SMBC Leasing and Finance, Inc. v Flexirent Capital Pty Ltd [2026] FCA 29

This Federal Court decision sits inside the broader Forum Group fraud litigation. The court recorded that four financiers were duped into advancing hundreds of millions of dollars through fraudulent transactions devised by Mr Bill Papas using associated Forum entities. SMBC Leasing & Finance, Inc. was one of those financiers. It had already obtained judgments against Mr Papas and related entities in other proceedings, but had not recovered its losses, so it pursued Flexirent Capital Pty Ltd.

The commercial setup is important. In 2018, Forum Enviro (Aust) Pty Ltd, or FEA, purported to enter into technology licence agreements with Veolia Environmental Services (Australia) Pty Ltd. FEA purported to act as Flexirent's undisclosed agent under a principal and agency agreement. Flexirent then sold to SMBC the right to receive monthly usage charges under those agreements, and title to the related equipment, through four transactions under a master receivables acquisition and servicing agreement, a supplemental deed and offer letters.

But the underlying transaction was fake. Veolia had not executed the agreements. The signatures were forged by Mr Papas. The receivables did not exist. The equipment did not exist. SMBC had paid Flexirent $29,709,714.14 under that 2018 arrangement.

There was then a second chapter. In early 2020, Flexirent and Humm Group decided to exit their managed service finance business. Flexirent's Head of Managed Services Financing, Mr Colbert, later consulted to FEA and raised with SMBC the possibility of dealing directly with FEA. SMBC then entered a separate 2020 arrangement with FEA, not Flexirent, and paid FEA $83,993,909.47 across 15 transactions. Those transactions were also based on documents Veolia had not really signed and on non-existent equipment.

The case therefore asked a practical commercial question. Which of SMBC's losses could legally be laid at Flexirent's door, and on what legal basis?

For the 2018 arrangement, SMBC ran three main types of claim against Flexirent.

First, it sued for breach of express warranties in the 2018 MRASA. The court recorded that it was common ground that Flexirent represented and warranted, in substance, that there was no fraud, dishonesty, material misrepresentation or negligence in connection with the selection and offer of each receivable, that the assignment of receivables rights to SMBC was valid and binding, that each receivable was a valid and binding obligation of Veolia, that appropriate know-your-client checks had been undertaken, and that Flexirent had no reason to believe Veolia would not pay. There were also warranties about ownership, title and existence of the related assets.

Second, SMBC relied on a contractual indemnity. The judgment describes a general indemnity in clause 8.1 of the 2018 MRASA covering losses arising from any fraud or negligence on the part of Flexirent or any of its agents or delegates. There was also a separate indemnity dealing with Flexirent's defined Agent, which led to an argument about whether the general indemnity should be read down.

Third, SMBC brought statutory claims under the ASIC Act. It said the four 2018 offer letters, read in context with the MRASA and the parties' dealings, conveyed representations that the receivables existed, the related assets existed and had been delivered and accepted, the underlying agreements were duly executed by and binding on Veolia, and no event of default was subsisting or would result. SMBC also relied on alleged omissions, saying Flexirent failed to tell it those matters were false.

For the 2020 arrangement, SMBC tried to extend the statutory case. It argued that it entered the later direct arrangement with FEA in reliance on the earlier 2018 representations and because Flexirent had not told it those earlier matters were false.

One of the most useful parts of the decision for business readers is the court's treatment of the 2018 warranties. Flexirent argued that SMBC could not recover contract damages unless it proved it relied on the warranties when approving each drawdown. That argument depended on characterising the clauses as merely representational rather than promissory.

The court rejected that argument. It held that the relevant clauses in the 2018 MRASA were plainly promissory warranties as at the date of the offer letters. In other words, they were contractual promises contained in the signed agreement itself. The court said no reasonable person in the position of the parties would understand them otherwise.

That distinction matters. A representation is generally a statement said to induce entry into a contract or transaction. A promissory warranty in a contract is part of the bargain itself. If it is false, the contract is breached. On the court's reasoning, once the 2018 warranties were shown to be false because the receivables and assets did not exist, SMBC did not need to separately prove reliance in order to recover for breach of contract. The court added that reliance was established anyway, but that was not necessary to the contract result.

The judgment shows the court dealing directly with authorities about collateral warranties and pre-contractual statements. The court said those cases did not answer the present situation because here the warranties were written into the principal signed contract. This was not a case about trying to elevate a sales statement into a collateral promise. SMBC had sought and obtained express promises in the contract documents.

For businesses, this is a drafting and risk-allocation point. If your contract says you represent and warrant that receivables exist, are enforceable, are free from fraud, or are backed by real assets and good title, a court may treat those words as enforceable promises. If they are wrong, the buyer may sue for breach without having to reconstruct every internal approval step and prove separate reliance on each clause.

SMBC succeeded on its primary 2018 case against Flexirent. The court held that the warranties and representations in the 2018 MRASA were false because of the fraud. The receivables did not exist, the related assets did not exist, Veolia had not executed the documents, and the contractual promises about validity, enforceability, title and related matters were therefore untrue.

