J&J Richards Super Pty Ltd ATF the J&J Richards Superannuation Fund v Nielsen

In the case of J&J Richards Super Pty Ltd ATF the J&J Richards Superannuation Fund v Nielsen, the Federal Court of Australia was tasked with resolving disputes arising from the operation of two managed investment schemes managed by Linchpin and Investport. The Applicant, J&J Richards Superannuation Fund, sought compensation for losses incurred by its members due to alleged misconduct by the directors of Linchpin and Investport, including breaches of directors' duties under the Corporations Act 2001 (Cth) and misleading or deceptive conduct. The primary legal issues were whether the directors contravened specific provisions of the Corporations Act and whether the Applicant and its members could claim damages against the directors for these contraventions.

The Court found that the directors were indeed involved in contraventions of the Corporations Act, specifically sections 601FC, 601FD(1)(b), and 601FD(1)(c). The directors were held liable for making improvident and inadequately secured loans to related entities, directors, and financial advisors, which resulted in significant losses for the Applicant and its members. The Court also determined that the information memorandum and product disclosure statements contained misleading and deceptive representations. Given the established predicate liability, the Applicant and its members were entitled to seek damages from the directors in an aggregate amount for the contraventions. Furthermore, the Court found that the insurer, AIG, was not entitled to reduce its liability under the Directors and Officers Insurance Policy due to non-disclosure, as the insurer had waived its right to rely on non-disclosure under the Insurance Contracts Act 1984 (Cth).

The Court concluded that the insurer could not rely on the professional services exclusion in the policy because the impugned conduct did not constitute the provision of professional services. This decision aligns with the reasoning in Murray Goulburn Co-Operative Co Ltd v AIG Australia Ltd. Finally, the Court held that AIG was not entitled to benefit from the conditional release granted to the directors under the Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) since the settlement orders did not preclude the Applicant from claiming indemnity against AIG.

In light of these findings, the Court ordered that the parties submit consent or competing draft declarations and orders to give effect to these reasons for judgment, including with respect to costs and interest, by a specified date.