International Litigation Partners Pte Ltd v Chameleon Mining Nl (Receivers and Managers Appointed)

[2012] HCATrans 146

[2012] HCATrans 146

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S362 of 2011

B e t w e e n -

INTERNATIONAL LITIGATION PARTNERS PTE LTD

Appellant

and

CHAMELEON MINING NL (RECEIVERS AND MANAGERS APPOINTED)

First Respondent

CAPE LAMBERT RESOURCES LIMITED

Second Respondent

ANDREW HUGH JENNER WILY

Third Respondent

DAVID ANTHONY HURST

Fourth Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 20 JUNE 2012, AT 10.25 AM

Copyright in the High Court of Australia

__________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MS R.C.A. HIGGINS, for the appellant.  (instructed by Ashurst Australia)

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR M.A. JONES, SC and MR M.L. BENNETT for the first respondent.  (instructed by Swaab Attorneys)

MR C.R.C. NEWLINDS, SC:   May it please the Court, I appear with MR J.C. GILES for the second respondent.  (instructed by Lavan Legal)

FRENCH CJ:   I note a submitting appearance for the third and fourth respondents.  Yes, Mr Walker.

MR WALKER:   As your Honours can see from the outline we have provided for the argument, we wish to start with the terms of the instruments and the particular one called the funding deed, which require classification under these somewhat convoluted statutory provisions.  As your Honours know from the materials and beyond contest in this Court is the consequence of the matters which are in issue in this Court, namely, if the classification is adverse to our argument then the lack of a licence led to the right to rescind and the loss of the $9 million fee which is now the only fee in question.

Could I take you please in volume 1 of the appeal book to page 97 which is the so‑called funding deed?  It is, on any view, an arrangement.  We note in paragraph 1 of our outline that this deed together with the charge, we submit, constitutes the arrangement requiring classification.  There is no term in the charge, specific term in the charge, beyond those to which we have made reference without going to them in our written submissions, which I want to show the Court, however, the terms of the funding deed are necessary for a number of purposes of the following argument.

On page 97, one sees the recitals, and I wish to emphasise the following elements.  Recital A notes a request by the first respondent that our client provide what is called “litigation funding” to it:

for its –

That means CHM’s –

Legal Costs in relation to the Proceedings.

Those legal costs are a defined term, to which I will come in just a moment.  The proceedings are also a defined term, and they are the proceedings in which, ultimately, Chameleon was successful.  Recital B notes a request as well by the first respondent, that our client provide what is called –

investigative and management expertise to assist in the Proceedings -

though, as your Honours will have noted from the reasons in the courts below, there is a paucity, to put it mildly, of clear operative covenant in what follows in the so‑called deed to stipulate for the provision of that, and we will be drawing attention to those matters.  In recital C, one notes ‑ ‑ ‑

FRENCH CJ:   “Paucity” means nothing?

MR WALKER:   I am going to attempt to show that there are things which, read in a particular way, contemplate or envisage, as we put it in our outline, the provision of such services.  It is quite impossible for me to say that the language stipulates for the doing of something, failure to do which would amount to a breach which, for example, could trigger the termination provisions that ‑ ‑ ‑

CRENNAN J:   Is a managed investment scheme the familiar financial product with which we should be concerned, in terms of the problem of classification of the funding deed and the charge, or is some other description to be invoked?

MR WALKER:   Those descriptors, particularly given the statutory definitions, not only cease to be useful, but can become positively misleading, not least because one’s experience in commercial legal advising and litigation tends to produce from different historical periods an understanding from market practice of what falls under those descriptions.  But that is almost expelled by the history which has produced the form of drafting with which we have to grapple which, as your Honours know, by using the epithet “functional” seeks to eschew particular forms in different times, places or sectors of industry of, I will call them instruments, to use a very general term, which in the market often did have descriptions, sometimes used statutorily, such as managed investment schemes.

So the shorter answer to Justice Crennan is yes, these are matters of concern, but as one looks closer and closer at the statutory questions they recede, as to their utility, I am sorry.  Recital C describes what has followed and will be, of course, some aid to an interpretation for the purposes of statutory classification, of what follows in the operative clauses.  You will see that the parties say that my client

has agreed . . . to provide funding, and management and investigation expertise –

and I have to utter the same qualification as I have already elaborated, in answer to the Chief Justice there – to provide funding and expertise and other matters to CHM – and one notes the plain description there of providing the funding to the first respondent –

to assist in investigating the Claims and to prosecute the Proceedings.

Recital D speaks for itself.  In what are called the operative clauses ‑ ‑ ‑

GUMMOW J:   What does recital D mean?  In particular, what is this phrase “an interest in the Claims and Proceedings” possibly mean?

MR WALKER:   It is not a very useful expression.  It is picked up in the operative clauses in terms of what I will call promises by CHM to keep control of, monitor and, as it were, report on receipts and dealing with receipts.

GUMMOW J:   That means contractual rights with respect to, does it?

MR WALKER:   It certainly means that and the operative clause is “show us that”.  If it means anything other than that, I am at a loss to find you in the operative clauses anything that enables what I will call a “conveyancing description”, I am sorry.  Between these parties we are to be treated as, and I use this colloquially rather than legally, a part owner.  Now, that raises, of course, a mass of legal difficulties.  That is only one of the sets of legal difficulties not grappled with, probably not appreciated by those drawing the fund.

GUMMOW J:   Or the people drafting the deed and charging for that activity.

MR WALKER:   Yes.  Brevity is perhaps the most merciful way of responding to Justice Gummow’s observation.  In the so‑called operative clauses, the first is the definitions and interpretation.  I need to draw to attention some of the component parts of the deal.  On page 98 at about line 15 there is the definition of “Early Termination Fee” which is the critical one in question here.

GUMMOW J:   I am sorry, Mr Walker, early termination fee?

MR WALKER:   Yes.  Now, it means a payment by the first respondent to us or our nominee of what is called “an amount equal to the Legal Costs (including Security for Costs), they are both defined and I will come to them, “expended by the funder”, my client, “up to the date of termination”, termination is possible pursuant to clause 4.1 to which I will be coming, “and a further amount equivalent to” and then one sees what I will call a strike price formula and then right at the end “or $9 million” and in the events it is the $9 million which operates under that formula for the higher of.  The question of the reimbursement of legal costs did not ‑ ‑ ‑

GUMMOW J:   Is it whichever is the greater or whichever is the lesser?

MR WALKER:   It is the higher of the value of 20 per cent or $9 million.

GUMMOW J:   Yes.

MR WALKER:   As to the return of the legal costs, that was not in contest.  It had being conceded and acted upon.  It is by reason of those events that what was in question in the proceedings was the right to receive $9 million as early termination of fee.  “Funding Fee” is a different concept and there was contest between the parties about an entitlement to that which is no longer live in this Court.  “Fixed and Floating Charge” is defined in the term which defied the facts of the case.  In fact, the charge was not executed on the date of this deed.  It was in December, not October. 

You will see that “Lawyers” refers to a firm appointed by the first respondent, true, “agreed by the Funder” but appointed by – the drafter does not go into any more detail about what I will call contractual responsibilities that may come upon what I presume is intended to be a retainer.  “Legal Costs” is an important definition.  I do not need to read it.  It is comprehensive and you will see that it includes in the second and third lines an important phrase:

all future agreed legal costs and disbursements incurred by CHM and Funder –

and you will see that there are extensions into the possibility of appeals.  “Percentage Payment” ‑ ‑ ‑

FRENCH CJ:   What legal costs would be incurred by the funder in relation to the proceedings?

