Federal Court of Australia Edgemont Investments LLC v Tyndall Capital Pty Ltd [2024] FCA 1116 File number: NSD 789 of 2024 Judgment of: JACKMAN J Date of judgment: 16 September 2024 Catchwords: CORPORATIONS – whether to grant leave to bring proceedings on behalf of company – whether to remove directors – whether to appoint receivers and managers PRACTICE AND PROCEDURE – whether to make freezing orders Legislation: Corporations Act 2001 (Cth) ss 233, 237, 1323 Cases cited: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWSCA 97; (2001) 37 ACSR 672 Hislop v Paltar Petroleum Ltd (No 3) [2017] FCA 1253 JAB Nominees (OST) Pty Ltd v Auswild (Ancillary Orders) [2020] VSC 731 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 54 Date of hearing: 16 September 2024 Counsel for the Plaintiff: Mr F Douglas SC and Mr T Smartt Solicitor for the Plaintiff: Banton Group Counsel for the First and Second Defendants: Mr M Pesman SC and Mr M Rose Solicitor for the First and Second Defendants: Emerson Lewis Lawyers Counsel for the Third and Fourth Defendants: Mr D Krochmalik Solicitor for the Third and Fourth Defendants: Clayton Utz Counsel for the Fifth Defendant: Mr APF Ryan Solicitor for the Fifth Defendant: Buchanan Rees Dispute Lawyers ORDERS NSD 789 of 2024 BETWEEN: EDGEMONT INVESTMENTS LLC First Plaintiff DAVID MCGOVERN Second Plaintiff JONATHAN BARLOW Third Plaintiff AND: TYNDALL CAPITAL PTY LTD (ACN 154 750 268) First Defendant MARKETLEND PTY LTD Second Defendant LEO ANTHONY TYNDALL (and others named in the Schedule) Third Defendant order made by: JACKMAN J DATE OF ORDER: 16 September 2024 THE COURT ORDERS THAT: 1. Leave be granted to the plaintiffs to file an amended statement of claim on the basis that the plaintiffs pay the costs thrown away by those amendments. 2. Leave be granted to the plaintiffs to file a further amended originating process in a form dealing with the matters discussed during submissions today. 3. Leave be granted to the plaintiffs to bring proceedings on behalf of Tyndall against the third, fourth and fifth defendants, arising out of the matters pleaded in the amended statement of claim, without the need to commence fresh proceedings. 4. Mr and Mrs Tyndall not cause Tyndall Capital Pty Ltd (Tyndall) or Marketlend Capital Pty Ltd (Marketlend) to pay money or transfer assets to either or both of them or for their benefit, except where Mr Luis Orp (or, in his absence, Mr Roy Galila) provides written authorisation for a payment, which authorisation is only to be provided where the payment: (a) relates to the remuneration or salary package for Mr or Mrs Tyndall; (b) relates to travel or accommodation expenses incurred or to be incurred in the course of performing duties on behalf of Tyndall or Marketlend; or (c) otherwise relates to a proper business expense that has been incurred or is to be incurred in the course of performing duties on behalf of Tyndall or Marketlend, but which sum may not exceed $1000. 5. Mr Orp (or, in his absence, Mr Galila) is to provide a statutory declaration every Wednesday, by 5 pm, of any payments made in the previous week to or for the benefit of Mr or Mrs Tyndall, stating the date, the amount, and a description of the item sufficient to demonstrate that it is a proper expense of Tyndall or Marketlend. 6. Tyndall be restrained from lending any further monies to Mr or Mrs Tyndall, pending the final resolution of these proceedings. 7. The interlocutory application filed by the plaintiffs otherwise be dismissed. 8. The costs of the interlocutory application be costs in the proceedings. 9. The proceedings are fixed for hearing on all issues, including pecuniary remedies and the price of any compulsory share purchase order, to commence on 6 February 2025, until the hearing is completed, with the expectation that the hearing will be completed substantially before 28 February 2025, and noting that the Court will not be sitting on this case on 17 and 18 February 2025. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT Delivered ex tempore, revised from transcript JACKMAN J: 1 The first defendant (Tyndall) is a holding company with no business operations of its own. The second defendant (Marketlend) is a wholly owned subsidiary of Tyndall and operates Tyndall's primary business, being a peer-to-peer lending platform. Each of the first plaintiff (Edgemont) and the second plaintiff (Mr McGovern) is a substantial minority shareholder in Tyndall and there is a dispute as to the precise extent of their shareholding. Edgemont holds shares as nominee for the third plaintiff (Mr Barlow) as trustee for his family trust. Mr McGovern and Mr Barlow met the third defendant (Mr Tyndall) and agreed to invest substantial capital in Tyndall between 2015 and 2017. Mr Barlow was a director of Tyndall until 17 September 2020. Mr Tyndall was the majority ordinary shareholder in Tyndall. He acquired a substantial shareholding on 14 July 2022, ostensibly for nominal consideration. The fourth defendant (Mrs Tyndall) is his wife. The fifth defendant (Mr Pattelli) is also a shareholder in Tyndall and was a director until his resignation on 6 September 2024. The sixth defendant (Megalodon) is a company which seems to be associated with Mr Pattelli. Tyndall's current directors are Mr and Mrs Tyndall. 