De Tocqueville, in the matter of Pacific Current Group Limited v Pacific Current Group Limited

Federal Court of Australia|2020-02-20|Before: Moshinsky J

IMF Bentham (Fund 5) Australian Investments Pty Ltd (ACN 635 083 984) (Funder), by the plaintiffs' counsel, undertakes that, subject to order 1 and 2 below, it will: (a) pay and indemnify Pacific Current Group Limited (ACN 006 708 792) (PAC) against all costs, charges and expenses incurred by the plaintiffs on behalf of PAC in bringing and maintaining the claim in the Federal Court of Australia in substantially the same form as the proposed statement of claim filed in this proceeding as annexure "MDT-3" to the affidavit of Michael Brendan Patrick de Tocqueville sworn on 20 September 2019 (the D&O Proceeding); and (b) pay and indemnify PAC against any orders for costs, including any orders for security for costs, made against it in the D&O Proceeding, (collectively, the "D&O Costs").
To the extent that the Funder does not satisfy any of its obligations pursuant to its undertaking set out in paragraph 1 above, IMF Bentham Limited (ACN 067 298 088), by the plaintiffs' counsel, undertakes to satisfy those obligations forthwith.

The plaintiffs be granted leave pursuant to s 237 of the Corporations Act 2001 (Cth) (Act), conditional upon order 2 below, to bring the D&O Proceeding on behalf of and in the name of PAC against: (a) Michael Clifford Fitzpatrick; (b) Andrew Stuart McGill; (c) Peter Robert Kennedy; (d) Melda Kay Donnelly; and (e) Reubert Edward Hayes, in the Federal Court of Australia.

(iv) fourthly, to the plaintiffs, the amount of $100,247.59 (including GST) (provided such costs are not unreasonable), being the actual legal fees that the plaintiffs incurred in proceeding VID940/2017, taking into account the plaintiffs' costs paid by PAC in that proceeding; (v) fifthly, to the plaintiffs, the amount of $111,651.07 (including GST) (provided such costs are not unreasonable), being the actual legal fees that the plaintiffs incurred in the period 18 March 2019 to 25 August 2019 (inclusive) in relation to the originating application dated 3 June 2019, prior to the commencement of funding of the D&O Proceeding by the Funder, less the amount of any such fees already received by the plaintiffs; and (vi) sixthly, to the Lawyers, the conditional component of their fees (provided such costs are not unreasonable), plus an uplift of 25% of that amount. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The plaintiffs, by their originating application dated 3 June 2019, apply under s 237 of the Corporations Act 2001 (Cth) for leave to bring a proceeding (the Proposed Proceeding) on behalf of Pacific Current Group Limited (PAC) against the directors of the company at the time of a decision to merge with Northern Lights Capital Group LLC (Northern Lights). The merger between PAC and Northern Lights took place in 2014. 2 The first plaintiff, Michael Brendan Patrick de Tocqueville, is a shareholder and former director of PAC. The second plaintiff, ASI Mutual Pty Ltd (ASI), a company controlled by Mr de Tocqueville, is also a shareholder of PAC. 3 The Proposed Proceeding would be brought by PAC as applicant against the following respondents, each of whom was a director of PAC in 2014: (a) Michael Clifford Fitzpatrick, the Chairman of PAC's board of directors at the relevant times; (b) Peter Robert Kennedy; (c) Melda Kay Donnelly; (d) Andrew Stuart McGill, the Managing Director and CEO of PAC at the relevant times; and (e) Reubert Edward Hayes, (the 2014 Directors). 4 In broad terms, the Proposed Proceeding would allege that the 2014 Directors breached their duties of care and diligence (under the general law and s 180(1) of the Corporations Act) in connection with the merger between PAC and Northern Lights. A draft statement of claim has been prepared for the purposes of the Proposed Proceeding. 5 The merger between PAC and Northern Lights was described in an announcement made by PAC to the ASX on 5 August 2014. Aspects of the merger included: (a) PAC would be merged with Northern Lights, a US based asset manager; (b) a new Australian trust (named the Aurora Trust) (the Trust) would be established, which would own PAC's and Northern Lights' interests in their respective investee companies; (c) PAC would hold approximately 61 per cent of units in the Trust; (d) Northern Lights would hold approximately 39 per cent of units in the Trust; (e) management and operation would be integrated and the business would be operated as one group under a common board of directors; and (f) establishment of a $49.1 million debt facility, funding the acquisition of additional parts of Northern Lights' investees that Northern Lights did not already own. 6 On 25 November 2014, PAC announced to the ASX that the merger had been completed. 7 Although the originating application was filed on 3 June 2019, it was not served on PAC until 13 September 2019. It appears that the delay was due to Mr de Tocqueville and ASI seeking litigation funding for the Proposed Proceeding. As a result of the delay in serving the originating application, the first case management hearing did not take place until 11 October 2019. Shortly after that case management hearing, the originating application was listed for hearing on 18 December 2019. 8 In the course of the hearing on 18 December 2019, certain issues emerged that necessitated the filing of further submissions. These issues related to litigation funding, in particular the form of undertaking to be given by the funder and the form of any orders sought pursuant to ss 241 and 242 of the Corporations Act. Accordingly, Mr de Tocqueville and ASI filed further submissions dated 13 January 2020 and PAC filed further submissions dated 24 January 2020. I considered the parties' further submissions to raise certain further issues and therefore listed the matter for mention on 12 February 2020. The parties addressed most of the further issues at the mention on 12 February 2020, but I also permitted certain matters to be addressed by the filing of further submissions and affidavit material. 9 As ultimately formulated, Mr de Tocqueville and ASI propose that the following undertakings be provided in relation to litigation funding and seek the following orders pursuant to ss 237, 241 and 242 of the Corporations Act (omitting paragraph 3 of the proposed orders, which relates to the costs of this proceeding): THE COURT NOTES THAT: 1. IMF Bentham (Fund 5) Australian Investments Pty Ltd (ACN 635 083 984) (Funder), by the plaintiffs' counsel, undertakes that, subject to order 1 and 2 below, it will: (a) pay and indemnify Pacific Current Group Limited (ACN 006 708 792) (PAC) against all costs, charges and expenses incurred by the Plaintiffs on behalf of PAC in bringing and maintaining the claim in the Federal Court of Australia in substantially the same form as the proposed statement of claim filed in this proceeding as annexure "MDT-3" to the affidavit of Michael Brendan Patrick de Tocqueville sworn on 20 September 2019 (the D&O Proceeding); and (b) pay and indemnify PAC against any orders for costs, including any orders for security for costs, made against it in the D&O Proceeding, (collectively, the "D&O Costs"). 2. To the extent that the Funder does not satisfy any of its obligations pursuant to its undertaking set out in paragraph 1 above, IMF Bentham Limited (ACN 067 298 088), by the plaintiffs' counsel, undertakes to satisfy those obligations forthwith. THE COURT ORDERS THAT: 1. The plaintiffs be granted leave pursuant to s 237 of the Corporations Act 2001 (Cth) (Act), conditional upon order 2 below, to bring the D&O Proceeding on behalf of and in the name of PAC against: (a) Michael Clifford Fitzpatrick; (b) Andrew Stuart McGill; (c) Peter Robert Kennedy; (d) Melda Kay Donnelly; and (e) Reubert Edward Hayes, in the Federal Court of Australia. 2. Pursuant to section 241 of the Act: (a) all money payable to PAC pursuant to any settlement of or judgment in the D&O Proceeding (Resolution Sum), or part thereof, must be paid directly to a Controlled Money Account opened by the plaintiffs' solicitors (the Lawyers) and kept for that purpose (the CMA); (b) any monies held in the CMA are to be held on trust for each of the Funder, the plaintiffs, and the Lawyers in the amount of their individual entitlements, calculated by reference to order 2(c)(i)-(vi), with the balance of any monies held on trust for PAC; (c) the Lawyers must pay to PAC, within 30 days of receipt of any part of the Resolution Sum, the amount that is the Resolution Sum less the following payments which shall be paid contemporaneously and in the following order of priority: (i) first, to the Funder, the amount of the D&O Costs already paid or payable by the Funder, less the amount of any such costs already received by the Funder; (ii) secondly, to the Funder, its ancillary costs paid in relation to the D&O Proceeding, including the costs associated with the provision of any security for costs and with taxation of costs as well as the costs of and incidental to the Originating Application dated 3 June 2019; (iii) thirdly, to the Funder, as consideration for the funding of the D&O Proceeding, an amount calculated as a percentage of any Resolution Sum, with the applicable percentage determined in accordance with Column A of Table 1 by reference to when the Resolution Sum is received: Table 1 Column A: Time to Settlement Approval or Judgment by the Court (from the date of grant of leave under section 237 of the Act) Column B: Percentage of Resolution Sum Up to and including 12 months 30% More than 12 months 35%