MR WALKER:   Apart from those which might be incurred as a result of the consultation envisaged by 8.1(b), to which I am going to come ‑ it is one of the efforts I make to give content to the supposed agreement to provide expertise – and from the activities expressly contemplated by 8.3 – and I have to put it that way, expressly contemplated by 8.3.  It is difficult to say it is stipulated by way of a promise that that will happen on our part.  There will, of course, also be whatever may be agreed.  You see that there is that floating category in this definition “all future agreed legal costs and disbursements incurred by CHM and Funder”.

Now, the expression incurred by CHM and funder leaves, alas, open the question whether this is confined, as would be uncommercial, to joint obligations only, that would be odd.  It presumably means not only joint but several as well as joint and several and it includes, we would therefore say in light of the text commencing with the expression in recital A, that is, “funding to CHM for its Legal Costs”, it includes those things which come from the retainer or appointment by CHM of lawyers to conduct the proceedings.

“Percentage Payment” is defined.  That has fallen away as a contested matter, but it is important for some of the arguments that you will have seen, in particular, concerning the risk management aspect of the case, and you see that there is a time weighted increase of the percentage of the fruits of the litigation stipulated to be included in the funding fee.  One sees the definition of “Funding Fee” and component (b) of it under that formula.

“Repayment Date”, which is used in various important provisions as you will see, is intended to be what might be called finalisation, to use one of the words found in the definition.  “Resolution” and “Resolution Sum” is similarly of some importance, though not critical to the arguments of this case; see the top of page 99.  The main promise, not surprisingly, comes first so far as performance by us is concerned.  Clause 2.1 on page 99 “agrees to pay the Legal Costs”.  Then the main promise in return, clause 3.1:

Upon Resolution of the Proceedings, the Funder will be entitled to:

(a)Repayment of the Legal Costs paid by it in accordance with clause 2.1;

(b)Payment of the Funding Fee.

I stress that is upon resolution of the proceedings.  The argument which was live below and not live here turned upon whether that continued to have effect after the early termination.  There are then ancillary promises in relation to CHM’s conduct for what might be called the stewardship of such money or receipts.  On page 100 in clauses 3.6 to 3.8, those terms continue, including reference to a termination pursuant to what is called “clause 8.1”.  That is not the only glitch in the drafting.  That is one of the least substantive.  It presumably means 10.1, though that does not matter for present purposes.  Under 3.9, you will see that there was a cap and that is an important provision for the risk management aspect of the argument between us:

CHM will not be required to pay any amount to the Funder under either clause –

clauses 3.7 or 3.8, which are the final, what I will call, disbursement provisions –

in excess of the Resolution Sum –

To remind you, the resolution sum is, in effect, the gross amount received whether by way of settlement judgment or otherwise of the proceedings.  I am not quite sure at the moment what the “otherwise” would comprehend, but it is intended obviously to be fruits of the litigation.  Clause 4 is that which came into effect, “Should there be a Change in Control”, and it is not in contest that there was, “the Funder’s obligations terminate effective immediately.”  Should that come into effect, says 4.2:

the Funder is entitled to immediate payment by CHM of the Early Termination Fee –

In the events, that had happened, the $9 million.  One sees that there is a reference then in 5 to the charge.  That is why we say that the better view is that the charge and the so‑called deed are to be regarded together in terms of the instruments to be classified under the statute, though I stress we do not rely upon anything substantive in the charge that affects one way or the other the argument before this Court.  However, there is an explicit integration, as it were, notwithstanding that in the events that happened the charge was not finally executed until some two months later.  There is, we think, another typographical error in 5.2.  The reference to “4.1” is probably a reference to 5.1. 

Could I then take your Honours, on page 101, to clause 8.  These are promises by CHM to “keep the Funder advised”, et cetera, in (a).  In (b), to “consult with and consider the views of the Funder” – that is one of the provisions that we draw to attention as contemplating the provision of advice or expertise by the funder – “in relation to any material issues”, as there described, “arising from the conduct and/or progress of the Proceedings or any Appeal”, and (c) is no doubt ancillary to that.  Clause 8.3 has a similar flavour ‑ ‑ ‑

FRENCH CJ:   Now, does 8.3 contemplate that the funder will get involved in directing the legal representatives of CHM in the conduct of the proceedings?

MR WALKER:   Not in terms, but bearing in mind that the lawyers are not free agents, indirectly the notion of instructing and directing lawyers might so indicate.  On the other hand, this is a promise to make what is called all reasonable efforts, if appropriate.  So the requirement to avoid abuse of process might – and there are no concrete examples arising in the facts of this case to which I can attach – assert a control, as a matter of interpretation of the contract, on the extent to which the funder could dictate the way in which the litigation was conducted.  That is as far as I can take that matter.  It has not been the, as I say, subject of any concrete example having arisen.

Clause 8.3, as I say, contemplates, contemplates the funder doing those things, including importantly, negotiating an outcome and it all ends up on its behalf, that is on CHM’s behalf, and it is that contemplation that we submit shows in the somewhat artless fashion of this deed that the recital B does not recite a request made in vain or left completely unanswered or rebuffed by the funder, but in its own crabwise way has been contemplated, in particular, in those parts of clause 8.

Could I, on page 102, show you clause 10 without reading its provisions.  One sees in short, as you will have noted in the written arguments between the parties, that the obligations undertaken by our client relevant to the arguments concerning management of risk are obligations that can be brought to a peremptory and short end under 10.1. 

Reference has been made in argument to that which is found on page 106 in clause 17.4 in the written submissions.  That is one of those provisions cited as showing the provision of some services by – or expertise by my client on reflection.  The most that can be said is that it provides an express support for the proposition that there is expected to be co‑operation between the parties.  I cannot put it more solidly than that.  Clause 17.4 is in familiar, what might be called, non‑solid terms.

So, your Honours, as we have pointed out therefore in paragraphs 2, 3 and 4 of our outline, those are, for present purposes, we submit, the salient features of this somewhat idiosyncratically drafted deed.  Could I now take your Honours to the terms of the statute which, though it would not be fair to describe them as idiosyncratically drafted, have certainly been drafted in a highly particular way?

GUMMOW J:   How did the statute become engaged in a forensic sense as a defence to a claim?

MR WALKER:   Receivers were appointed upon which litigation was commenced to determine whether there was an entitlement to the early termination fee which was – the non‑payment of which was the basis of the appointment of receivers.  That in turn depended upon the question whether – or what the content of obligation between the parties was quite apart from the question of whether the funding fee was also due and that raised the question of the consequences of my client not having a requisite licence. 

GUMMOW J:   It is an illegality point, is it?

FRENCH CJ:   Well, Chameleon sought declaratory relief, did it not, that the funding deed was validly rescinded pursuant to 925A?

MR WALKER:   It is a statutory rescission.  Now, it is based upon the need to have a licence, the rescission.  It was not argued as what I will call a common law outcome of illegality.  It was a statutory outcome which was a right to rescind which has had the effect vindicated to date in these proceedings that there is no obligation ‑ ‑ ‑

GUMMOW J:   If there was no statutory right to rescind?

