The Property Mentors Australia Pty Ltd v Touch for Health Pty Ltd as Trustee for Knight Superannuation Fund [2026] FCAFC 21

The Full Federal Court dismissed the appeal and partly allowed the cross-appeal in The Property Mentors Australia Pty Ltd v Touch for Health Pty Ltd as Trustee for Knight Superannuation Fund [2026] FCAFC 21. The case concerned an Information Memorandum used to promote an investment in a proposed residential development in Secret Harbour, Western Australia.

The court upheld findings that the document conveyed misleading or deceptive representations about the investment term and expected return. It also varied the declaration so that, in addition to the company, two individuals were declared to have engaged in the misleading conduct. The decision is especially relevant for businesses raising money through trusts, syndicates or other structured investments.

The investment was promoted through an Information Memorandum for the Secret Harbor Unit Trust in connection with a proposed residential development at Lot 380 Cottesloe Crescent, Secret Harbour, Western Australia. Investors were told, in substance, that this was a relatively short-term opportunity with a strong expected return.

The declaration ultimately made by the Full Court identifies two representations conveyed by the Information Memorandum. One was that the investment would have a term of 12 to 15 months. The other was that it was to be expected that the investment would return more than 20% to the applicants. The reasons also explain that the expected profit case at trial was framed more specifically by reference to a table headed "Unit Holder Returns", which was said to convey a return on investment in the range of 39.7% to 49.6%.

The dispute was not simply about a project that later underperformed. The court focused on a problem that existed from the outset. The return model shown to investors did not fit the legal rights created by the unit trust. On the court's analysis, each unit holder had the same entitlement on a winding up, including return of capital, whether or not that holder had contributed cash for the units. Once that structure was applied, the promoted return for cash investors could not be achieved in the way the Information Memorandum suggested.

The promoters accepted there was a fundamental problem, described in the reasons as a dilution error. Their answer was that there had been an assumption, or at least an intention, that cash investors would effectively be paid back in priority and that PM Asset Holdings, the associated entity holding the balance of the units, would accept less. But the trust deed did not require that result. The court treated that gap between the promoted economics and the legal structure as central.

The appeal raised whether the first appellant had breached s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) by making misleading or deceptive representations about the expected timeframe of the development and the expected profits or returns. Because those were future-looking statements, the case also involved the question whether there were reasonable grounds for making them.

The catchwords record one important finding on the timeframe representation. The appellants did not discharge the evidentiary onus to establish reasonable grounds for making the representation that the investment would have a term of 12 to 15 months. That is significant for businesses because it shows that a projected timeline in an investor document is not treated as harmless sales language if it conveys a concrete future matter.

The expected profit issue was more detailed. The appellants argued that the primary judge should have accepted evidence about an intention to ensure that cash investors were paid in priority, despite the absence of any provision in the Unit Trust Deed compelling that course. They also relied on a Browne v Dunn argument and on findings made below about lack of knowledge of falsity for accessorial liability purposes.

The cross-appeal raised two further issues. First, whether the second and third cross-respondents had themselves engaged in the misleading conduct as principals, rather than merely being involved in the company's contravention. Second, whether the investors' loss arose when they invested in June 2015 or only later, when the development failed and the property was sold, for the purpose of pre-judgment interest.

The Full Court dismissed the appeal. It found no basis to interfere with the primary judge's findings on misleading or deceptive conduct. On the timeframe representation, the appellants had not discharged the evidentiary onus to establish reasonable grounds. On the expected profit representation, the court held that the primary judge's findings did not indicate acceptance of the appellants' stated intention and there was no basis for appellate interference with the fact finding.

Jackson J's reasons explain the expected profit issue in practical terms. The Information Memorandum overlooked the terms of the Secret Harbor Unit Trust itself. Those terms required a return of capital to each unit holder regardless of whether the holder had contributed cash for units. Each unit had the same entitlement on a winding up. On the projected numbers discussed in the reasons, a return on equity of around 40% or more was unattainable and even any positive return on equity was likely unattainable once the trust deed mechanics were applied.

The court then dealt carefully with the promoters' reliance on intention. Mr Bateman had given evidence that, if the mistake had been discovered, PM Asset Holdings would have taken a smaller amount and investors would have been paid out as contemplated. But the court said that evidence did not establish reasonable grounds for the representation. The cross-examination made clear that there was no mechanism in the trust deed for a priority return of capital to cash investors and that PM Asset Holdings could have insisted on strict compliance with its rights. The court also rejected the suggestion that this evidence was unchallenged. It had been challenged in cross-examination and in written submissions.

Just as importantly, the court said the argument being addressed at trial was not really that the subjective intentions of Mr Harris or Mr Bateman supplied reasonable grounds for a future representation. Rather, the argument had shifted to a contention that the preferential return of capital was somehow plainly the intention of the trust structure itself. The primary judge rejected that so-called assumption, and the Full Court held there was no reason to disturb that conclusion. The terms of the trust contradicted it, and statements in the Information Memorandum describing the effect of those terms also contradicted it.

