Federal Court of Australia

SMBC Leasing and Finance, Inc. v Flexirent Capital Pty Ltd [2026] FCA 29

ORDERS

THE COURT ORDERS THAT:

1. The parties confer with a view to reaching agreement by 5 pm on 13 February 2026 as to the appropriate orders to give effect to these reasons for judgment and as to costs.

2. The parties email to the Associate to Thawley J by 5 pm on 13 February 2026, the orders which have been agreed.

3. If agreement on any issue is not reached by 5 pm on 13 February 2026, the parties are to file (and email to the Associate to Thawley J) by 5 pm on 18 February 2026 the unagreed orders the party seeks, together with submissions of no longer than 5 pages as to why the party’s orders should be made.

4. The proceedings be listed at 9 am on 20 February 2026 for argument on any orders not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THAWLEY J:

A    OVERVIEW

1 Between August 2018 and June 2021, four financiers were duped into advancing hundreds of millions of dollars in relation to fraudulent transactions devised by Mr Bill Papas (also known as Mr Basile Papadimitriou). The fraud was carried out by Mr Papas through associated entities (Forum Entities). The financiers have obtained judgments against Mr Papas and various associated entities in other proceedings.

2 One of the duped financiers was SMBC Leasing & Finance, Inc. It has not yet recovered its losses under the judgments it has obtained. SMBC’s losses arise from two financing arrangements SMBC entered into in respect of assets which, unbeknownst to it, never existed. In this proceeding, SMBC pursues its losses arising from the two arrangements from Flexirent Capital Pty Ltd, the first respondent. There was no dispute that, if Flexirent was found to be liable, then its parent, Humm Group Ltd (the second respondent), would be liable to SMBC under a guarantee.

3 The first financing arrangement was entered into in 2018 and the second in 2020. Under the 2018 arrangement:

(a) A company associated with Mr Papas, Forum Enviro (Aust) Pty Ltd (FEA), purported to enter into “Technology Licence Agreements” (TLAs) with Veolia Environmental Services (Australia) Pty Ltd. Under the TLAs, Veolia rented equipment (assets) in return for paying monthly “Usage Charges”.

(b) FEA purported to enter into the TLAs as Flexirent’s undisclosed agent under a “Principal and Agency Agreement” (PAA) between FEA and Flexirent.

(c) In four transactions – undertaken pursuant to a Master Receivables Acquisition and Servicing Agreement (2018 MRASA) and a Supplemental Deed (2018 Supplemental Deed) – SMBC acquired from Flexirent the right to receive the “Usage Charges” (monthly Receivables) under the TLAs, and title to the equipment (assets). These transactions occurred by Flexirent submitting an “Offer Letter” to SMBC. The relevant TLAs were attached to the Offer Letters and identified the equipment the subject of the TLAs. If accepted, SMBC paid Flexirent the relevant “Settlement Amount”.

4 In fact, Veolia did not execute the TLAs and the equipment did not exist. Veolia’s signatures on the TLAs were forged by Mr Papas. Mr Papas’s fraud was not uncovered until June or July 2021. A warrant for his arrest was issued on 20 October 2021. Mr Papas fled to Greece.

5 SMBC paid $29,709,714.14 to Flexirent pursuant to the 2018 arrangement with Flexirent.

6 In early 2020, Flexirent and Humm Group decided to exit their “Managed Service Finance” business. This resulted in Flexirent’s Head of Managed Services Financing, Mr Colbert, deciding to depart Flexirent. Before his formal resignation from Flexirent, effective 3 June 2020, Mr Colbert consulted to FEA, providing strategic and funding advice to Mr Papas.

7 Acting as consultant to FEA, Mr Colbert raised with SMBC the opportunity for it to work directly with FEA to fund further Veolia deals. Mr Colbert did this in discussions with Mr Timpany, who was employed by SMBC to originate and execute leasing and asset-based finance transactions.

8 After conducting due diligence, SMBC entered into the 2020 arrangement with FEA. SMBC did not contend that Flexirent knew that SMBC was going to enter into the 2020 arrangement with FEA otherwise than by attributing Mr Colbert’s knowledge to Flexirent.

9 Under the 2020 arrangement:

(a) FEA and Veolia purportedly signed two Master Technology Licence Agreements, one for Waste Management and one for Health Management (the 2020 MTLAs). Veolia could submit a “TLA Schedule” to FEA under the 2020 MTLAs if it wished to rent equipment: cl 1.1. Veolia would pay monthly “Usage Charges” (Receivables) to FEA.

(b) In fifteen transactions – undertaken pursuant to a Master Receivables Acquisition and Servicing Agreement (2020 MRASA) and a Supplemental Deed (2020 Supplemental Deed) – SMBC acquired from FEA the right to receive the “Usage Charges” (Receivables). These transactions occurred by FEA submitting an “Offer Letter” to SMBC. If accepted, SMBC paid FEA the relevant “Settlement Amount”. The 2020 MRASA and Supplemental Deed were in similar terms to the 2018 MRASA and Supplemental Deed, except that FEA replaced Flexirent and title to the equipment was not acquired by SMBC.

10 As had been the position with respect to the 2018 arrangement, Veolia had not in fact executed any of the relevant documents and the equipment did not exist.

11 SMBC paid $83,993,909.47 to FEA pursuant to the 2020 arrangement with FEA.

12 SMBC’s claims against Flexirent in relation to the 2018 arrangement, as narrowed during the hearing, were for:

(a) breaches of various express warranties in the 2018 MRASA;

(b) indemnification under a general indemnity in cl 8.1 of the 2018 MRASA; and

(c) misleading or deceptive conduct in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); and

(d) false or misleading representations in contravention of s 12DB(1)(a) and (b) of the ASIC Act.

13 SMBC’s claims under ss 12DA and 12DB were based on representations said to be expressly or impliedly conveyed by the terms of the four Offer Letters, read in the context of the commercial dealings between the parties, in particular the 2018 MRASA.

14 In summary, the four representations SMBC relied on (the Representations) were that: the 2018 TLAs had been duly executed by, and were binding on, Veolia; the Receivables referred to in each Offer Letter existed; the Related Assets referred to in each Offer Letter existed and had been delivered to, and duly accepted by, Veolia; and no Event of Default was subsisting or would result as a result of the transactions contemplated under each Offer Letter.

15 SMBC also relied on Flexirent’s failure to inform SMBC that the Representations were false because: the 2018 TLAs had not been executed by Veolia; the Receivables did not exist; the Related Assets did not exist; and there was an Event of Default. These were referred to in [39B] of the Second Further Amended Statement of Claim (2FASOC) as the Omissions.

16 SMBC contended that:

(a) FEA knew about the Omissions (and the fraud) because FEA’s knowledge included the knowledge of Mr Papas (and others); and

(b) FEA’s knowledge should be imputed to Flexirent under the general law and by s 12GH of the ASIC Act.

17 SMBC’s claims against Flexirent in relation to the 2020 arrangement built upon its claims for misleading and deceptive conduct (s 12DA) and false and misleading representations (s 12DB) concerning the 2018 arrangement. SMBC claimed that:

(a) it entered into the 2020 arrangement and purchased the Receivables in reliance on the Representations made expressly or impliedly in the four Offer Letters related to the 2018 arrangement and because of Flexirent’s failure to inform SMBC about the matters referred to as the Omissions: 2FASOC at [46B];

(b) if Flexirent had not engaged in the misleading conduct, SMBC would not have entered into the 2020 MRASA ,or purchased the Receivables arising from contracts purportedly entered into between FEA and Veolia, or advanced the funds pursuant to the 15 Offer Letters in 2020 and 2021: 2FASOC at [46C].

18 For the reasons which follow, in relation to the 2018 arrangement, SMBC succeeds in its primary claim, being its claim for breach of contract and contractual indemnity. The damages awarded in relation to these claims exceed the damages which would be awarded in relation to its statutory claims, which were also made out in relation to the 2018 arrangement. SMBC fails in its wholly statutory claims concerning the 2020 arrangement.

B THE 2018 ARRANGEMENT

B1    The contract claim: breach of warranty

Flexirent made warranties and representations which were not true

19 The 2018 arrangements were governed by:

(a) a Principal and Agency Agreement (PAA) between Flexirent and FEA, dated 13 June 2018: CBC1 at 1849;

(b) a Master Receivables Acquisition and Servicing Agreement (2018 MRASA) between Flexirent and SMBC, dated 2 August 2018: CBC1 at 3230;

(c) a Supplemental Deed (2018 Supplemental Deed) between Flexirent and SMBC, dated 2 August 2018: CBC1 at 3268; and

(d) an Agent Side Letter between SMBC, Flexirent and FEA dated 2 August 2018: CBC1 at 3286.

20 It was common ground that, in the 2018 MRASA, Flexirent represented and warranted in respect of each Receivable referred to in each of the four Offer Letters that (see: 2FASOC at [21]; Defence at [21]; cl 6.2 of the 2018 MRASA):

(a) there was no fraud, dishonesty, material misrepresentation or negligence on the part of Flexirent in connection with the selection and offer to SMBC of each Receivable – see: cl 6.2(b);

(b) the assignment of the Receivables Rights to SMBC under the relevant Offer Letter was valid and binding on it and enforceable against Flexirent’s creditors – see: cl 6.2(d);

(c) each Receivable was a valid and binding obligation of Veolia, enforceable in accordance with its terms against Veolia except to the extent that it is affected by applicable equitable principles and laws relating to insolvency and creditors’ rights generally – see: cl 6.2(f);

(d) Flexirent had undertaken appropriate “know your client” checks in connection with the relevant Lessee and had complied with all other money laundering regulations and any other applicable statutory requirements and applicable guidance – see: cl 6.2(i); and

(e) Flexirent had no reason to believe that any payments due to Flexirent under the Receivable Terms on or after the relevant Settlement Date would not be paid by the Lessee in full in accordance with the terms of the Receivable Terms – see: cl 6.2(k).

21 It was also common ground that those were not true because (see: 2FASOC at [23]; Defence at [23]):

(a) there was a misrepresentation on the part of Flexirent in connection with the selection and offer to SMBC of each Receivable, because Flexirent presented for sale purported Receivables which did not exist. Flexirent did not admit that any misrepresentation was material: Defence at [23]. However, for reasons expanded upon below, a representation that the Receivables existed was material. The existence of the Receivables was central to SMBC obtaining any return for the funds it advanced;

(b) all consents in relation to the assignment of the Receivables Rights to the Purchaser in accordance with the 2018 MRASA had not been obtained, because the Receivables did not exist;

(c) the Receivables Rights were not assignable, because the Receivables did not exist;

(d) the assignment of the Receivables Rights to SMBC under the 2018 MRASA was not valid and binding on Flexirent and was not enforceable against Flexirent’s creditors, because the Receivables did not exist;

(e) each Receivable was not a valid and binding obligation of Veolia, enforceable in accordance with its terms against Veolia, because the Receivables did not exist.

22 Flexirent did not admit, but did not seriously contest, that the following warranties and representations were untrue (see: 2FASOC at [22] and [24]; Defence at [22] and [24]):

(a) Flexirent owned the Related Assets free of Security Interest, and was entitled to and could (without the consent of Veolia or any third party) assign, with full title guarantee and free from all Security Interests, its interest in and sell the Related Assets, and had and would pass to SMBC, on payment of the settlement amount, full legal and beneficial ownership in and good and marketable title thereto free and clear of all Security Interests: cl 6.3(b); and

(b) the Related Assets exist, had been delivered to Veolia and were acceptable to Veolia in accordance with the terms of the Contract, and Flexirent had not received written notice from Veolia that the Related Assets were not acceptable to it or were not in accordance with the terms of the Contract: cl 6.3(c).

23 Those warranties and representations were not true, because the assets did not exist – see: Ireland at [13(b)], [21] to [22], [27] to [33], [38] to [40].

The only real issue was whether SMBC had to establish reliance

24 Flexirent submitted that SMBC’s claim for breach of warranty failed because it did not prove that it relied on those warranties in approving each drawdown. More specifically, Flexirent submitted that:

(a) the representations and warranties in cll 6.2 and 6.3 were not properly characterised as promissory, but were merely representational: RCS[2.2] to [2.13];

(b) therefore, SMBC had to prove that it relied on the warranties in approving each drawdown.