MR WALKER:   Then on the holdings, not to be disturbed in this Court, we are owed $9 million for the early termination because there was the change in the control. 

CRENNAN J:   The statutory right to rescind was based on the absence of a licence and a licence was required if you were selling financial products?

MR WALKER:   That is right.  None of that is in issue and much of that was not in issue below.

GUMMOW J:   Where do we see the declaration – the application for declaration?

MR WALKER:   If your Honours go to page 4 in volume 1, the declarations sought, starting at about line 25 and, in particular ‑ ‑ ‑

GUMMOW J:   It is 4D, I suppose.

MR WALKER:   It is 4D and its consequence 4E which is what I was referring to.  So that as Justice Crennan has noted, once all those framing matters are attended to, as they are without contest in this Court, the issues upon which the fate of the $9 million turns are those we have tried to set out, we hope, in a logical order, probably not uniquely correct order - there may be other ways of approaching this.  The one we offer, with respect, is in paragraph 5 of our outline.

GUMMOW J:   Just before that, the relief you seek in this Court appears at 226, does it:

within 30 days of judgment –

in this Court, I suppose –

the First Respondent pay –

the $9 million.  Would there be interest on that?

MR WALKER:   There ought be and order 11 should be understood as encompassing that.

GUMMOW J:   We need to be told precisely these matters.

MR WALKER:   Yes, your Honour.

GUMMOW J:   That is not good enough at the moment.

MR WALKER:   No, your Honour. 

GUMMOW J:   Well, we better have a minute at some stage.  Your junior can busy herself.

MR WALKER:   If it please the Court.  Your Honours, can I therefore then take you to the Corporations Act, Chapter 7?

CRENNAN J:   Which reprint are you using?

MR WALKER:   The reprint which has been suggested by the library we should be using is the 1 January 2011 reprint.  I hope that is that which the Court has.  Now, Justice Giles at one stage used the ‑ ‑ ‑

GUMMOW J:   Wait a minute.

CRENNAN J:   Is there any issue about whether the 2008 reprint was the reprint that was the relevant reprint in terms of the chronology of these matters?

MR WALKER:   No, there is no material difference at all.  There is no point to be made about that.  The parties agree ‑ ‑ ‑

GUMMOW J:   To be precise, at what date is it said you should have had but did not have the necessary licence?  That is the issue.

MR WALKER:   We should have had it.  We know that.

GUMMOW J:   If we know that, we will know what the right reprint is.

MR WALKER:   Yes.  We should have had it on 28 October 2008.

GUMMOW J:   Exactly.

MR WALKER:   Yes.  Your Honours, could I start with section 761A in the reprint, page 916.  There is a reference there, halfway down the page, to “financial product” which you are there told “has the meaning given by Division 3” to which we are about to come.  Before going to that definition, in relation to the critical expressions of “issued”, et cetera”, you will note at page 922 section 761E to which I do not need to turn in any more detail than note it.

FRENCH CJ:   Those page numbers suggest you are reading from a different reprint.  You are reading from the 2011 reprint, are you?

MR WALKER:   Yes.  I am sorry.  I will not use page references at all.  Section 761E.

FRENCH CJ:   Yes.

MR WALKER:   Could I then take your Honours to 762A which is one of these overview provisions and it commences Division 3 where we are told we find the relevant definition.  In 762A, in its subsections (1), (2) and (3), it starts by informing the reader that:

Subdivision B sets out [what is called] a general definition . . . Subject to subsections (2) and (3), a facility is a financial product if it falls within that definition.

The first of those to which that is subject, subsection (2), is described as “Specific inclusions”.  It says that:

Subdivision C identifies, or provides for the identification of, kinds of facilities that, subject to subsection (3), are financial products (whether or not they are within the general definition). 

Subsection (3), to which that last was subject and to which subsection (1) is also subject ‑ ‑ ‑

GUMMOW J:   The Commonwealth has come a fair way since Mr Ewens  used to supervise these activities.

MR WALKER:   Justice Giles talked about “a trail”.  Reading and rereading this material makes you wonder whether that is a typographical error for “a trial”.  Subsection (3) are what they call “Overriding exclusions” and there Subdivision D is going to identify or provide:

for identification of, kinds of facilities that are not financial products.  These facilities are not financial products:

(a)even if they are within the general definition; and

(b)even if they are within a class of facilities identified as mentioned in subsection (2).

FRENCH CJ:   So it is not to be inferred that those exclusions would be financial products but for the exclusion?  That might be the case but not necessarily so in terms of construction?

MR WALKER:   Exactly so.  The importance of 762A, if it has any, is that it confuses or attenuates rather than assists to point up the approach to interpretation, particularly of general definition provisions, but also of specific inclusion provisions, by reference to a parliamentary intention framed in conventional terms such as identifying a mischief and ensuring that the purpose of attending to the mischief follows from a proper interpretation of the words.

In particular, the concept of over‑inclusion in what is called the general definition is pretty obviously informing the approach to this, so that the parliamentary intention includes the meaning of the words used in the general definition, we are told from 762A(1), (2) and (3), will go further than Parliament ever intended, hence overriding exclusions.  Furthermore, they will not necessarily encompass things that are intended to be regulated because that will include subsection (2) – there will be specific inclusions not caught within the general definition.

Of course, as the Chief Justice has pointed out, none of this is in neat, mutually exclusive categories.  There are overlaps and mysteries so that one may not know whether a specific inclusion, for example, is for more abundant caution or, indeed, whether an overriding exclusion was for more abundant caution in the sense that it would not have been caught within the general definition anyhow, but they have thought about it at the time of enactment and included it.

It gets worse, as your Honours appreciate.  We do not need to go to any but one of these.  It gets worse as a matter of style in this sense, that at the time of enactment there are two other ways in which the general definition, as evincing a statutory intention framed in terms of mischief and beneficial purpose of regulation, et cetera, ceases to be clear from the meaning of the words in their context because Parliament envisages upon enactment that regulation may alter the identification of what are called kinds of facilities that are to be subject to this regulation, and there is also executive instruments called ASIC class orders that can do so, and as you know historically that has happened for facilities of the kind in question in this case.

So stepping back, one can say that the history to which we have made reference in our written submission of the decision, the policy decision, to move from what I will call specified kinds of recognisable instruments being regulated to functional descriptions apparently designed to include not only those recognised and already used that Parliament wished to regulate, but also those which the ingenuity or so‑called innovation of persons serving or acting in these markets might devise in the future.

There is also a concept that you will have seen in the extraneous materials that we have quoted – I do not want to take you to them in any detail – a concept not easily rendered precise of flexibility, and that apparently includes this notion of being able to alter the impact of the law by regulation as well as by these executive orders.  Some may think that flexibility might be a euphemism for not bothering members of Parliament with changes of policy, but that, of course, may be an inappropriate overstatement of what might only be an unexceptional recourse to delegated legislation enacted by Parliament.

CRENNAN J:   Except that class orders are generally a preliminary strategy, are they not, in relation to legislative change, or am I wrong about that?

MR WALKER:   Seen very generally, that may be a behavioural description, but it is not necessarily the way in which one sees the operation of these provisions.  It is certainly not mandated that that is how it will operate.  It suffices to say that the historical considerations which lead to a very deliberate approach, which is manifest in 762A and that which 762A describes, is explained by reference to this notion of seeking to capture things functionally.  Whether or not that actually assists in understanding the meaning of the critical phrases, to which we will come, might be doubted but at the very beginning of the exercise is the management of risk and that obviously is a notion which seeks, at least in economic terms, to describe things functionally. 

