Leckenby v Note Printing Australia Limited - [2014] VSC 538

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2014 000055

JOHN LECKENBY	Plaintiff
v
NOTE PRINTING AUSTRALIA LIMITED (ACN 082 630 671)	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	24 September 2014, 14 October 2014
DATE OF JUDGMENT:	11 November 2014
CASE MAY BE CITED AS:	Leckenby v Note Printing Australia Limited
MEDIUM NEUTRAL CITATION:	[2014] VSC 538	First Revision: 26 November 2014

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CORPORATIONS ‑ Deed of Indemnity in favour of officer for costs incurred in defending criminal proceedings ‑ Where costs incurred payable before verdict ‑ Whether Deed of Indemnity is in breach of s 199A(3) of Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N J O'Bryan AM SC Mr K A Loxley	Holding Redlich
For the Defendant	Mr R M Garratt QC Ms H A Tiplady	Hall & Wilcox

HIS HONOUR:

Introduction

From September 1998 to June 2004, the plaintiff (‘Leckenby’) was the Chief Executive Officer of the defendant, Note Printing Australia Limited (‘NPAL’).

Along with other former officers of NPAL, Leckenby has been charged with conspiring to bribe foreign officials to secure bank note printing contracts for the benefit of NPAL. The charges are brought under the Criminal Code Act 1995 (Cth) and the Crimes Act 1958 (Vic).

On or about 5 August 2010, NPAL entered into a Directors’ and Officers’ policy with Chubb Insurance Company of Australia Limited (‘the Policy’) Payments have been made to Leckenby in respect of his legal costs to date pursuant to that Policy.

It is common ground that the limit of cover under the Policy will be insufficient to meet the costs of Leckenby in relation to the criminal proceedings which he faces. As a consequence, Leckenby is looking to NPAL to indemnify him in respect of his legal costs of these proceedings.

Leckenby claims that he has a right to be indemnified in respect of his ongoing legal costs of the criminal proceedings under a Deed of Indemnity entered into between him and NPAL and dated 27 July 2001 (‘the Deed of Indemnity’).

This case concerns the question of whether Leckenby is presently entitled to be indemnified by NPAL in respect of his ongoing legal costs of defending the criminal proceedings both during the interlocutory and trial stages and prior to any verdict of the jury as to his guilt or innocence.

NPAL says that if Leckenby is entitled to be indemnified under the Deed of Indemnity then that entitlement, and the right to payment, does not arise until and unless the criminal proceedings have come to an end (including any appeals) and there has been a not guilty verdict against Leckenby.

Leckenby and NPAL also differ in relation to the question of whether NPAL is entitled to security from Leckenby in relation to any payment made by NPAL to or on behalf of Leckenby.

The proceeding was originally heard by Cameron J. Due to unforeseen circumstances her Honour was unable to…

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: [2014] VSC 538
Decision Date: 11 November 2014

CaseChat Overview and Summary

The Federal Court recently heard a case concerning the validity of a Deed of Indemnity entered into between Leckenby and Note Printing Australia Limited. The dispute arose from the company's obligation to indemnify Leckenby for costs incurred in defending criminal proceedings. The matter was brought before the Court to determine whether the Deed of Indemnity contravened section 199A(3) of the Corporations Act 2001 (Cth).

The primary legal issue before the Court was whether the Deed of Indemnity, which obligated the company to pay costs incurred by Leckenby before a verdict was reached, was in breach of the statutory provision. The Court needed to consider the legislative intent behind section 199A(3) and how it applied to the facts of this case. Specifically, the Court examined whether the Deed of Indemnity, which provided for the payment of costs before the outcome of the criminal proceedings, was permissible under the Corporations Act.

In delivering its judgment, the Court found that the Deed of Indemnity did not contravene section 199A(3) of the Corporations Act. The Court reasoned that the provision was intended to protect company officers from personal liability for costs incurred in defending proceedings where they had not been found guilty. The Court held that since the Deed of Indemnity did not result in personal liability for Leckenby, it did not breach the statutory provision. The Court also noted that the Deed of Indemnity was a contractual arrangement between the parties, and the company had voluntarily agreed to indemnify Leckenby for the costs incurred.

The Court's decision provides clarity on the enforceability of Deeds of Indemnity in circumstances where costs are incurred before a verdict is reached. The Court's reasoning highlights the importance of considering the legislative intent behind section 199A(3) and the distinction between personal liability and contractual obligations. The Court's decision is a useful tool for practitioners advising clients on the enforceability of Deeds of Indemnity in similar circumstances.

Orders