The “representations and warranties” were promissory

25 The relevant clauses in the 2018 MRASA were as follows (CBC1 at 3243–4):

6.2    Representations and warranties – Receivables

On the date of the relevant Letter of Offer and on the relevant Settlement Date for that Offer Letter, the Seller represents and warrants to the Purchaser in respect of each Receivable referred to in the relevant Offer Letter:

…

(b)    there is no fraud, dishonesty, material misrepresentation or negligence on the part of the Seller in connection with the selection and offer to the Purchaser of each Receivable;

…

(d)    the assignment of the Receivables Rights to the Purchaser under this document is valid and binding on it and is enforceable against the Seller’s creditors;

…

(f)    each Receivable is a valid and binding obligation of the Lessee, enforceable in accordance with its terms against the Lessee except to the extent that it is affected by applicable equitable principles and laws relating to insolvency and creditors’ rights generally;

…

(i)    the Seller has undertaken appropriate “know your client” checks in connection with the relevant Lessee and has complied with all other money laundering regulations and any other applicable statutory requirements and applicable guidance;

…

(k)    the Seller has no reason to believe that any payments due to the Seller under the Receivable Terms on or after the relevant Settlement Date will not be paid by the Lessee in full in accordance with the terms of the Receivable Terms;

…

6.3    Representations and warranties – Related Assets

On the date of the relevant Letter of Offer and on the relevant Settlement Date for that Offer Letter, the Seller represents and warrants to the Purchaser in respect of each Related Asset related to the Receivables referred to in the relevant Offer Letter:

…

(b)    the Seller owns the Related Assets free of Security Interest, and is entitled to and can (without the consent of the Lessee or any third party) assign with full title guarantee and free from all Security Interests its interest in and sell the Related Assets, and has and will pass to the Purchaser on payment of the Settlement Amount full legal and beneficial ownership in and good and marketable title thereto free and clear of all Security Interests;

(c)    the Related Assets exist, has been delivered to the Lessee and are acceptable to the Lessee in accordance with the terms of the Contract, and the Seller has not received written notice from the Lessee that the Related Assets are not acceptable to it or are not in accordance with the terms of the Contract;

26 These representations and warranties are plainly promissory warranties, as at the date of the Offer Letters. No reasonable person in the position of the parties would understand the clauses as other than promissory. A reasonable person in the position of SMBC would have understood from the language and conduct of Flexirent that the clauses were promissory warranties – see: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40].

27 Flexirent argued that the word “warranty” can be used in different ways and that, when the parties to the 2018 MRASA intended a condition of the contract to be promissory, they said so in clear terms, pointing to cll 6.5 and 6.7 as containing a series of express undertakings: RCS[2.3] and [2.5]. Flexirent also referred to the use of the word “ensure” in cl 17.1. It was submitted that these provisions “impose obligations which are performance based and forward looking” and that “[t]here is simply no comparable promissory language” in the relevant parts of cl 6.2 and 6.3: RCS[2.5].

28 Senior Counsel for Flexirent submitted – by reference to three cases addressing the law relating to warranties collateral to a later written contract – that cll 6.2 and 6.3 are representational, not promissory (at RCS[2.6]): JJ Savage & Sons Pty Ltd v Blakney [1970] HCA 6; 119 CLR 435; Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8; Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; 156 CLR 41.

29 Those cases do not address the situation where the warranties are contained in the contract and where no question arises about whether a collateral contract exists.

30 In JJ Savage, the defendant constructed and sold a boat to the plaintiff. The boat could not move faster than 12 miles per hour. The issue was whether certain pre-contractual statements about the estimated speed of the boat if equipped with a particular engine constituted a term of the contract for the construction of the boat or a “warranty” collateral to the contract.

31 The trial judge held that the representation was neither a term of the contract nor a collateral warranty: Blakney v JJ Savage & Sons Pty Ltd [1973] VR 385. The Full Court of the Supreme Court of Victoria held that the representation was a collateral warranty that the boat would attain an approximate speed of 15 miles per hour. The High Court held that it was not sufficient to establish a collateral warranty that the principal contract would not have been made without the asserted warranty: at 442. Rather, the test was whether the statement was promissory in nature. On the facts, the statement about the estimated speed of the boat, made before the principal contract was entered into, was representational and not promissory: at 442–3.

32 The issue before the High Court did not concern warranties contained in the principal contract. If this were not plain from the facts of the case, it was made clear by the High Court’s reasoning that the plaintiff “could have sought from the appellant [but did not seek] a promise – however expressed, whether as an assurance, guarantee, promise or otherwise – that the boat would attain the speed as a prerequisite to his ordering the boat”: at 442.

33 If such a promise had been made (and it had related to a future time when construction of the boat was complete), it would have been unnecessary for the disappointed boat owner to establish reliance on the contractual term in order to recover loss or damage. If the boat could not travel at 15 miles per hour, then the contract would have been breached, and the boat owner would have been entitled to an award of damages for breach of a contractual warranty.

34 Unlike the position in JJ Savage, SMBC sought and obtained promises from Flexirent in the express terms of a signed contract. In the commercial context in which the 2018 MRASA was entered into, and having regard to the language of the contract as a whole, cll 6.2 and 6.3 are contractually binding promises, not aspirational representations about future events. The contrary argument, by reference to cases about collateral warranties, is without merit.

35 Ross concerned the sale of a harvesting machine by Allis-Chalmers to Mr Ross, a farmer. Mr Ross made clear to Allis-Chalmers’ representative that his ability to finance the purchase was dependent on the harvesting machine harvesting a certain number of acres per day: at 8–‍9. Allis-Chalmers’ representative told Mr Ross: “My own experience with our machine is you should budget on 90 acres per day”: at 9. Applying the principles in JJ Savage, the High Court concluded that his statement did not constitute a collateral warranty and was not promissory in nature; it was an estimation or opinion, not a promise: at 10–11. As in JJ Savage, the High Court was not addressing warranties contained in a contract.

36 In Hospital Products, the High Court considered the characterisation of certain representations made by a distributor to United States Surgical Corporation (USSC) before USSC was appointed the exclusive Australian distributor of one of its products. Flexirent relied on the reasoning of Gibbs CJ (in dissent) at 61, concerning the need for pre-contractual representations to be characterised as promissory before they could be contractual. Chief Justice Gibbs referred to and endorsed what had been held in JJ Savage and Ross that a statement will constitute a collateral warranty only if it was “promissory and not merely representational”. The reasoning of Gibbs CJ does not take Flexirent’s case any further.

37 A “warranty” in a contemporary commercial written contract would ordinarily be understood as being a promise in the sense of saying, “I guarantee it” or “I give my word on it” – see, for example: Oscar Chess Ltd v Williams [1957] 1 WLR 370 at 374 (Denning LJ); Alexus Pty Ltd v Pont Holdings Pty Ltd [2000] NSWSC 1171; 10 BPR 18,371 at [15] to [17] (Young J); Thillagaratnam v Doan [2022] WASC 185 at [130] (Curthoys J).

38 Here, the relevant warranties are plainly promissory. The language relied upon by Flexirent in other provisions does not lead to a different conclusion.

SMBC did not need to establish reliance on the warranties

39 Flexirent relied on Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1306; 7 ASTLR 480 at [305], in which it was stated that “[c]ommon law damages for breach of a contractual warranty will not be awarded to a party who has not relied on the alleged truth of the warranty because in those circumstances the breach of warranty is not causative of any loss”. The only authority cited in Tekitu in support of that proposition was Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [1993] FCA 358; 42 FCR 470 (Northrop, Lockhart and Gummow JJ).

40 Accounting Systems concerned a claim for misleading or deceptive conduct and did not address the common law contractual position. Whilst the relevant representations in Accounting Systems were contained in the contract, the claim was not for breach of warranties contained in the contract. Because of the way the trial was conducted, CCH was taken to have abandoned any claim under contract: at 499. Consequently, the case centred on CCH’s claim that Accounting Systems had engaged in misleading or deceptive conduct by giving false warranties in the contract. Against that background, Lockhart and Gummow JJ held that CCH had to prove that the warranties were false and that CCH relied on them such that its losses were suffered “by” the conduct of Accounting Systems: at 505. The need to prove that the losses were losses “by” the conduct of Accounting Systems arose because the case was one for statutory misleading or deceptive conduct.

41 The distinction between a misleading conduct claim and a breach of contract claim, so far as concerns the need to prove that loss was suffered “by” the conduct, may also be made by reference to the need to prove reliance in a claim in tort for misrepresentation (or deceit). To establish the tort, it is necessary to prove reliance; but reliance does not need to be established to recover damages for breach of contractual warranty. As Lewison LJ stated in Wemyss v Karim [2016] EWCA Civ 27 at [26] (Longmore and Kitchin LJJ agreeing):

There is one further important difference between a claim in contract for breach of warranty and a claim in tort for misrepresentation. In the case of a claim for misrepresentation the claimant must show that he relied on the representation in deciding to enter into the contract (although the representation need not be the sole cause of the decision). However, in the case of a claim for breach of warranty all that the claimant needs to prove is that the warranty has been broken. As Slade LJ said in Harlingdon and Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1991] 1 QB 564:

“If a party to a contract wishes to claim relief in respect of a misrepresentation as to a matter which did not constitute a term of the contract, his claim will fail unless he is able to show that he relied on this representation in entering into the contract; in general, however, if a party wishes to claim relief in respect of a breach of a term of the contract (whether it be a condition or warranty) he need prove no actual reliance.” (Emphasis in original)

42 It is not essential to prove reliance in a claim for breach of a contractual warranty. It is sufficient to show that a promise was a term of the contract, that the promise was broken, and that the breach of promise resulted in loss. Liability flows from non-performance, that is, from a breach of the promise. See also: Turner v Anquetil [1953] NZLR 952 at 957 (F B Adams J); Chief Executive of the Department of Corrections v Fujitsu New Zealand Ltd [2023] NZHC 3598 at [123] (Cooke J); Dixon v Takapuna Residence Development Limited [2024] NZCA 129 at [21] (Gilbert J for the Court); Beale HG (ed), Chitty on Contracts (36th ed, Sweet & Maxwell, 2026) at [10-111]; Cartwright, Misrepresentation Mistake and Non-Disclosure (7th ed, Sweet & Maxwell, 2025) at [8-02] and [8-23].

43 A person who is unsure of the true position with respect to a matter, or who does not want to take the risk with respect to an existing or future state of affairs, will often require the matter to be included in the contract as a warranty precisely because the person is unsure, does not wish to conduct inquiries, or wants the risk of the future state of affairs not eventuating to fall on the other contracting party. The inclusion of the warranty in the contract serves to allocate risk in respect of the matter being untrue. In commercial contracts, it is common to find provisions which are intended to be strictly and literally performed: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641–2 (Jordan CJ), referred to in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 at [47] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

44 Contrary to Flexirent’s submission, SMBC did not have to establish that it relied on the warranties contained in the 2018 MRASA when approving the drawdowns made in respect of the four Offer Letters.

In any event, SMBC did rely on the warranties

45 SMBC would not have entered into the 2018 MRASA unless the representations and warranties had been given in that contract. No rational businessperson in the position of SMBC, engaged in the kind of receivables purchases which it was, would have entered into the 2018 MRASA without representations and warranties of the kind given.

46 Mr Butcher was President of SMBC Leasing UK in 2018. He executed the 2018 MRASA and the other transaction documents on behalf of SMBC under a power of attorney. He gave evidence that, when reading those documents before signing them, he remembered that he “focused on the representations and warranties given by Flexirent in the 2018 MRASA”: Butcher at [13]. In cross-examination, he confirmed that he remembered doing so, insisting when challenged that he had a memory of focusing on the representations and warranties and stating “that’s the key part of the documents”: T128.41–129.4. He gave evidence, consistently with what one would expect in this commercial context, that in transactions of this kind – buying lease receivables – the representations and warranties from the party selling the receivables are “vital” and “the crux of the deal”: T130.1–15.

47 There was nothing about the events which followed entry into the 2018 MRASA to suggest that the relevant warranties in the 2018 MRASA ceased to be relied upon. Mr Butcher relied on the relevant warranties when considering whether to enter into the specific transaction contemplated in relevant Offer Letters. He stated (T141.45–142.17):

So you’re looking at that alongside the fact that your reps and warranties are repeating in the documentation to make sure that you’ve got – that – that’s just giving – you know, giving it belt and braces comfort to make sure you’re buying a – a correct receivable.

48 Mr Macpherson, as Senior Vice President of the Credit Department Asia Pacific Division of SMBC, also relied on the representations and warranties in assessing the proposed deal from a credit perspective. He stated (Macpherson at [13]):

Upon receipt of the draft credit application for the facility in 2018, I carefully reviewed it to assess the matters I considered as part of my standard practice when assessing a credit application, including the credit profile of the obligor and the transaction, the request for debt facilities, the debt structure and terms (being the key terms and conditions of the financing, including the pricing, undertakings, representations and warranties, events of default, review events and security interests) and the grading of the obligor.

