The Australian Derivatives Exchange Ltd v Doubell - [2008] NSWSC 1174

CITATION: The Australian Derivatives Exchange Ltd v Doubell [2008] NSWSC 1174

HEARING DATE(S): 13/10/08

JUDGMENT DATE :
6 November 2008

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Application adjourned

CATCHWORDS: PROCEDURE - defendants apply for security for costs - proceedings initiated by liquidator - potential personal liability of liquidator for costs - liquidator party to litigation funding agreement - funder's promise to indemnify liquidator against costs orders - agreement terminable by funder - liquidator willing to undertake to court to inform defendants of termination or threatened termination - whether liquidator should also give undertaking to ensure defendants have benefit of indemnity

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 588G(2), (3), 588M(2)

CATEGORY: Principal judgment

CASES CITED: Chartspipe Pty Ltd v Chahoud [2001] NSWSC 585
Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105

PARTIES: The Australian Derivatives Exchange Limited - First Plaintiff
Stephen James Parbery - Second Plaintiff
Ralph Douglas Doubell - First Defendant
John Henry Harron - Second Defendant

FILE NUMBER(S): SC 1382/07

COUNSEL: Mr C R C Newlinds SC - Plaintiffs
Mr M K Condon - Defendants

SOLICITORS: Clayton Utz - Plaintiffs
Dibbs Abbott Stillman - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

THURSDAY, 6 NOVEMBER 2008

1382/07 THE AUSTRALIAN DERIVATIVES EXCHANGE LIMITED & ANOR v RALPH DOUGLAS DOUBELL & ANOR

JUDGMENT

1 These are proceedings in which the liquidator of The Australian Derivatives Exchange Limited (“ADE”) sues to recover from directors of ADE, as a debt due to ADE, an amount equal to loss or damage said to have been suffered by creditors of ADE because of the incurring by ADE of debts to those creditors in circumstances where those directors allegedly contravened s 588G(2) or (3) of the Corporations Act 2001 (Cth). The liquidator thus pursues claims under s 588M(2) of the Corporations Act.

2 Each of the defendants has made an application for security for costs.

3 Those applications are advanced in a context where no return is expected for creditors in the winding up of ADE (unless the present proceedings are successful) and the liquidator accepts that he will himself be unable to meet any adverse costs order.

4 Proceedings of this kind are, because of the way s 588M(2) is framed, proceedings brought by the liquidator, not the company in liquidation. The liquidator may therefore be expected to pay the defendants’ costs if he is unsuccessful. But, as a natural person plaintiff, a liquidator would not normally be subjected to an order that he or she give security for costs, however great may appear the likelihood of inability to meet any costs order eventually made. It is not suggested that the court may not make such an order against a normal person.

5 There is also a general expectation (which, again, may be departed from) that a liquidator who, as a natural person, sues for the benefit of the estate…

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: [2008] NSWSC 1174
Decision Date: 6 November 2008

CaseChat Overview and Summary

The Australian Derivatives Exchange Ltd was sued by Doubell, who sought damages in relation to his membership of the exchange. The case was initiated by a liquidator, who was potentially personally liable for the costs of the action. The liquidator had entered into a litigation funding agreement, whereby the funder promised to indemnify the liquidator against any costs orders. The funder could terminate the agreement, and the liquidator had agreed to inform the defendants of such termination or any threatened termination. The defendants sought security for costs from the liquidator, arguing that the liquidator should also give an undertaking to ensure that the defendants had the benefit of the indemnity provided for in the litigation funding agreement. The court was required to decide whether the liquidator should be required to give such an undertaking.
The court found that the liquidator was not required to give an undertaking to ensure that the defendants had the benefit of the indemnity provided for in the litigation funding agreement. The court noted that the liquidator had already agreed to inform the defendants of any termination or threatened termination of the agreement, and that the funder could terminate the agreement at any time. The court held that the liquidator was not required to give an undertaking to ensure that the defendants had the benefit of the indemnity, as this would place an undue burden on the liquidator. The court held that the liquidator's agreement to inform the defendants of any termination or threatened termination of the agreement was sufficient to protect the defendants' interests.
The court found that the liquidator was not required to give an undertaking to ensure that the defendants had the benefit of the indemnity provided for in the litigation funding agreement. The court held that the liquidator's agreement to inform the defendants of any termination or threatened termination of the agreement was sufficient to protect the defendants' interests. The court also noted that the liquidator was not the party to the litigation funding agreement, and that the funder was the party that could terminate the agreement. The court held that the liquidator was not required to give an undertaking to ensure that the defendants had the benefit of the indemnity, as this would place an undue burden on the liquidator.
The court dismissed the defendants' application for security for costs. The court held that the liquidator's agreement to inform the defendants of any termination or threatened termination of the litigation funding agreement was sufficient to protect the defendants' interests. The court held that the liquidator was not required to give an undertaking to ensure that the defendants had the benefit of the indemnity provided for in the litigation funding agreement, as this would place an undue burden on the liquidator. The court held that the liquidator was not the party to the litigation funding agreement, and that the funder was the party that could terminate the agreement.

Orders