2 By amended originating process, the plaintiffs seek remedies for alleged oppression pursuant to s 233 of the Corporations Act 2001 (Cth) (the Act), for alleged breaches of agreements in relation to the issue of shares pursuant to convertible notes in 2016 and 2017, for alleged unlawful dealings in shares of Tyndall, and for alleged breaches of directors' duties. 3 The interlocutory relief which is sought today is for: (a) injunctions restraining Tyndall from paying money or transferring assets to or for the benefit of Mr and Mrs Tyndall, and restraining Mr and Mrs Tyndall from causing Tyndall to do so; (b) an order pursuant to s 237 of the Act permitting the plaintiffs to institute proceedings against Mr and Mrs Tyndall and Mr Pattelli for breaches of directors' duties; (c) an order removing Mr and Mrs Tyndall as a director of Tyndall; and (d) the appointment of receivers and managers of the property of Tyndall pending the appointment of suitable directors, with indemnity from Tyndall's assets for expenses and remuneration, and on the basis that the receivers and managers may seek orders from the Court facilitating the appointment of new directors to Tyndall, who will, in due course, replace the receivers and managers. 4 The evidence adduced by the plaintiffs shows a prima facie case of mismanagement and misconduct of the affairs of Tyndall, although I add that the evidence is necessarily incomplete and has been prepared on an expedited basis for this interlocutory hearing. 5 The plaintiffs first complain of what they call excessive remuneration paid to Mr and Mrs Tyndall. In the financial years ended 30 June 2019 to 2023, Mr Tyndall received $3,268,483 in salary and Mrs Tyndall received $1,119,280 in salary. The plaintiffs submit that there is no correlation between their remuneration and the company's financial performance, but that does not strike me as a badge of misconduct. The constitution of Tyndall incorporates s 202A of the Act (noting the obvious typographical error in cl 9(i) which refers to a non-existent s 102A), such that the directors of Tyndall are to be paid the remuneration that the company determines by resolution. However, there does not appear to have been any such resolution by the company in general meeting, although one might think that that could be remedied, at least as a matter of form, given that Mr Tyndall is the majority shareholder. I note that Mr Douglas KC, who appears for the plaintiffs, adds that any such resolution may itself give rise to a further complaint for oppressive conduct. The defendants claim that Mr and Mrs Tyndall's salaries were approved by Tyndall's directors, but in the absence of any minutes or documents recording such a resolution, this does not strike me, on the present evidence, as being more likely than not to be so. In any event, that would not constitute a resolution of the company in general meeting as required by the company's constitution. 6 The plaintiffs also submit that Mrs Tyndall's remuneration is grossly excessive in light of her qualification in interior design and her past experience as an executive assistant, which I assume involved secretarial duties, and that Mr Tyndall's remuneration is also excessive and there is no document evidencing the methodology for it. I accept that the plaintiffs have a reasonably arguable position in relation to the level of remuneration paid to Mr and Mrs Tyndall, but the evidence is at too early a stage for me to make any further finding, and there was no evidence before me as to what an appropriate market-based salary would be for each of them. Accordingly, at this stage, I do not regard the level of remuneration for Mr and Mrs Tyndall as a substantial factor in favour of the relief sought by the plaintiffs. 7 The plaintiffs next draw attention to personal expenses which they submit have been met by Tyndall. In the financial years ended 30 June 2017 to 2023, Mr and Mrs Tyndall used $235,324 of Tyndall's money on motor vehicle expenses. It is difficult for me at the moment on the present evidence to see how that was justified for an online peer-to-peer lending business. In the financial years ended 30 June 2017 to 2023, Mr and Mrs Tyndall spent $1,452,630 of Tyndall's money in travel and entertainment expenses, including over $660,000 in airfares (including return business class flights from Sydney to Tokyo for themselves and their son), over $260,000 in restaurants and bars, and over $133,000 on taxis and ride shares. 