Whenever one describes things functionally in relation to economy, the choice of the level of generality at which one speaks means that there become very invidious choice and decisions to be made about the application of such general descriptions to particular instruments or facilities in question.  That is why we call this a classification exercise and it is a matter of whether the words used by Parliament indicate that there has been, in this case, we submit, an error in the Court of Appeal.  Can I then take your Honours to 763A which is Subdivision B, the general definition, and it is paragraph (b) of subsection (1) upon which emphasis is to be laid in these proceedings:

a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

. . . 

(b)manages financial risk –

That is a matter which then requires, as the draftsman helpfully says, to go to 763C.  Before we do, one needs to go note 763A(2):

a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non‑cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.

That has been sloganized as being objective not subjective test and that is why evidence of motivation of individuals is not to be found.

GUMMOW J:   Was your client making a financial investment?

MR WALKER:   As a matter of ordinary English, clearly yes, that is paying money for a return.  We are unable to make any beneficial use of that, obviously, in the circumstances of this case where we needed a licence because of the position of the other side.

FRENCH CJ:   Section 763A(2) is a kind of deeming provision, is it, in respect to a particular subset of financial products, that is, things acquired for some other purpose?

MR WALKER:   In a sense, it does deem a person to be doing one of the following when they enter into an arrangement of a kind through which people commonly make even if that person is not doing it for that purpose.

FRENCH CJ:   The class of facility to which it refers is that kind through which people commonly manage financial risks.

MR WALKER:   Commonly, and one might add, given the following words, even if the person in question did not.

FRENCH CJ:   Yes, exactly.

MR WALKER:   So it is a deeming or extension, yes.

CRENNAN J:   Well, does “commonly” take your mind back to familiar products in relation to the management of financial risk?

MR WALKER:   Surely, yes.

FRENCH CJ:   But does it have any part to play in this case?

MR WALKER:   No.

FRENCH CJ:   It does not, does it?

MR WALKER:   No.  Can I take you to ‑ ‑ ‑

GUMMOW J:   So it seems to be your client was making a financial investment which involved your client managing someone else’s financial risk.

MR WALKER:   We are going to suggest that, properly understood, it is not management of risk, but that is a matter upon which we failed on ‑ ‑ ‑

GUMMOW J:   That seems to be the area of debate.

MR WALKER:   Yes.  We are going to make a stand, as your Honours know, this is the first argument at that point, but ‑ ‑ ‑

FRENCH CJ:   It is what Justice Hayne would call the killing ground.

MR WALKER:   No, because it is the last that is the killing ground.  The provision of credit is the killing ground.  But if your Honours will bear with me, I do nonetheless wish to go through each of the intermediate steps before we get to that final in the order that we have set it out.  Section 763C then provides the legislative text to address the matter that Justice Gummow has mentioned:

a person manages financial risk if they:

(a)manage the financial consequences to them of particular circumstances happening –

et cetera.  I am sorry, I overlooked this earlier.  I need to draw to attention that the managing of financial risk, which is paragraph (b) in 763A(1), as you will note, we contrast that with (a) and (c) which actually uses the word “make” and we suggest that the word “manage” compared with the word “make” is being compared with something which can be a creation from nothing or a creation anew, a fresh creation, whereas “manage” rather suggests that there is already a given, an existing state of affairs which includes or is to be characterised as presenting financial risk and that is being managed. 

Of course, as you have seen from our written submissions, we respectfully submit that there has been error below in treating as the management of financial risk what is either largely or completely to be seen as the creation of an allocation of risk between the parties to the contract and it is not managing the financial risk for parties to enter into a contract which is, in one sense, to be seen in a completely pedestrian way as the allocation of risk of different outcomes between parties, like any contract.

GUMMOW J:   How then does the first example work, taking out insurance?

MR WALKER:   You have to have something which gives you an insurable interest so there is a circumstance that presents a risk; fire as a national phenomenon, your ownership of property.  So that pre‑exists, and an insurance policy manages it.  It does not create the risk of the fire and it does not make you an owner of the property.  The same thing is true with the hedging example that follows.  There is an exposure, intended or already contemplated, to a market affected by change of prices over time, et cetera, and one acquires a futures contract in order to handle that pre‑existing uncertainty, and uncertainty not itself created by the facility for managing the risk.

An example that does not constitute financial risk, though they have the armed guards - so a security firm, while that is a way of managing the risk that thefts will happen, it is not a way of managing financial consequences if thefts do occur.  That is not an example which is particularly useful and it is certainly not one that would be, in our submission, in the mainstream of trying to understand what contracts or arrangements will be within the notion of managing financial consequences of circumstances happening or not. 

We submit quite simply that when parties assign financial consequences between them as a result of one performing a contract and circumstances occurring, in this case an adverse or successful outcome of the proceedings, that is not managing risk, that is the purchase of a prospect by CHM and it is the undertaking of a risk, the creation of a risk, by my client.  It is not a risk external, in any relevant sense. 

In this context, it is necessary to appreciate, as we have drawn to attention in paragraph 10 of our written submissions, that shortly before and leading up to the entry into of this so‑called deed there was an offer on the table, $2 million plus costs that CHM had been advised to accept.  Now, there has been a Suttor v Gundowda point taken against us in this regard.  Could we simply draw to attention the transcript, which has been added to the supplementary appeal book as page 421C, which shows counsel for my client taking the point, using the expression of ‑ ‑ ‑

HEYDON J:   Do you have any spare copies of that?  There seems to be a shortage.

MR WALKER:   I am very sorry, your Honour.  It might be obscured by a covering letter.  May I hand up some?

FRENCH CJ:   Yes.

GUMMOW J:   Does it appear in the supplementary appeal book, or does it not?

MR WALKER:   It was supposed to, but only recently.  It was not included and we detected that and took steps to remedy it, and we are sorry.  This is the transcript which is referred to in paragraph 2 of our submissions in reply.  At about line 14, Mr Jackman said:

The argument that has been put forward is that Chameleon is managing the financial consequences of losing or barely ‑ ‑ ‑

FRENCH CJ:   Which page are you reading from now?

MR WALKER:   Page 421C.  It is marked at the top.  It is page 126 of the printed transcript of 19 August 2010.

HEYDON J:   A slight complication seems to be that this is attributed to Mr Smith.  His is the last name mentioned on the previous page at line 26.  Mr Jackman may have ‑ ‑ ‑

MR WALKER:   On the other hand on page 126, line 45 it has Smith objecting.

FRENCH CJ:   The previous page is page 32 of the transcript; this page is page 126 of the transcript.

MR WALKER:   There are two separate pages that have been included.  So this is Mr Jackman.

GUMMOW J:   Line?

MR WALKER:   Picking it up at about line 15:

Chameleon is managing the financial consequences of losing or barely winning in a way that doesn’t surmount costs.