(iv) fourthly, to the plaintiffs, the amount of $100,247.59 (including GST) being the actual legal fees that the plaintiffs incurred in proceeding VID940/2017, taking into account the plaintiffs' costs paid by PAC in that proceeding; (v) fifthly, to the plaintiffs, the amount of $111,651.07 (including GST) being the actual legal fees that the plaintiffs incurred in the period 18 March 2019 to 25 August 2019 (inclusive) in relation to the originating application dated 3 June 2019, prior to the commencement of funding of the D&O Proceeding by the Funder, less the amount of any such fees already received by the plaintiffs; and (vi) sixthly, to the Lawyers, the conditional component of their fees, plus an uplift of 25% of that amount. 10 There is some urgency as regards the determination of the originating application, due to the possible expiry of a limitation period on 24 February 2020.

Evidence 11 Mr de Tocqueville and ASI rely on the following affidavits in support of the application: (a) affidavits of Mr de Tocqueville dated 13 September 2019, 20 September 2019, 20 November 2019, 2 December 2019 and 14 February 2020; (b) an affidavit of Holly Sarah Marchant, a paralegal employed by Keypoint Law, the solicitors for Mr de Tocqueville and ASI, dated 8 October 2019; (c) affidavits of Andrew John Saker, the Managing Director and CEO of IMF Bentham Limited (IMF Bentham), dated 13 December 2019 and 17 December 2019; and (d) an affidavit of Roland David Burt, a solicitor at Keypoint Law, dated 16 December 2019. 12 In opposition to the application, PAC relies on: (a) an affidavit of Antony David Robinson, the Chairman of the board of directors of PAC, dated 25 November 2019; and (b) an affidavit of Michael Keith Hamilton Pryse, a partner of Herbert Smith Freehills, the solicitors for PAC, dated 9 October 2019. 13 There was no cross-examination.