49 Flexirent submitted that SMBC was required to prove reliance at the time of each drawdown. I do not accept that it did. SMBC’s claim was based on the terms of the 2018 MRASA. Under that agreement, Flexirent warranted that, when an offer was made, the Receivables the subject of the offer would exist. They did not.

50 Even if SMBC had to prove reliance on the contractual warranties at the time of accepting the Offer Letters and paying the Settlement Amounts, the obvious inference is that it did. This is supported by Mr Butcher’s evidence, extracted above. SMBC knew that there were warranties that the relevant assets existed, because they were contained in the 2018 MRASA. The existence of the warranties was a central foundation of the commercial arrangement established between Flexirent and SMBC. The Offer Letters were contemplated by the terms of the warranties in the 2018 MRASA and concerned assets which the 2018 MRASA warranted existed. The contractual obligations between the parties had not relevantly changed since the 2018 MRASA. SMBC would not have accepted an Offer Letter unless it considered that Flexirent had warranted that the assets existed. The compelling inference that SMBC relied on the warranties in the 2018 MRASA at the time of accepting the Offer Letters was in no way harmed by the lengthy cross-examination about the exact sequence of events when accepting an Offer Letter or what the witnesses could now recall about what precisely was in the mind of the relevant witness many years ago when they played their role in accepting the Offer Letters.

Conclusion on breach of warranty

51 Flexirent warranted (amongst other things) that the assets and receivables existed. They did not. The losses arose because the assets and receivables did not exist. SMBC is entitled to damages for its losses.

52 It was not necessary for SMBC to establish reliance on the warranties, but it did establish that reliance, both in entering into the 2018 MRASA and in accepting the four Offer Letters.

B2    The contract claim: indemnity

53 Whilst SMBC has made out its primary case for breach of warranty, it is necessary to address the indemnity in cl 8.1 because, in relation to financing and break costs concerning the 2018 arrangement, the claim is said to give rise to an entitlement to damages which are not recoverable under its primary case for breach of warranty.

54 For the reasons which follow, Flexirent is liable to indemnify SMBC under cl 8.1.

55 Flexirent relied upon paragraphs (a) and (f) of cl 8.1, which provide:

8.1    General indemnity

The Seller indemnifies the Purchaser from and against liability, loss, costs, charges and expenses arising from or incurred in connection with:

(a)    a breach of representation or obligation by the Seller under any Transaction Document;

…

(f)    any fraud or negligence on the part of the Seller or any of its agents or delegates,

except to the extent caused or contributed by the fraud, gross negligence or wilful misconduct of the Purchaser.

56 The 2018 MRASA is a “Transaction Document” as defined in cl 1.1: CBC1 at 3237–8.

57 Clause 8.1(a) applies to the “representations and warranties” set out at [20] and [22] above. Flexirent breached those warranties. Flexirent is therefore liable to indemnify SMBC from and against liability, loss, costs, charges and expenses arising from or incurred in connection with those breaches. FEA’s conduct is not directly relevant to SMBC’s claim on the indemnity in cl 8.1(a).

58 Clause 8.1(f) also applies. It requires two matters to be established:

(1) that FEA committed fraud within the meaning of cl 8.1(f); and

(2) that FEA was Flexirent’s agent.

59 As to the first matter, there was no dispute that the signatures of Veolia’s officers on the 2018 TLAs were forged: Defence at [32(b)]. Mr Papas forged the signatures. FEA knew of the fraud. I reach those conclusions for the following reasons (see also [198] below):

(a) Mr Papas was the sole director of FEA: CBC5 at 1621.

(b) Mr Papas provided the 2018 TLAs, each of which the respondents admit was forged, to FEA’s broker: CBC1 at 2986, 2989 and 3004; CBC2 at 53, 54, 474, 738, 1108, 1110 and 1112.

(c) On occasion, Suzi Phillips (Mr Papas’ Executive Assistant) emailed revised TLAs to Mr Colbert, copying Mr Papas: CBC2 at 99, 100 and 116.

(d) Mr Papas emailed Mr Colbert updating him on the supposed timing of Veolia signing the documents and did so after Veolia had supposedly signed the documents: CBC1 at 956; CBC2 at 50.

(e) Mr Papas’ signature appears on each of the 2018 TLAs, both on behalf of FEA and sometimes also as witness to the purported Veolia signatures: CBC1 at 3397; CBC2 at 494, 835 and 1382.

(f) A notebook belonging to Mr Papas contains a diagram referring to “False Contracts” and “overseas escape” (CBC5 at 1042) and a page of what I infer to contain Mr Papas’ practice false signatures for the false contracts: CBC5 at 769.

(g) FEA did not invoice Veolia for the monthly rental amounts: Ireland at [28].

(h) FEA would have invoiced Veolia if it were unaware of the fraud. FEA did not do so because it knew the amounts were not actually owing and that doing so would have drawn the fraud to the attention of Veolia.

(i) FEA did not receive any payments from Veolia in respect of the purported contracts: Ireland at [30]. Notwithstanding receiving nothing from Veolia, FEA made monthly payments totalling over $25 million to SMBC from 2018 to 2021.

60 As to the second matter, FEA was Flexirent’s agent. Flexirent appointed FEA “as its non-exclusive agent” under cl 3.1 of the PAA: CBC1 at 1856. Under cl 3.5, the appointment was “strictly limited to the activities expressly contemplated”, which included that: (a) FEA could refer transactions to Flexirent by issuing a Transaction Proposal (cl 7.1(a)); (b) a Transaction Approval could be issued by Flexirent (cl 8.1(a)); and (c) for approved transactions, FEA was required to “prepare all necessary and appropriate documentation and arrange for the due execution of that documentation, including applicable approved Transaction Documents, by Customer”, “take appropriate Security from Customer”, “take all action necessary to ensure that the Payments and other moneys payable under any Transaction Document are paid in accordance with this Agreement”, and “perform all obligations of [FEA] under the relevant Transaction Documents” (cl 8.4(a)). By those provisions, FEA was appointed as Flexirent’s agent to engage in transactions which had the effect of binding Flexirent.

61 Flexirent submitted that cl 8.1(f) does not apply. It submitted that, read with cl 10.1, the term “agent” in cl 8.1(f) does not include FEA. Clause 10.1 provides:

10.1    Indemnity

The Seller indemnifies the Purchaser for liability, loss, costs, charges and expenses arising from, or incurred as a result of the Agent failing to comply with the Material Documents.

62 Clause 10.1 deals with a different subject matter to cl 8.1(f). Clause 10.1 is about losses arising from the “Agent” failing to comply with the Material Documents. The word “Agent” was defined in cl 1.1 of the 2018 MRASA by reference to the Supplemental Deed, which defined “Agent” as FEA: CBC1 at 3270. A “Material Document” was defined in cl 1.1 of the 2018 MRASA in the following way:

Material Document in connection with a Lessee, has the meaning given to it in the Supplemental Deed for that Lessee.

63 The 2018 MRASA is not a “Material Document” as defined in the Supplemental Deed: CBC1 at 3272.

64 Clause 8.1 covers fault-based liability for contractual breach, fraud or negligence. Clause 8.1(f) applies to all “agents”. Clause 10.1 provides a form of strict liability arising from failures of the “Agent” as defined, namely FEA. There is no inconsistency between cl 8.1(f) and cl 10.1. They address different matters.

65 In this context, the fact that there is a specific indemnity applicable to FEA does not lead to a conclusion that the general indemnity does not also apply. Further, the fact that there may be some circumstances where both cl 8.1(f) and cl 10.1 could apply does lead to the conclusion that cl 8.1(f) was not (objectively) intended to apply to FEA.

66 The losses sustained by SMBC arose from, or were incurred in connection with, the matters in cl 8.1(a) and (f), each of which independently apply to give rise to an entitlement on the part of SMBC to indemnity for its losses. The consequences of the warranties being wrong (cl 8.1(a)) and FEA’s fraud having occurred (cl 8.1(f)) is that SMBC has not received the whole of the Receivables in return for the “Settlement Amounts” it advanced.

B3    The claim for misleading conduct and false or misleading representations

SMBC’s case was confined to ss 12DA and 12DB of the ASIC Act

67 It is not strictly necessary to determine whether SMBC is entitled to damages for misleading conduct and false or misleading representations in relation to the 2018 arrangement because SMBC has made out its contractual claims and the damages for those claims exceed the damages which would be awarded if its claims for misleading conduct and false or misleading representations were made out. Nevertheless, SMBC’s claims should be addressed, in particular because of their relevance to the 2020 arrangement.

68 SMBC’s claim for misleading conduct and false or misleading representations was ultimately founded upon ss 12DA(1) and 12DB(1)(a) and (b) of the ASIC Act. SMBC initially raised ss 18(1) and 29(1)(a), (b) and (d) of the Australian Consumer Law (ACL) (in Sch 2 to the Competition and Consumer Act 2010 (Cth)) in support of its claim: 2FASOC at [41] to [44]. It later contended that the better view was that the ACL has no application because the alleged representations concern the supply or possible supply of “financial services” or “financial products”, such that s 131A of the Competition and Consumer Act disapplies the operation of the ACL: T262.15–20 and 263.28–42; ss 12BAA(7)(k) and 12BAB(1)(b) of the ASIC Act; definition of “credit” in reg 2B(1)(a) and (3)(b)(iv) of the Australian Securities and Investments Commission Regulations 2001 (Cth); International Litigation Partners Pte Ltd v Chameleon Mining NL [2012] HCA 45; 246 CLR 455 at [26] (French CJ, Gummow, Crennan and Bell JJ). In substance, SMBC abandoned reliance on the ACL and focussed solely on the ASIC Act.

69 Section 12DA(1) contains the general prohibition on misleading or deceptive conduct in trade or commerce in relation to financial services. It provides:

A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.

70 Section 12DB(1) prohibits specifically identified false or misleading representations in trade or commerce in connection with the supply or possible supply of financial services. Section 12DB(1)(a) and (b) provides:

A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services:

(a)    make a false or misleading representation that services are of a particular standard, quality, value or grade; or

(b)    make a false or misleading representation that a particular person has agreed to acquire services; or

…

71 SMBC alleged that Flexirent breached ss 12DA(1) and 12DB(1) by making the following representations (the Representations):

(a) the 2018 TLAs had been duly executed, and were binding on, Veolia (the first representation);

(b) the Receivables referred to in each Offer Letter existed (the second representation);

(c) the Related Assets referred to in each Offer Letter existed and had been delivered to, and duly accepted by, Veolia (the third representation); and

(d) no Event of Default was subsisting or would result as a result of the transactions contemplated under the Offer Letter (the fourth representation).

72 The Representations were said to have been made expressly in providing each Offer Letter: 2FASOC at [39]. The Representations were also said to have been made implicitly through Flexirent’s conduct from 2 August 2018 to 7 July 2020, the implication arising from: (a) providing each Offer Letter; (b) certain other communications; and (c) Flexirent’s failure to disclose the “Omissions”: 2FASOC at [39A].

73 The “Omissions” were Flexirent’s failure to disclose to SMBC that the Representations were false, namely that (2FASOC at [39B]):

(a) the 2018 TLAs had not been duly executed by Veolia and were not binding on Veolia;

(b) the Receivables referred to in each of the Offer Letters did not exist;

(c) the Related Assets referred to in each of the Offer Letters did not exist and had not been delivered to, and duly accepted by, Veolia; and

(d) an Event of Default was subsisting or would result as a result of the transactions contemplated under each of the Offer Letters.

74 SMBC alleged that Flexirent had knowledge of the matters not disclosed because the knowledge or state of mind of the director and officers of FEA (including Mr Papas) was FEA’s knowledge and the state of mind of FEA (Flexirent’s agent) was to be attributed to Flexirent: 2FASOC at [3A] to [3E] and [39C].

75 It was not disputed that, if the alleged representations were made, they were made “in trade or commerce” in connection with financial services and “the supply or possible supply of financial services”: ss 12DA(1) and 12DB(1). It was also not in dispute that the Representations, if conveyed, were false.

76 The issues raised by ss 12DA and 12DB, as confined by the focus of the parties in submissions, were:

(a) whether the first, second and third representations were made;

(b) whether the first and second representations were covered by s 12DB; and

(c) the amount of loss or damage.