That was an argument that said well, here is something that pre‑existed the funding deed - and then he goes on -

The purpose of the funding deed is not to lose or barely win it is to win handsomely and Chameleon’s rights are properly tried so as to generate a substantial resolution sum.  If there is an incidental aspect of that which manages some incidental down side to Chameleon that is not the financial product purpose, it’s simply an incidental aspect of what is a purpose of creating an opportunity that otherwise would have been missed.  There is very attenuated reliance upon trying to manage the risk of Chameleon losing litigation that but for us –

That is, but for the funder –

would have been nipped in the bud back in October 08 –

That equals the offer which was there on the table to stop their losses – $2 million plus costs – that was back in October 2008.  So the argument was put, we submit, that this is no more, therefore, managing a risk within the meaning of the statute than someone who wishes to buy what they perceive to be a valuable painting at a bargain price is managing the risk of not getting that benefit.  These people wanted to pursue this litigation.  They thought it was worth more than offer from the other side valued it.  They did not want to miss that opportunity. 

In ordinary English, of course, it is always a risk if you do not attend the auction.  If you do not bid, you will not get the Monet for tuppence.  That does not make purchase – the auction contract for the Monet a facility for managing risk.  Risk does not include, simply, the chance of not obtaining a benefit.  That is what we submit shows the error of the approach against us.

CRENNAN J:   Does this all mean you accept that there is an element of managing risk because ‑ ‑ ‑

MR WALKER:   As Mr Jackman said, yes.

CRENNAN J:   Yes.  There could be a win or a loss and still be seriously out of pocket.  So you are not denying that that is an element.

MR WALKER:   Quite.

CRENNAN J:   But you are relying on E to escape the consequences.

MR WALKER:   Exactly.  That is why in the logical sequence we must next come to “Incidental Component”, which I do – paragraphs 8 and following of our written outline.  Now, at that point may I take you to the way in which Justice Hodgson puts it because that provides a more direct answer, perhaps, to Justice Crennan’s last question to me.  On page 176 of the appeal book, there is the heading “Management of Financial Risk”.  In his Honour’s reasons on page 177, in a somewhat deflating way for me now, his Honour deals with what I have just argued extremely briefly, and says it is plain that I am wrong and then goes on and says:

The difficult question is whether it is nevertheless excluded from the general definition of financial product by operation of s 763E.

Quite so.  That is why I am next on this argument, issue (b), in our sequence:

the management . . . can be considered a component of a facility . . . in particular the financial of litigation by advancing money –

et cetera, paragraph 123.  Two questions:

Is the risk management component “an incidental component –

and that is where we go to 763E, to which Justice Crennan referred, and then this really quite striking statutory language:

Is it reasonable to assume that the main purpose of the facility, considered as a whole, was not managing financial risk?

That means that there is continued importance to the way in which we put the case under issue (a) because even if we are not right that there is no management of risk for the purposes of our issue (a) point, all the arguments that we have put there serve the purpose of showing of course it is reasonable to assume that the main purpose was not managing financial risk.  It is just as Mr Jackman said.  These people were not shy people looking to stop losses by “after the event” insurance.  They were punting for big return.  They wanted the fruits of the litigation in greatly larger sums than the measly amount that was there on offer.  That was not managing financial risk except in the sense of wanting to get something very valuable for a bargain price.

FRENCH CJ:   Now, can I just understand your position with respect to the managing risk point.  At 56 in your written submissions, you say:

The contract is not a facility through which, or through the acquisition of which, a person “manages” –

a risk which is created.

It is the mechanism by which that risk originates.

Now, is it your primary position that you are not a financial contract because, properly characterised, it does not answer the definition on the point on which it was fought, that is to say, management of risk.

MR WALKER:   That is right.

FRENCH CJ:   Then the failback position is incidental.

MR WALKER:   Exactly.

FRENCH CJ:   Yes, okay.

MR WALKER:   Exactly.  So what the Chief Justice has just put to me is my primary position, that is issue (a), and by primary we do not mean it is the killing ground – to use Justice Hayne’s expression – it means it is the first one we have to deal with.

FRENCH CJ:   You win if you win.

MR WALKER:   If we win it, we win, and perhaps to put it less confidently, we are not giving it up, so we do take that point.  But if we are wrong in that, and for arguments which did inform our position on that point, certainly the 763E argument about the management of financial risk being incidental and it being reasonable to assume that something other was a main purpose comes in, in our submission, with very considerable force, and for the reasons that Justice Hodgson pointed out, page 177, paragraph 124:

The Federal Court proceedings had already been commenced, and security for costs had been ordered, by the time the Funding Agreement was entered into, so that there was then already a potential risk of adverse costs orders.

It is to be recalled that at that very time they had cover for that under the offer on the table.  The question was, were they going to give up the prospect of getting ever so much more, not wanting to fund it themselves apparently because they were prepared ‑ ‑ ‑

GUMMOW J:   What is your answer to that first sentence in paragraph 124?

MR WALKER:   Paragraph 124?

GUMMOW J:   Yes.

MR WALKER:   For the purposes of issue (b), it is that in a sense that is true, but its incidental characteristic is shown by the facts of the case whereby there was on the table an offer which had that been their main concern would have looked after it.

GUMMOW J:   No, no, what do you say as to the first sentence of 124 with reference to your primary submission that you have just ‑ ‑ ‑

MR WALKER:   Well, it is contrary to my primary submission.  As Justice Hodgson was – see his first sentence at paragraph 122.

GUMMOW J:   I know it is contrary to it, but what is your answer to it?

MR WALKER:   My answer is that when one looks at the facts there was already in place a means by which that risk could have been managed, except that offer.

CRENNAN J:   The whole argument depends on the existence of the settlement offer, does it not?  That part of it, that ‑ ‑ ‑

MR WALKER:   That part of my answer to the objections raised, which I have to contend against, to our primary position, our issue (a) position, does depend on that, because clearly the provisions of the funding deed, which after all was entered into precisely because they did not accept the offer, it does protect them against those adverse costs orders including those, as it were, mounted up by reason of events before the funding deed, and that is why ‑ ‑ ‑

GUMMOW J:   Now, Justice Hodgson does not refer to the settlement offer, does he?

MR WALKER:   No, he does not.

BELL J:   Can I inquire why one looks to the settlement offer for the purposes of your primary argument?  Why does what you in fact had in mind, or more particularly what Chameleon had in mind, affect your primary position as distinct ‑ ‑ ‑

MR WALKER:   Because it is a characterisation question of an arrangement and because in the setting in which this arrangement was reached there was another obvious way of managing that risk.  I am conscious that this is an answer that really as much, if not more, informs our use of these matters for issue (b) as for issue (a).

BELL J:   Yes.

MR WALKER:   I really do not have anything to add to it in relation to issue (a), but we do, with respect, adopt the way Justice Hodgson dealt with the overall characterisation, without any reference to the settlement, of the matter in paragraphs 124 and 125.  It culminates relevantly in 125:

the management of future risks was plainly incidental to the financing of the litigation:  those risks were dependent on the litigation proceeding, and did not exist independently of that.

GUMMOW J:   Sorry to be stubborn about this.  Did Mr Jackman, in the transcript, did he deal with your proposition number one, as it were?

MR WALKER:   Yes.

GUMMOW J:   Is he dealing with that or he is just dealing with the Hodgson JA proposition?

MR WALKER:   I think, with respect, he is doing both, but more the second, more issue (b) than issue (a).  I think the word “incidental” appears about seven times on that page.

GUMMOW J:   Yes, that is what I had in mind.

