ASIC involvement marks new twist in Chameleon Mining case
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.
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What was particularly unusual about this was that the funding agreement was rescinded in mid-August 2010, but the exemption from holding a financial services licence was granted by ASIC on 1 December 2010.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.
Harry Snow acted for Chameleon Mining NL.
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