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Note Printing Australia Ltd v Leckenby

Note Printing Australia Ltd v Leckenby

Case [2015] VSCA 105 20 May 2015

Fiduciary Duty

Unconscionable Conduct

Breach of Trust

Corporate Law & Governance

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0151

NOTE PRINTING AUSTRALIA LTD (ACN 082 630 671)	Applicant
v
JOHN LECKENBY	Respondent

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JUDGES:	TATE, WHELAN and FERGUSON JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	6 March 2015
DATE OF JUDGMENT:	20 May 2015
MEDIUM NEUTRAL CITATION:	[2015] VSCA 105
JUDGMENT APPEALED FROM:	[2014] VSC 538 (Sifris J)

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CORPORATIONS – Deed of indemnity between company and its officer for legal costs and expenses in defending criminal proceedings – Whether present entitlement to be indemnified during proceedings and before verdict, or whether indemnity arises only at the conclusion of proceedings if no finding of guilt – Effect of obligation to refund where officer found guilty – Whether obligation under deed in breach of prohibition in s 199A(3)(b) of the Corporations Act 2001 (Cth) – Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112 applied – Leave to appeal granted – Appeal dismissed.

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

TATE JA:

TABLE OF CONTENTS

Introduction …………………………………………………………….. 1

The dispute over the obligation to indemnify ………………………. 2

The Deed ………………………………………………………………… 4

The prohibition under the Corporations Act ……………………….. 7

The judge’s reasons …………………………………………………….. 9

Is cl 2.2(b) consistent with the prohibition under s 199A(3)(b)? 15

           (1)       Interpreting the statutory language of s 199A(3)(b) …….. 18

           (2)       The significance of the obligation to refund …………….. 27

           (3)       Is a criminal charge a ‘Claim’? …………………………... 31

Conclusion on the application for leave to appeal ……………….. 33

Conclusion on the appeal …………………………………………….. 36

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Introduction

The applicant, Note Printing Australia Limited (‘NPAL’), seeks leave to appeal from the orders of a Judge of the Trial Division of the Supreme Court upholding the present entitlement of the respondent, John Leckenby (‘Leckenby’), to be indemnified by NPAL for legal costs and expenses incurred in defending criminal proceedings in the Supreme Court (‘the criminal proceedings’).[1] The criminal proceedings remain on foot. The application for leave to appeal, which was heard at the same time as the appeal, turns on the construction of a Deed of Indemnity.
[1]Leckenby v Note Printing Australia Limited [2014] VSC 538 (‘Reasons’).

The central question raised is whether Leckenby is presently entitled to be indemnified for his ongoing legal costs during the course of the criminal proceedings and before verdict, or whether his entitlement 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 in favour of Leckenby.

For the reasons that follow, I consider that Leckenby has a present entitlement to be indemnified prior to verdict. I would grant leave to appeal and dismiss the appeal.

The dispute over the obligation to indemnify

Leckenby was the Chief Executive Officer of NPAL from September 1998 to June 2004. Along with…

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.

Continue reading Note Printing Australia Ltd v Leckenby

Details

AGLC: Note Printing Australia Ltd v Leckenby [2015] VSCA 105
Case: [2015] VSCA 105
Decision Date: 20 May 2015

CaseChat Overview and Summary

Note Printing Australia Ltd brought proceedings against one of its former directors, Mr Leckenby, seeking to recover costs and expenses incurred in defending criminal proceedings against him. The Federal Court was asked to determine whether the former director was entitled to be indemnified during the proceedings and before the verdict, or whether the indemnity arose only at the conclusion of the proceedings if there was no finding of guilt. The court was also required to determine whether the obligation to refund the former director's costs if he was found guilty breached section 199A(3)(b) of the Corporations Act 2001 (Cth).

The court found that the deed of indemnity provided that the former director was to be indemnified by the company during the proceedings and before the verdict, and that the obligation to refund arose only if the former director was found guilty. The court held that the obligation to refund did not breach section 199A(3)(b) of the Corporations Act, as it was a condition subsequent to the former director's guilt, and not a penalty. The court applied the decision in Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112, which held that a condition subsequent did not breach the prohibition in section 199A(3)(b) of the Corporations Act.

The court held that the former director was entitled to be indemnified during the proceedings and before the verdict, and that the obligation to refund did not breach section 199A(3)(b) of the Corporations Act. The court dismissed the appeal and granted leave to appeal to the Full Court of the Federal Court. The final orders were that the appeal be dismissed and leave to appeal be granted to the Full Court of the Federal Court.

Orders