His purpose in life was to release captive animals from pet stores, and create "safe havens" for them that were "free of predators". Yesterday, after a psychiatric report was presented to court, a charge of bestiality against the financier was dropped.

The Herald understands it was because prosecutors are unable to prove he used his penis to penetrate the rabbits, a requirement of that charge. A short hearing will be held next month after a forensic psychiatrist, Stephen Allnutt, diagnosed him as having an "almost resolved psychotic episode". McMahon, who yesterday attended Downing Centre Local Court dressed in a dark suit, told psychiatrists he believed he was communicating with the rabbits when he bought them from pet shops and released them into Hyde Park in March and April.

He denies ever having had sex with animals. He did not have a mental disorder and was not mentally ill, Dr Allnutt said. The dead or dying animals, some skinned, were allegedly found in and around McMahon's York Street office between July and early August.

The lane adjoined a building in which McMahon allegedly occupied a first-floor office, from which he ran a financial planning and mortgage brokerage, Meares-McMahon Capital, with Jason Meares, the brother of the swimsuit designer Jodhi Meares, former wife of James Packer. McMahon had been using the drug methamphetamine, also known as ice, every day because it gave him a "mental push" at work and gave him confidence in business dealings that otherwise caused anxiety, the report said. He had been using the drug for about a year.

He had smoked marijuana almost every day since he was 14, and had a "life-long love for nature", the report added. But Dr Allnutt said his "interest in nature, bird-watching and mysticism became distorted by the amphetamine use".

He had "delusional" beliefs that "were further complicated by his interest in mysticism, hence the development of his idea that he could communicate with animals through a third eye", Dr Allnutt said. "At the time he really believed that he had been communicating with the rabbits, and that this interaction with the rabbits was of value to nature. He said that when this happened he would feel a 'joy' in his heart." McMahon allegedly said he felt some of the rabbits he released were unhappy.

Dr Allnutt said that McMahon told him of three "significant" experiences in the past 18 months - twice when birds followed him in his truck in the outback, looking at him, and a time when he saw a cloud forming the shape of a wedgetail eagle. "During the period that he had these experiences he had also become contemplative about contributing more to nature," Dr Allnutt said.