MR WALKER:   Yes.  In paragraph 126 on page 178 of the book Justice Hodgson is referring to the matter that is raised by 763E to which I need to take your Honours now.  In subsection (1), the scheme is to say that:

Something . . . that, but for this section, would be a financial product –

it is dubbed the “incidental product” – is not because of this subdivision if certain things are true.  Then in order to complicate the dovetail, the parentheses:

(however, it may still be a financial product because of Subdivision C).

That is specific inclusions.  That is why derivatives come up under section 764A(1)(c).  So this will be an answer to whether or not it is a risk management.  One sees that one of the elements is in paragraph (b):

it is reasonable to assume that the main purpose –

and that seems to be used in apposition to the notion of incidental purpose or incidental component or a facility being incidental.  The main purpose –

is not a financial product purpose.

GUMMOW J:   It is an assumption.

MR WALKER:   There are several assumptions.  One of them is that there is any main purpose and, plainly, the words raise the question whether there is some procrustean bed whereby such a mixed matter must have something which is main and must have something which is incidental.  Probably the words are not rugged enough to do that.

FRENCH CJ:   Is 763E a carve‑out from the operation of 762B?

MR WALKER:   Yes.  It says it will not be within the Subdivision B general definition, so this is part of the general ‑ ‑ ‑

FRENCH CJ:   Section 762B says it does not matter if your financial product is a component, you still look at it separately as a financial product.  Section 763E then takes that class of component which is incidental.

MR WALKER:   The trouble is that 762B starts off by talking about a financial product and something is not a financial product within the limited operation of 763E if it is an incidental product.

FRENCH CJ:   It is but for this section.  That is why I was calling it a carve‑out.

MR WALKER:   Yes, but 762B will not be engaged to something that is not a financial product.

GUMMOW J:   Now, what is the evidentiary matrix for paragraph (b)?  Is this distilled from the document itself?

MR WALKER:   Yes.  The purpose is to fund litigation that the recitals tell you, they want the proceedings to be funded, the parties look forward to sharing the spoils and there is the incidental, if they lose, which is obviously not something they intend to happen but they contemplate may happen, if they lose, there will be a stoploss effect.  Hence, there is a risk management aspect to it.  Is that the main purpose?  No.  The main purpose is to get funding for litigation in order to win it and then to share the proceeds.

BELL J:   One divines that from the deed and not from knowledge of the settlement offer on the table, surely?

MR WALKER:   Yes, emphatically so.  You do not need anything more than that.  Now, the Court obviously takes into account what it knows of human nature, that is, people prefer to win proceedings that will gain them money than not, but that is not evidentiary.

CRENNAN J:   Bearing in mind what Justice Hodgson has to say in paragraph 126 about what is meant by “it is reasonable to assume”, is there anything in the statutory scheme that would assist one in understanding whether that is an objective requirement?

MR WALKER:   One of the reasons I drew to attention 763A(2) was because it has been said, though not in the way that can supplant the text, that that renders the question objective rather than subjective, but that may be too glib altogether.  The better answer to Justice Crennan ‑ ‑ ‑

GUMMOW J:   Sorry, where ‑ ‑ ‑

MR WALKER:   Section 763A(2) I had noted earlier.  The better answer to Justice Crennan’s question is no, it is not to be found in the text, something indicative of – with more specificity than the words of 763E(1)(b) themselves of when it will be reasonable to assume something or even what it means to be reasonable to assume something.  One of the problems ‑ ‑ ‑

GUMMOW J:   But does the financial product have to be an instrument, contractual instrument?

MR WALKER:   No, it does not.  It has to be what is called a facility.  They happen to be instruments in this case.

GUMMOW J:   I know.  That may not be the universe.

FRENCH CJ:   Well, “facility” is picked up in 762C, is it not?

MR WALKER:   Yes.  You then have to look at arrangement.  “Arrangement”, which is paragraph (b) of 762C, is a defined term - see 761B.  I think that completes the cross‑referencing answer to Justice Gummow.  So you have to go to 762C and that ‑ ‑ ‑

GUMMOW J:   Yes.

MR WALKER:   That does not say anything about instrument, but it obviously contemplates that there will be instruments. 

GUMMOW J:   And arrangement.

MR WALKER:   Then “arrangement” is defined, 761B.  But a lot of words to say it can be composite and that is also defined ‑ ‑ ‑

GUMMOW J:   The answer is ‑ ‑ ‑

CRENNAN J:   It is 761A also.

MR WALKER:   ‑ ‑ ‑ in 761A it refers to the provision we have just noted.

CRENNAN J:   Yes, written or ‑ ‑ ‑

GUMMOW J:   Sorry, whereabouts in 761A?

MR WALKER:   It is the fourth definition:

contract, agreement, understanding, scheme or other arrangement –

That is the definition of “arrangement”.  It includes “whether written”, “whether or not enforceable”.  So it is the word “arrangement” that comprehends, but is not limited to, instruments.

GUMMOW J:   No, it can be informal and oral.

MR WALKER:   Yes, yes, it does not have to be binding, which is not an unfamiliar concept but ‑ ‑ ‑

GUMMOW J:   But what you are really saying is because there was an instrument here somehow the parol evidence rule applies when you are distilling what can reasonably be said as to its character?

MR WALKER:   No, because as I said in answer to Justice Bell, all you need here is the document.  You do not need to go to the circumstances.  You can, but you do not need to.  This is an arrangement entered into because these people wished the proceedings to commence with us funding it; to continue with us funding it.

FRENCH CJ:   Is it right to say that the ground on which it was fought was the document?

MR WALKER:   Yes, yes.

CRENNAN J:   But for your first proposition you want to rely on the $2 million settlement document?

MR WALKER:   Yes, but I am now well and truly into the second proposition.

CRENNAN J:   I know.

BELL J:   Just to understand the ground on which it was fought, at paragraph 90 of Justice Giles’ judgment at appeal book 167 it is said that your client “did not invoke” 763E in its written submissions.

MR WALKER:   That is correct.

BELL J:   I thought the matter received some attention in submissions.  But you have taken us to that passage in the exchange ‑ ‑ ‑

MR WALKER:   That was at trial, yes.

BELL J:   At trial, yes.  So the point was taken before Justice Hammerschlag, but not ‑ ‑ ‑

MR WALKER:   That is right, and was certainly canvassed in ‑ ‑ ‑

BELL J:   In oral argument.

MR WALKER:   ‑ ‑ ‑ the Court of Appeal, yes.  Apropos paragraph 126 of Justice Hodgson’s reasons on page 178, his Honour does not discuss, but obviously the Court needs to consider what does it mean to assume.  We have essayed some explanation of that in our written submission, which can be summarised as saying that normally it means a proposition which either lacks or does not need or is reached regardless of evidence.  So “assuming contrary to the fact” is a familiar phrase in courts. 

FRENCH CJ:   It is a bit irrelevant of the objective purpose criterion in Part IVA of the Income Tax Assessment Act.  I know there are different words used, but the same ‑ ‑ ‑

MR WALKER:   Your Honour, the best I can say to that is “sort of”, yes.  They are cognate but in a very unsatisfactorily articulated way.  That meaning, that ordinary meaning of “assume” ‑ ‑ ‑

GUMMOW J:   It can mean “conclude”, can it not?