8 In the financial years ended 30 June 2017 to 2023, Mr and Mrs Tyndall used a Mastercard UnLock card connected to Tyndall's accounts to incur about $233,607 in what appear to be personal expenses on accommodation, airfares, restaurants and bars, retail shopping, taxis and ride shares, medical bills and ferry fees. In due course, the evidence may show that some or all of those items were properly incurred in relation to the business of Tyndall or Marketlend. But at this stage, the plaintiffs have established a serious question to be tried on the point. Mr Tyndall has also used about $80,000 in company money to buy himself motorcycles, which may or may not be ultimately shown to have been for the proper business of Tyndall and its subsidiary Marketlend. 9 Mr Tyndall was a practising barrister until the end of 2022 and spent $1,295,457 of Tyndall's money to pay his chambers without any apportionment involving Mr Tyndall paying anything personally. Mr Tyndall says the chambers were used as Tyndall's principal place of business until December 2022, but that does not in itself explain the lack of apportionment between Tyndall and Mr Tyndall. It may be that some of the expense can be justified, and indeed it may prove to be the case that all, or almost all, of the expense is justified by reference to the proper business purposes of Tyndall and Marketlend. But at this stage, the plaintiffs have established a serious question to be tried on the point. 10 Between November 2019 and December 2022, Mr Tyndall caused Tyndall to spend $189,936 of Tyndall's money on buying cryptocurrency in his name. Mr and Mrs Tyndall say that any such crypto assets are held by Mr Tyndall on trust for Tyndall and are Tyndall's assets. They also say that the relevant cryptocurrency exchange could be used only by a natural person, not by a company, thereby explaining why it is that the assets were held in Mr Tyndall's name. At this stage, while I appreciate that there is a serious question concerning the legitimacy of the purchases of cryptocurrency, it does not strike me, on the present evidence, as a substantial factor in favour of the plaintiffs. 11 Mr Tyndall continued, in the financial year ended 30 June 2024, to spend about $700,000 on what the plaintiffs submit were personal expenses, including Bar Association fees for Mr Tyndall, costs associated with Mr Tyndall's pastime as a disc jockey, costs associated with Mr Tyndall's motorbike and Porsche, gym fees, and personal shopping expenses. 12 Ms Roy, the solicitor for Mr and Mrs Tyndall, gives evidence on information and belief that many of the alleged personal expenses were, in fact, incurred for the proper business purposes of Tyndall. Further, as a matter of general practice, Ms Roy says that if Mr and Mrs Tyndall incur expenses that are not connected with the operations of Tyndall or Marketlend, or not otherwise covered by Tyndall's expense policy, then the amount is added to their loan account, and the loan account is then set off against the value of Mr and Mrs Tyndall's leave entitlements (see para 43 of Ms Roy's affidavit of 9 September 2024). 13 However, Ms Roy's affidavit at paras 48, 51 and 54 appears to convey that that practice has not been followed, although it is the intention of Mr and Mrs Tyndall to have their personal expenses added to their loan account. The plaintiffs' evidence is that the only amounts charged to Mr Tyndall's loan account are gym fees and a monthly car lease. There is no evidence as to how much money has not yet been added to the loan accounts, or when this intention will be implemented. There is a real question as to the existence of the claimed practice, which does not appear to be documented. Looking at the issue of personal expenses as a whole, it seems to me that the plaintiffs have established a prima facie case that at least some of the money which has been spent was for Mr and Mrs Tyndall's private use and has not been included in their loan accounts with Tyndall. 14 The next matter referred to by the plaintiffs concerns a company known as RAI Limited. Until 30 June 2021, Tyndall owned 100 per cent of RAI Limited, which it transferred for nominal consideration to Argyll Trust Co Limited, as trustee for RAI Special Purpose Trust. RAI appears to stand for "Risk Assessment Intelligence", a proprietary cloud-based risk model. After the transfer, Tyndall represented in writing to investors and the plaintiffs that RAI Limited was still a wholly-owned subsidiary of Tyndall, thereby arguably conveying that RAI had some value. Later correspondence from the defendants suggests that RAI Limited was of no value or negative value. On 13 February 2023, RAI Limited became the indirect shareholder of Tyndall, in that RAI Limited's wholly owned subsidiary, Broadband Compare Pty Ltd, has spent $246,282 on shares in Tyndall since 13 February 2023. I regard the matter concerning RAI Limited as raising a serious question to be tried, as the plaintiffs contend. 