidence of the appellant's director {Mr Gertos) was that he believed that the Company would complete the contract because of the fact that it contracted to do so and that the principal of the Company was an industry professional.
- The primary judge also erred in concluding that:
a. the appellant had reasonable grounds for suspecting that the Company was insolvent or would become insolvent by reason of entering the Contract and making the payment of $5m; and
b. a reasonable person in its circumstances had reasonable grounds for such a suspicion.
- The primary judge erred in concluding that the matters prescribed ins 588FF(2) (b) were not proved by the appellant because it knew that the Company was a proprietary company assuming liability to pay the balance of the deposit and a substantial amount of stamp duty.
- The primary judge ought to have held that the appellant proved the matters prescribed in s 588FF(2) (b) by reference to the matters referred to in grounds 4 and 5 hereof.
- In relation to the claim Mr Pamboris, the primary judge erred in not acting on his admissions- made in the defence filed on 29 November 2024- that:
a. he provided a personal guarantee in favour of the appellant; and
b. he was, and remain liable, to pay sum of $,999,9000 pursuant to the personal guarantee
- As such the primary judge erred in not entering judgment against Mr Pamboris on the personal guarantee.
Much of the debate on appeal focused on the application of the good faith requirement in s 588FG(2)(a), and whether his Honour erred in reaching the conclusion that Westwood had failed to establish that it entered the Contract in good faith. A number of significant questions of principle were raised in that context. One such question was whether taking advantage of the uncommerciality of a transaction at the expense of a counterparty is itself indicative of a want of good faith: see Cussen v Sultan (2009) 74 ACSR 496; [2009] NSWSC 1114 at [36]-[38].
It is sufficient for the purposes of resolving the appeal to deal with the grounds concerning s 588FG(2)(b). For the reasons developed below, the trial judge was correct to conclude that subpar (b) of s 588FG(2) was not satisfied. That conclusion compels the result that Westwood cannot take the benefit of s 588FG(2), such that the appeal must fail.
In the circumstances, it is not necessary to resolve the issue concerning good faith. Nor is it appropriate to do so. Much of the debate about the good faith limb of the statutory defence under subpar (a) of s 588FG(2) tended to be abstracted from the factual reality of the present case. It is undesirable to embark on the exercise of resolving the potentially important issues of principle that were raised. Such points of principle are better left for resolution in a case in which the debate has a firmer factual foundation.
As Mr Condon SC, who appeared for Westwood, frankly acknowledged in oral submissions, the critical obstacle facing Westwood on the appeal is demonstrating appellable error by the primary judge, in respect of the s 588FG(2) defence, in circumstances where Westwood bore the onus of proof and there were strong adverse credit findings against Mr Gertos, being the witness relied on by Westwood to explain the circumstances of the Contract. Mr Condon SC properly conceded that if Westwood could not overcome that obstacle, the appeal would be dismissed.
In my view, the obstacle is insurmountable. In the circumstances the appeal must fail.
Westwood contended in its notice of appeal and in written submissions that the trial judge erred by making a global finding that Mr Gertos was an unreliable witness, in circumstances where it was appropriate to have made a more qualified credibility finding, and to have considered the credibility of the evidence of Mr Gertos in particular respects. In oral submissions Westwood conceded that the trial judge was entitled to make the findings that he did about the inconsistency and lack of credibility of various aspects of the evidence of Mr Gertos. The point that Westwood nevertheless emphasised was that the trial judge erred in not placing any weight on the evidence of Mr Gertos even when it was unchallenged, not inherently improbable and corroborated to some extent.
The trial judge expressed the general conclusion that Mr Gertos was an unreliable witness. That does not involve any error, particularly when this finding is understood in the context of the reasons for judgment as a whole. His Honour was plainly alive to the principle that a witness may be found to be untruthful in particular respects but not others, and the credibility of the evidence of a witness ought to be assessed accordingly. His Honour referred in this regard to the observations of Basten JA (with whom Handley JA agreed) in Sangha v Baxter [2009] NSWCA 78; (2009) 52 MVR 492 at [155].
