Pacific First Mortgage Fund claim against: Philip Sullivan, Thomas Swan, Stephen McCormick & the Estate of the late Ian Donaldson

Appeal unanimously dismissed

 Maurice Blackburn is pleased to confirm that on 25 September 2017 the Full Court delivered a judgment, unanimously dismissing the appeal brought by Messrs Sullivan, Swan and Donaldson.  Costs orders will be made in favour of the Fund against each of Mr Sullivan, Mr Swan and the Estate of the late Mr Donaldson (who died in May 2017).

The appellants failed to satisfy the Court that there had been any substantial miscarriage of justice.  An issue on the appeal was whether the trial judge ought to have found the appellants liable to compensate the Fund, either because they did not contravene s.601FD (the provision in the Corporations Act that requires directors to exercise due care and diligence etc.) or because they should be exonerated for acting honestly in all the circumstances of the case.

The Full Court was satisfied that the trial judge’s findings, that the appellants contravened the Act, were inevitable, as were the conclusions that the appellants should not be exonerated from those contraventions in the circumstances of the case.  The Full Court also concluded that there was no procedural unfairness in the conduct of the trial before Justice Wigney or in the findings made against Mr Donaldson and Mr Swan.

The Appeal judgment highlights the failure of the appellants to put forward any case that challenged the central findings of negligence and breach of the Corporations Act against them.  The Full Court stated: 

Put simply, the appellants' case theory missed the point of Trilogy's case.  Equally, the complaint that the trial judge failed to engage with that case theory misses the point of his Honour's conclusions.

High Court Appeal

Under the Court rules, the appellants have a period of 28 days to lodge an application for special leave to appeal to the High Court.  On 28 September 2017 Maurice Blackburn was notified that Mr Bransgrove had received instructions to apply for special leave to appeal to the High Court.

Read the appeal judgment in full.

Read Maurice Blackburn's media statement.

The outstanding amounts payable by Messrs Sullivan, Swan, McCormick and the estate of the late Ian Donaldson, are now as follows:

Background to the Appeal

On 16 March 2016 Messrs Sullivan, Swan and Donaldson (the Appellants) lodged an appeal to the Full Court of the Federal Court of Australia.  An amended notice of appeal was subsequently lodged on 20 June 2016 and a further amended notice of appeal on 15 September 2016. 

Mr McCormick did not appeal from the $62,947,486.86 judgment entered against him.

The Appellants alleged in the amended appeal that Justice Wigney: erred in his findings as to the credit of the Appellants; erred in making adverse findings against the Appellants as to collusion and fraud; proceeded on fundamental misapprehensions of fact; failed to provide procedural fairness to the Appellants; failed to engage with the Appellants’ “case theory” (that they were deceived by Mr McCormick and ignorant as to his “fraud”); and that the trial miscarried.

Trilogy contested the appeal and also lodged a notice of contention on 12 July 2016, alleging if, (contrary to the judge’s findings), Mr Sullivan did not know of the advances being made to AGA above the approved limit in the period April to August 2006, he failed to exercise reasonable care and diligence in failing to take steps to ascertain the position and to address it.

Following an application made by Trilogy, the Appellants were ordered to pay security for Trilogy’s costs of the appeal.  Messrs Sullivan, Swan and Donaldson have since lodged security with the Court for part of Trilogy’s costs of the appeal.

The appeal was heard on 14 – 16 November 2016 before the Full Court, comprising Chief Justice Allsop, Justice Farrell and Justice Gleeson.

Trial Judgment

Trilogy Funds Management Limited’s claim against Messrs Sullivan, McCormick, Donaldson and Swan in the Federal Court was successful.  On Friday, 18 December 2015 Justice Wigney found in favour of the Fund and delivered his reasons for judgment following a long trial in the first half of 2014. 

In delivering judgment, Justice Wigney stated:

This claim involves a tale of a rapacious Gold Coast property developer with grandiose plans, a compliant and obliging valuer who lacked independence, and a responsible entity of a managed investment scheme [City Pacific Limited], the officers of which appeared unable or unwilling to say “no” to the developer, or to otherwise exercise appropriate care and diligence to ensure compliance with the scheme’s mandated policies and procedures.  In the end, the developer failed and the security property was found to be worth many millions of dollars less than both its supposed valuation and the outstanding loan. The scheme [Pacific First Mortgage Fund] and its members were left significantly out of pocket.

Read the judgment in full.

Read Maurice Blackburn's media statement.


On 4 March 2016 Justice Wigney entered judgment against Messrs Sullivan and McCormick for $62,947,486.86 plus costs and against Messrs Swan and Donaldson for $10,565,042.52 plus costs.

Enforcement against Mr McCormick

Steps to enforce the Judgment debt against Mr McCormick have been taken. A bankruptcy notice was served on Mr McCormick on 26 July 2016 seeking payment in excess of $63m comprising the judgment debt with interest.  An application was filed in the High Court of New Zealand on 25 August 2016 to have Mr McCormick declared bankrupt following his failure to comply with the notice.  On 15 December 2016 that application was adjourned pending the outcome of the appeal brought by Messrs Sullivan, Swan and Donaldson. 

Now that the appeal has been determined, the bankruptcy application against Mr McCormick will be relisted for determination.

Further information

For further information, unit holders in the Pacific First Mortgage Fund should direct any enquiries they have to Balmain NB Corporation Limited, as sub-asset manager of the Fund, via telephone 1800 194 500 or email