15 The next matter is the topic of Tyndall establishing a captive insurer. The directors of Tyndall appeared to have established a captive insurer which issued insurance policies and accepted insurance claims, despite not holding an Australian Financial Services Licence. The directors spent nearly US$300,000 on this endeavour. Tyndall has stated that the insurer will be decommissioned, but it has not confirmed that any moneys spent on this endeavour have been repaid to Tyndall. There is no evidence as to any arrangements to replace the captive insurer, so as to guard against the possibility of Tyndall having uninsured loans on the Marketlend platform. I regard this also as a matter on which the plaintiffs have established a serious question to be tried. 16 The plaintiffs then make a series of allegations as to the financial performance and recordkeeping of Tyndall. In financial year 2023, Tyndall appears to have suffered a loss of $5.3 million and has negative net assets of $5.6 million. The plaintiffs rely also on what appear at this stage to be various deficiencies in Tyndall's recordkeeping and auditing practise. I regard these matters as matters in respect of which there is a serious question to be tried. 17 The plaintiffs also complain of Tyndall's breach of s 205B(2) of the Act. It appears that Tyndall has been in breach of its obligations to notify ASIC of Mr Tyndall's change of address under s 205B(4), in that Mr Tyndall no longer lives at the address in Manly which appears on a recent company search. Mrs Tyndall still lives there, but she and Mr Tyndall are separated. It appears that Mr Tyndall is either residing, or spending significant amounts of time, in the United Arab Emirates with his girlfriend. However, I have been informed that this breach of s 205B(2) has been rectified in the last 24 hours, and thus no longer appears to me to be a matter of particular significance for the current application. Derivative proceedings 18 The plaintiffs seek leave under s 237 of the Act permitting them to bring proceedings in the name of Tyndall against Mr and Mrs Tyndall and Mr Pattelli for breaches of directors' duties. It is not in issue that the plaintiffs have standing under s 236(1)(a). Edgemont and Mr McGovern are members of Tyndall, and Mr Barlow is a former director. The plaintiffs must also satisfy the five criteria in s 237(1). The first to fourth defendants accept that three of those criteria are satisfied, namely, that Tyndall itself will not bring the claims (para (a)), the plaintiffs are acting in good faith (para (b)), and notice has been given to the company (para (e)). Mr Pattelli puts no submissions on the application for leave under s 237. 19 That leaves two matters: whether there is a serious question to be tried as to the alleged breaches of directors' duties (para (d)), and whether it is in the best interests of Tyndall that the plaintiffs be granted leave (para (c)). 20 I am comfortably satisfied that there is a serious question to be tried as to breaches of directors' duties. Indeed, the first to fourth defendants concede that that is the case, except for one matter, namely, that the statement of claim neglected to make any allegation that the alleged breaches caused any loss to Tyndall. That oversight has now been remedied by the plaintiffs by the amended statement of claim, which I have granted leave for the plaintiffs to file. 21 As to whether it is in the best interests of Tyndall that the plaintiffs be granted leave, generally a claim by a company against an officer for recovery or compensation for damage done to the company by the officer's breach of duty is in the best interests of the company: Hislop v Paltar Petroleum Ltd (No 3) [2017] FCA 1253 at [20] (Gleeson J). In the present case, no other shareholder appears to be willing to seek leave to pursue the claims, and their shareholdings are relatively small. The plaintiffs are willing to bear Tyndall's costs of bringing the proceedings against the directors, and have undertaken to the Court and to the defendants that they will pay any adverse costs orders against Tyndall, including in the event that the proceedings fail. Tyndall will therefore bear no financial risk from bringing the claim for breach of directors' duties. 22 The defendants submit that the allegations of breach of directors' duties can be pursued by way of the action for oppression, rather than requiring a separate derivative suit to be brought by Tyndall, as the New South Wales Court of Appeal held in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWSCA 97; (2001) 37 ACSR 672, [137]–[143] (Spigelman CJ), [527]–[528] (Priestley JA) and [698] (Fitzgerald JA). Even after Fexuto was decided 23 years ago, it has been doubted (perhaps surprisingly) whether s 233 permits relief to be granted by way of damages or equitable compensation for breach of duty by a director to the company without a claim being brought by the corporation either directly or pursuant to leave under s 237 of the Act: JAB Nominees (OST) Pty Ltd v Auswild (Ancillary Orders) [2020] VSC 731 at [228]–[230] (Riordan J). 