The Offer Letters and TLAs

77 The Offer Letters were each in a similar form and substantially followed the form prescribed by the 2018 MRASA: CBC1 at 3259. Each Offer Letter: (1) attached a TLA (or two TLAs), which identified Related Assets offered for sale in an annexure; (2) expressly described the Receivables and Related Assets by reference to the terms of the relevant TLA; and (3) stated that no Event of Default “was subsisting or would result as a result of the transactions contemplated under the Offer Letter”.

78 An example Offer Letter is as follows (CBC1 at 3394–5):

Offer Letter

Offer Letter - Master Receivables Acquisition and Servicing Agreement between Flexirent Capital Pty Ltd (“Seller”) and SMBC Leasing and Finance, Inc. Sydney Branch (“Purchaser”) dated 2 August 2018 (“MRASA”)

The Seller gives notice as follows:

1.    This is an Offer Letter in connection with Veolia Environmental Services (Australia) Pty Ltd (ACN 051 316 584) (the Lessee), in respect of:

(a)    the Technology Licence Agreement - Waste Management executed by the Lessee on 13 July 2018 between the Lessee and Forum Enviro (Aust) Pty Ltd, with a “Commencement Date” of 5 July 2018; and

(b)    the Technology Licence Agreement - Waste Management executed by the Lessee on 13 July 2018 between the Lessee and Forum Enviro (Aust) Pty Ltd, with a “Commencement Date” of 5 August 2018,

(each a TLA), a copy of each of which is attached to this Offer Letter.

2.    The details of the Receivables and Related Assets which are offered for sale are:

(a)    in respect of each TLA, the Receivables are the “Usage Charge” (as defined in that TLA) and other monetary obligations owing to the Seller under the relevant TLA.

(b)    in respect of each TLA, the Related Assets are the “Equipment”, as defined in that TLA,

further details of which are set out in the spreadsheet annexed to this Offer Letter.

3.    The Receivables Rights in respect of the Receivables include (without limitation) the right, interest, present and future, actual or contingent of the Seller, in and to:

(a)    any Payment under the relevant Contract or Receivable Terms;

(b)    all claims, rights and remedies of the Seller arising out of or in connection with a breach of, or default under, the relevant Contract or Receivable Terms, or any payment of indemnity insofar as they relate to the payment of the Payments or Related Assets; and

(c)    any indemnity, guarantee or other form of security or credit enhancement relating to the relevant Contract or Receivable Terms (insofar as it relates to the Payments).

4.    The Settlement Date is 8 August 2018.

5.    The Settlement Amount is $14,411,503.49.

6.    The Settlement Amount is to be paid to the following account:

Account name: Flexirent Capital

BSB: 012-013

Account number: 837591252

7.    The Seller confirms that no Event of Default, Perfection Servicer Termination Event or Title Event is subsisting or would result as a result of the transactions contemplated under this Offer Letter.

The “Interpretation” clause of the MRASA applies to this Offer Letter.

79 In the “Equipment” annexure(s) to each TLA, the assets were described, the serial numbers of the assets were set out, and the location of the assets was given: CBC1 at 3403–5 and 3413–5; CBC2 at 500–1, 854–5 and 1388–9 (schedules headed “Equipment”).

Each of the Representations was conveyed

80 The representation that the 2018 TLAs had been duly executed by, and were binding on, Veolia: The Offer Letters stated at [1] that the “Seller [Flexirent] gives notice” that the Offer Letters were “in respect of” the TLAs “executed by the Lessee [Veolia]” and commencing on specific dates. Flexirent represented, and a reasonable person would have understood it to have represented, that the TLAs were duly executed by Veolia and were binding on Veolia. If the TLAs were not executed by Veolia, they would not have been “executed by the Lessee”. If they were not binding on Veolia, they would not have a relevant commencement date. The Offer Letters conveyed the existence of binding TLAs executed by Veolia and FEA, all the more so when regard is had (as it must be) to the subsisting contractual relationship between Flexirent and SMBC.

81 There was no surrounding conduct which conveyed that the TLAs had not been executed by, or were not binding on, Veolia. That is, the Offer Letters, assessed in the context of the whole of the conduct, clearly conveyed that the 2018 TLAs had been duly executed by, and were binding on, Veolia.

82 The representation that the Receivables referred to in each Offer Letter existed: In the context of the contractual relationship between the parties, each Offer Letter represented that the Receivables existed. The subsisting contractual arrangements were directed to such sales. The Offer Letters each stated that the “Receivables … are offered for sale”: at [2]. There was no point offering for sale Receivables which did not exist.

83 The Offer Letters stated that the Receivables “are the ‘Usage Charge’ (as defined in that TLA) and other monetary obligations owing to the Seller under the relevant TLA” (emphasis added), which conveys that the Receivables existed: at [2(a)] (emphasis added).

84 There was no surrounding conduct which conveyed that the Receivables did not exist.

85 The representation that the Related Assets referred to in each Offer Letter existed and had been delivered to, and duly accepted by, Veolia: In the context of the subsisting contractual relationship between the parties, each Offer Letter represented that the Related Assets referred to in each Offer Letter existed and had been delivered to, and were duly accepted by, Veolia. The contractual arrangements were directed to sales of the Related Assets as well as the Receivables. SMBC was to become the legal owner of the Related Assets upon acceptance of an Offer Letter. The Offer Letters each stated that the “Related Assets … are offered for sale”: at [2]. There was no point “offering for sale” assets which did not exist.

86 The Offer Letters stated that “the Related Assets are the ‘Equipment’, as defined in that TLA” (at [2(b)]), which again conveys that the Related Assets are something, being the assets identified in the relevant TLA. Any reasonable reader of the Offer Letters and TLAs would understand that what was being offered for sale were assets, of the description given in the TLAs, which existed. The descriptions of the assets in the TLAs were such as to convey the impression that the assets existed. For example, in the “Equipment” annexure to one TLA, the assets are described, the serial numbers of the assets are set out, and the location of the assets is given: CBC1 at 3403–5 (schedule headed “Equipment”). Clause 3.1 of the TLA required FEA to deliver and install the “Equipment” as defined in cl 23.1: CBC1 at 3399 and 3401. The Equipment could not be removed from the location identified in the Schedule: cl 8.19.

87 There was no surrounding conduct which conveyed that the Related Assets referred to in each Offer Letter did not exist or had not been delivered to, and duly accepted by, Veolia, as was contemplated by the Offer Letters and cl 6.3 of the 2018 MRASA.

88 The representation that no Event of Default was subsisting or would result as a result of the transactions contemplated under the Offer Letter: The fourth representation was admitted by Flexirent and there is no doubt that it was conveyed by each Offer Letter: at [7]; Defence at [39(d)].

The Representations were false

89 Each of the first three representations was false. Veolia’s signatures on the 2018 TLAs were forged. They were not duly executed, or binding on, Veolia. The Related Assets referred to in each Offer Letter did not exist, and were not delivered to, or duly accepted by, Veolia. The Receivables referred to in each Offer Letter did not exist.

90 The fourth representation was also false. An Event of Default is defined in cl 7 of the Supplemental Deed to have occurred if “all or a material provision of a Transaction Document or a Material Document, or a transaction in connection with it, is or becomes (or is claimed to be) void, voidable or unenforceable and such event has had or will have a Material Adverse Effect”: CBC1 at 3234 and 3276–7. The TLAs were Material Documents: CBC1 at 3272. Each TLA was forged and so was “void, voidable or unenforceable”. The TLAs being void had a “Material Adverse Effect” on SMBC within the meaning of the definition of the phrase, because there was no obligation on the part of Veolia to make any payment to SMBC: CBC1 at 3235 and 3272.

Flexirent contravened ss 12DA and 12DB(1)(b)

91 Flexirent contravened s 12DA of the ASIC Act on each occasion on which it made the Representations, being: 7 August 2018 (CBC1 at 3393–416); 28 September 2018 (CBC2 at 491–501); 23 October 2018 (CBC2 at 862–3); and 19 December 2018 (CBC2 at 1379–89).

92 Flexirent also contravened s 12DB(1)(b) of the ASIC Act on each occasion on which it made the Representations. Section 12DB(1)(b) was contravened because Flexirent incorrectly represented that Veolia had agreed to acquire services which it had not agreed to acquire.

93 Flexirent submitted that s 29(1)(a), (b) and (d) of the ACL could not apply because those provisions “are designed to regulate circumstances in which there is a discrepancy between the good or service which should have been supplied and that which was actually supplied” and do not apply when the relevant service does not exist: RCS[5.26] and [5.27]. As mentioned, SMBC abandoned reliance on s 29(1) of the ACL. I understood Flexirent to advance an equivalent argument in relation to SMBC’s claims based on s 12DB(1)(a) and (b).

94 Section 12DB(1)(b) of the ASIC Act (which corresponds with s 29(1)(d) of the ACL) prohibits “a false or misleading representation that a particular person has agreed to acquire services”. There is no good reason to construe this as only applying where the service exists. If a person has not agreed to acquire the service, the service does not exist so far as that person is concerned. Contrary to Flexirent’s submissions, s 12DB(1)(b) is not designed to regulate circumstances where there is a discrepancy between what was supplied and what should have been supplied.

95 Given Flexirent has established that s 12DB(1)(b) was contravened, as SMBC submitted:

(a) it is unnecessary to reach a concluded view about whether s 12DB(1)(a) was also contravened. However, I consider that s 12DB(1)(a) (which corresponds with s 29(1)(b) of the ACL) can apply where a financial service does not exist. For example, s 12DB(1)(a) would prohibit false or misleading representations about the value of financial services to be provided at a future time. Such financial services might never exist. Section 12DB(1)(a) does not expressly limit its operation to situations in which the relevant financial service exists and Flexirent did not advance any good reason to construe the provision as implying such a limitation;

(b) it is unnecessary to consider the application of provisions concerning statutory apportionment for contributory negligence or concurrent wrongdoing under ss 12GF(1B) and 12GR, which do not apply to claims under s 12DB – see: ss 12GF(1B) and 12GP(1).

Causation: loss or damage was sustained “by” Flexirent’s conduct and representations

96 Section 12GF of the ASIC Act entitles a person to recover loss or damage suffered “by” conduct of another person that contravenes ss 12DA or 12DB. This requires a causal connection between the loss and the contravention. It is satisfied if the conduct materially contributed to the loss, even if other factors also played a part: Henville v Walker [2001] HCA 52; 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109.

97 SMBC would not have accepted any of the Offer Letters if the Representations had not been made. SMBC suffered loss by accepting the Offer Letters and, amongst other things, paying the relevant Settlement Amounts. Flexirent’s contraventions of ss 12DA and 12DB were a material cause of SMBC’s losses. Quantification is addressed in Section B5 below.

98 Contrary to Flexirent’s submissions, it is not fatal to SMBC’s case that Mr Butcher and Mr Macpherson did not give precise evidence of a specific recollection of reading and relying upon each of the Offer Letters. The absence of a specific recollection of events which occurred many years ago is of limited significance. It does not displace the obvious and natural inference that SMBC relied on the Representations conveyed by the Offer Letters (understood in the context of the TLAs and conduct of the parties as a whole, including the 2018 MRASA) and that SMBC would not have agreed to each drawdown had those representations not been made.

99 The Representations went to the heart of the commercial arrangement, being the acquisition of the Receivables and Related Assets. SMBC would not have paid the large amounts it did unless it considered Flexirent had made the Representations, as they did through the Offer Letters, consistently with what was required by the 2018 MRASA. SMBC paid the Settlement Amounts because it thought that the Related Assets existed, Veolia had accepted and was bound by the TLAs, the Receivables existed and there was no Event of Default. It would not have done so if it knew any of those matters was untrue.

100 In any event, Mr Butcher’s and Mr Macpherson’s evidence confirmed – consistently with the obvious – that critical factors in the transaction included: the rights and related assets that SMBC was acquiring; the validity of the agreements under which they arose; and whether the transactions were compliant with the terms of the 2018 MRASA. For example, Mr Butcher gave evidence that when he approved the first payment under the 2018 arrangement, he understood the effect of paragraph 7 of the Offer Letter (the fourth representation) to be that there was a “valid deal” (T153.1–4):

the important part of point 7 is that they were giving us comfort that we had a valid deal which we could enforce upon if we needed to, and that we were going to collect the – going to be able to collect the future receivables under that transaction.

