ASIC involve­ment marks new twist in Chameleon Min­ing case

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In brief — Finan­cial ser­vices licence exemp­tions do not have ret­ro­spec­tive effect

ASIC has become involved in the case of Inter­na­tion­al Lit­i­ga­tion Part­ners Pty Ltd v Chameleon Min­ing NL, sub­mit­ting to the court that exemp­tions from the need to hold a finan­cial ser­vices licence do not have ret­ro­spec­tive effect.

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Lit­i­ga­tion fund­ing agree­ment is a finan­cial product

As report­ed in our ear­li­er arti­cle, Has the long-antic­i­pat­ed reg­u­la­tion of lit­i­ga­tion fund­ing final­ly arrived? the NSW Court of Appeal recent­ly deter­mined that because a lit­i­ga­tion fund­ing agree­ment is a ​“finan­cial prod­uct” and Inter­na­tion­al Lit­i­ga­tion Part­ners (ILP) did not hold a finan­cial ser­vices licence, Chameleon Min­ing was enti­tled to rescind the fund­ing agreement.

ILP exempt­ed from finan­cial ser­vices licence requirement

After the judg­ment was hand­ed down in March 2011, the court invit­ed the par­ties to sub­mit short min­utes of order. When ILP sub­mit­ted its pro­posed orders, it took the curi­ous step of also sub­mit­ting a doc­u­ment issued by ASIC exempt­ing ILP from the require­ment to hold a finan­cial ser­vices licence.

What was par­tic­u­lar­ly unusu­al about this was that the fund­ing agree­ment was rescind­ed in mid-August 2010, but the exemp­tion from hold­ing a finan­cial ser­vices licence was grant­ed by ASIC on 1 Decem­ber 2010.

ILP claims exemp­tion has ret­ro­spec­tive effect

The argu­ment put by ILP was that the exemp­tion grant­ed by the ASIC instru­ment changed the law, had ret­ro­spec­tive effect and was specif­i­cal­ly relat­ed to the fund­ing agree­ment. Accord­ing to ILP, this meant that Chameleon had no enti­tle­ment to rescind the fund­ing agreement.

ASIC view of ret­ro­spec­tive exemp­tion claim

ASIC became involved and lodged writ­ten sub­mis­sions as ami­cus curi­ae (lit­er­al­ly ​“friend of the court”, one who vol­un­teers or is invit­ed by a court to give advice or make sub­mis­sions to the court), stat­ing that the exemp­tion was not intend­ed to be retrospective. 

The court took a sim­i­lar view. The judg­ment hand­ed down on 3 June 2011 states that ​“it is doubt­ful whether ASIC has pow­er … to make exemp­tions with ret­ro­spec­tive effect. In any event, on its prop­er con­struc­tion, the Instru­ment does not have ret­ro­spec­tive effect.” 

The 3 June 2011 judg­ment has the ben­e­fit of clar­i­fy­ing the law with regard to instru­ments of the kind issued to ILP by ASIC. In the view of the court (and as sub­mit­ted by ASIC), such instru­ments do not have ret­ro­spec­tive effect and cer­tain­ly can­not be used ret­ro­spec­tive­ly to change the out­come of court proceedings.

The full text of the 3 June 2011 judg­ment in Inter­na­tion­al Lit­i­ga­tion Part­ners Pty Ltd v Chameleon Min­ing NL can be down­loaded here.

Har­ry Snow act­ed for Chameleon Min­ing NL.

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