Mr de Tocqueville and ASI 14 Mr de Tocqueville holds 400,000 shares in PAC, comprising approximately 0.84 per cent of the issued capital of PAC. He has held shares in PAC since June 1999. ASI holds 50,000 shares in PAC, comprising approximately 0.11% of the issued capital of PAC. ASI has held its shares in PAC since 30 July 2011. Mr de Tocqueville is the sole director of ASI and holds all of its shares, directly or indirectly. 15 Mr de Tocqueville was a director of PAC from 27 October 1998 until 14 August 2002. When he was a director of PAC, the company was named Paper Technology International Limited and was a paper manufacturing business. During his time as a director, PAC sold its manufacturing business and commenced acquiring interests in funds management businesses. 16 Since August 2014, Mr de Tocqueville has sent correspondence to the members of PAC management and board members in relation to the management of PAC, and in particular in relation to the decision to enter into the merger. A sample of these communications is annexed to Mr Robinson's affidavit. It is fair to say that some of these communications are expressed in intemperate language.

PAC 17 In 2000, PAC changed its name to Treasury Group Limited. This was the name of the company during 2014. The company subsequently changed its name to its present name, Pacific Current Group Limited.

The 2017 application 18 In August 2017, Mr de Tocqueville commenced an application under s 247A of the Corporations Act for orders permitting inspection of certain of PAC's records relating to the merger between PAC and Northern Lights. Orders for inspection were made on 27 October 2017. Mr de Tocqueville subsequently inspected the documents provided by PAC. 19 Mr de Tocqueville retained solicitors and counsel to consider the documents produced pursuant to the 27 October 2017 orders. In his 13 September 2019 affidavit, Mr de Tocqueville states that, following that consideration he is of the view that PAC has claims against the 2014 Directors for breach of their duties of care and diligence, in relation to the merger. On this basis, Mr de Tocqueville instructed his lawyers to prepare a draft statement of claim. 20 The documents produced pursuant to the 27 October 2017 orders disclosed that PAC has directors' and officers' insurance. In a memorandum to PAC's board dated 12 November 2014, it was recommended that the directors' and officers' cover "be increased to not less than $45 million (existing $30 million)".