23 While I do not share that doubt, the matter should not be left open for an argument before an appellate court. In addition, not all breaches of directors' duties will amount to oppression and I see no reason why the claims of breach of directors' duties in the present case should be confined to circumstances which would also amount to oppression. Further, there is an important difference in remedies available for the two causes of action. In a derivative claim, it is the company which is awarded the remedy by way of full compensation. In an oppression claim, the claim is by the plaintiffs (in this case, some but not all of them, minority shareholders) which would be granted a remedy, perhaps reflecting the extent to which their individual shareholdings were diminished in value by the alleged wrongdoing, which will necessarily be less than would have accrued to the company itself pursuant to a derivative suit. 24 In all the circumstances, it is appropriate to grant leave to the plaintiffs under s 237 to bring proceedings in the name of Tyndall against Mr and Mrs Tyndall and Mr Pattelli. I see no reason why those proceedings cannot be brought within the framework of the present proceedings. The appointment of receivers and managers 25 The plaintiffs seek an order under s 1323(1)(h) of the Act for the appointment of receivers and managers. There are two fundamental questions: first, whether it is necessary or desirable to appoint receivers and managers to the property of Tyndall; and second, whether a less drastic remedy will suffice 26 The plaintiffs submit that they have a strong case of oppression and breach of directors' duties. They go so far as to submit that Mr Tyndall is unlikely to respect a court order and enforcing a freezing order will be difficult, and there is no feasible alternative to appointment of receivers and managers. I do not accept those submissions. 27 To understand the consequences for Tyndall of the appointment of receivers and managers, some explanation of the business of Tyndall, and particularly of its subsidiary Marketlend, is required. Marketlend is a lender, supplier, servicer and seller of receivables and operates a marketplace lending platform through which it provides commercial business clients seeking finance with funding solutions by matching those borrowers with sophisticated, wholesale, institutional and self-managed superannuation fund investors (Investors) including through its online marketplace lending platform. The financing that is offered is typically invoice financing and inventory financing solutions. Marketlend caters to borrowers of various sizes and provides funds, either by way of draw down through lines of credit and debtor finance facilities, or by way of supply chain finance facilities. 28 As to the provision of funds by way of line of credit and debtor finance facilities, this involves Marketlend making available for draw down amounts under line of credit facilities, with those funds being applied to business expenses or debtor receivable stock. To the extent those funds are drawn to meet business expenses, those funds are required to be repaid within the term of the facility. To the extent that funds have been drawn to finance debtor receivables, the relevant debtor of the business is required to repay Marketlend in accordance with the terms of the relevant invoice. 29 As to supply chain finance facilities, these involve Marketlend purchasing supplies from a borrower's suppliers and subsequently selling those supplies to the borrower on terms. For Australian borrowers, those facilities are offered by Marketlend through its branded product "UnLock" which is a buy now, pay later service. For offshore borrowers, Marketlend offers facilities by utilising a portal through which a borrower submits invoices for verification by Marketlend. And subject to that verification, Marketlend will pay those invoices and the borrower will then be obliged to repay Marketlend, usually within 90 days. 30 In order to provide those facilities, Marketlend obtains funds from external sources. In this regard, Marketlend is not a "balance sheet" lender which deploys its own capital, but rather Marketlend will obtain funds to advance to borrowers at the same time as carrying out its due diligence on those borrowers. This process typically involves a borrower being introduced to Marketlend through Marketlend's network of borrowers or approaching Marketlend in other ways, for instance, as a result of referrals or discovering Marketlend through internet searches and other advertising. After or at the same time as carrying out due diligence in relation to the borrower and determining whether to advance funds, Marketlend uses a securitisation process to raise funds in order to make advances to a borrower. This process involves Marketlend selling the benefit of the loan to one of a number of trusts, of which the trustee is currently BNY Mellon, having previously been Australian Executor Trustees Limited, and the appointed trust manager is Tyndall. 