In Octet Finance Pty Ltd v Macgregor [2026] NSWSC 103, the Supreme Court of New South Wales delivered an important reminder for directors and senior officers. When a company is in financial distress, communications with lenders matter, and silence can be costly.
When a Recapitalisation Isn’t the Whole Story
The case arose out of an unsecured $4 million revolving trade finance facility provided by Octet Finance to Mrs Mac’s Pty Ltd, a pie manufacturer facing financial pressure. While the company was publicly described as pursuing a “recapitalisation”, it was simultaneously exploring an asset sale which ultimately resulted in a transaction with an entity associated with United Petroleum Pty Ltd (Pie Face) and the immediate liquidation of the company.
Octet alleged it had been led to believe that the recapitalisation would result in repayment of its facility in full. Instead, following completion of the asset sale and payment of the secured creditor, Westpac, Octet was left unpaid in the liquidation.
The Court’s Key Finding - Silence Can Mislead
The Court found that the CFO had engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law. Critically, the misleading conduct was not an outright false statement. Rather, it was the failure to correct Octet’s understanding that it would likely be repaid following a recapitalisation, in circumstances where the restructuring path had materially shifted toward an asset sale and likely liquidation.
The Court made clear that once the CFO appreciated that the recapitalisation narrative no longer reflected the commercial reality, there was an obligation to correct the financier’s understanding. The failure to do so rendered the continuing silence misleading.
The decision highlights that where a company officer knows a lender is operating under a material misapprehension, particularly one created or reinforced by earlier communications, silence may amount to misleading conduct.
Directors Avoid Liability, but Not Without Scrutiny
Although the CFO was held liable (with damages ultimately reduced to $37,779.46 after proportionate liability adjustments), the claims against six directors were dismissed.
Octet attempted to argue that the CFO had been acting as the directors’ personal agent, particularly in the context of their reliance on the safe harbour protections under s 588GA of the Corporations Act. The Court rejected that contention. The directors had not directly communicated with Octet, and the CFO’s conduct could not be imputed to them.
The Court also rejected allegations of knowing involvement and unconscionable conduct, recognising the commercial sensitivity and confidentiality of the asset sale process.
The Broader Lesson for Directors
While the directors avoided personal liability in this case, the judgment carries a broader warning.
When a company is under financial stress:
- Lenders are acutely focused on risk exposure.
- Communications are scrutinised with hindsight.
- Recovery action is likely if expectations are not met.
The Court’s reasoning makes clear that senior officers, particularly CFOs, bear responsibility for ensuring that lenders are not left operating under a materially false impression. If circumstances change in a way that significantly affects repayment prospects, transparency becomes critical.
Directors cannot assume that careful internal restructuring processes or reliance on safe harbour protections will shield them from external scrutiny. Even if personal liability is ultimately avoided, litigation risk, reputational damage and significant legal cost exposure remain very real.
Takeaways
- Be accurate and complete in communications with lenders. Partial truths or outdated narratives can become misleading.
- Correct misunderstandings promptly. If a lender is relying on assumptions that no longer reflect reality, silence may create liability.
- Align internal strategy with external messaging. If pursuing both recapitalisation and asset sale pathways, communications must reflect that dual-track reality.
- Document decision-making and communications carefully.
The case is a timely reminder that when companies approach insolvency, the margin for error in lender communications narrows considerably. Transparency is not merely good governance, it may be the difference between avoiding and incurring personal liability.