The draft statement of claim 21 A draft statement of claim for the Proposed Proceeding is annexed to Mr de Tocqueville's affidavit dated 20 September 2019. The draft pleading has been settled by senior and junior counsel, namely Michael Pearce SC, Ian Waller QC and Andrew Cameron. 22 After introductory paragraphs dealing with the parties, it is alleged in [11] of the draft statement of claim that, by reason of their positions as directors of PAC, at all material times each of the 2014 Directors owed duties to PAC to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in PAC's circumstances and occupied the office held by, and had the same responsibilities within PAC as, that director. The particulars to that paragraph state that the duties arise under the general law and pursuant to s 180(1) of the Corporations Act. 23 In [12]-[15] of the draft statement of claim, specific responsibilities are alleged with respect to each of the directors. 24 The draft statement of claim, at [16]-[17], contains the following allegations regarding Northern Lights: 16. At all material times, Northern Lights: (a) was founded in 2006 and headquartered in Seattle in the United States of America; (b) was a private limited liability company incorporated under the laws of the State of Delaware in the United States of America; (c) carried on the business of funds management and investing in fund managers in the United States of America, the United Kingdom and France until 25 November 2014; and (d) had assets which were illiquid, being investments in private boutique fund managers. 17. Prior to the merger with PAC, Northern Lights' business, insofar as it involved investing in fund managers, comprised holding interests in several boutique funds, including Seizert Capital Partners LLC (Seizert) and WHV Investment Management Inc (WHV) as well as a number of immature boutique funds (collectively, the Northern Lights Boutiques). 25 The next section of the draft statement of claim deals with the proposed merger between PAC and Northern Lights. By way of background, it is alleged in [18] as follows: 18. As at 24 February 2014: (a) PAC's investment activity had stagnated as it had completed seven investments in the previous six years and ninety per cent of its forecast financial year 2014 earnings were generated from two of the nine boutique funds in which it held interests, namely RARE (sixty percent) and IML (thirty percent); (b) PAC owned 40% of RARE and, if the owners of the remaining 60% of RARE put it up for sale: (i) PAC had a first right of refusal to purchase the 60% it did not own; (ii) if PAC did not exercise its right to purchase the remaining 60%, it was obliged to sell its 40% interest to the purchasers of the 60% interest; (c) it was likely the 60% owners of RARE would seek a sale of their interest before 30 June 2015; (d) if the 60% owners of RARE sought a sale of their interest before 30 June 2015, PAC did not have the capacity to exercise its entitlement to buy that interest and so would be forced to sell its 40% interest; and (e) if RARE was divested, PAC's earnings before interest, tax, depreciation and amortisation would be reduced by eighty five per cent, and (if the divestment proceeds were retained) interest income would be the largest component of PAC's net profit after tax until new investments occurred. PARTICULARS The Applicant refers to pages 2 and 3 of the memorandum dated 21 February 2014 from Mr McGill to the PAC Board. A copy of the memorandum is in the possession of the solicitors for the Plaintiff and may be inspected by appointment. 26 The draft statement of claim then sets out allegations concerning certain PAC board meetings, namely meetings that took place on 24 February 2014, 26 March 2014, 16 April 2014 and 2 June 2014. This section of the draft pleading refers to various memoranda and board papers. In particular, [21] of the draft statement of claim refers to a memorandum prepared by Mr McGill, in his capacity as CEO of PAC, and Andrew Howard, Chief Investment Officer of PAC, dated 21 February 2014, which is alleged to have been presented to the PAC board at its 24 February 2014 meeting. This memorandum is alleged to have stated (among other things) that (see [21(j)]): Northern Lights valued 100% of Seizert at $US81 million, meaning that the value of $US121.125 million attributed to Seizert: (i) was overstated by approximately $US40 million; and (ii) was based on the erroneous assumption that Northern Lights owned 100 hundred per cent of Seizert when in fact it only owned 30 per cent. PARTICULARS The Plaintiff refers to pages 8 and 9 of the 21 February 2014 Memorandum. 27 It is alleged that at the board meeting on 24 February 2014 it was resolved that PAC execute a terms sheet to formalise negotiations for its merger with Northern Lights: see [22] of the draft statement of claim. 28 Next, it is alleged that on or about 22 March 2014, Mr McGill provided a paper he had prepared to the PAC board. This paper is alleged to have predicted (among other things) that earnings per share for PAC shareholders for the 2015 financial year after the proposed merger with Northern Lights would increase by 12.7 per cent: see the draft statement of claim at [24]. 29 It is alleged at [29] that at the board meeting on 16 April 2014 it was resolved that PAC sign a memorandum of terms for a merger between PAC and Northern Lights. It is alleged at [30] of the draft statement of claim that the memorandum of terms provided (among other things) that: (a) the "Economics" will include all cash and/or property available for distribution or dividend whether derived from earnings or sale proceeds or otherwise; (b) PAC would be entitled to 60 per cent of the Economics of the Trust and Northern Lights would be entitled to the remaining 40 per cent of the Economics of the Trust; and (c) the anticipated EBITDA from Northern Lights for the period ended 30 June 2014 would be US$19.2 million. 30 After setting out allegations concerning the 2 June 2014 board meeting, the draft statement of claim then refers to correspondence to and from the ASX (at [34]-[35]) and a draft due diligence report prepared by Deloitte (at [36]-[38]). The draft due diligence report, referred to as the "Deloitte Due Diligence Report", is alleged to have been provided to PAC on or before the 2 June 2014 board meeting. The draft statement of claim, at [38], contains the following pleading regarding that report: 38. In the Deloitte Due Diligence Report: (a) the EBITDA for Northern Lights for: (i) the financial year 2013 was adjusted from $US19.842 million down to $US6.55l million; and (ii) the twelve months to March 2014 was adjusted from $US19.198 million down to $US7.589 million; PARTICULARS The Plaintiff refers to page 8 of the Deloitte Due Diligence Report. (b) the combined value of Northern Lights was assessed at $US52.735 million (compared with the combined unadjusted total of $US127.833 million); PARTICULARS The Plaintiff refers to page 27 of the Deloitte Due Diligence Report. (c) it is stated that pursuant to Northern Lights' contractual arrangements with WHV, WHV has a discretion to make distributions, had in the past made none and there was serious doubt that it would make the projected distribution of $4 million in FY14; and PARTICULARS The Plaintiff refers to page 20 of the Deloitte Due Diligence Report. (d) it is stated that in relation to Seizert, the first half of financial year 2013 was an outlier year and that the earning distributions after year 3 may change and not all be allocated to the combined business. PARTICULARS The Plaintiff refers to pages 21 and 25 of the Deloitte Due Diligence Report. 