31 Each trust is established for the purpose of funding the acquisition of financial assets, in this case loans, from Marketlend in its defined capacities as originator, seller and servicer. Typically, each trust through the trustee funds the acquisition of the loan by issuing notes to Investors. The notes issued to Investors are secured against the assets of each trust, whose assets include the loan receivables and rights under insurance policies relating to loan receivables. 32 As Mr Orp explains in his affidavit, the appointment of receivers to the companies will have a number of adverse consequences. 33 First, and in relation to Tyndall's sources of funding from Investors, the appointment of receivers over the business or assets of Tyndall would constitute an "Insolvency Event" pursuant to the Master Trust Deed. An Insolvency Event, would relevantly include where a controller (as defined in the Act, as including a receiver) is appointed in respect of Tyndall. That appointment would lead to a "Trust Manager Default" by reason of which the trustee of the trust may immediately terminate the rights and obligations of Tyndall and appoint another entity to act in its place in relation to each of the trusts. 34 Second, the appointment of a receiver over the business or assets of Tyndall would constitute an "Event of Default" pursuant to the Series Supplements, being documents setting out details of the commercial terms of investments made by Investors to fund Marketlend's operations, pursuant to which (amongst other things) time for payment by Marketlend of monies owing might be accelerated, and the receiver may be appointed over certain assets of Marketlend who would have powers, including to sell those assets. 35 Third, the appointment of receivers over the assets of Marketlend would constitute an "Insolvency Event" pursuant to the Sales Origination and Servicing Agreements entered into by Marketlend (by which Marketlend sells the benefit of loans made by it to one of a number of trusts), and pursuant to which the trustee of the trust may, amongst other things, immediately terminate the appointment of Marketlend as servicer or originator under those agreements. 36 Fourth, the appointment of receivers over the assets or business of Tyndall (or its related entities, including Marketlend ) would constitute an "Insolvency Event" pursuant to the Serious Supplements. Should that occur, Investors may in their absolute discretion treat that Event of Default as releasing and discharging them from any future obligations under the relevant transaction documents, require the trustee under each of the trusts immediately to repay invested amounts together with accrued interest, direct the security trustee (as defined in each General Security Deed for each trust) to enforce the General Security Deed and direct the trustee to replace Tyndall. 37 Fifth, based on Mr Orp's extensive experience in the lending and securitisation industry, should receivers be appointed to Tyndall or Marketlend there would be a number of further negative consequences which would significantly devalue the businesses of both entities and the value of Tyndall's shares. Those consequences could include both Tyndall and Marketlend being removed and replaced by the trustee of each of the trusts in light of the uncertainties relating to the ongoing management and operations of the business collectively conducted by Tyndall and Marketlend (particularly in circumstances in which the trustee could not conclude with any degree of confidence that Tyndall and Marketlend would be able to continue to perform their services in relation to the trusts). 38 As Mr Orp further explains, if Tyndall were to be replaced under the trust deed, this would result in Tyndall no longer managing any of the trusts and no longer having any function pursuant to the various trusts, such that it would lose its right to generate its primary source of revenue, being the management fees to which it is entitled for administering and managing those trusts. Similarly, should Marketlend's appointment of servicer and originator be terminated, this would result in Marketlend losing its right to generate its primary source of revenue, being origination fees and servicer fees to which it is entitled pursuant to cl 21 of the Sale Origination and Servicing Agreements. 