The court also explained why findings below about lack of knowledge of falsity did not help the appellants. Those findings went to whether the investors had proved that Mr Harris and Mr Bateman knew, at the time of issue, that the Information Memorandum was inconsistent with the trust deed. They did not amount to a finding that the trust would in fact have been administered contrary to its terms or that the promoted return model had reasonable grounds.

This is the most commercially useful part of the decision. The court drew a clear line between what the promoters said they intended to do and what the legal documents actually required. The Information Memorandum promoted returns as if cash investors would effectively recover their capital in a way that preserved the advertised profit percentage. But the Unit Trust Deed did not create that priority.

The reasons show why that mattered. PM Asset Holdings held a large number of units. If all units shared in capital and profit according to the deed, the economics for cash investors were materially worse than the Information Memorandum suggested. The court treated that as a present structural defect in the representation, not a problem that could be cured by saying everyone would probably act fairly later.

For business owners, the lesson is concrete. If your model depends on one class of participant stepping aside, waiving rights, accepting less, or being paid later, that needs to be reflected in the governing documents or in the rights actually issued. A hope, assumption or internal understanding is not the same thing as a legal mechanism. If the legal structure allows someone to insist on a different outcome, a forecast built on the preferred outcome may lack reasonable grounds.

The cross-appeal succeeded on the issue of principal liability. The Full Court held that the second and third cross-respondents had themselves engaged in misleading or deceptive conduct as principals. The declaration was varied accordingly.

The court's reasoning was direct. The question was not whether a person acted for themselves or only as a director or agent. The question was whether that person engaged in the conduct. For Mr Bateman, the answer was straightforward because he wrote the Information Memorandum and sent it to investors. For Mr Harris, the court found that he read every word, satisfied himself that the contents were fair and reasonable, approved it to go out under the company's name and livery, and joined in deciding to whom it would be sent.

That was enough. The court said Mr Harris's approval of the Information Memorandum for dissemination to potential investors was conduct that had a tendency to lead persons into error because of the contents of the document that was then disseminated. In other words, a person can be acting in a corporate capacity and still personally engage in misleading conduct.

This matters for founders, directors and deal promoters. If you draft, approve or distribute investor communications, you should not assume the company is the only exposed party. The closer your role is to creating and releasing the message, the harder it is to argue that you did not engage in the conduct yourself.

The investors argued that their cause of action did not accrue until December 2019, when the land was sold by a mortgagee and the development losses crystallised. The Full Court rejected that argument and left the primary judge's decision on pre-judgment interest undisturbed.

The court said Wardley did not establish any general proposition that loss under s 12GF of the ASIC Act only arises when a plaintiff becomes aware of the loss or when the full extent of the loss is finally known. On these facts, the investors suffered loss when they made their investments in June 2015.

The reasons describe that loss as real, immediate and ascertainable. It was real because the investors had paid money over. It was immediate because, from the outset, the investments were drained of value by the trust structure requiring the contributed capital to be shared with PM Asset Holdings. It was ascertainable because, on a proper understanding of the terms of issue of the units, the true position could be identified even though the conduct remained misleading.

For businesses, this part of the case is a reminder that misleading investment claims can arise earlier than the final commercial collapse of a project. For claimants, it is a reminder not to assume that time only starts running once the project has completely failed.

This decision is best read as a document alignment case. The court was not dealing with vague optimism. It was dealing with concrete statements in a formal investment document about timing and returns. Those statements were tested against the legal rights created by the trust deed and against whether there were reasonable grounds for making them.

If your business raises money, issues units or shares, syndicates a project, or circulates a deck with projected returns, the practical message is simple. Before anything is sent, make sure the legal structure, the cap table or unit register, the financial model and the disclosure document all match. If the promoted outcome depends on a waiver, subordination, priority return, side arrangement or later exercise of discretion, document that properly first.

The case also shows that internal confidence is not enough. A director or promoter may genuinely believe investors will be treated fairly, but that does not supply reasonable grounds if the governing documents permit a different result. Courts will look at the legal rights and the actual content of the communication, not just the promoter's stated intention after the event.

Does this mean I can never include projected returns? No. But if you include them, you need reasonable grounds and the legal structure must support the outcome being shown.

What if everyone internally understands how the money will really be split? That is not enough if the governing documents do not require that split. Internal understanding does not replace legal rights.

Can I rely on a later amendment if the structure is not quite right yet? This case is a warning against that approach. The question is whether the representation was supportable when the document was provided.

Is this only relevant to property syndicates? No. The same reasoning can matter in startup fundraising, managed investment style arrangements, shareholder offers and any structure where investor returns depend on legal entitlements.

The judgment is a Full Federal Court decision dated 10 March 2026. The available text includes the catchwords, orders and substantial reasons, including detailed discussion of the expected profit issue, principal liability and the timing of loss. The text available for this page is truncated near the end, so this summary stays within the facts and reasoning that are clearly stated.

This page is general information only and not legal advice.