31 The next section in the draft statement of claim concerns the approval of the merger between PAC and Northern Lights. This is alleged to have occurred at a meeting of the PAC board on 23 July 2014: see the draft statement of claim at [40]. The draft pleading then refers to the ASX announcement (at [41]) and the transaction documents for the merger (at [42]). It is alleged that PAC, Northern Lights and the Trustee entered into a series of documents to implement the merger of PAC and Northern Lights. It is then alleged at [43] as follows: On or about 24 November 2014: (a) the assets of PAC were given an acquisition value of $AU255,624,260; (b) PAC transferred its assets and liabilities to the Trustee to hold on the terms of the Aurora Trust; (c) PAC was issued units in the Aurora Trust representing 61.22 per cent of all the units in the Aurora Trust; (d) the assets of Northern Lights were given an acquisition value of $AU161,925,984; (e) Northern Lights transferred its assets and liabilities to the Trustee to hold on the terms of the Aurora Trust; and (f) Northern Lights was issued units in the Aurora Trust representing 38.78 per cent of all the units in the Aurora Trust. PARTICULARS The Plaintiff refers to the Transaction Documents and page 31 of the special purpose financial report for the period 25 November 2014 to 30 June 2015. A copy of the said financial report is in the possession of the Plaintiffs solicitors and may be inspected by appointment. 32 The next section of the draft statement of claim is headed "Inadequate and imprudent decision making". First, allegations are made concerning the resolution passed at the 24 February 2014 PAC board meeting. Secondly, allegations are made concerning the resolution passed at the 16 April 2014 PAC board meeting. Thirdly, allegations are made concerning the resolution passed at the 23 July 2014 PAC board meeting. Given the significance of these allegations for present purposes, I set them out in full (but omitting the particulars): Terms Sheet Execution Resolution 44. When each of the Defendants voted in favour of the Terms Sheet Execution Resolution at the February 2014 Board Meeting: (a) there was no evidence before the PAC Board that the merger would be earnings per share and/or value enhancing for the PAC shareholders; (b) there was not available to the PAC Board: (i) any quantification of any benefit that distributions of the proceeds of the divestment of RARE would deliver to shareholders; and (ii) any analysis of how the Aurora Trust would need to perform in order to deliver equivalent or superior benefits to PAC shareholders than if the merger with Northern Lights did not occur, having regard in particular to the distribution of the proceeds of the RARE divestment; (c) the information and methodology available to the PAC Board used to value Northern Lights' assets and to determine the proportion of units in the Aurora Trust that PAC and Northern Lights each would be allocated inflated Northern Lights' entitlement to units in the Aurora Trust as: (i) financial year 2014 was not a representative year of performance for Northern Lights; (ii) Northern Lights' earnings were based, in part, upon assets which it did not own or which should have been excluded; (iii) the valuation multiple adopted was arbitrary and not appropriate to be applied to Northern Lights; and (d) each of the Defendants accepted that $US61 million was to be paid upfront to Northern Lights for its portfolio of immature boutique fund managers, referred to as "alternative boutiques" without any information supporting that valuation or without querying the rationale for payment upfront; (e) the terms of the proposed merger exposed PAC to foreseeable disadvantage with no proportionate benefit to PAC; and (f) the provisions of the Terms Sheet set PAC on a course that would result in losses to it because the proposed allocation of units in the Aurora Trust between PAC and Northern Lights was not based on their respective true values but was based on an overvaluation of Northern Lights. 45. A director acting with reasonable care and diligence considering whether to vote in favour of the Terms Sheet Execution Resolution would not have exercised their power to vote on the proposed merger with Northern Lights in the absence of the following: (a) a reliable assessment that the merger would be earnings per share and value enhancing for the PAC shareholders; (b) quantification of the position that PAC shareholders would have been in if the merger did not take place, including considering the impact of the divestment of RARE; (c) a reliable forecast of the earnings of the merged entity, including the Northern Lights Boutiques; (d) an appropriate valuation of the Northern Lights Boutiques (both mature and alternative) for the purpose of determining the allocation of units in the Aurora Trust; (e) an understanding as to how the alternative Northern Lights Boutiques could be valued at $US61 million; and (f) an understanding of the commercial benefit to PAC of the merger structure as proposed, including the encumbrance of the merged entity's assets to establish a debt facility that would be drawn-down for the benefit of Northern Lights. 46. By reason of the matters in paragraphs 44 and 45 above, by voting in favour of the Terms Sheet Execution Resolution at the February 2014 Board Meeting, each of the Defendants failed to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in PAC's circumstances and occupied the office held by, and had the same responsibilities within PAC as, that Defendant in contravention of the general law duty referred to in paragraph 11 above and/or section 180(1) of the Corporations Act. Revised Terms Sheet Execution Resolution 47. When each of the Defendants voted in favour of the Revised Terms Sheet Execution Resolution at the April 2014 Board Meeting: (a) the circumstances alleged in paragraphs 44 and 45 continued; (b) no explanation had been provided for the disconformity between the figures in the 22 March 2014 paper referred to in paragraphs 24-26 above; (c) the Defendants had each failed to ensure that there was a proper commercial basis for the proposed 60/40 allocation of units in the Aurora Trust as between PAC and Northern Lights; and (d) the provisions of the Revised Terms Sheet set PAC on a course that would result in losses to it because: (i) the proposed allocation of units in the Aurora Trust between PAC and Northern Lights was not based on their respective true values but was based on an overvaluation of Northern Lights; and (ii) an accurate split of the Economics of the Aurora Trust was not 60/40 between PAC and Northern Lights. 48. By reason of the matters in paragraph 47 above, by voting in favour of the Revised Terms Sheet Execution Resolution at the April 2014 Board Meeting each of the Defendants failed to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in PAC's circumstances and occupied the office held by, and had the same responsibilities within PAC as, that Defendant in contravention of the general law duty referred to in paragraph 11 above and/or section 180(1) of the Corporations Act. Transaction Documents Execution Resolution 49. When each of the Defendants voted in favour of the Transaction Documents Execution Resolution at the July 2014 Board Meeting: (a) the circumstances alleged in paragraphs 44, 45 and 47 above continued; (b) no explanation had been provided for, and no account or no adequate account was taken of, the findings of the Deloitte Due Diligence Report referred to in paragraph 38 above; and (c) the Defendants had each failed reasonably to satisfy themselves: (i) that there was a legitimate reason for PAC to merge with Northern Lights; (ii) that the forecast performance of the Northern Lights Boutiques was reliable, especially given the findings of the Deloitte Due Diligence Report; and (iii) that PAC did not require the approval of shareholders or would be justified in merging without shareholders' approval. 50. By reason of the matters in paragraph 49 above, by voting in favour of the Transaction Documents Execution Resolution at the July 2014 Board Meeting each of the Defendants failed to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in PAC's circumstances and occupied the office held by, and had the same responsibilities within PAC as, that Defendant in contravention of the general law duty referred to in paragraph 11 above and/or section 180(1) of the Corporations Act. (Particulars omitted.) 33 The draft statement of claim, at [51]-[57], contains allegations concerning an alleged failure to obtain shareholder approval in respect of the merger. 34 At [58] of the draft statement of claim, it is alleged that in the period 24 November 2014 to 30 June 2017, the Trustee wrote down the value of the Northern Lights Boutiques by approximately A$217,971,344. 35 It is alleged, at [59], that as a result of each of the contraventions of the general law duty and of s 180(1) of the Corporations Act, PAC has suffered loss and damage. It is also alleged, at [60], that PAC is entitled to equitable compensation.