Westwood has not demonstrated that there were relevant aspects of the evidence of Mr Gertos going to the circumstances of the Contract that were in fact unchallenged, not inherently improbable and corroborated to some extent by other evidence. Most problematically for Westwood, the evidence of Mr Gertos that was squarely rejected by the trial judge as lacking credibility was the evidence directed to explaining his attitude to Portman’s financial capacity to pay the amounts due under the Contract, which built on his evidence relating to the sale of the Annandale Property. In relation to those matters, the trial judge plainly did consider in specific terms, and not merely by application of a global finding, the credibility and reliability of the evidence given by Mr Gertos.
Mr Gertos claimed that he had confidence about the capacity of Portman to pay the amounts due under the Contract to purchase the Punchbowl Property based on his previous conversations about the Annandale Property with the supposed equity partner of Mr Pamboris in Cyprus and with Mr Smith of Westpac. The trial judge squarely addressed the contradictory evidence of Mr Gertos on those matters and rejected the evidence about the alleged conversations: J[18]-[20], J[97] and J[100].
For the reasons developed below, that presents fundamental difficulties for Westwood’s case on appeal, where Westwood bears the onus of proof in respect of the statutory defence. If his Honour’s adverse credibility findings relevant to this topic are undisturbed, as they must be, Westwood is left without a coherent basis to explain the circumstances of the Contract in a way that is consistent with satisfying the elements of s 588FG(2)(b).
Westwood sought to rely on appeal on the general principle of caveat emptor, arguing as a related proposition that a seller of property is not ordinarily expected to interrogate the financial capacity of a buyer. It emphasised the commercial context in which the Contract was made, being the market for development of substantial commercial properties, where risk-taking involving large sums of money is typical and different parties may take different views about the profitability of a venture. Westwood submitted that in such a market, honest and proper conduct on the part of a seller like Westwood does not ordinarily involve the seller satisfying itself that the purchaser is acting prudently in its own interests and has the financial wherewithal to complete the transaction. Relatedly, Westwood submitted (as part of grounds 4(b), 5(b) and 8 of the notice of appeal) that a seller is under no general legal duty, whether as an aspect of good faith or otherwise, to inquire into the financial circumstances of a buyer.
From these premises Westwood argued that there was nothing in the circumstances of the Contract that would have led a reasonable person in the position of the seller to adopt a different attitude, or to form any suspicion about Portman’s inability to pay the amounts due to be paid in the months following the Contract. Westwood draws attention to the fact that Portman did not allege that Westwood acted dishonestly in the transaction, used sharp tactics or consciously took advantage of a counterparty suffering from some particular incapacity or disadvantage.
There may be many commercial property transactions where this is the correct framework of factual analysis when considering the application of s 588FG. But it is inapt in the present case. This was not a property transaction of a typical kind between a seller and a buyer acting at arms-length. Westwood, through Mr Gertos, had an extensive pre-existing relationship with Portman and Mr Pamboris, which involved a materially different dynamic and a materially different level of knowledge of the financial circumstances of the buyer.
As summarised above, Mr Gertos had claimed, at the Liquidator’s examination, that he approached his dealings with Mr Pamboris in relation to the Annandale Property in a manner that did not involve or require any interrogation of the financial capacity of Mr Pamboris. Thus he asserted that at the time of that transaction he knew nothing about the investors behind Mr Pamboris and never asked. He justified this with the logic that “When you sell something, you shut up. Never talk beyond the sale”.