101 SMBC did not rely solely on the fact that the Offer Letters were issued. It relied on the representations contained in the Offer Letters. Contrary to Flexirent’s submission, the position of SMBC is not equivalent to the position of the lenders in Anchorage Capital Master Offshore Ltd v Sparkes (No 3) [2021] NSWSC 1025. In that case, funds were advanced after receiving drawdown or rollover notices issued in accordance with an earlier facility agreement: at [5] (Ball J). By virtue of the terms of the relevant facility agreement the notices made representations to the effect that (i) there had been no change in the financial position of Arrium that had a material adverse effect on the borrowers’ ability to perform their obligations under the agreement; and (ii) no event of default or potential event of default had occurred or continued unremedied: at [5].

102 There was substantial evidence that the lenders were aware of Arrium’s deteriorating financial position since the facility agreement: at [400]. Anchorage led no evidence of reliance on the representations contained in the notices. In the absence of that evidence, Ball J was not satisfied that the lenders relied on the representations made by the signatories as opposed to the lenders relying on the drawdown notices given by the entity seeking to make the drawdown: at [399]. His Honour stated:

The Anchorage Plaintiffs submit that reliance can be inferred because the giving of the notices was an essential step in the process by which loans were made or rolled over. However, that submission focuses on the wrong issue. I accept that the Lenders relied on the Drawdown and Rollover Notices in making or rolling over the loans. The question, however, is whether they relied on the representations said to be made by the signatories in those notices or whether, for example, they relied solely on the fact that the notices were given in accordance with the relevant facility agreement and the warranties were given by the entity seeking to make the drawdown. That raises the question whether the Lenders paid any attention to the representations contained in the Drawdown Notices. It also raises the question of what it was about representations made in a personal capacity by the individuals who signed the Drawdown Notices that caused the Lenders to advance or rollover funds – in the sense that but for those personal representations they would not have done so.

103 This aspect of his Honour’s reasoning was specifically upheld on appeal – see: Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88; 111 NSWLR 304 at [377] (Ward P, Brereton JA and Griffiths AJA).

104 On appeal, the plaintiffs’ case on causation was that, but for the relevant misleading or deceptive conduct, the notices would not have been issued, or would have been appropriately qualified; and that had they not been issued, or had they been appropriately qualified, the drawings the subject of the notices would not have been advanced: at [375]. The Court of Appeal concluded that the provision of a conforming notice did not of itself oblige the lenders to advance funds and that the mere repetition in the drawdown notice of the contractually stipulated representations did not oblige the lenders to advance the moneys, if relevant conditions precedent were not objectively satisfied: at [376]. If a lender formed the opinion that there had been a material adverse change, it could decline to make an advance, notwithstanding the provision of a conforming drawdown notice.

105 The present case is different. SMBC relied on the representations contained in the Offer Letters. SMBC paid the relevant “Settlement Amounts” under the Offer Letters because it was caused to believe by the Representations in the Offer Letters that the relevant assets existed. It also relied on the representations contained in the 2018 MRASA and the fact that the Offer Letters were made in accordance with that agreement. It was not suggested that there was anything which had occurred which caused SMBC to doubt that the assets existed and all of the circumstances, in particular the 2018 MRASA and the Offer Letters, pointed to the existence of the assets.

SMBC’s case based on the Omissions

106 Given that the Representations were made, that they were false, and that they were a material cause of SMBC’s loss, SMBC’s case based on the Omissions does not take matters any further. Examining whether there was a reasonable expectation of disclosure is generally unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 at [23] (French CJ and Kiefel J).

107 The Omissions and Flexirent’s silence is considered in relation to the 2020 arrangement, where those matters assume greater significance.

B4    Expectation loss and damage for breach of warranty

108 Damages for breach of contract are to be calculated by reference to the position in which SMBC would have been if the contract had been performed: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 at [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ); Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; 281 CLR 39 at [48] (Gordon J). The measure of damages for breach of contract is calculated by reference to the value of the promised performance, sometimes referred to as “expectation loss” or “expectation damages”: Cessnock at [49].

The starting figure

109 There was no issue that the starting figure for calculating expectation loss was $15,259,500: T257; Cairns 2 at [20]; Nguyen 1 at [5.5.3] and [5.5.4]. This represents the Receivables that SMBC would have received under the four Offer Letters if the warranties were true, less what it did receive from FEA by way of payments of those Receivables.

No discount for “contingencies” or “time value of money”

110 Flexirent submitted that it was necessary to discount the amount of $15,259,500 by 5.1% for “contingencies” and the “time value of money”: RCS[6.7]. No sensible basis for the application of either discount in circumstances such as the present was advanced.

111 Payments were made to SMBC until 30 June 2021. No losses were suffered until that point in time. The fraud was then discovered. Losses were suffered from 30 June 2021 on each occasion payments should have been, but were not, received. The last payment would have been received on 23 November 2023. Losses have been calculated by reference to the dates on which the losses were sustained.

112 There is no uncertainty about loss. It has occurred and is known. There should therefore be no reduction for “contingencies”.

113 There is no claim for future losses. If there had been, it would have been appropriate to award the present value of the future loss. There should be no reduction for the “time value of money”.

Interest up until judgment

114 It was not in dispute that interest in respect of the undiscounted total of $15,259,500 – calculated from the time each unreceived Receivable was not received up until 30 June 2025 – was $3,304,526: Cairns 2 at [20]; T297–300.

115 SMBC is entitled to payment of interest in the amount of $3,304,526 and to interest from 30 June 2025 until the date of judgment.

No discount for “tax benefits” from depreciation claims

116 Flexirent submitted that account should be taken of what were said to be “tax benefits” from depreciation claims, which it calculated at $1,997,216. The issue was raised because, in the 2018 and 2019 financial years, SMBC claimed depreciation deductions in respect of the assets (title to which was transferred to SMBC), which – unbeknownst to SMBC – did not exist.

117 Flexirent relied on expert witness reports prepared by Mr Nguyen, who was instructed to assume that any award of damages would not be assessable income for tax purposes: Nguyen 1 at [1.3.2] and [3.2.4]. Mr Nguyen calculated a contended “tax benefit” which would arise if SMCB obtained the benefit of the depreciation deductions and if the award of damages was not taxed.

118 Flexirent has not established that SMBC is likely both to keep the benefit of the depreciation deductions and avoid a tax liability on the award of damages. Indeed, that scenario is most unlikely. Flexirent has not discharged the onus of proving that the damages to be awarded would not be subject to tax – see: Finley v Connell Associates [2002] Lloyd’s Rep PN 62 at [218]. Indeed, the “expectation loss” award of damages represents income that would have been received and is therefore likely to be taxable as ordinary income in the hands of SMBC.

119 Whilst the parties adduced evidence addressing various contended tax consequences flowing from the true events which occurred, the tax implications overall are uncertain. By way of example, if the depreciation deductions which have been claimed are disallowed by the Commissioner of Taxation, it is at least possible that a deduction might be available under s 40-880 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), even if there are arguments against its application. If the relevant amounts are not deductible at all, including under s 40-880, then the amounts may form part of the cost base of Capital Gains Tax (CGT) assets. Any “benefit” would depend on a CGT event occurring and the amount of any capital proceeds.

120 The issues are further complicated by the fact that the depreciation deductions claimed were not evenly spread and determining the amount of any asserted “tax benefit” from the claim for depreciation involves examining the utilisation of tax losses which might not ultimately be able to be used.

121 The existence (or at least retention) of any “tax benefit” related to depreciation deductions is unlikely, certainly in any amount approaching that calculated by Mr Nguyen, because the “benefit” assumes that the award of damages is not taxable. It is not possible on the material before the Court to reconstruct accurately those of SMBC’s taxation affairs which might be affected by the events which have given rise to this dispute, including the fact that SMBC claimed depreciation deductions which (unbeknownst to SMBC) it should not have, given that the assets did not exist. In circumstances where SMBC claimed depreciation deductions without knowing a fraud had been perpetrated against it, it is likely that an appropriate settlement will be reached with the Commissioner having regard to the totality of SMBC’s position in relevant years. Any settlement is likely to take into account the award of damages made by the orders giving effect to these reasons for judgment.

122 The point of taking tax considerations into account in awarding damages, where they can be ascertained sufficiently reliably, is to ensure that the recipient receives just and fair compensation – see, for example: Daniels v Anderson (1995) 37 NSWLR 438 at 585F; Davinski Nominees Pty Ltd v I & A Bowler Holdings Pty Ltd [2011] VSC 220 at [58] and [59]. For the reasons given, and as is further explained below, the evidence does not establish that SMBC would be over-compensated if an amount were not deducted from the award of damages for the asserted “tax benefits” which Flexirent contends SMBC obtained.

No deduction for GST refund

123 SMBC has lodged objections with the Commissioner in respect of Goods and Services Tax (GST) it incorrectly paid. Based on the false belief that the contracts between Flexirent (through its agent, FEA) and Veolia were genuine, SMBC treated the amounts payable to SMBC under the assigned TLAs as consideration for taxable supplies and paid GST in relation to those supplies: CBC5 at 1992. It has requested a refund of $1,894,380 in respect of the months August 2018 to June 2021: Lancaster at [3].

124 Senior Counsel for Flexirent submitted that the Court should proceed “on the common-sense footing” that GST incorrectly paid as a result of the fraud will be remitted by the Commissioner to SMBC: RCS[6.8].

125 Flexirent’s submission provides a good example of the risks in approaching issues, particularly taxation issues, by asserting “common-sense” outcomes without articulating why the outcome is likely or examining the relevant statutory regime.

126 Incorrectly paid GST is not automatically refunded. Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) addresses the circumstances in which “excess GST” may be refunded. In simple terms, GST is not refundable where it has been “passed on” to another entity. Given the nature of the GST system, GST is often (if not typically) passed on – see generally: Avon Products Pty Ltd v Commissioner of Taxation [2006] HCA 29; 230 CLR 356 at [8]; Geocon Land Holdings No. 5 Pty Ltd v Commissioner of Taxation [2025] FCAFC 172 at [110].

127 Further, the taxpayer bears the onus of establishing that the “excess GST” was not passed on, a matter which may prove difficult to establish even where the economic burden of the tax has been borne by the taxpayer.

128 A solicitor representing SMBC gave evidence that the ATO’s position was that only the GST in respect of the month of June 2021 should be refunded because that was the only month in respect of which SMBC had discharged its onus of establishing that no amount of GST had been “passed on”: Lancaster at [5]. Contrary to Flexirent’s submission, the evidence was in no way “vague”. It referred to the relevant sections of the ITAA 1997 and GST Act, accurately summarised the effect of the provisions, and clearly conveyed what the ATO had stated to be its position, in terms which accord with what one would expect.

129 There should be no deduction for an “anticipated” GST refund. If SMBC does receive a refund for GST for one month, I am not satisfied that would result in over-compensation. Rather, as mentioned earlier, the likely course of events is that an appropriate overall resolution will be reached between SMBC and the Commissioner which is likely to take into account that (unbeknownst to SMBC): no assets were acquired, depreciation deductions should not have been claimed, and the award of damages from this proceeding replaces what would have been income in SMBC’s hands had Flexirent not breached its contract with SMBC. It is not possible to determine what any such settlement might be.

No deduction for security deposits received and held by SMBC

130 SMBC received $1,503,810 in security deposits for the 2018 TLAs in a collections account in its name: CBC5 at 2023–101. No person has asked for that amount to be returned. Flexirent claims that the amount should be used to reduce the damages from its breach: RCS[6.13].

131 Flexirent’s submission proceeds on a misunderstanding of the operation of the relevant contractual provisions. Clause 5 of the 2018 Supplemental Deed provided (CBC1 at 3276):

5.    APPLICATION OF SECURITY DEPOSIT

If, at any time, [FEA] fails to comply with the corresponding clause 2.6 (Agent obligation regarding Collections) of the Agent Side Letter, then [SMBC] may recover an amount equal to the difference between:

(a)     the amount of the Collections received by the Agent; and

(b)     the amount that the Purchaser actually receives on that account,

and may withdraw and apply any Security Deposit Amount to the extent necessary to recover that amount.

132 It was common ground that the reference to cl 2.6 of the Agent Side Letter should be a reference to cl 2.4, which provided (CBC1 at 3288):

2.4    Agent obligations regarding Collections

Notwithstanding any provision (including clause 14.4) of the Principal and Agency Agreement, [FEA] must remit all Collections received by [FEA] to the Collections Account on the same Business Day of receipt of those Collections by the Agent.

133 FEA did not receive any “Collections” as defined. Veolia did not pay anything to FEA. FEA did not fail to comply with cl 2.4. SMBC does not have, and never had, a contractual right to withdraw and apply any Security Deposit Amount. Flexirent did not suggest there was any other relevant right to the Security Deposit Amount.