MR WALKER:   Yes, quite.  It could not possibly be true here.  It would make nonsense of the idea.  “Reasonable to assume” seems to, as Justice Hodgson, with respect, powerfully puts it, require something which is a less stringent requirement than, for example, “concluding that the proper character is”, and it includes what from another area of discourse can be called evaluative assessments where reasonable minds might differ.  Now, maybe that is because the case is a borderline case or it may be that the character in question is not particularly precise in its description or application. 

In this case, it is graphically demonstrated by the way Justice Hodgson proceeds by saying, well, Justice Young reaches a different view, I think that is reasonable but far from suggesting is not reasonable to assume that the main purpose is X, it really only underlines the effect of this curious language that the legislature has adopted and, in our submission, is very difficult.  Even just confining oneself to an understanding of human nature and looking at this funding deed, it is very difficult to say that it is not reasonable to assume that the main purpose was to get funding so litigation could continue to a happy outcome with a big payoff. 

Now, if that is true, then, in our submission, that is plainly not managing financial risk in the sense that we have already put, and I would call in aid here the argument under issue (a), and, we would submit, because the downside that happens if the case is lost is not the main purpose of such a contract, that could presumably – stoploss insurance could have been bought for much, much, much less than is bargained for in the funding deed.  One can see that is incidental.  It does not mean it is not attractive, it does not mean it is not regarded as necessary, but it is an incidental rather than main.  It is for those reasons that, in our submission, Justice Hodgson, with respect, was plainly correct in the conclusion that culminates in his paragraph 128.  That concludes what I wanted to say about issue (b). 

I am now up to issue (c) commencing paragraph 10 of our outline because under the scheme announced by 762A we are out of specific inclusions and we are now into overriding exclusions.  I am sorry, we are out of general definition with the exclusion it had, 763E, to the specific inclusion, Subdivision C, 764A(1)(c), a derivative. 

If I could take your Honours back to the definition of “derivative”, which one finds in 761D.  It has its own complexity of arrangement.  The heart of the matter is, for relevant purposes, in paragraph (c).  This is a composite definition.  These are not alternatives.  All have to be true.  So under (c):

the amount of the consideration, or the value of the arrangement –

That is the arrangement under which there may be a requirement to provide, at some future time, consideration -

is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else –

It is that expression “something else”, particularly, within it the word “else” that drives the core of our argument as your Honours will have seen.  However, that “something else” is immediately made extraordinarily general in potential by the words in parentheses -

(of any nature whatsoever and whether or not deliverable), including, for example –

We know these are, therefore, not examples that provide parameters, but just illustration – asset, rate, index, commodity.  To go back to a matter that Justice Crennan has asked me several times about that shows, and the extrinsic material pre‑legislation confirms this, that they certainly had in mind what were understood to be derivatives at the time, but they were seeking to extract, perhaps abstract, matters at a higher level of functionality than simply talking about, for example, hedging contracts or futures in order to, apparently, deal with the fact that players in the exchange would invent something new or hybrid that would not fit a definition and that would defeat the purpose of classification and, thus, the beneficial intent to regulate.  That is the history that produces this kind of definition.  It does not necessarily greatly assist in applying it in a particular case.

GUMMOW J:   How would a futures contract fit in with the definition of “derivative”?  How would it work – just attaching the language to a specific situation?

MR WALKER:   Well, the value of the arrangement in the doomsday notion of actually having to deliver will obviously vary by reference to the value of a commodity.  That is the classical plain vanilla view.  It may be a strictly theoretical one, but that is the theory.  With the way they are traded, your Honours, that would also include index of futures.  That would include an index. 

One sees the approach to definition – inclusion and exclusion – continuing in 761D, itself.  Subsection (2) empowers the regulations to declare a derivative and it will be so, despite anything in what follows – (3) and (4).  But one also knows from subsection (2), that the regulations could declare something “Without limiting subsection (1)”.  It is difficult to know exactly what that will mean in terms of including something that would not fall within subsection (1), but it does not arise here.  The exceptions in subsection (3) are critical for our case because one sees that even if they are covered by the general definition of subsection (1), (b):

a contract for the future provision of services –

is not included.  Then, just to preserve what some call flexibility, you have got (d) in any event, “anything declared by the regulations”.  So there can be regulations to include subsection (2) or regulations to exclude subsection (3).  Then under subsection (4) there is what I might call a general inflation index, or CPI index, exclusion. 

Again, going back to Justice Crennan’s inquiry, it being notorious that such terms or the components of pricing formulae are being resorted to in such a huge variety of cases, including cases that would otherwise fall within the beneficial purpose, but going far beyond that in a way that apparently Parliament wished immediately to exclude, notwithstanding that functionally they would fall within the derivative definition.

Now, one thing is clear, therefore, from 761D and that is that one would only with great caution employ anything of a kind that might be called notorious or market usage antedating this legislation to understand what derivative means.  Of course, it must provide some generally informative view, but the danger is that one would then read these extremely prescriptive almost puzzle constructed definitions overly informed by what I will call an intuition, and that would be a wrong approach to the legislation.

In any event, what we have suggested is that in this case, as you have seen from the way in which we argue it in our written submissions in reply, the main feature that we wish to identify as being erroneous in the argument against us, the main feature is that, in effect, for derivative, as explained by the statute, the reasoning simply substitutes that which is an attribute but not a full description of being a derivative, namely, contingency.  Of course, the amount of costs to be paid back depends upon, is contingent upon, as a matter of ordinary English, can be said to be derived from the amount that has been advanced.  That so much is obvious. 

There is no need provided textually for the word “component” to be preceded by the problematic epithet “separate”.  It is a matter of linguistic usage.  It may be that “separate” does not actually add anything to the word “component”, because if you can talk about something as a component of something larger, you have already been able to distinguish the part from the whole, the component from the composite.  In our submission, it is to take a misstep to insist upon separateness, and then to convey implication that “separate” just means somehow independence, that is, each might operate on their own.  Of course they are components of a whole, of course they all contribute, of course they all have their role, but what the statute contemplates is that there may be one or more that is incidental, and one or more that is main.

In that regard, it is critical to note, as my learned friend to be fair, pointed out, that the definition of “facility” in 762C includes with respect to what we know may be informal, that is, arrangements, it includes individual terms and it is for those reasons, in our submission, that there is nothing contrary to the text or contrary to the manner of proceeding that this statute invites in perceiving that there is more than one component to this funding deed. 

The funding deed is either the whole of the relevant facility or a part of it, part of the arrangement.  Terms, individual terms of the funding deed, just as one can have individual terms of an informal arrangement, can be components that are financial products or not.  It is for those reasons, in our submission, that it is in accordance with the process of reasoning that the statute requires, that we have identified the different components in the way that Justice Hodgson suggested should be done.

Could I then move to the question of credit?  Now, to trace politically or by way of the learning of parliamentary draftsmen a possible pedigree by reference to precursor provisions in other jurisdictions can be slightly dangerous and the dangers are manifest in the example which has been pressed on your Honours this afternoon. 

It is to be recalled that the Queensland version, the model to which my learned friend drew your attention, uses the word “contract” and you will recall that although none of the statutes or, indeed, the case law subject to Justice Bell’s Geeveekay decision to which I will come uses the expression of “definite and unavoidable” it is obvious how a contract may be thought to support the notion of definite and unavoidable in a way that arrangement might not, bearing in mind that arrangements need not be contractually binding.

