Equitable Assignment: The question is how the parties viewed the transaction not how the transaction was recorded

31 March 2022
Guy Edgecombe, Partner, Brisbane

Business Finance Pty Ltd (receiver and manager appointed) v Partner Invest Pty Ltd (in liquidation) [2022] NSWSC 1 was a dispute between the external administrators of the plaintiff and defendant companies. Marcus Ayres was the appointed receiver and manager of Business Finance Pty Ltd (Business Finance) and Andrew Sallway was the liquidator of Partner Invest Pty Ltd (Partner Invest).

In a transaction that occurred before the external administrators were appointed, there was a question as to whether Partner Invest had assigned its rights as a lender, mortgagee, and secured party in a particular loan to Business Finance as an equitable assignment for value.


These two companies were related and shared a common director, Frankie McDad. At the time of the loan, Partner Invest was wholly owned by McDad, who was the sole director. In September 2016, Business Finance was incorporated and wholly owned by Partner Invest. The primary business of both companies was to raise funds from private investors to use in providing non-bank business loans which were secured by mortgages, caveats, general security agreements, and personal guarantees. Business Finance and Partner Invest executed an Administrative Services Agreement on 28 September 2016, and accordingly, Partner Invest was involved in administering Business Finance’s loans.

JML Loan

The loan that was the subject of the case was to JML Property Group (JML). In 2017, JML borrowed funds from Partner Invest for the purposes of constructing two townhouses and to purchase a sand quarry (the JML Loan). The security of the loan was first-ranking mortgages in favour of Partner Invest over properties in Kangaroo Flat, Bendigo, and Golden Square. Personal guarantees were also provided by the family members of the sole director and shareholder of JML and further, a security interest was granted by JML over all present and after-acquired property.

In the lead up to settlement, Business Finance transferred $830,000 from their operating account to Partner Invest’s solicitors trust account with the description ‘Buy Loan 652’. These funds were recorded in the trust account statement as received from Partner invest and described as ‘Mortgage – Advance from Partner Invest to JML’.

Intercompany Transfers

As the companies were related, other intercompany transfers did take place. From 27 October 2016, funds were credited to Business Finance’s account from Partner Invest. Mr Sallway reconstructed Partner Invest’s trust accounts, which revealed that at the time of the JML Loan, Business Finance had received $2.7 million from Partner Invest. By August 2018, Partner Invest had transferred $4.25 million and emails from McDad indicated the purpose was to sponsor equity to boost Business Finance’s loan book amount to $34 million.

Equitable Assignment

Mr Ayers submitted on behalf of Business Finance that the JML loan had been equitably assigned by Partner Invest, by reason of the $830,000 transfer from Business Finance. Mr Sallway however, put forward that Mr Ayers evidence was miscellaneous, unsigned correspondence that had been cobbled together.

There was no record of an agreement to assign the loan or show any intention to assign or transfer the JML Loan to Business Finance. However, the records kept by Business Finance and Partner Invest, as noted a number of times by Her Honour, were poor and incomplete. Further, the records kept by Partner Invest’s solicitors were ‘something of a mess.’[1]

As a purported assignment in equity, the transaction should take the form of and be intended as an immediate transfer of the beneficial interest, distinct from an agreement to assign it.[2] Except where writing is required by the Statute of Frauds, no formality is necessary beyond a clear expression of an intention to make an immediate disposition. The JML Loan is an interest in land, so section 53 of the Property Law Act 1958 (Vic) and section 126 of the Instruments Act 1958 (Vic) were relevant. Section 126 states that an agreement can be evidenced by a memorandum or note of the agreement so long as it is signed by the person to be charged.

In considering the existence of an equitable assignment, Justice Rees asked two questions:

  • Was there a manifestation by Partner Invest of an intention to transfer the equitable interest in the JML Loan and associated security to Business Finance in a manner binding upon itself?
  • Was there a clear expression of an intention to make an immediate disposition?

Based on the transaction documents, Her Honour considered that Partner Invest intended to immediately sell and Business Finance intended to immediately buy the JML loan and associated securities. Although the documents were executed by Partner Invest as lender and mortgagee, when the time came to complete the transaction it was apparent that the loan would be a Business Finance loan and would form part of its portfolio. Partner Invest wanted to support the establishment of Business Finance’s portfolio of loans, which is evidenced by providing funds to Business Finance and transferring loans as sponsor equity.

Justice Rees was less interested in how the companies and Partner Invest’s solicitors recorded the transactions and considered how the parties to the transaction viewed the matter. By doing so, her Honour ordered that on 2 January 2018, by equitable assignment for value, Partner Invest had assigned to Business Finance all of its rights as the lender under the JML Loan. As a result, Business Finance holds an equitable mortgage over the Kangaroo Flat and Bendigo properties and a charge over the property subject to the PPSR.

Key Takeaway

The existence of an equitable assignment for value does not necessarily turn on how the documents record the transaction. Instead, it is important how the parties to the transaction view the matter and whether they would consider that the transfer was for an equitable interest and for immediate disposition.

If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Authored by:

Guy Edgecombe, Partner
Caitlin Miller, Graduate


[1] Business Finance Pty Ltd (receiver and manager appointed) v Partner Invest Pty Ltd (in liquidation) [2022] NSWSC 1 (7 January 2022) at [5].

[2] Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30–1; [1963] HCA 21.


This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

Get in touch