Hutchison v Hillcrest Litigation Services Ltd - [2010] NSWSC 934

NEW SOUTH WALES SUPREME COURT

CITATION:
Hutchison v Hillcrest Litigation Services Limited [2010] NSWSC 934

JURISDICTION:
Equity

FILE NUMBER(S):
2009/326146

HEARING DATE(S):
09 August 2010

JUDGMENT DATE:
23 August 2010

PARTIES:
1st Plaintiff: Keiran William Hutchison as joint and several liquidator on behalf of Austin Australia Pty Ltd (in liquidation)
2nd Plaintiff: John Raymond Gibbons as joint and several liquidator on behalf of Austin Australia Pty Ltd (in liquidation)
Defendant: Hillcrest Litigation Services Limited

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable

COUNSEL:
Plaintiffs: J Simpkins SC with S Golledge
Defendant: J R J Lockhart SC

SOLICITORS:
Plaintiffs: Colin Biggers & Paisley
Defendant: Addisons Commercial Lawyers

CATCHWORDS:
CORPORATIONS – determination of separate questions – where plaintiffs entered into litigation funding agreement with defendant in respect of company’s arbitration proceedings – questions of construction of funding agreement – whether funding agreement contained implied term that defendant would act reasonably in determining whether to agree to particular fees or disbursements being recoverable as “Insolvency Practitioner’s Fees and disbursements” – whether funding agreement void for uncertainty if power to give or refuse agreement to particular expense not qualified by implied term to act reasonably – no question of principle
CORPORATIONS – application for leave nunc pro tunc pursuant to Corporations Act 2001 (Cth), s 477(2B) approving liquidators’ entry into costs agreement with firm of solicitors – whether to make an order under s 1322(4)(d) extending time for applying for approval – appropriate form of orders

LEGISLATION CITED:
Commercial Arbitration Act 1984 (NSW)
Corporations Act 2001 (Cth)

CASES CITED:
Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 130
Re GA Listing and Maintenance Pty Ltd (1994) 15 ACSR 308
Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 18 ACLC 738
Re Read [2007] FCA 1985; (2007) 164 FCR 237
Chamberlain v RG & H Investments Pty Ltd (ACN 000 599 477) [2009] FCA 1531; (2009) 76 ACSR 415
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

TEXTS CITED:

DECISION:
Refer to paras [75]-[77] of judgment.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Monday, 23 August 2010

2009/326146 Keiran William Hutchison as joint and several liquidator of Austin Australia Pty Ltd (in liquidation) & Anor v Hillcrest Litigation Services Limited

JUDGMENT

Outline of principal issues

HIS HONOUR: The principal questions on the present hearing concern the construction of a litigation funding agreement. On 23 June 2010 Bergin CJ in Eq ordered those questions to be determined separately from other issues in the proceedings.
The plaintiffs are liquidators of Austin Australia Pty Limited (in liq) (“Austin” or “the company”). They were appointed as voluntary administrators of Austin on 31 December 2003. On 10 March 2004 the creditors of Austin resolved that the company be wound up voluntarily and the plaintiffs were appointed liquidators.
Austin had commenced arbitration proceedings against Auburn Council in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 934
Decision Date: 23 August 2010

CaseChat Overview and Summary

The case of Hutchison v Hillcrest Litigation Services Ltd was before the Federal Court of Australia, which was required to determine questions of construction of a litigation funding agreement. The plaintiffs, represented by the Insolvency Practitioner, had entered into a litigation funding agreement with the defendant, Hillcrest Litigation Services Ltd, to fund the costs of arbitration proceedings. The dispute arose from the interpretation of the funding agreement, specifically whether it contained an implied term that the defendant would act reasonably in determining whether to agree to particular fees or disbursements being recoverable as "Insolvency Practitioner's Fees and disbursements." The plaintiffs argued that the funding agreement was void for uncertainty if the power to give or refuse agreement to particular expenses was not qualified by an implied term to act reasonably.