Documents relevant to or referred to in the draft statement of claim 36 Annexed to Mr de Tocqueville's affidavit dated 20 November 2019 is a folder containing documents either referred to or relevant to the allegations in the draft statement of claim. During the hearing of the application, I was taken to a number of these documents. 37 Further documents relevant to the draft statement of claim are annexed to Mr de Tocqueville's affidavit dated 2 December 2019. I was also taken to some of these documents during the hearing.

Litigation funding 38 Mr de Tocqueville and ASI have secured litigation funding for the Proposed Proceeding. The funder is IMF Bentham (Fund 5) Australian Investments Pty Ltd, which is a wholly-owned subsidiary of IMF Bentham Fund 5 LLP (Fund 5). As explained below, Fund 5 was established by IMF Bentham, which is an Australian litigation funder listed on the ASX. 39 Mr Saker deposes in his first affidavit (and I accept) that: IMF Bentham is the largest and longest established litigation funder in Australia; IMF Bentham has won or settled 89 per cent of the 192 cases that it funded to conclusion since listing on the ASX in 2001; these 171 cases received approximately $1.5 billion for the funded parties, averaging 2 years and 6 months to complete; and, as at the close of trading on 12 December 2019, IMF Bentham's market capitalisation was $818.07 million. 40 Mr Saker also deposes in his first affidavit (and I accept) that: on 20 June 2019, IMF Bentham announced to the ASX the launch of Fund 5, which has an aggregate committed capital of US$500 million (including US$100 million committed by IMF Bentham), for the purpose of making non-US litigation finance investments; and Fund 5 makes its investments in litigation through wholly-owned subsidiaries. 41 Both IMF Bentham (Fund 5) Australian Investments Pty Ltd and IMF Bentham are willing to give undertakings to the Court in relation to the costs of the Proposed Proceeding. The form of the proposed undertakings (and the orders that are sought pursuant to ss 241 and 242 of the Corporations Act) have been set out earlier in these reasons.

Directors' and officers' insurance 42 Mr de Tocqueville and ASI filed an interlocutory process dated 13 September 2019 in this proceeding seeking an order pursuant to s 247A of the Corporations Act authorising the plaintiffs to inspect books of PAC, being the directors' and officers' insurance policies to which the Proposed Proceeding may respond. This application was discussed but not determined at a case management hearing on 11 October 2019. Ultimately, it was not necessary for the interlocutory application to be determined, as the documents sought were provided by PAC to Mr de Tocqueville and ASI. These documents were annexed to Mr de Tocqueville's affidavit dated 2 December 2019. On the basis of these documents, Mr de Tocqueville deposes that he believes that the indemnity limit of the directors' and officers' insurance held by PAC is $60 million.

The PAC board and the Application Sub-Committee 43 The current members of the PAC board are: Antony Robinson (the Chairman); Paul Greenwood (who is also the CEO and CIO); Melda Donnelly; Peter Kennedy; Jerry Chafkin; and Gilles Geurin. 44 Two of the current directors (namely Mr Kennedy and Ms Donnelly) would be respondents to the Proposed Proceeding, if leave is granted to bring that proceeding. Further, Mr Greenwood was a co-founder of Northern Lights prior to its merger with PAC and participated in the discussions in 2014. Mr Guerin is the CEO of BNP Paribas Capital Partners, which held investments in Northern Lights and was a representative shareholder of Northern Lights in 2014. 45 In these circumstances, the only members of the Board who have been involved in the decision-making in relation to PAC's response to the originating application dated 3 June 2019 have been Mr Robinson and Mr Chafkin (the Application Sub-Committee). 46 On 7 October 2019, the Application Sub-Committee resolved to engage senior counsel to provide written advice on the prospects and merits of the claims in the draft statement of claim, including the potential quantum of the claim if successful. Mr Pryse of Herbert Smith Freehills subsequently engaged Davit Batt QC and Mark Hosking of counsel to provide that advice. A memorandum of advice from counsel was received on 12 November 2019. A copy of the advice is annexed to Mr Robinson's affidavit. The advice was received into evidence on the basis that its use was limited to the fact that the advice was given and received, rather than for the correctness of the opinions expressed in it. 47 Mr Robinson deposes in his affidavit (and I accept) that: a conference with counsel took place on 13 November 2019; the conference took place by video-conference; during the conference, Mr Batt QC spoke to the advice and said that there was a low prospect of the claims in the draft statement of claim succeeding; during the conference, Mr Robinson asked about the way damages would be assessed if any claim was successful; Mr Batt QC said that if a Court found a breach as alleged in the draft statement of claim, the Court would undertake a counterfactual analysis to determine whether PAC suffered any loss because of that breach; and the counterfactual analysis would compare the actual position of PAC at the time of judgment with how PAC would have fared if the merger had not occurred. 48 Mr Robinson also deposes (and I accept) that: based on this advice, he instructed Ashley Killick, who is the Interim CFO of PAC, to conduct a counterfactual analysis so as to facilitate an estimate of the likely damages that might be obtained if any claim in the draft statement of claim was successful; and the counterfactual analysis was to compare the actual share price of PAC against what would be the likely net asset value per share today, if the merger did not occur. Subsequently, Mr Robinson received a covering memorandum and a copy of the counterfactual analysis, both prepared by Mr Killick. These are annexed to Mr Robinson's affidavit. 49 Mr Robinson deposes (and I accept) that: he requested David Griswold to organise for a memorandum to be prepared that set out management's view as to the potential impact that litigation against the 2014 Directors would have on the ongoing management of PAC; on 21 November 2019, Mr Robinson received a memorandum from Mr Greenwood (not Mr Griswold) setting out Mr Greenwood's views as to the potential impacts of the litigation against the 2014 Directors on PAC. A copy of that memorandum is annexed to Mr Robinson's affidavit. 50 Mr Robinson deposes (and I accept) that: on 22 November 2019, a meeting of the board of PAC was held; the only directors at the meeting were the two members of the Application Sub-Committee, save that Mr Greenwood was invited to part of the meeting to discuss his paper; Mr Greenwood departed the meeting after discussing his paper and did not participate in any decision-making at the meeting; also in attendance were Mr Killick, Mr Pryse, and Myra Beal of Herbert Smith Freehills; at the meeting, the members of the Application Sub-Committee both agreed that it was in the best interests of PAC not to commence a proceeding against the 2014 Directors in a form and substance substantially the same as set out in the draft statement of claim; and the PAC board resolved not to commence a proceeding against the 2014 Directors. A copy of the signed minutes of the meeting is annexed to Mr Robinson's affidavit.

