New governance allegations and auditor claims now in play after Federal Court ruling
Shareholders have won leave to widen claims against ISX (now Southern Cross Payments) and auditor Grant Thornton over alleged governance failures and misleading FY18 accounts.
In Brydi Pty Ltd atf the Brydi Super Fund v Southern Cross Payments Ltd [2026] FCA 543, Justice O'Callaghan delivered judgment on 5 May 2026, granting the lead applicant leave to file an amended originating application and statement of claim.
The proceeding, commenced under Part IVA of the Federal Court of Australia Act 1976 (Cth), represents persons who acquired shares in ISX on the ASX. On 22 December 2014, ISX, then named Otis Energy Limited, acquired 100% of the issued shares of iSignthis BV (a company incorporated in the Netherlands) and ISX IP Ltd (a company incorporated in the British Virgin Islands), changed its name to iSignthis Limited and traded under the ASX ticker ISX until 4 November 2022.
After the listing, certain directors, including CEO Mr Karantzis, stood to earn "Milestone Shares" if, within three full financial years, ISX achieved revenue over a 6-month reporting period equivalent to an annual revenue of at least $10 million. The FY18 accounts were audited by Grant Thornton, with Mr Taylor as lead auditor, and contained a declaration by the directors that the revenue to achieve the Milestone Shares had been met and that the shares would be issued.
The applicant alleges the revenue recorded in the FY18 accounts was recorded in circumstances where, under the applicable Accounting Standards, it should not have been recognised because the revenue was generated by an activity that was not a core service. On the applicant's case, the Milestone Shares vested when they ought not to have, and the FY18 accounts were not accurate. If the milestones triggered, the new ordinary shares issued on the conversion of the Milestone Shares constituted approximately 33% of the issued ordinary shares of ISX, materially diluting other shareholders.
The amendments add allegations that ISX engaged in misleading or deceptive conduct and made false or misleading statements contrary to ss 1041H and 1041E of the Corporations Act 2001 (Cth). Parallel claims target Grant Thornton's audit opinion. Grant Thornton does not oppose the amendments directed against it.
The applicant also pleaded new ISX Governance and Control Representations, alleging ISX represented that all of its directors and members of its audit committee were required by ISX to act, and did act, with integrity; that ISX had sufficient systems and controls in place to appropriately recognise revenue in accordance with applicable Accounting Standards; and that ISX had disclosed to affected persons all key risks to its business and that there was nothing, to the knowledge of ISX or its directors, that presented a threat to the continued listing, trading or governance of the company. The amended pleading names Mr Richards (Chief Financial Officer), Mr Karantzis (Managing Director and CEO) and Mr Timothy Hart (Chairman), alleging they caused ISX to enter into the Authenticate Contracts and the Outsourcing Agreements for the actuating purpose of generating enough revenue to achieve the Milestone Shares. These remain allegations.
The amendments followed reasons issued by the Company Auditors Disciplinary Board on 25 June 2025 in proceedings against Mr Taylor and Mr Trivett. Mr Taylor has since had his registration as an auditor cancelled.
ISX opposed several paragraphs on two grounds: abuse of process and insufficient particularisation. On the abuse of process ground, ISX pointed to ASIC's earlier civil penalty proceeding, in which Justice McEvoy on 21 June 2024 declared that Mr Karantzis had contravened ss 180(1), 1309(2), 1309(12) and 674(2A) of the Act by reason of his involvement in iSignthis' contravention of s 674(2), but dismissed ASIC's case that he had contravened ss 181(1) and 182(1)(a) in relation to the so-called "integration agreements." The company was ordered to pay a $10 million pecuniary penalty and Mr Karantzis $1 million, with a six-year disqualification. iSignthis Ltd and Mr Karantzis have appealed; the appeal was heard in the March 2026 sittings and is yet to be determined. ASIC did not appeal the dismissal of the ss 181 and 182 claims.
Justice O'Callaghan rejected the abuse of process challenge. The new proceeding involves a different applicant, an additional respondent in Grant Thornton, and different statutory provisions. His Honour held the applicants should not be impeded from exercising their rights of access to the courts, and that they were not under any duty to commence proceedings against ISX because they knew of the ASIC proceeding and the possibility of a common issue. The complaint about the content of certain particulars was, his Honour found, only faintly pressed and lacked substance.
The court ordered ISX to pay the applicant's costs of the amendment application, and the applicant to pay the costs of ISX and Grant Thornton thrown away by reason of the amendments.