134 Given that Flexirent has not established that SMBC has any demonstrated right to use the Security Deposit Amounts, the security deposits cannot be applied to reduce the losses consequent upon Flexirent’s breach. That will not ultimately result in a windfall gain to SMBC. The security deposits are likely to be addressed by way of insolvency set off. If FEA has to pay SMBC, the Liquidators are likely to be able to deduct the amount of the security deposits from what the Liquidators would otherwise have to pay to SMBC.

Liquidator funding and recoveries from the liquidation

Background

135 Between 6 December 2021 and 17 June 2022, SMBC provided $2,125,000 of funding to the Liquidators of FEA (and other Forum Entities) by way of a limited recourse loan pursuant to a Funding Deed to which SMBC acceded. The purpose of the funding was to fund the Liquidators’ remuneration and expenses incurred in connection with the external administrations of the Forum Entities, “including but not limited to, their initial investigations of the Relevant Entities and the identification of possible future sources of asset recoveries”: cl 3.2 of the Funding Agreement; CBC5 at 1580. SMBC later entered into three side deeds extending and increasing its funding commitments to the Liquidators: Preston at [8].

136 The Forum Entities hold assets which were the subject of claims by two Westpac entities, SMBC and Societe Generale (Financiers) that certain funds that the Forum Entities received, or assets acquired with those funds, or their traceable proceeds, were held on trust for the Financiers. Most of those claims were brought by the Financiers in three Federal Court proceedings that were heard together by Cheeseman J in February 2023 (Forum Proceedings): Preston at [17]. Justice Cheeseman delivered reasons for judgment on liability on 11 October 2024: Westpac Banking Corporation v Forum Finance Pty Ltd (in liq) (Liability) [2024] FCA 1176 (Cheeseman J). Justice Cheeseman gave judgment on relief on 21 May 2025 and delivered reasons for judgment on relief on 1 August 2025: Westpac Banking Corporation v Forum Finance Pty Ltd (in liq) (Relief) [2025] FCA 882. Her Honour made orders in favour of SMBC recognising its proprietary claims over the assets of FEA and other “Forum Entities” and SMBC’s personal claims against FEA, other Forum Entities, and Mr Papas. Also on 1 August 2025, her Honour gave judgment and delivered reasons on the Liquidators’ application for directions (Liquidators’ Proceeding) regarding the approach that the Liquidators proposed to take in making distributions from the assets of the Forum Entities to the Financiers and other creditors, in light of the proprietary and personal claims recognised by the Court in the Forum Proceedings: Preston, in the matter of the Forum Group of Companies Pty Ltd (in liq) [2025] FCA 883.

137 The Liquidators anticipate that:

(a) SMBC is likely to receive $1,063,000 from the Liquidators by way of repayment of the funding advanced by SMBC to the Liquidators: Preston at [23(a)];

(b) SMBC is likely to receive $8,025,000 through its proprietary claims, comprising:

(i) $2,847,000 in respect of proprietary claims traced to funding provided to Forum via Flexirent; and

(ii) $5,198,000 in respect of proprietary claims traced to funding to Forum other than funding provided via Flexirent;

(c) SMBC will be required under the Funding Agreement and its side deeds to make further funding of an additional $2,150,000 available to the Liquidators from the recoveries in (b) above: Preston at [23(c)];

(d) There is no realistic prospect of the Liquidators being able to repay any of the further funding referred to in (c) above: Preston at [24].

138 The total SMBC is likely to incur in funding the Liquidators is $3,212,000, made up of: $2,125,000 already paid; $2,150,000 yet to be paid; less $1,063,000 yet to be repaid by the Liquidators.

139 SMBC contended that:

(a) SMBC’s costs of funding the Liquidators in the amount of $3,212,000 were reasonable steps taken in mitigation and that amount should be allowed: ACS[10] to [16] and [105] to [106]. The issue is not one of remoteness of damage: ACS[147].

(b) No amount should be taken into account for anticipated recoveries from the Liquidators: ACS[144] to [146]. Separate judgments may be entered against separate wrongdoers for overlapping amounts: Xiao v BCEG International (Australia) Pty Ltd [2023] NSWCA 48; 111 NSWLR 132 at [48] to [51]. The fact that SMBC might recover an amount in relation to its proprietary claims raises an issue of double recovery but is not a reason not to enter judgment against Flexirent in the full amount.

140 Flexirent submitted that:

(a) The costs of funding the Liquidators were too remote and incurring them was not a reasonable step in mitigation: RCS[6.17].

(b) It is appropriate to deduct from the calculation of damages an amount reflecting the likely recoveries from the liquidations: RCS[6.16]. However, if no such deduction is allowed, and Flexirent satisfies the full amount of the judgment, Flexirent should be entitled to an assignment of SMBC’s rights against FEA. Flexirent relied on Maria’s Farm Veggies Pty Ltd v Maria’s Kitchen Gardens Pty Ltd [2018] NSWSC 670 at [69] and s 23 of the Federal Court of Australia Act 1976 (Cth): RCS[6.16]; T366.28–32.

141 The Forum Proceedings concerned both the 2018 arrangement and the 2020 arrangement. As is explained in Section C below, SMBC’s claims in respect of the 2020 arrangement have not been made out. Accordingly, if SMBC is entitled to funding costs as costs reasonably incurred in mitigation, it is entitled only to a portion of those costs. Further, if the award of damages is to take account of likely recoveries by SMBC, it is only recoveries in relation to the 2018 arrangement which should be taken into account.

Resolution

142 For the reasons which follow, it is appropriate to:

(a) include in the calculation of damages an amount for a portion of funding costs which represent the funding costs relating to the 2018 arrangement; and

(b) exclude from the calculation of damages an amount representing likely recoveries in relation to the 2018 arrangement.

143 SMBC is correct in submitting that its funding of the Liquidators was a step reasonably taken in mitigation. The issue is not one of remoteness of damage. SMBC is entitled to claim the cost of steps reasonably taken in mitigation. The calculation is made more difficult by the fact that an apportionment must be undertaken to reflect SMBC’s success in relation to the 2018 arrangement and failure in relation to the 2020 arrangement.

144 The issue in relation to recovery from the Liquidators is, on the facts here, one about assessment of damages rather than about entering judgments for overlapping amounts. The evidence establishes that SMBC is likely to recover an amount from the Liquidators. It is preferable to take this into account in assessing damages rather than leaving the issue for further dispute between the parties.

145 As noted earlier, the Liquidators anticipate that SMBC will receive $2,847,000 in respect of proprietary claims traced to funding provided via Flexirent (being a reference to the 2018 arrangement). The award of damages should be reduced by this amount and increased by an amount reflecting SMBC’s funding costs related to the 2018 arrangement.

146 The amount of $2,847,000 represents approximately 35.5% of the total likely recovery of $8,025,000 – see [137(b)] above. As Flexirent submitted, it is reasonable in those circumstances to allow SMBC by way of damages approximately 35.5% of its funding costs to secure that benefit. The balance of the funding costs is reasonably seen as relating to the 2020 arrangement.

147 SMBC’s total funding costs – relating to the 2018 arrangement and the 2020 arrangement – are likely to be $3,212,000. SMBC should therefore be awarded the amount of $1,140,000 (approximately 35.5% of $3,212,000) in respect of its funding relating to the 2018 arrangement.

148 There may be other methods of apportionment, for example on the basis of the total Settlement Amounts paid by SMBC under the 2018 and 2020 arrangements. There is no reason to think that the resulting apportionment on this basis (about 26%) is any more reliable.

149 It is reasonable to adopt the methodology proposed by Flexirent in circumstances where SMBC did not raise an alternative method of apportionment and one of the Liquidators gave evidence that it was not practicable to determine which of the costs and expenses of the liquidations of the Forum Entities related to the 2018 or 2020 arrangements: Preston at [16].

150 The award of damages against Flexirent should be reduced by the amount of $1,707,000 to take into account SMBC’s likely recovery ($2,847,000) and the likely total costs incurred by SMBC in obtaining that likely recovery ($1,140,000).

Legal fees and expenses for Forum Proceedings

151 SMBC incurred legal costs in pursuing its claims to recover from the Forum Entities in the Forum Proceedings and the Liquidators’ Proceeding. However, SMBC only claims 36.2% of those costs because the remaining 63.8% were passed on to a different SMBC entity: ACS[18]; Perry at [23]. The total amount that SMBC claims is AUD2,751,992 plus USD399,611.55.

152 The expenditure of these amounts on legal costs was a reasonable step in mitigation to the extent that they relate to the 2018 arrangement. Neither party made any express submission about the extent of recovery of legal costs should SMBC succeed only in relation to the 2018 arrangement. In these circumstances, the apportionment should be the same as for the costs of funding the Liquidators. The award of damages should include 35.5% of AUD2,751,992 and 35.5% of USD399,611.55. SMBC did not claim interest in respect of legal costs.

Financing and break costs

153 SMBC claimed financing costs incurred on unwinding and terminating interest rate swaps and hedging arrangements that SMBC had entered into in funding the 2018 arrangement, being $311,061.40 ($73,500 plus $237,561.40): Timpany 1 at [188] to [189] and [191] to [192]; ACS[34(b)]; ACRS[50] to [52]. It claimed it was entitled to recover that amount under the indemnity in cl 8.1 of the 2018 MRASA, but not under its claim for breach of warranty: T304.

154 Flexirent contended that these financing and break costs were too remote on the basis that there was “nothing in the terms of any of the four contracts … to suggest that Flexirent is or could be liable for such expenses”: RCS[6.15].

155 Flexirent’s submission lacks substance. Entities engaged in the industry in which SMBC was engaged are likely to incur break costs in terminating internal contractual arrangements entered into for the purpose of obtaining funds for advances. In any event, cl 8.2 of the 2018 MRASA, read with the definition of “Break Costs” in cl 1.1, contemplated that SMBC may incur break costs “in terminating or redeploying any funding arrangements (including any swaps, hedges or derivatives)”.

156 Flexirent also submitted that there was “no clear evidence of SMBC’s legal liability to pay the costs that have been claimed”: RCS[6.15]. However, the evidence given by Mr Timpany established that the costs were incurred and paid. Flexirent did not plead that there was no “legal liability” to pay, that issue first being raised in closing submissions.

157 SMBC is entitled to $311,061.40 on account of financing and break costs under its claim for indemnity and interest on that amount up until judgment.

B5    Loss and damage under the indemnity or for misleading conduct

158 Given that I have accepted SMBC’s contract case, it is strictly unnecessary to address damages under the indemnity and for misleading conduct, both of which result in damages assessed on a “no transaction basis”. I will address it briefly.

159 There was no issue that the starting figure for calculating loss under the contractual indemnity or for misleading conduct was $11,329,914.14: T259; Cairns 2 at [23]; Nguyen 1 at [4.3.2]. Interest up until 30 June 2025 is $5,825,756: ACS[148] to [149]; Cairns 2 at [22] to [23] and [118]. SMBC would have been entitled to these amounts, and to interest from 30 June 2025 to judgment.

160 The award of damages against Flexirent would have been reduced by the amount of $1,707,000 to take into account SMBC’s likely recovery ($2,847,000) and the likely total costs incurred by SMBC in obtaining that recovery ($1,140,000).

161 SMBC would also have been entitled to $311,061.40 on account of financing and break costs (and interest on that amount up until judgment).

C    THE 2020 ARRANGEMENT

C1    The relevant events

Flexirent decides to end its Managed Services Financing business and Mr Colbert begins consulting work with FEA

162 In early 2020, Flexirent conducted an assessment of its Managed Services Finance (MSF) business, holding a “Summit Meeting” on 4 February 2020: CBC2 at 1783–800. By 2 April 2020, Flexirent had decided not to continue with that business. One consequence of this was that its head of MSF, Mr Colbert, was to depart Flexirent. His departure was discussed in April 2020 and, on 1 June 2020, he gave “formal notice” of his resignation on 3 June 2020, which was “effectively 6 weeks since” his exit had been discussed and which aligned with his notice period: CBC2 at 1807; CBC3 at 206.

163 On 31 March 2020, Mr Colbert sent an email to Mr Papas from his personal email address, informing Mr Papas that it was his personal email address, that he would “shoot some information to [Mr Papas] in the morning”, and that they could “organise a zoom meeting to discuss on Thursday [2 April 2020]”: CBC2 at 1801. The email contained Mr Colbert’s personal mobile number, rather than either of his Flexirent numbers – see, for example: CBC2 at 1803.