Applicable principles 51 Proceedings on behalf of a company are dealt with in Pt 2F.1A of the Corporations Act. Section 236(1) relevantly provides that a person may bring proceedings on behalf of a company if: (a) the person is a member of the company or an officer or former officer of the company; and (b) the person is acting with leave granted under s 237. 52 Section 237 relevantly provides as follows: 237 Applying for and granting leave (1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings. (2) The Court must grant the application if it is satisfied that: (a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and (b) the applicant is acting in good faith; and (c) it is in the best interests of the company that the applicant be granted leave; and (d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and (e) either: (i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or (ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied. 53 Sub-sections (3) and (4) of s 237 provide for a rebuttable presumption that granting leave is not in the best interests of the company to arise in certain circumstances. In the present case, PAC does not rely on the rebuttable presumption. 54 If the criteria in s 237(2) are made out, there is no discretion and the Court is required to grant leave. 55 The applicant for leave bears the onus of satisfying the Court that, on the balance of probabilities, each of the requirements in s 237(2) has been fulfilled: Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313 (Swansson) at [26] per Palmer J. 56 In relation to s 237(2)(b) - the requirement that the applicant is acting in good faith - in Swansson, Palmer J stated at [36]: … in my opinion, there are at least two interrelated factors to which the courts will always have regard in determining whether the good faith requirement of s 237(2)(b) is satisfied. The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief. The second factor is whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process. 57 In relation to s 237(2)(c) - the requirement that it is in the best interests of the company that the applicant be granted leave - it is necessary to take into account all relevant circumstances: see Swansson at [56]. In Huang v Wang (2016) 114 ACSR 586 (Huang v Wang), Bathurst CJ (with whom McColl JA and Barrett AJA agreed) stated at [59] that the best interests of the company means best interests in the sense of its separate and independent welfare; and that best interests, at least assuming the company is solvent, will predominantly reflect the interests of shareholders in that capacity. 58 In relation to s 237(2)(d) - the requirement that there is a serious question to be tried - in Re Gladstone Pacific Nickel Pty Ltd (2011) 86 ACSR 432, Ball J stated at [56] that the test of whether there is a serious question to be tried is the same as the test that is applied by the Court in determining whether to grant an interlocutory injunction. See also White (Trustee) v MWL Financial Group Pty Ltd [2018] FCA 2018 at [33] per Davies J. 59 As Bathurst CJ noted in Huang v Wang at [60], there is a question whether, having concluded that there is a serious question to be tried, the Court can again consider the question in determining whether it is in the best interests of the company to bring the proceeding. Chief Justice Bathurst stated: A question of some difficulty is whether, having concluded that there is a serious question to be tried, the court can again consider the question in determining whether it is in the best interests of the company to bring the proceedings. In Re Gladstone, Ball J at [58] indicated it was necessary to consider the prospects of success. It must be remembered that an application under the section does not involve a consideration of the underlying merits of the proposed litigation, except to the extent it is necessary to determine if there is a serious question to be tried. Further, in cases where a court has doubts as to the prospects of success, a court can make an order conditional on the applicant undertaking to indemnify the company from any liability for costs which it may incur in pursuing the action. 60 In Redenbach v Legal Practice Management Group Pty Ltd (2018) 125 ACSR 513, Black J stated at [52]: The Respondent Companies submit, and I broadly accept, that leave under s 237 must not be given lightly, although that proposition might be advanced in respect of any exercise of judicial discretion. The Respondent Companies also submit, and I accept, that the Court should be conscious that the grant of leave results in a company being compelled to engage in litigation as a plaintiff against its will, or at least against the will of its controllers: Swansson above. 61 Sections 241 and 242 of the Corporations Act confer certain powers on the Court. Those sections provide: 241 General powers of the Court (1) The Court may make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave, or an application for leave, including: (a) interim orders; and (b) directions about the conduct of the proceedings, including requiring mediation; and (c) an order directing the company, or an officer of the company, to do, or not to do, any act; and (d) an order appointing an independent person to investigate, and report to the Court on: (i) the financial affairs of the company; or (ii) the facts or circumstances which gave rise to the cause of action the subject of the proceedings; or (iii) the costs incurred in the proceedings by the parties to the proceedings and the person granted leave. (2) A person appointed by the Court under paragraph (1)(d) is entitled, on giving reasonable notice to the company, to inspect any books of the company for any purpose connected with their appointment. (3) If the Court appoints a person under paragraph (1)(d): (a) the Court must also make an order stating who is liable for the remuneration and expenses of the person appointed; and (b) the Court may vary the order at any time; and (c) the persons who may be made liable under the order, or the order as varied, are: (i) all or any of the parties to the proceedings or application; and (ii) the company; and (d) if the order, or the order as varied, makes 2 or more persons liable, the order may also determine the nature and extent of the liability of each of those persons. (4) Subsection (3) does not affect the powers of the Court as to costs. 242 Power of the Court to make costs orders The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section: (a) the person who applied for or was granted leave; (b) the company; (c) any other party to the proceedings or application. An order under this section may require indemnification for costs.