So that the immediate distinction can be seen where this word “credit”, according to our friend’s argument, has been lifted – my word, not his – from other jurisdictions and other contexts, sure, but it has been lifted into a framework which quite deliberately has “contract, arrangement or understanding” as the commencing phrase rather than just “contract”.

Furthermore, unlike the Queensland credit provision to which attention was drawn – the first one, that is – the Corporations Act provisions with which we are concerned does have the extension to include any form of financial accommodation which plainly goes beyond – that is the first item in (b) – plainly goes beyond that which is comprehended by (a).  Now, that does not mean there is not overlap, but it certainly shows that there is a going beyond. 

Next there was an argument, which though it never concluded thus, inexorably led to the notion that the expression “contingent debt” is something in the nature of a contradiction in terms, but it is not.  Reliance was placed upon the Geeveekay decision 19 VR 512, particularly at the passage commencing at 528, and it suffices to note that neither in paragraph 71, to which footnote 81 is appended, nor in any other part of the reasons, as we read them, is there any attempt by Justice Bell to suggest that Chief Justice Gleeson was wrong or did not provide applicable learning for the issue before his Honour in the very passage in Hawkins 26 NSWLR 562 at 572, noted by his Honour in that passage and relied upon, as your Honours know, in our written submissions, for the proposition that debt can include contingent debt, not contingent only in the sense that a future date arrives before the end of the world occurs, but contingent upon events which may mean the repayment is never required.

GUMMOW J:   Justice Sholl in Alexander was talking about common money counts, was he not?

MR WALKER:   Yes. 

GUMMOW J:   Not necessarily exhausting the universe of what a debt could be.

MR WALKER:   Exactly so, particularly where the ‑ ‑ ‑

GUMMOW J:   That is your point, is it, about paragraph 71?

MR WALKER:   Yes.  Now, my learned friend also sought to draw support from the Dimond v Lovell [2000] 1 QB 216 and [2002] 1 AC 384 decisions. In our submission, if anything, the passage from Lord Hobhouse’s reasons at 405 of the Appeal Cases report between B to D, if anything, that contemplates the notion of contingency to which Chief Justice Gleeson had referred and which the word “debt” perfectly naturally would include. But, more significantly, in none of those passages to which attention was drawn by my learned friend is there anything which supports, let alone provides reason to apply in the present context, the inclusion of this notion of definite and unavoidable, and it is the unavoidable which, in particular ‑ ‑ ‑

GUMMOW J:   It is the word “deferred”, is it not, that causes the trouble?

MR WALKER:   Yes.  Deferral, of course, not only includes until next Wednesday, it can also include until you are in funds, a very common form of deferral, or until an event, which the parties hope will provide funds, for example, this case, has occurred.  Now, those three examples are all in a sense contingent, in quite different senses contingent, but the second and third are cases which fit the present case and they say nothing, and nothing is suggested in any of the extraneous material nor does common sense suggest, as to any plausible reason why one would be within the notion of debt but not the others.

Textual support was sought from at least, with the virtue of coming from within the same legislative provisions, from the terms of 7.1.06(1), definition of “credit facility” in the regulation and an attempt made to quarantine the use of the word and perhaps the concept of “credit” away from some of the definitions to which my learned friend made reference.  I hope I did not mishear.  If I did, I apologise to my friend, but we understood it to be said that a bill facility, including the discounting arrangements of a kind Justice Gummow had raised with my friend, would not be within the notion of credit, but the use of language in 7.1.06(1)(b)(ii) plainly shows that those responsible for the use of these words intended just that kind of facility to be the notion of credit.

It is, if I may be permitted to resort to the notion of commercial or economic equivalence, it is of course a form of providing financial accommodation by reason of chances being taken, time being given, before cash has to be paid.  In our submission, it is not to be entirely ignored, even in a closely defined term such as “credit” in 7.1.06(3), that the notion of deferral includes a period during which, as it were, recalling the etymology, there is belief or faith in something that will happen – repayment, in the paradigm case – in the future.  In English, ordinary English, giving credit is entrusting somebody with a benefit that they will in future return in the agreed measure. 

Now, it is for those reasons, in our submission, that we come to the arguments my learned friend, Mr Gleeson, put in relation to the funding deed itself in the application to it of these terms.  Both my learned friends put argument at the close of their addresses to the effect that here is no deferral, here is no, therefore, credit.  Now, leaving aside at the moment the answer provided by Justice Hodgson’s reference to financial accommodation about which I have said all I needed to say in‑chief and which is a complete answer, leave that aside, of course there is a deferral by means of the lawyers for CHM being paid within 28 days of their bills and the time when CHM as their client bears financial responsibility for those payments being deferred until the hoped for happy event. 

In our submission, there is a strong whiff of commercial unreality in CHM saying they enjoyed no deferral of financial responsibility for their solicitor’s bills by this funding deed.  What they talk about as the immediate obligation of repayment is simply the occasion when the period of deferral has come to an end.  That is true of every deferral by way of credit or financial accommodation.  Come the day or event, then the payment is due and payable there and then, leaving aside periods of grace or reasonable times to meet demand.  That does not say there has not been deferral, it simply marks the end of the period of deferral and it is for those reasons, in our submission, that the argument about “for any period” should be rejected.

Your Honours, the parties have had discussions about the matters concerning forms of order in one possible event.  Might I hand up some minutes to reflect that?  Let me simply say, I had been under the understanding that the following was a position that, it being known to everyone represented at the Bar table, it was common ground.  I am apparently wrong in that, in which case let me simply put it forward in the following way.  The figure that you will see in 2.a is a net figure which reflects the fact that, for reasons I need not weary your Honours with, there was money obtained by my client as a result of various settlements over and above that to which my client was entitled by way of reimbursement for fees, for costs.

In the Court of Appeal that had been reflected in a so‑called order for restitution of a figure which when you subtract it from $9 million produces that figure $8,381,144.30.  That is the explanation for that figure.  I confess, I would have proposed for simplicity the $9 million figure there and the order for restitution remaining undisturbed, which would have required us to ask your Honours, were we successful in this case, not to set aside order 7 in the Court of Appeal.  Short minutes were prepared on that basis.

GUMMOW J:   This looks a sensible way of doing it, does it not?

MR WALKER:   Yes.  However, as was pointed out to me in a way where we accepted entirely the force of it, that might not be fair or proper in relation to interest.  This is why we proposed that.  I am sorry it has caused dissent at the Bar table.  I thought it had received assent.

GUMMOW J:   This date of 10 August 2010, that reflects the terms of 4.2, does it, immediate payment on change of control?  That is the change in control bait?

MR WALKER:   Yes. 

GUMMOW J:   I see.

MR WALKER:   May it please your Honours. 

FRENCH CJ:   Mr Gleeson, in relation to the minutes of order?

MR GLEESON:   Your Honours, the document has only been discussed between the parties during today. 

GUMMOW J:   Of course, only because the Court took the point.

MR GLEESON:   Exactly, your Honour.  It is almost correct but I am told it may not be entirely correct.  Could your Honours allow the parties until, say, Friday to hand up what ought to be an agreed form of order in the event the appeal was successful, and I imagine it can be agreed by then.

FRENCH CJ:   Yes, all right.  The Court will reserve its decision.  The Court adjourns until 10.00 am tomorrow.

AT 4.05 PM THE MATTER WAS ADJOURNED