Case: Anstella Nominees Pty Ltd v St George Motor Finance Ltd [2003] FCA 466
Outcome: referred to
On 14 May 2003, Finkelstein J delivered reasons for judgment giving approval to Mr Rambaldi as liquidator of Irlmond to enter into the funding agreement in the form attached to his counsel's supplementary submission of 12 May 2003: see Anstella Nominees Pty Ltd v St George Motor Finance Ltd [2003] FCA 466 (" Anstella "). His Honour wrote (at [5]-[8]): "The initial version of the draft agreement required the liquidator to surrender his power to control the destiny of the action in the event of disagreement between the liquidator and the other applicants concerning the settlement or discontinuance of the action. The draft agreement provided that the liquidator could not instruct his solicitors to settle or discontinue the proceeding without obtaining the consent of the other applicants. If there was a dispute, the matter had to go to arbitration. ... It seemed to me ... that the proposal gave rise to a ... difficulty, namely whether there are any circumstances under which a liquidator can lawfully give up his statutory powers or duties. There is a view that, while a liquidator may listen to the opinion of others on what steps he should take in a particular situation, in the end he must exercise his own judgment on what is or is not in the best interests of the creditors or contributories. For this reason he cannot give up control of litigation in which his company is a party. This is the view taken by Lightman J in Grovewood Holdings Plc v James Capel &amp; Co Ltd [1995] Ch 80. ... Recognising the potential difficulty he was in, the liquidator sought time to see whether Insolvency Litigation Fund Pty Ltd ("ILF") (the company providing the funding) could be persuaded to change the terms. This is in fact what occurred. The liquidator was able to negotiate the removal of the restriction on his ability to settle or discontinue the proceeding if Irlmond became a party to the action." 37 On 15 May 2003, the litigation funding agreement (hereafter referred to as "the LFA") was executed by Mr and Mrs Spalla, Mr Still, Anstella, Mr Rambaldi, Irlmond, and ILF. Other significant provisions of the LFA include: &#8226; Clause 4(a)(iv) provided that the "Spalla Interests shall pay and shall at all times remain liable to pay all Legal Costs charged by the Solicitors, Senior Counsel and Junior Counsel in respect to ... Irlmond and the Liquidator's participation in and conduct of the Proceeding." Clause 4.2 required the Spalla Interests to provide the liquidator with a letter confirming that the Spalla Interests have sufficient funds to settle these costs. &#8226; Pursuant to Clause 5.1, the Spalla Interests agreed to indemnify Irlmond and the liquidator in respect of legal costs claimed by their joint representatives in the proceeding. &#8226; Clause 6.1 provided that ILF would indemnify the liquidator for any costs for which he becomes personally liable in relation to his and Irlmond's participation in the primary proceeding. Pursuant to Clause 6.2, "[t]he indemnity provided by ILF to the Liquidator in respect of any Costs Order will not be a continuing indemnity, but may be terminated by ILF, in its absolute discretion by giving 7 days written notice to the Liquidator". This right of termination was subject to a proviso that ILF would remain liable for any personal costs orders against the liquidator up to the time of termination. &#8226; Clause 7 related to the appointment of solicitors and counsel and provided that solicitors and junior and senior counsel would be retained to act for the liquidator, Irlmond and the Spalla Interests. In accordance with clause 1.1, the solicitors were to be HWL "or such other firm of solicitors retained to act for the Liquidator and Irlmond from time to time" and senior counsel was to be Peter Hayes QC "or such other lead Counsel retained to act for the Liquidator and Irlmond from time to time". &#8226; Clause 15 contained certain warranties, including that the "Spalla Interests warrants [sic] that it [sic] has sufficient financial resources to carry out its [sic] obligations under this Agreement and shall continue to have such financial resources." 38 HWL and the Spalla Interests entered into a costs agreement with respect to the primary proceeding in May 2003. Mr Spalla's original retainer with HWL required Mr Spalla to pay $80,000 upfront with the balance to be at HWL's prevailing hourly rates, plus a 20% uplift fee to be paid on the successful outcome of the matter. Mr Spalla was to meet all HWL's disbursements and counsel fees. Mr Spalla reached a similar "no win, no fee" arrangement with Mr Hayes QC. Mr Spalla paid the initial amount of $80,000 to HWL and funded the litigation in accordance with these agreements. He did not, however, have sufficient funds to meet the costs of the litigation had all of the lawyers' costs been due at the time they were incurred.