39 Sixth, in circumstances in which Tyndall operates using an AFSL, then pursuant to s 915B of the Act, ASIC may suspend or cancel an AFSL held by a body corporate by giving written notice to the body if, among other things, the body becomes a "Chapter 5 body corporate", which is defined to include a body corporate in respect of property of which a receiver or a receiver and manager has been appointed (whether or not by a court). Mr Orp identifies a number of instances in which ASIC has cancelled the AFSL of the body corporate following an Insolvency Event. As he explains, if Tyndall's AFSL were to be cancelled by ASIC, not only would Tyndall lose its ability to generate revenue in relation to the existing trusts, but it would also lose its ability to provide financial services at all, including as a trust manager pursuant to any other future securitisation arrangements. 40 Seventh, Mr Orp identifies a number of consequences in relation to the existing trusts and the loans under the Series Supplement and Subscription Agreements, including that to the extent that receivers were to be appointed to Tyndall or Marketlend, this would almost certainly result in Investors both making a call on their investments and refusing to continue to fund any existing or future loans in light of the uncertainties relating to the ongoing management and operations of the business collectively conducted by those companies. 41 Mr Orp identifies that, should Investors make an immediate call on their investments and not continue to provide funding pursuant to whatever future funding commitments they had agreed to under their investments, this would have a number of impacts on existing borrowers, including that those borrowers would be unable to draw down further on any unutilised portion of their loans, that Marketlend would be required to commence collecting all amounts due from existing borrowers, and that the facilities would not be able to be renewed by Marketlend. As Mr Orp further explains, those borrowers rely heavily on Marketlend's facilities in order to trade, and should those borrowers suddenly lose the ability to rely on finance being provided by Marketlend, that may have a potentially devastating impact on the borrowers and their businesses. The amounts currently advanced to borrowers are significant, with 266 active facilities and in excess of $58 million available to the nine largest borrowers of Marketlend alone. 42 Eighth, Mr Orp identifies that the company's future operations will likely be jeopardised by reason of any appointment of receivers. In particular, Mr Orp is aware that there are a number of prospective borrowers who have recently been introduced to Marketlend who have expressed interest in entering into new loans with Marketlend, and that there are a number of current and prospective Investors who have expressed interest in providing substantial amounts of funding to Marketlend, including for those prospective loans. Mr Orp observes that, should receivers be appointed, those opportunities are unlikely to come to fruition. 43 Ninth, Mr Orp identifies that, even assuming that Tyndall's AFSL is not suspended or cancelled (which he considers would be unlikely), any appointment of receivers to the businesses of the companies would severely damage future operations not involving existing loans and trusts, including because new borrowers would be more reluctant to enter into loans with Marketlend, and Marketlend would not be able to fund new borrowers without further capital from Investors. 44 Tenth, Mr Orp identifies a number of other arrangements that may be affected by reason of any appointment of receivers, including in respect of Tyndall's commercial lease for its principal place of business, existing direct debit agreements in respect of offshore supply chain financing arrangements, and the ability of Marketlend to offer borrowers the UnLock Mastercard facility. 45 Finally, Mr Orp observes that the appointment of receivers may also have further deeper effects on the business of Marketlend and Tyndall, including that it is a possibility that staff of Tyndall, who to date have always taken instructions and directions from Mr Tyndall, may resign and seek employment elsewhere, in light of the uncertainty surrounding the ongoing operations of the business. 46 In light of Mr Orp's evidence, I do not regard it as appropriate for the Court to appoint receivers and managers on an interlocutory basis. Such an appointment will potentially damage Tyndall and Marketlend to an extent that is disproportionate to the harm sought to be prevented. Removal of Directors 47 The plaintiffs submit that Mr Tyndall should be removed by the Court exercising its power under s 233 of the Act, having regard to the scale of his alleged misconduct. The plaintiffs accept that Mrs Tyndall must remain a director, so that Tyndall complies with s 201A(1), which requires a proprietary company to have at least one director ordinarily resident in Australia. 