The court also held that the general indemnity applied. It rejected the argument that the more specific indemnity concerning Flexirent's defined Agent cut down the broader indemnity for losses arising from fraud or negligence by Flexirent or any of its agents or delegates. The court said the general indemnity applied and the specific indemnity covered different territory, although there could be circumstances where both applied.

On the statutory side, the court held that Flexirent engaged in misleading or deceptive conduct under section 12DA of the ASIC Act in relation to the four 2018 offer letters. In context, those letters conveyed representations about the existence of the receivables and related assets, the validity of the underlying agreements, and the absence of a subsisting or resulting event of default. The court also held that Flexirent contravened section 12DB(1)(b) because it represented that Veolia had agreed to acquire services when it had not. The extract says it was unnecessary to decide whether section 12DB(1)(a) was also contravened.

But SMBC failed on its wholly statutory claims concerning the 2020 arrangement entered directly with FEA. The court held that the earlier 2018 representations were not a material cause of SMBC's loss in the later transaction. It also rejected the omission or silence case. Flexirent did not have actual knowledge that the earlier representations were false, and no reasonable person in SMBC's position would have expected Flexirent to disclose fraud by its agent that it did not know about. The court also held that FEA's knowledge of the fraud, attributed through Mr Papas, was not imputed to Flexirent.

There was no dispute that if Flexirent was liable, Humm Group would be liable under a guarantee. The reasons then directed the parties to confer on the appropriate orders and costs.

The judgment gives substantial guidance on damages, which is often where commercial cases become most practical. The court approached the matter as one of expectation damages and worked through a series of arguments for reducing the amount recoverable.

Flexirent argued for discounts based on contingencies and the time value of money. The court rejected those arguments because there was no relevant uncertainty about the loss and the damages did not relate to future events.

Flexirent also argued for a discount based on asserted tax benefits from depreciation deductions claimed in relation to non-existent assets. The court rejected that too. The extract says the argument assumed any damages award would not be taxed, but that had not been established. Different views could be taken about the tax consequences and the overall tax position was uncertain, so no discount was appropriate.

The same happened with GST. SMBC had objected to GST assessments concerning GST that should not have been paid. But the court noted that incorrectly paid GST is not automatically refunded under the statutory regime, the ATO had not determined the objection, and the evidence did not establish that any refund would result in over-compensation. So again, no discount.

Flexirent also sought a reduction for security deposits held by SMBC. The court rejected that because SMBC was not entitled to use those deposits and they were likely to be set off against likely distributions from the liquidation of the Forum entities.

One discount was accepted in principle. The court held that a discount was appropriate for likely recovery from the liquidation of the Forum entities to the extent that the likely recovery related to the 2018 arrangement. That mattered because existing judgments against the Forum entities concerned both the 2018 and 2020 arrangements, but SMBC failed in this proceeding in relation to the 2020 arrangement.

The court also held that certain additional costs were recoverable, including funding costs referable to the 2018 arrangement in the liquidation work, legal fees and expenses referable to the 2018 arrangement, and financing costs associated with the purported purchase of the receivables and related assets from Flexirent.

For business readers, the practical point is simple. A defendant will not necessarily reduce damages by pointing to possible tax outcomes, possible GST refunds or possible future recoveries. The evidence must show that a discount is justified and that the plaintiff would otherwise be overcompensated.

This case is directly relevant to businesses that package and sell payment rights, lease streams, subscriptions, managed service contracts or equipment-backed receivables. It is also relevant to buyers of those assets, and to businesses that use agents or intermediaries to source customer contracts.

First, signed warranties matter. If your contract says the receivables exist, the customer is bound, the assets exist and title can pass, those statements may be treated as promissory warranties. If they are false, the buyer may have a straightforward contract claim.

Second, indemnities can be broader than expected. The court treated the general indemnity for fraud or negligence by Flexirent or its agents or delegates as operative, even though there was also a more specific indemnity elsewhere. Businesses should not assume a specific clause silently narrows a broader one unless the drafting clearly does that work.

Third, statutory claims still require careful causation analysis. Even where earlier conduct was misleading, that does not automatically make a party liable for losses in a later and separate transaction. If the later deal was entered directly with someone else, the causal chain may fail.

Fourth, agency risk is not just about authority. It is also about verification. If an agent sources customer documents, your business still needs systems to verify execution, customer identity, asset existence, title and delivery. A promise in your downstream contract may expose you even if the immediate fraud was committed elsewhere.

Finally, parent guarantees matter. The court recorded that there was no dispute that if Flexirent was liable, Humm Group would be liable under a guarantee. Group structures do not necessarily contain the risk if guarantees have been given.

The judgment was delivered by Thawley J on 30 January 2026. The orders recorded that the parties were to confer by 13 February 2026 about the appropriate orders to give effect to the reasons and about costs, with any disputed orders and short submissions to be filed by 18 February 2026 and any argument listed for 20 February 2026.

That means the liability findings and the court's reasoning on the main issues are clear, but anyone needing the exact final form of relief or costs orders should check the entered orders on the court file.