The court had to decide whether the funding agreement contained an implied term of reasonableness in the defendant's discretion to approve fees or disbursements and whether the agreement was void for uncertainty if such a term was not present. The court found that the funding agreement did not contain an implied term that the defendant would act reasonably in determining whether to agree to particular fees or disbursements. However, the court held that this did not render the agreement void for uncertainty. The court concluded that the power to give or refuse agreement to particular expenses was qualified by an implied term to act reasonably, which was a common law implication that applied to the funding agreement.

The court's decision was that the funding agreement was not void for uncertainty, and the implied term of reasonableness applied to the defendant's discretion in approving fees or disbursements. The court made orders approving the liquidators' entry into a costs agreement with a firm of solicitors and extending the time for applying for approval under the Corporations Act 2001 (Cth), s 1322(4)(d). The court also made orders for costs and directions for the preparation and filing of further documents.

Orders

Orders of the court

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Background

Background to the litigation

The second agreement, called a side agreement, made on 21 August 2007 relevantly provided as follows:“BACKGROUNDA.The Insolvency Practitioner and HLS are party to a Litigation Funding Agreement dated 22 May 2006, relating to the Funding Costs of the Proceedings (‘the Litigation Funding Agreement’).B.The Insolvency Practitioner has requested HLS increase the amount of funding for the Funding Costs of and in connection with the Proceedings.C.HLS has agreed to increase the amount of funding for the Funding Costs of and in connection with the Proceedings on the terms set out in this Agreement.OPERATIVE PART1. DEFINITIONS AND INTERPRETATION(a)The Definitions and Interpretations as contained in Clause 1 of the Litigation Funding Agreement apply to this Agreement.(b)The funding provided by HLS pursuant to this Agreement is in addition to all or any funding provided by HLS pursuant to the Litigation Funding Agreement.2. FUNDING BY HLSHLS will pay:(i)the Legal Fees and disbursements of the Proceedings up to a maximum amount of one hundred thousand dollars ($100,000.00);(ii)the Legal Fees and disbursements of any security for costs application brought by or on behalf of Auburn Council; and (iii)any security for Auburn Council’s costs ordered by the Arbitrator of the Proceedings or by the Court.3. CONSIDERATION AND ASSIGNMENT(a)In consideration of HLS agreeing to provide the funding set out in Clause 2 of this Agreement, the parties agree to amend the Litigation Funding Agreement as follows:(i)Clause 6(a) is amended so as to assign to HLS 45% of the balance of the Resolution Sum; and(ii)Clause 8(d) is amended so as to apportion and pay the Resolution Sum as to 55% thereof to the Insolvency Practitioner and 45% thereof to HLS.(b)No amount will become due and payable by the Insolvency Practitioner to HLS unless and until the Insolvency Practitioner receives the Resolution Sum, and only to the extent of such receipt.4. OTHER EVENTSIn the event that:(a)Auburn Council prosecutes an appeal, other than a holding appeal, of the decision of His Honour Justice Einstein dated 6 March 2007, and/or(b)Auburn Council makes any interlocutory application(s), other than an application for security costs, in respect of or relating to the Proceedings,then HLS agrees to pay the Legal Fees and disbursements in relation to or in connection with any such application(s) and the parties agree to amend the Litigation Funding agreement as follows:(i)Clause 6(a) is amended so as to assign to HLS 50% of the balance of the Resolution Sum; and(ii)Clause 8(d) is amended so as to apportion and pay the Resolution Sum as to 50% thereof to the Insolvency Practitioner and 50% thereof to HLS.(c)No amount will become due and payable by the Insolvency Practitioner to HLS unless and until the Insolvency Practitioner receives the Resolution Sum, and only to the extent of such receipt.” Although clause 2(i) was expressed as a future obligation of the defendant, the defendant had already satisfied its obligation under clause 2(i) at the time the agreement was signed.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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