On 21 July 2026, Justice Free, Justice Ball and Acting Justice Harrison of the New South Wales Court of Appeal upheld the decision of Justice Black in the matter of Portman Securities (in liq) Pty Ltd [2025] NSWSC 1338, that Westwood Capital Pty Ltd (Westwood) was to repay more than $5 million received in connection with an unsuccessful property transaction involving Portman Securities Pty Ltd (Portman), now in liquidation.

Maddocks acted for Portman. 

The decision provides important guidance on the operation of the good faith defence in section 588FG(2) of the Corporations Act 2001 (Cth) (Act). In particular, the Court considered the circumstances in which a recipient of funds arising from a voidable transaction may be unable to rely on the statutory defence to retain those funds, notwithstanding a claim that it acted in good faith.

The Appeal 

In March 2020, Westwood entered into a contract to sell a property in Punchbowl to Portman for $100 million. The contract required Portman to pay a $10 million deposit by instalments. Portman paid only $5 million of the deposit. After Portman failed to make the other required instalment payments, Westwood terminated the contract in October 2020. Portman was subsequently wound up and Christopher Darin of Worrells was appointed as the liquidator (Liquidator).

In June 2024, the Liquidator commenced proceedings against a number of parties, including Westwood, seeking, among other things, repayment of the deposit on the basis that the transaction was uncommercial and voidable under the Act. Westwood, in turn, cross-claimed for the unpaid balance of the deposit and sought to enforce an alleged personal guarantee given by Portman’s sole director, Mr Mario Pamboris.

At first instance before Justice Black, the Liquidator succeeded on all claims. The Court ordered Westwood to repay Portman more than $5 million received under the transaction, dismissed Westwood’s claim for the balance of the deposit, and rejected its attempt to enforce the alleged personal guarantee. 

Westwood subsequently appealed to the New South Wales Court of Appeal. The appeal was dismissed on all grounds with the findings of Justice Black at first instance being upheld.

The Good Faith Defence: s 588FG(2)

On appeal, Westwood’s principal argument was that it had established the statutory defence in section 588FG(2) of the Act, which protects a party from orders in relation to a voidable transaction where that party:

• acted in good faith;
• had no reasonable grounds for suspecting the company was insolvent; and
• provided valuable consideration or otherwise altered its position in reliance on the transaction.

In relation to s 588FG(2)(a), the Court of Appeal declined to determine the broader scope and content of the good faith requirement, holding that the issue did not arise on a sufficiently developed factual foundation. The Court of Appeal instead left those questions for consideration in a future case where the facts more directly engage the operation of the requirement.^[1]

Further, the Court of Appeal undertook a detailed examination of the insolvency limb of the defence in section 588FG(2)(b), confirming that it contains both a subjective and an objective element and is “hybrid” in character.^[2]

As the Court explained in reference to Justice Black’s initial remarks, section 588FG(2)(b)(i) requires consideration of the respondent’s actual state of knowledge and circumstances. The inquiry is directed to whether that particular person, having regard to its “perspicacity”, the information available to it and any “analysis of that information it had made”, had reasonable grounds for suspecting insolvency.^[3] By contrast, section 588FG(2)(b)(ii) imposes an objective standard. It requires the Court to consider whether a reasonable person in the respondent’s position would have had grounds to suspect insolvency, assessed in light of all the circumstances known or available at the time of the transaction.^[4]

Westwood argued that its sole director, Mr Bill Gertos, had previously made inquiries into Portman’s financial position in connection with an earlier property transaction in Camperdown and had relied on the results of those inquiries when assessing Portman’s capacity to complete the Punchbowl acquisition.

However, Justice Black rejected that evidence regarding those alleged inquiries, making significant adverse credibility findings and concluding that his account was inconsistent and unreliable.^[5] As a result, Westwood was unable to establish an evidentiary basis for its contention that it had no reasonable grounds for suspecting Portman’s insolvency, or a “forensic void” according to the Court.^[6]

Justice Black also observed that the Punchbowl transaction was not a typical arm’s-length commercial dealing. Mr Gertos and Mr Pamboris had a longstanding relationship, which afforded Westwood a greater degree of insight into Portman’s financial affairs than would ordinarily be available to an unrelated vendor.^[7] In those circumstances, the Court found that Westwood could not rely on the absence of formal indicators of insolvency and was unable to satisfy the requirements of the section 588FG(2) defence.

The Court of Appeal upheld those findings. In doing so, it rejected Westwood’s submission that a reasonable commercial party is entitled to rely solely on a counterparty’s representations as to its funding capacity in the absence of any apparent warning signs.^[8]

The decision highlights that Courts will closely scrutinise both the credibility of the evidence relied upon to establish the good faith defence and the nature of the parties’ relationship when assessing whether reasonable grounds existed to suspect insolvency.