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

High Court dismisses applications seeking special leave to appeal and orders costs against Sullivan and Co

On 15 February 2018, the applications seeking special leave to appeal to the High Court lodged on behalf of Messrs Sullivan, Swan and Donaldson were dismissed by the High Court, with costs awarded against them. The High Court determined the applications on the papers without requiring any oral hearing.

The dismissal of the applications marks the end of the road for Messrs Sullivan, Swan and the estate of the late Ian Donaldson in terms of available avenues of appeal.  This means the original orders of Justice Wigney, which were unanimously reaffirmed by three judges in the Full Court of the Federal Court, and now the High Court, have been reaffirmed.

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

Judgment debtor


Interest on judgment 
(@ 15 February 2018)


P K Sullivan




T W Swan




I W Donaldson




Procedural history of the path to the High Court

$70m win on Appeal – Sullivan’s claims unanimously dismissed

On 25 September 2017 the Full Court delivered a judgment, unanimously dismissing the appeal brought by Messrs Sullivan, Swan and Donaldson.  Costs were also ordered 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).

None of the appellants were able to satisfy the Court that there had been any substantial miscarriage of justice.  One issue was whether the trial judge ought to have found the appellants liable to compensate the Fund, either because they claimed 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 claimed they should be exonerated for acting honestly in all the circumstances of the case.

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

The Appeal judgment highlights the appellants’ failure 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.

Read the appeal judgment in full.

Read Maurice Blackburn's media statement.

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 lodged $144,000 towards security for 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.

Background to 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.

Trial judgment orders

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 (a bankrupt)

An application filed in the High Court of New Zealand on 25 August 2016 sought to have Mr McCormick declared bankrupt following his failure to comply with a bankruptcy notice.  On 15 December 2016 that application was adjourned pending the outcome of the appeal brought by Messrs Sullivan, Swan and Donaldson. 

Shortly after the outcome of the appeal, on 19 October 2017, Mr McCormick was declared bankrupt by order of the High Court of New Zealand, with an outstanding Judgment debt owed to Trilogy of $70,814,202, including interest to 19 October 2017.

The Official Assignee, appointed to Mr McCormick’s estate in New Zealand, is taking steps to recover and liquidate assets as part of the administration on behalf of creditors.

Further information

For further information, unit holders in the Pacific First Mortgage Fund should direct any enquiries they have to Trilogy Funds Management Ltd  via telephone to Trilogy Investor Relations on 1800 194 500  or email