If that attitude was reflected in consistent, coherent and credible evidence about how Mr Gertos and Westwood did in fact approach the sale of the Annandale Property, and later the sale of the Punchbowl Property, there could theoretically be a sound basis for Westwood to discharge its onus of proof in respect of s 588FG(2)(b), invoking the kind of expectations of commercial behaviour described above. However, there is no such evidence. Indeed, Westwood and Mr Gertos sought to advance at trial an entirely contrary position. By that account, starting with the sale of the Annandale Property Mr Gertos did take it upon himself to interrogate the financial capacity of Mr Pamboris and his companies to pay the amount agreed for the purchase of that property. He did so in circumstances where he had insight into the limited financial capacity of Portman and Mr Pamboris. In his affidavit at trial the reason Mr Gertos gave for having had confidence that Portman would be able to pay its debts related to the Contract as and when they fell due was that he was satisfied that Mr Pamboris had the funds available “based on the previous discussions I had with [Mr] Smith from Westpac, Pamboris himself, and Pamboris’ equity partner from Cyprus”. Self-evidently, the logic of this version of events was that Mr Gertos made those inquiries because he considered it necessary in the circumstances in his own interests to do so.
Through grounds 5 and 8 of appeal (elaborated upon in submissions) Westwood has attempted to reconstruct a path to demonstrating that the elements of s 588FG(2)(b) are satisfied. It submits that the following propositions can be salvaged from the evidence of Mr Gertos, notwithstanding that his evidence must be treated with caution given the justified adverse credibility findings made by the trial judge:
Mr Gertos was professionally acquainted with Mr Pamboris, had known him for many years and understood him to be an experienced operator in business, including as an accountant;
Mr Pamboris was independent from Mr Gertos and in that sense engaged with each other on an arms-length basis;
Mr Gertos knew that Mr Pamboris had a strong and sustained interest in acquiring the Punchbowl Property. He was persistent, to the point of being like a “dog with a bone”;
Mr Pamboris had previously demonstrated his seriousness as a commercial property developer by contracting to buy the Annandale Property for $68 million; and
negotiations for the sale of the Punchbowl Property were extensive.
These factors are said to support a conclusion that Mr Gertos believed that Portman would complete the Contract because it contracted to do so and because Mr Pamboris, as an industry professional, was prepared to undertake that commitment through Portman.
While the factual propositions emphasised by Westwood are broadly consistent with the evidence, they cannot be accepted in an unqualified way. As to (1), while it is true that Mr Gertos had a longstanding professional familiarity with Mr Pamboris, that cuts both ways for Westwood when it comes to the level of implicit trust placed in Portman’s ability to make a commercial bargain and perform its obligations. By the time of the Contract, Mr Gertos had formed a dim view of the professional abilities of Mr Pamboris. It cannot be said that he viewed Mr Pamboris as a businessman and professional whose judgment was sound. As to (2), while the parties were at arms-length in the sense that there was no indication that Portman was acting in such a way as to favour Westwood intentionally, the parties were well known to each other and Mr Gertos had an uncommon level of insight into the financial affairs of Mr Pamboris and Portman. As to (4), while it is true that Portman had previously agreed to pay $68 million for the Annandale Property (being a materially smaller sum than was agreed for the purchase of the Punchbowl Property), that transaction was never completed. This was not a company that Mr Gertos knew to have a track record of meeting its contractual obligations.
More significantly, this list of factual propositions is materially incomplete when it comes to assessing the circumstances that constituted reasonable grounds for suspecting that Portman would become insolvent by entering into the Contract. As explained above, this was not a situation where Westwood and Mr Gertos remained aloof from the affairs of Portman, and simply accepted at face value that Portman and Mr Pamboris were serious commercial operators with the capacity to perform the Contract. That is not a characterisation of events that is plausibly open to Westwood given the case run at trial. Westwood cannot now seek to separate the assertion by Mr Gertos that he had confidence that Portman would complete the purchase of the Punchbowl Property from his claimed conversations about the sources of funding lying behind Portman.
It is convenient at this point to consider specific criticisms that Westwood advances about the reasoning of the primary judge. Westwood submits (through ground 7 of the notice of appeal) that the trial judge placed undue weight on the fact that Portman was a proprietary company. The premise of the argument is that the trial judge reasoned that the mere fact that the buyer was a proprietary company was itself a cause for suspicion that by entering into the Contract Portman would become insolvent (or at least was one of a number of circumstances giving rise to such a suspicion). Westwood argues that any such proposition is “startling”, given that it is commonplace, particularly in the commercial property development market, for business to be conducted by proprietary companies.