48 Mr Tyndall has been central to the operations, management and strategic direction of Tyndall and Marketlend. In particular, Mr Orp says that the process of pitching investment opportunities to bring new wholesale and institutional investors on board and raise capital from investors is exclusively the role of Mr Tyndall (para 40 of his affidavit). Mr Orp says that if Mr Tyndall were removed as a director, Tyndall and Marketlend would be removed and replaced by the trustee of each of the trusts, by reason of the uncertainties relating to the ongoing management and operations of the business conducted by Tyndall and Marketlend (para 58). There seems to me to be a real risk of irreparable detriment being suffered by Tyndall if Mr Tyndall is removed. Three shareholders have expressed their opposition to the amended originating process (see para 12 of Mr Calabretta's affidavit and exhibit 1). That reinforces the general proposition that the composition of the board should be a matter for consideration by all members of Tyndall, including those not party to the proceedings (see s 203C of the Act). In all the circumstances, I do not regard it as appropriate that Mr Tyndall be removed as a director on an interlocutory basis. Freezing Orders 49 The plaintiffs seek orders restraining Tyndall from paying money or transferring assets to Mr or Mrs Tyndall and restraining Mr and Mrs Tyndall from causing Tyndall to do so. Mr Tyndall is central to the ongoing business of Tyndall and Marketlend. There is a real risk that he would not continue in his role or do so with sufficient dedication and energy if he were not remunerated. Mr and Mrs Tyndall are entitled to reasonable remuneration for their services, and I am not in a position, on the current evidence, to say what that reasonable remuneration would amount to. Similarly, expenses properly incurred by Mr and Mrs Tyndall for the purpose of the business of Tyndall and Marketlend should be reimbursed. 50 Mr and Mrs Tyndall have proffered an undertaking which has been the subject of considerable discussion before me. Ultimately, the defendants consent to an order to the following effect: Mr and Mrs Tyndall will not cause Tyndall or Marketlend to pay money or transfer assets to either or both of them or for their benefit, except where Mr Luis Orp (or, in his absence, Mr Roy Galila) provides written authorisation for a payment, which authorisation is only to be provided where the payment: (a) relates to the remuneration or salary package for Mr or Mrs Tyndall; (b) relates to travel or accommodation expenses incurred or to be incurred in the course of performing duties on behalf of Tyndall or Marketlend; or (c) otherwise relates to a proper business expense that has been incurred or is to be incurred in the course of performing duties on behalf of Tyndall or Marketlend, but which sum may not exceed $1000. 51 In addition, Mr Orp or, in his absence, Mr Galila is to provide a statutory declaration every Wednesday, by 5 pm, of any payments made in the previous week to or for the benefit of Mr or Mrs Tyndall, stating the date, the amount, and a description of the item sufficient to demonstrate that it is a proper expense of Tyndall or Marketlend. 52 In addition, I regard it as appropriate to order that Tyndall be restrained from lending any further money to Mr or Mrs Tyndall, pending the final resolution of these proceedings. 53 In my view, those orders represent a sufficient compromise between the orders sought by the plaintiffs and the potential harm which might otherwise accrue to Tyndall and Marketlend from the full width of the orders sought by the plaintiffs. Costs 54 Counsel for Tyndall and Marketlend seeks an order for costs of today, on the basis that they had previously indicated that if it were not for the application for receivers and managers to be appointed, then they would not participate in today's hearing. While that position has been clearly expressed by Tyndall and Marketlend, the written submissions and oral submissions made by Tyndall and Marketlend today have gone well beyond the question of the appointment of receivers and managers. Their attendance at today's hearing was, in my view, necessary in order to deal with the application as a whole, including the potential for intermediate positions between those formulated by the plaintiff and those formulated by Mr and Mrs Tyndall to be fully ventilated. Accordingly, I do not regard it as appropriate to make an order in favour of Tyndall and Marketlend for their costs of today, and the order for costs will be that the costs of the plaintiffs' interlocutory application will be costs in the proceedings. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. Associate: Dated: 24 September 2024 SCHEDULE OF PARTIES NSD 789 of 2024 Defendants Fourth Defendant: BRADLEY GENE PATTELLI Fifth Defendant: MEGALODON LLC