Decision in International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45

The High Court has unanimously allowed an appeal in the case of International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45, finding that International Litigation Partners (ILP) was entitled to an early termination fee under a litigation funding agreement with Chameleon Mining. 

ILP agreed to fund Chameleon's litigation against another company in return for a share in the proceeds of the litigation. The agreement was made under a Funding Deed which allowed ILP to terminate the agreement if there was a change in control of Chameleon. This occured, and ILP terminated the arrangement and claimed an early termination fee of over $8 million. Chameleon refused to pay, saying that ILP was not entitled to the fee because ILP did not hold an Australian financial services license under Pt 7.6 of the Corporations Act. The Act provides that if a financial service is provided in the course of a financial services business by someone who must hold a license, but does not, then the other party has the right to rescind the contract. 

In a unanimous decision, the High Court found that ILP was entitled to the early termination fee. The Funding Deed was a form of financial accomodation in that ILP agreed to pay Chameleon's legal costs when asked to do so in return for a share of the amount recovered in the litigation. Therefore, the Funding Deed was a credit facility within the meaning of the Corporations Act, making ILP excempt from the requirement to hold an Australian financial services license. Under the Corporations Regulations, a credit facility arises where credit is provided for any period, with or without prior agreement between the credit provider and the debtor, and whether or not both credit and debit facilities are available. The High Court reasoned that "a contract, arrangement or understanding that is any form of financial accomodation is 'credit,' and its provision 'for any period' will be a 'credit facility.'"   In July 2012, the Government had made new Corporations Regulations exempting certain types of litigation receiving litigation funding from the license requriements. This decision further solidifies the view that litigation funders are not providing services that require such a license.    The Caselink feature of our LawOne Service has over 70, 000 links to judgments relating to legislative provisions, making it an essential research tool for legal professionals.