The argument proceeds from a misreading of the trial judge’s reasons, which must be read fairly and in context. Westwood’s argument depends upon the references in his Honour’s reasons to the status of Portman as a proprietary company, at [100] and [104] (each of which is set out above). The statement in [100] – that Westwood “at least knew the Company was a proprietary company that had assume[d] obligations to pay in the order of $10 million in three months and that was sufficient to indicate insolvency, absent reason to think that it had the capacity to make those payments” – cannot be read in isolation from the surrounding passages in the judgment.
That statement was a direct response to the submission that Westwood had no knowledge of the Company's internal financial position, that Mr Gertos was not reasonably required to have such knowledge and that there were no external indicators of insolvency at the time of exchange. The trial judge’s cross-reference to what is further noted below is a reference to [104], where his Honour observed that Westwood knew that Portman was a proprietary company “without apparent financial backing” and found that Portman’s assumption of the obligation to pay large amounts in a short period of time “raised the risk of the Company’s insolvency, and Mr Gertos made no inquiry that was capable of displacing that risk”. His Honour proceeded to find that Westwood knew of these matters, which arose from the “obvious disconnect between the magnitude of the contractual obligations assumed by the Company and its financial and borrowing capacity, which was self-evident to Mr Gertos”.
In these passages his Honour was not suggesting that the mere fact of a buyer operating through a proprietary company is itself enough, regardless of context, to give rise to a suspicion of insolvency upon that company entering a transaction to purchase property. The fact that Portman was a proprietary company was part of the matrix for understanding what the circumstances suggested to Mr Gertos, and would have suggested to a reasonable person in his position, about the financial means available to that corporate entity. Portman was a special purpose vehicle, without any apparent source of support from related corporations. It was controlled by Mr Pamboris, with whom Mr Gertos was familiar from professional and business dealings over a number of years. That provided Mr Gertos with insight into the financial backing (or lack thereof) that Mr Pamboris was able to offer Portman. Portman did not have any substantial assets of its own and no apparent ongoing business activities separate from this transaction. Thus, on his Honour’s reasoning, it was not the mere fact of being a proprietary company assuming large liabilities that was significant. It was the fact that this was a proprietary company that was assuming the liability to make large payments in a short period of time “without apparent financial backing” and without “financial and borrowing capacity”.
His Honour’s conclusion about the reasonable grounds for suspecting that Portman would become insolvent by entering into the Contract are only reinforced by a consideration of other factual circumstances. By entering into the Contract, Portman was assuming obligations to pay very large sums of money within a short period of time. The Contract was formed on 26 March 2020 and by the end of June 2020 Portman was obliged to pay a further $4,999,900, being the balance of the deposit, and stamp duty exceeding $5.4 million.
Mr Gertos had been dealing with Portman, through Mr Pamboris, as a potential buyer of commercial property since the Annandale transaction in 2016. The only indication that Portman ever held any substantial asset was the receipt of $8 million from TfNSW. By the time of the negotiations over the sale of the Punchbowl Property, another entity of Mr Pamboris, Waldron Hill Projects, owed Westwood at least $1.5 million and possibly as much as $2.5 million, to compensate it for Mr Pamboris having made an “absolute abortion” of project management services in respect of the Punchbowl Property. Mr Gertos had plainly formed a dim view by that time of the professional capabilities of Mr Pamboris. He knew that Portman had paid $5,000,010 by the time the Contract was formed, through the first two instalments of the deposit. In the circumstances, there could not have been any reasonable basis for Mr Gertos to expect that any substantial part of the $8 million sourced from TfNSW was still available to fund the future obligations of Portman. There were obvious and pressing questions about where Portman was going to find the more than $10.4 million required to meet its obligations within a period of just over three months.