164 As is clear from the context and the terms of the contemporaneous communications, Mr Colbert was not dealing with Mr Papas or FEA as an employee of Flexirent (which had decided to exit its MSF business). Rather, Mr Colbert was performing a form of advisory or consultancy role on his own account, presumably with an eye to his future business or employment prospects whilst he transitioned out of employment with Flexirent.

165 On 2 April 2020, Mr Colbert sent Mr Papas an email, again from his personal email address: CBC2 at 1807. His email stated that it was “not a bad time to review current funding arrangements with a view [to] understanding what your future funding requirements are so as to best support your business growth”. The email provided details of potential funders, including SMBC, and indicated that Mr Colbert could start organising some meetings over the coming weeks. It is clear that Mr Colbert was not dealing with FEA in his capacity as an employee of Flexirent.

166 Later, Mr Colbert and Mr Papas arranged to meet on 8 April 2020 by Zoom: CBC2 at 1812–4 and 1816. Mr Colbert emailed Mr Papas on 8 April 2020 before their scheduled meeting. His email stated that there was “credit appetite for the likes of Veolia”, mentioning funding options which included domestic banks, Japanese banks (including SMBC), leasing companies and other overseas banks: CBC2 at 1818. The email stated that FEA “already has an established funding framework with SMBC via the Flexi relationship” and that SMBC have a “huge appetite for Veolia”.

Mr Colbert liaises with SMBC with respect to future financing arrangements

167 In April 2020, Mr Colbert informed Mr Timpany that he was leaving Flexirent because Flexirent was not going to continue with its MSF business unit: Timpany 1 at [111]. Mr Colbert discussed with Mr Timpany the opportunity for SMBC to work directly with FEA and to fund further Veolia deals. Mr Timpany had been employed by SMBC from September 2017 to July 2019 and recommenced in April 2020. His role with SMBC was to originate and execute leasing and asset-based finance transactions in Australia: Timpany 1 at [6].

168 On 29 April 2020, Mr Papas, Mr Colbert and Mr Timpany met by videoconference to discuss the 2018 arrangement and the possibility of a new funding arrangement between SMBC and FEA, without the involvement of Flexirent given that it was no longer going to do MSF business: Timpany 1 at [112]; Timpany 2 at [6] to [9]. The agenda for the meeting was stated to be (CBC2 at 1823):

* Transition of Forum Direct to SMBC

* Veolia Opportunity and Scope Work

* Credit appetite

* Facility Limit and Term

* Time Frame for Execution

169 During the videoconference:

(a) Mr Papas asked Mr Colbert whether Mr Colbert could manage the transaction – being the 2020 arrangement assuming it came about – from the Forum side: Timpany 1 at [114]; Timpany 2 at [8].

(b) Mr Timpany asked Mr Colbert and Mr Papas whether the accounts and remittance advices for the 2018 arrangement could be provided directly from FEA going forward. Either Mr Colbert or Mr Papas stated that he could arrange for someone within the back office team at FEA to do this: Timpany 2 at [7].

170 On 29 April 2020, after the meeting with Mr Papas and Mr Colbert, Mr Timpany sent an email to Mr Andrew Dick of SMBC stating that he had a productive discussion with Mr Papas, who had “indicated interest in establishing a direct funding relationship with SMBC-LF in Australia, to expand beyond his reliance on solely Westpac”. Mr Timpany stated that “it appears that [Mr Colbert] may have got some sort of part time consulting arrangement with [FEA]” following his upcoming exit from Flexirent: CBC2 at 1822; Timpany 2 at [9].

171 On 5 May 2020, Mr Timpany sent an email to Mr Colbert asking who SMBC should contact at FEA to request the accounts and remittance advices going forward: CBC2 at 1834; Timpany 2 at [6] and [10].

SMBC and FEA enter into the 2020 arrangement

172 On 21 May 2020, SMBC and FEA executed a term sheet recording indicative terms with respect to the forthcoming transactions to be entered into between SMBC, FEA and Veolia: CBC2 at 1924–39. SMBC then started its internal credit approval process: CBC2 at 1940.

173 On 25 May 2020, Mr Colbert sent an email to Mr Papas asking to be kept off the emails concerning the 2020 arrangement until he had a formal Forum (FEA) email address and noting he would be “full time as of Wednesday”: CBC2 at 1955.

174 As mentioned earlier, Mr Colbert sent an email to Mr Wright (Humm Group) on 1 June 2020 giving notice of his resignation from Humm Group effective on and from 3 June 2020: CBC3 at 206. Mr Colbert had a Forum email address from at least 1 June 2020: CBC3 at 207. Although Mr Colbert did not have a Forum email address until after 25 May 2020, he had a consulting role to Forum since at least early April 2020 – see, eg: CBC2 at 1807.

175 SMBC conducted its own due diligence before entering into the agreements with FEA: T62.29–‍30, 63.44 to 64.3 and 67.12 to 68.1.

176 On 17 July 2020, SMBC and FEA entered into:

(a) the Master Receivables Acquisition and Servicing Agreement (2020 MRASA): CBC3 at 1266.

(b) the Supplemental Deed (2020 Supplemental Deed): CBC3 at 1299.

177 These were in similar terms to the 2018 MRASA and the 2018 Supplemental Deed, except that FEA replaced Flexirent and title to the equipment was not acquired by SMBC.

178 On 23 July 2020, FEA and Veolia purportedly signed two Master Technology Licence Agreements, one for Waste Management and one for Health Management (2020 MTLAs): CBC3 at 1709 and 1715.

179 In summary, under the 2020 arrangement:

(a) If it wished to rent equipment, Veolia could submit a “TLA Schedule” to FEA under either of the 2020 MTLAs: cl 1.1.

(b) If a “TLA Schedule” was submitted, Veolia would pay “Usage Charges” to FEA.

(c) FEA issued “Offer Letters” to SMBC in connection with the TLA Schedules. SMBC could accept Offer Letters and pay the relevant “Settlement Amount” to FEA.

(d) If an Offer Letter was accepted, the monthly Usage Charges paid to FEA by Veolia would be paid as monthly “Receivables” to SMBC.

180 Under the 2020 MRASA and the 2020 MTLAs, a total of 15 Offer Letters were sent by FEA and accepted by SMBC between 27 July 2020 and 21 May 2021. These referred to one of the 2020 MTLAs and related to “Usage Charges” purportedly owed by Veolia under TLA Schedules which Veolia had purportedly submitted to FEA. These were annexed to the Offer Letters: Timpany 1 at [104] and [144].

181 As with the 2018 TLAs, each of the 2020 to 2021 TLA Schedules had an “Equipment” annexure attached, which contained a list of assets. Each of the 2020 to 2021 TLA Schedules was purportedly signed on behalf of Veolia by named individuals. Mr Papas purportedly witnessed those signatures and signed on behalf of FEA.

182 The total amount paid by SMBC to FEA pursuant to the 15 Offer Letters between 30 July 2020 and 26 May 2021, across a total of nine payments, was $83,993,909.47: Timpany 1 at [105], [157], [168] and [173].

183 The 2020 MTLAs and the 2020 to 2021 TLA Schedules were not signed by those from Veolia whose names appear as signatories. The signatures were forged by Mr Papas. No “Usage Charges” were in fact paid, or payable by, Veolia.

184 As noted earlier, FEA made monthly payments to SMBC under relevant Offer Letters and the to 2020 MRASA so that it could continue its fraud by submitting further Offer Letters. This continued until the fraud came to light.

C2    SMBC’s claim for misleading or deceptive conduct

185 SMBC ultimately put its claim for misleading or deceptive conduct in relation to the 2020 arrangement in the following way:

(1) Flexirent made the Representations, expressly and impliedly, that: (a) the 2018 TLAs had been duly executed by, and were binding on, Veolia; (b) the 2018 Receivables existed; (c) the 2018 Related Assets existed and had been duly delivered to, and accepted by, Veolia; and (d) no Event of Default was subsisting or would result from the transactions contemplated under each of the 2018 Offer Letters (see [71] above).

(2) From 2018 up to July 2020 – when SMBC entered into the 2020 arrangement – Flexirent failed to disclose to SMBC that the Representations were false. These are the “Omissions” referred to at [73] above: 2FASOC at [39B]; ACS[56] and [59]; T42.33–‍7.

(3) Flexirent knew that the Representations were false, because: (a) the knowledge of FEA’s officers, including Mr Papas, should be attributed to FEA; and (b) the knowledge of FEA was to be attributed or imputed to Flexirent under the general law of agency and under s 12GH of the ASIC Act: 2FASOC at [39C]; ACS[58]; T43.35–46.

(4) Flexirent knew that SMBC was entering into a similar arrangement in 2020 in which SMBC would be exposed to the same risk, because the knowledge of Mr Colbert, who was an employee of Flexirent at the time, in brokering the 2020 arrangement should be attributed or imputed to Flexirent: 2FASOC at [41(b)]; ACS[57]; T43.30–5.

186 There are two, independently sufficient, reasons why SMBC’s case fails.

187 First, Mr Colbert’s knowledge about SMBC entering into the 2020 arrangement was acquired by him in pursuing his own consulting activities and not in the course of his employment by, or in his capacity as an employee of, Flexirent. His knowledge in this respect is not to be attributed to Flexirent. The evidence did not establish that Flexirent was relevantly aware that SMBC was proposing to enter into the 2020 arrangement. Flexirent’s silence must be assessed against that fact.

188 Secondly:

(a) the Representations conveyed by the 2018 Offer Letters were not of themselves a material cause of SMBC entering into the 2020 arrangement;

(b) Flexirent did not in fact know the Representations were false before SMBC entered into the 2020 arrangement or at any relevant time;

(c) FEA’s knowledge (which included Mr Papas’ knowledge) is not to be attributed to Flexirent; and

(d) Whether analysed by reference to a “reasonable expectation” of disclosure or otherwise, Flexirent’s conduct in failing to disclose the falsity of the Representations, about which it did not know, was not conduct which contravened s 12DA of the ASIC Act.

Mr Colbert’s knowledge should not be attributed to Flexirent

189 SMBC’s case was that Flexirent’s conduct was misleading in contravention of s 12DA because it both: (a) made the Representations; and (b) failed to disclose the Omissions in circumstances where SMBC “was continuing to receive payments purportedly in respect of the 2018 TLAs, and where Flexirent knew that SMBC … was proposing to enter into arrangements directly with FEA to purchase receivables that would arise under contracts entered into between FEA and Veolia”: 2FASOC at [41(b)]. SMBC relied on the Omissions (the failure to disclose) only in relation to s 12DA of the ASIC Act: 2FASOC at [41(b)], [46B] and [46C].

190 It is central to this case that Flexirent was aware that SMBC was proposing to enter into the 2020 arrangements directly with FEA. SMBC contended that Flexirent knew this through Mr Colbert – see: particulars to 2FASOC at [41(b)]. It sought to establish Mr Colbert’s knowledge through the evidence of Mr Timpany. Although SMBC also referred to the affidavit evidence of Mr Colbert in its particulars and submissions, it ultimately chose not to read Mr Colbert’s affidavit.

191 SMBC has not proven that Flexirent was aware that SMBC proposed to enter into the 2020 arrangement. Mr Colbert knew that SMBC was proposing to enter into the 2020 arrangement. Mr Colbert’s knowledge was acquired by him in pursuing his own consulting activities and not in the course of his employment by, or in his capacity as an employee of, Flexirent. Mr Colbert’s knowledge in this respect is not to be attributed to SMBC. SMBC did not contend that Flexirent had the knowledge otherwise than by attribution through Mr Colbert.

192 SMBC did not contend that its claim under s 12DA in relation to the 2020 arrangement could succeed if Flexirent was unaware that SMBC was proposing to enter into the 2020 arrangement.

The Representations were not of themselves a material cause of SMBC’s loss

193 SMBC did not enter into the 2020 arrangement because the Representations in the four Offer Letters the subject of the 2018 arrangement had been made. SMBC conducted its own due diligence and credit approval process in relation to the 2020 arrangement. The evidence did not establish that it chose to enter into the 2020 arrangement because of the Representations conveyed by the four 2018 Offer Letters.

194 Whilst the existing 2018 arrangement was relevant background context, as was the fact that SMBC had been receiving amounts apparently (but not in fact) coming from Veolia, the Representations conveyed by the Offer Letters did not in any material sense cause SMBC to enter into the 2020 arrangement.

195 It cannot be said that the losses sustained by SMBC under the 2020 arrangement were suffered “by” Flexirent’s conduct for the purposes of s 12GF so far as that conduct comprises the Representations.

