By and -

Key decisions

  • LCM Funding Pty Ltd v Stanwell Corporation Limited [2022] FCAFC 103
  • Porter v Dyer [2022] FCAFC 116

CORPORATIONS

A typical litigation funding scheme is not a ‘managed investment scheme’ under Corporations Act 2001 (Cth) s 9 – Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd overturned

LCM Funding Pty Ltd v Stanwell Corporation Limited [2022] FCAFC 103 (Middleton, Lee and Anderson JJ)

LCM Funding Pty Ltd (‘LCM’) brought an appeal from Stanwell Corporation Limited v LCM Funding Pty Ltd [2021] FCA 1430 contending that the decision of Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147 (‘Brookfield Case’) was wrong insofar as it found that a litigation funding scheme (‘LFS’), having the characteristics identified in that case, was a managed investment scheme (‘MIS’) within the meaning of s 9 of the Corporations Act 2001 (Cth) (‘Act’).

The action concerned a LFS relating to the class action Stillwater Pastoral Company Pty Ltd v Stanwell Corporation Ltd & Anor (proceeding QUD 19 of 2021) (‘Scheme’). In the proceeding below:

  • Stanwell Corporation Limited (‘Stanwell’) alleged that the Scheme constituted a financial product as defined in s 764A(1)(m) of the Act and was an unregistered MIS. Stanwell sought declarations to that effect, and orders under the Act restraining LCM from operating an unregistered MIS and/or issuing a financial product without a relevant licence.
  • LCM responded by contending that: (1) the Scheme was not a financial product or an MIS by operation of the ‘grandfathering’ provisions in Corporations Regulations 2001 (Cth) (‘Corporations Regulations’) regulation 10.38.01; and (2) in any event, the Scheme was not a MIS and LCM was not operating a MIS. LCM accepted that the Scheme was indistinguishable from that in the Brookfield Case but submitted that the majority decision in the Brookfield Case was wrong.
  • LCM by cross-claim sought declarations: (1) that the Scheme does not have the features of the definition of a MIS set out in ss 9(a)(i) and (ii) of the Act; and (2) that LCM and Stillwater Pastoral Company Pty Ltd (‘Stillwater’) have not operated, and were not operating, a scheme with those features.
  • LCM also sought referral of the proceedings or part of them to the Full Court pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) (‘FCA Act’), to challenge the correctness of the Brookfield Case.

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