Westwood submits on appeal that the willingness of Portman and Mr Pamboris to assume an obligation to pay the State more than $5.4 million in stamp duty is a matter that would have been a source of comfort to Mr Gertos, because it was an indication that a commercially astute businessman was prepared to accept that liability and the risk of all of the potential consequences associated with debts to a government instrumentality. That submission overlooks the more immediate significance of the stamp duty liability that was triggered by the Contract, being the need for Portman to source an additional amount of other $5.4 million. It also assumes that Mr Gertos viewed Mr Pamboris as a commercially astute businessman. That was evidently not the case as of 2018.
Westwood accepts that if it does not succeed on the appeal as against Portman concerning the outstanding liability to pay $4,999,900, it cannot succeed in its claim against Mr Pamboris for enforcement of the personal guarantee allegedly given by him. For the reasons I have given above, the appeal as against Portman must be dismissed.
Accordingly, it is unnecessary to resolve the claim concerning the guarantee. One significant problem with that claim is that, on the findings of the trial judge, Westwood failed to establish that the sum of $4,999,900 remained outstanding. Westwood seeks to rely on admissions made by Mr Pamboris on the pleadings that he remained liable to pay Westwood such an amount pursuant to the guarantee. However, subsequent to the filing of the defence by Mr Pamboris, Athenee was joined to the proceedings and consequential issues arose concerning whether Athenee had, at the direction of Mr Pamboris, advanced the amount of $5 million to Westwood. At trial the position taken by Mr Pamboris was that the amount in question had, at his direction, been paid by Athenee to Westwood. In the face of that submission Westwood failed to prove that the amount in fact remained outstanding.
Westwood has not sought to cure the defect on appeal by referring to relevant evidence. To the extent that it seeks to rely on the admission by Mr Pamboris on the pleadings, that has limited force on the question of whether the amount remained outstanding, given that the relevant admission predates the claims concerning Athenee and the trial was conducted on the basis that Mr Pamboris denied that the amount remained outstanding. For these reasons, I would be inclined to reject the claim against Mr Pamboris, if it were necessary to resolve the issue.
The orders that I would make are:
Appeal dismissed.
The appellant is to pay the costs of the respondents.
HARRISON AJA: I agree with Free JA.
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Westwood Capital Pty Ltd
Christopher Damien Darin in his capacity as liquidator of Portman Securities Pty Ltd
(1966) 115 CLR 266
(2009) 52 MVR 492
(1998) 71 SASR 142
Appeal dismissed. The appellant is to pay the costs of the respondents ([99]).
Westwood’s cross-claim was dismissed. As the Contract was declared void pursuant to s 588FF of the Corporations Act, there was no basis for Westwood to demand payment of the final instalment of the deposit. As Portman had been relieved of its obligations under the Contract, there was also no basis to enforce the guarantee allegedly given by Mr Pamboris. In any event, the trial judge was not satisfied on the balance of probabilities that any guarantee was in fact given by Mr Pamboris. This was in circumstances where there was conflicting evidence about whether Mr Pamboris had signed a version of the Contract incorporating the relevant guarantee clause. There was also an unresolved issue about whether or not Westwood had already received payment of $5 million from a lender called Athenee Mortgages Pty Ltd (Athenee) at the direction of Mr Pamboris, by way of discharge of the amount allegedly owed by him. The trial judge was not satisfied that the amount was still outstanding.
Westwood appeals from a number of those adverse findings. It does not contest the conclusion that the Contract was an uncommercial transaction. However, it argues that the necessary elements of s 588FG(2) were established by the evidence. For the reasons which follow, that argument fails. In particular, the trial judge was correct to find that Westwood did not discharge its onus of proving that at the time of the Contract it had no reasonable grounds for suspecting that Portman was insolvent or would become insolvent as a result of entering into or giving effect to the transaction, or that a reasonable person in the same circumstances would have had no such grounds for so suspecting. That is sufficient to support his Honour’s conclusion that Westwood’s statutory defence fails. Given that conclusion, even if Mr Pamboris gave a guarantee in respect of Portman’s obligations and the relevant amount said to be owed is still outstanding, the guarantee is not engaged. It follows that the appeal should be dismissed.
Putting aside the admission by Mr Pamboris, his Honour was not satisfied on the balance of probabilities that any guarantee by Mr Pamboris became part of the Contract and took effect.