Flexirent did not in fact know the Representations were false

196 There was no dispute that Flexirent did not in fact know that the Representations were false at any material time otherwise than through a process of, first, attributing Mr Papas’ knowledge to FEA and, secondly, attributing or imputing FEA’s knowledge to Flexirent.

FEA’s knowledge is not to be attributed to Flexirent

197 It was not a part of SMBC’s case that FEA’s fraudulent act was to be attributed to Flexirent. Rather, its case was that: (a) Mr Papas’ knowledge was to be attributed to FEA; and (b) FEA’s knowledge of the fraud was to be imputed or attributed to Flexirent because FEA was Flexirent’s agent. SMBC submitted that, by this sequence of attribution of knowledge, Flexirent was to be taken to have known from the outset of the 2018 arrangement that the Representations were false.

198 As to (a), the fraud perpetrated by Mr Papas, although for his own benefit, was also undertaken for the benefit of FEA and associated entities through which he was to derive a personal benefit. It is appropriate in these circumstances to attribute Mr Papas’ knowledge of the fraud to FEA – see, for example: Beach Petroleum NL v Johnson [1993] FCA 392; 43 FCR 1 at 30 [22.32]. The matters referred to in the subparagraphs of [59] above also establish FEA’s knowledge of the fraud.

199 As to (b), SMBC contended that FEA’s knowledge should be attributed to Flexirent under the general law and by s 12GH of the ASIC Act, presumably meaning s 12GH(1). Section 12GH(1) provides:

If, in a proceeding under this Subdivision in respect of conduct engaged in by a body corporate, being conduct in relation to which the Division applies, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a director, employee or agent of the body corporate, being a director, employee or agent by whom the conduct was engaged in within the scope of the person’s actual or apparent authority, had that state of mind.

200 Before turning to the operation of s 12GH(1) and the general law concerning attribution of knowledge, some of the factual background should be emphasised:

(a) First, SMBC relies on Flexirent’s actual or apparent authority to attribute or impute FEA’s knowledge to Flexirent. The authority upon which this submission is founded is an alleged authority on the part of FEA to act as agent for Flexirent in contracting with Veolia. FEA was not Flexirent’s agent for the purpose of Flexirent contracting with SMBC. As discussed below, no point was made by Flexirent about FEA being SMBC’s agent for the limited purpose of collecting the Receivables.

(b) Secondly, Veolia and FEA did not in fact enter into the transactions referred to in the four 2018 Offer Letters. That was a central aspect of the fraud. Mr Papas pretended that Veolia entered into transactions with FEA by forging the signatures of the relevant officers of Veolia. No question of actual or apparent authority arises so far as Veolia is concerned. Whilst FEA had authority to enter into a contract with Veolia as (undisclosed) agent for Flexirent, FEA never exercised that authority to enter into any such contract.

(c) Thirdly, even if Veolia had transacted with FEA (which it did not), there would have been no sensible role for the operation of principles of apparent authority because Flexirent was an undisclosed principal and could not be taken to have held FEA out as having authority to act as its agent at all. If Veolia had transacted with FEA (which it did not), it would have assumed that its contract was with FEA, not Flexirent.

(d) Fourthly, so far as SMBC is concerned, it was aware of the precise terms of the agency relationship between Flexirent (as undisclosed principal) and FEA (as undisclosed agent). SMBC had been provided with the PAA between Flexirent and FEA. Like Flexirent, SMBC incorrectly assumed that there were relevant transactions between FEA and Veolia. Viewed from SMBC’s perspective, knowledge of the actual terms of the agency relationship diminishes any significant role for possible reliance by SMBC on arguments about apparent authority of FEA in FEA’s dealings with Veolia as agent for Flexirent.

201 As noted at (a) above, neither party made any point about FEA being SMBC’s agent for the limited purpose of collections under the Agent Side Letter. The Agent Side Letter provided for FEA to collect the monthly Receivables from Veolia and to remit those funds to SMBC.

202 Given the point was not raised by Flexirent, it is unnecessary to consider whether FEA’s knowledge of the fraud should be attributed to SMBC (as FEA’s principal for collections) for the purposes of SMBC’s claim against Flexirent.

203 Flexirent did not submit that it was not “necessary to establish the state of mind of the body corporate” for SMBC’s claim such that s 12GH(1) does not apply. Although it may be arguable that it is not strictly “necessary” to establish a state of mind in a claim under s 12GF for a contravention of s 12DA, and that s 12GH(1) therefore does not apply, knowledge of the alleged contravener is relevant in a case of misleading conduct by omission – see: [211] to [213] below. To read s 12GH(1) as applying only to causes of action for which state of mind is a necessary element would be a narrower reading of the subsection than has been adopted of the similarly worded provision in the Trade Practices Act 1974 (Cth) – see: EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [147] to [149] (White J).

204 Assuming s 12GH(1) applies because it is relevantly “necessary” to establish Flexirent’s state of mind, the provision does not apply on the facts. The relevant “conduct engaged in by a body corporate” upon which SMBC relies is Flexirent’s conduct in (or silence by) not disclosing that the Representations were untrue (the Omissions). The “state of mind” on which SMBC relies is Flexirent’s knowledge that the Representations were untrue. SMBC submits that FEA knew the Representations were untrue and that s 12GH(1) operates to attribute that knowledge to Flexirent. However:

(a) s 12GH(1) would only operate if FEA engaged in “the conduct” – not disclosing to SMBC that the Representations were untrue – in the scope of FEA’s actual or apparent authority;

(b) FEA’s failure to disclose to SMBC that the Representations were untrue was not a failure which occurred in any dealing between Flexirent and SMBC in which FEA acted as Flexirent’s agent;

(c) So far as Flexirent’s conduct in failing to disclose to SMBC that the Representations were untrue could be seen as having been engaged in by FEA (which it cannot), that conduct was not within the scope of FEA’s actual or apparent authority. FEA was on a fraudulent frolic of its own. That fraud was being perpetrated on Flexirent (and SMBC).

205 The rules of attribution, including the general law rules of attribution, are to be shaped by the text and context of the relevant statute (here, the ASIC Act) – see: Commonwealth Bank of Australia v Kojic [2016] FCAFC 186; 249 FCR 421 at [96], [98], [106] and [148] (Edelman J). Where the question is whether a corporation has contravened a statute, the statute must be the starting point to the answer, albeit the general law will be a part of the assessment: Kojic at [100]. Whilst the statute might be seen as supplemental to the general rules of attribution, the statutory rules (if applicable according to their terms) might be narrower in particular respects: Kojic at [109] and [110].

206 It is not an evident purpose of s 12GH(1), assuming it to apply, to attribute to an otherwise unaware principal knowledge of its agent’s unauthorised fraud for the purposes of creating a statutory liability on the part of the principal for misleading conduct in not bringing the unknown fraud to the attention of a party who does not deal with the agent in contracting with the principal.

207 Attribution of knowledge under the general law of agency “depend[s] on the nature of the claim and purpose for which the attribution is sought”: Aidzan Pty Ltd (in liq) v K & A Laird (NSW) Pty Ltd (in liq) [2024] NSWCA 185; 115 NSWLR 93 at [70] (Meagher JA).

208 Aidzan concerned a director’s knowledge of his fraud against the company, and the question whether that knowledge should be attributed to the company so as to bar a claim by the company against its director for that fraud. Unsurprisingly, the New South Wales Court of Appeal held that the director’s knowledge was not to be attributed to the company so as to bar the company from claiming against the director: at [69].

209 The nature of the claim here, and the purpose of attribution, is different to Aidzan, but the result is the same. The context here is a statutory claim for misleading and deceptive conduct by a fourth party (SMBC) against a principal (Flexirent) which relies on imputing an agent’s (FEA’s) knowledge to the principal, being the agent’s knowledge in relation to purported (but not actual) dealings with a third party (Veolia). FEA was authorised to bind Flexirent (as undisclosed principal) to contracts with Veolia, but it never exercised that authority to enter into a real contract. FEA was not Flexirent’s agent in the relevant dealing between Flexirent and SMBC. FEA had no relevant agency role in the sale by Flexirent to SMBC of the Receivables for the Settlement Amounts.

210 FEA’s knowledge of the fraud is not attributed to Flexirent under s 12GH(1), assuming it to apply. The general law does not provide any different result.

Silence (the Omissions) and “reasonable expectation” of disclosure

211 The significance of silence always falls to be considered in the context in which it occurs: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32 (Black CJ) and 41 (Gummow J). The effect of any relevant statements or actions, or any silence or inaction, occurring in the context of a single course of conduct must be deduced objectively from the whole course of conduct: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [37] (Gleeson CJ, Hayne and Heydon JJ) and [109] (McHugh J); Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [102] (Gummow, Hayne, Heydon and Kiefel JJ); BMW at [20] (French CJ and Kiefel J) and [91] (Heydon, Crennan and Bell JJ). It invites error to look at isolated parts of conduct: Butcher at [109]; Campbell at [102].

212 In characterising conduct, the knowledge of the person to whom the conduct is directed can be relevant, as can the existence of common assumptions and practices established between the parties: BMW at [20]. So too can the knowledge of the person engaging in the impugned conduct be relevant. The knowledge of a person making a representation that the representation is false is as much a part of the circumstances and conduct as any other relevant conduct, and is relevant to the question of whether the impugned conduct, which includes a failure to disclose the falsity of the representation, fails to meet the statutory standard by constituting misleading or deceptive conduct.

213 Contrary to SMBC’s submission, that proposition is not inconsistent with the more general proposition that state of mind is not an element of the statutory cause of action for misleading or deceptive conduct. That is a different issue: conduct can be misleading even if a corporation did not know the conduct was misleading and did not intend to mislead. The statutory standard is objective and not dependent upon questions of subjective intention. Similar conclusions were reached by Griffiths J in Elevate NSW Pty Ltd v Canada Bay Private Hospital Pty Ltd [2019] FCA 1248; 138 ACSR 186 at [86] to [90].

214 A practical approach to the application of the prohibition against misleading conduct might involve looking to whether there was a “reasonable expectation” of disclosure. In Demagogue at 41, Gummow J stated that “unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist”. Of course, the statute does not expressly create a test of reasonable expectation of disclosure, or use such language at all, but answering the question whether there was a reasonable expectation of disclosure might provide a practical approach to the characterisation of conduct which involves non-disclosure of information: BMW at [19] and [20].

215 The critical context here includes the separate circumstances of, and commercial relationship between, SMBC, Flexirent, and FEA and the knowledge of each of them over the course of the 2018 arrangement and in connection with the 2020 arrangement to which Flexirent was not a contracting party and about which it had no relevant knowledge.

216 No reasonable person in the position of SMBC would have expected Flexirent to have disclosed a fraud perpetrated against Flexirent by its agent (FEA) in purported dealings with Veolia. SMBC knew of various contractual provisions requiring FEA to inform Flexirent of material matters, but it could not reasonably have believed that those duties of disclosure would affect the likelihood of Flexirent being informed by FEA that the latter was committing fraud: NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128; 15 VR 156 at [39] (Nettle JA, Buchanan JA and Bongiorno AJA agreeing). Even if Flexirent should be imputed with FEA’s knowledge (which it should not for the reasons given earlier), no person in SMBC’s position would reasonably expect Flexirent to disclose something which it did not in fact know, but which it might be presumed to know by operation of law.

Conclusion

217 Whether analysed by reference to reasonable expectations of disclosure or according to the express terms of the statute, Flexirent did not engage in conduct which was misleading or deceptive in relation to the 2020 arrangement.

C3    Loss or Damage

218 Given SMBC’s claim in relation to the 2020 arrangement fails, it is strictly unnecessary to determine SMBC’s loss. I address it briefly.

219 Had SMBC succeeded, it would have been entitled to damages in the amount of $76,677,709.47. SMBC paid a total of $83,993,909.47 to FEA. SMBC received $7,316,200.00 from FEA in purported repayment of the Receivables.

220 SMBC would also have been entitled to financing costs relating to the 2020 arrangement in the amount of $192,080.12, being ($503,141.52 less $311,061.40 awarded in respect of the 2018 arrangement).

D    CONCLUSION

221 SMBC’s claims in contract in relation to the 2018 arrangement have been made out. Flexirent is liable to pay SMBC the amounts indicated above. There was no dispute that Humm Group is also liable to pay those amounts to SMBC by reason of a Deed of Cross Guarantee dated 25 June 2008. The parties should provide agreed orders to give effect to these reasons for judgment, including for payment of interest and costs.

Associate:

Dated:    30 January 2026