Mr Gertos said that he asked about the investors standing behind Mr Pamboris and then made follow up calls to verify the information, including with an Australian banker. His explanation of his attitude to the subsequent sale of the Punchbowl Property was that, having been satisfied of the financial backing that existed for the Annandale Property, he was confident that Mr Pamboris had access to the funds necessary for the purchase of the Punchbowl Property. Mr Gertos never claimed in his evidence that in relation to the Annandale Property or the Punchbowl Property he was content simply to rely on contractual promises and accept at face value Portman’s willingness to commit to contractual obligations.
This evidence must be treated with great caution, given the adverse credibility findings made by the trial judge about Mr Gertos. The critical point for present purposes is that it would be wholly artificial to approach the application of s 588FG(2)(b) on the basis that Mr Gertos remained aloof from the financial affairs of Portman, and took the attitude that he had no need to consider the capacity of Portman to pay the deposit and the stamp duty, because that was a matter solely for Portman. Characterising Westwood’s approach in that way is impossible to reconcile with the case that Westwood ran at trial in seeking to discharge its onus under s 588FG(2).
The application of s 588FG(2)(b) in the present case must therefore proceed from an acceptance, at least on a hypothetical basis, that Mr Gertos found it necessary in relation to the Annandale Property to make inquiries about Portman’s capacity to pay. On this hypothesis, he did not need to make further inquiries on that topic in relation to the Punchbowl Property because he was continuing to rely on his earlier inquiries. “Suspicion” for the purposes of s 588FG(2)(b) involves a “positive feeling of actual apprehension or mistrust” that the debtor will be able to pay its debts: Chicago Boot Co at [20], quoting Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 303; [1966] HCA 21. Where the circumstances of a buyer are such as to prompt inquiries by the seller about its financial backing, that may itself be suggestive of some feeling of apprehension about the capacity of the party to pay its debts. Attention then turns to what is revealed by the inquiries that are made. A seller might receive reassurances that remove the grounds for suspicion about insolvency that might otherwise exist. That was the essence of the case run by Westwood at trial. But here its appeal runs into the problem that the trial judge rejected the evidence of Mr Gertos about what he learned regarding the sources of finance for Portman. That creates a forensic void for Westwood. It is a void that Westwood is unable to fill on appeal.
These circumstances are also critical to understanding the reference by the trial judge in the passage quoted above to Mr Gertos having “made no inquiry that was capable of displacing that risk”. That does not suggest, as Westwood contended in its submissions, that the trial judge posited a general legal obligation on the part of a seller to make inquiries as to the financial capacity of a prospective buyer. The point being made was grounded in the particular facts of this matter. The circumstances of the transaction were, for the reasons given by his Honour, such as to give rise to questions about whether Portman had some source of financing to perform its obligations under the Contract. If Mr Gertos had made inquiries of the kind that could have answered those questions in a reliable way, and displaced the apparent risk of insolvency, that would have been significant.
That approach was not only logical given the circumstances of the transaction, it was also consistent with the way in which Westwood set out at trial to prove the elements of the statutory good faith defence. As I have endeavoured to explain above, through the evidence of Mr Gertos, and also Mr Savill, Westwood sought to prove that inquiries were in fact made (in relation to the sale of the Annandale Property), and that as a result, Mr Gertos became satisfied that Portman had the financial capacity to undertake the purchase. By this route Westwood sought to demonstrate as a subjective matter that Westwood had no reasonable grounds to suspect that Portman would become insolvent as a result of the Contract. This was also the basis that Westwood relied on to demonstrate on the objective standard that a reasonable position in Westwood’s circumstances would have had no such grounds for so suspecting.
The problem for Westwood is that this evidence was rejected. That left a situation where Mr Gertos had not been shown to have made inquiries that in fact led to reliable answers about the financial capacity of Portman. Given that Westwood bore the onus of proof, the absence of satisfactory evidence of inquiries of this kind became forensically critical. That reasoning involved no error.