Consideration 62 In the present case, there is no issue that Mr de Tocqueville and ASI fall within paragraph (a) of s 236(1). They are both members of PAC. Mr de Tocqueville is also a former officer of the company. 63 Turning to the requirements set out in s 237(2), there is no issue that the requirements in paragraph (a) and (e) are fulfilled. In relation to paragraph (a), it is clear on the evidence that PAC will not itself bring the Proposed Proceeding. In relation to paragraph (e), Mr de Tocqueville and ASI gave notice to PAC of their intention to apply for leave and of the reasons for applying. This was done in a letter dated 23 May 2019, a copy of which is annexed to Ms Marchant's affidavit. 64 Thus, the live issues concern paragraphs (b), (c) and (d) of s 237(2). Of these issues, the oral submissions on behalf of PAC focussed almost entirely on the requirements of paragraph (c), that is, whether the Court is satisfied that it is in the best interests of PAC that Mr de Tocqueville and ASI be granted leave. In light of this emphasis, it will be convenient to deal first with paragraphs (b) and (d) and then to focus on paragraph (c). 65 In relation to paragraph (b) of s 237(2), I am satisfied that Mr de Tocqueville and ASI are acting in good faith. The material presented in Mr de Tocqueville's affidavits demonstrates that he believes that PAC has good claims against the 2014 Directors. Further, there is no proper basis to suggest (and I did not understand PAC to be suggesting) that Mr de Tocqueville is seeking to bring the Proposed Proceeding for a collateral purpose. PAC relies on the correspondence sent by Mr de Tocqueville to PAC (as described in Mr Robinson's affidavit) to suggest a want of good faith. However, I do not regard this correspondence to amount to an absence of good faith. It may indicate a degree of anger towards the board and management, in particular as regards the merger with Northern Lights, but that is different to an absence of good faith. PAC submits that, despite the considered opinion of Mr Batt QC and Mr Hosking that the claim has low prospects of success, Mr de Tocqueville is persisting with his application. However, I do not consider the pursuit of the application in these circumstances to suggest an absence of good faith. PAC also relies on the delay in bringing the application. However, the delay is explained in part by the 2017 application to obtain relevant documents and by the time taken to secure litigation funding. In all the circumstances, I am satisfied that Mr de Tocqueville and ASI are acting in good faith. 66 In relation to paragraph (d) of s 237(2), I am satisfied that the Proposed Proceeding raises a serious question to be tried. The claims set out in the draft statement of claim have been described in detail earlier in these reasons. The claims are clearly expressed and cogent. At the hearing on 18 December 2019, senior counsel for PAC did not advance any oral submissions that there was not a serious question to be tried. In PAC's written submissions at [84]-[86], PAC accepts that the test of whether there is a serious question to be tried is the same as the test that is applied by the Court in determining whether to grant an interlocutory injunction, which it describes as a "relatively low threshold". No substantive submissions are advanced as to why there is not a serious question to be tried. I am satisfied on the basis of Mr de Tocqueville's and ASI's evidence and the draft statement of claim that there is a serious question to be tried. 67 I turn, then, to consider whether I am satisfied that it is in the best interests of PAC that Mr de Tocqueville and ASI be granted leave to bring the Proposed Proceeding on behalf of PAC. As the cases referred to above indicate, this requires a consideration of all relevant facts and circumstances. In relation to the present case, these include: the nature of the claims proposed to be brought against the 2014 Directors; the litigation funding arrangements (including the orders sought pursuant to s 241); and the position of the PAC board (comprised of the Application Sub-Committee) in relation to the Proposed Proceeding. 68 For the reasons that follow, subject to IMF Bentham (Fund 5) Australian Investments Pty Ltd and IMF Bentham agreeing to provide the proposed undertakings on the basis of certain adjustments I propose to make to paragraph 2 of the proposed orders, and the plaintiffs confirming that they wish to proceed on the basis of those adjustments, I am satisfied that it is in the best interests of PAC that Mr de Tocqueville and ASI be granted leave to bring the Proposed Proceeding on behalf of PAC. 69 First, the claims set out in the draft statement of claim are, as I have said, clearly expressed and cogent. I have described the claims in some detail earlier in these reasons. During the hearing of the application, I was taken to many of the documents that underpin the central allegations in the draft statement of claim. The material before the Court demonstrates that there is, at least, a proper basis for the claims proposed to be made against the 2014 Directors. 70 Secondly, it appears that the claims are covered by directors' and officers' insurance and that the extent of this cover is $60 million. Accordingly, if the claims are successful and result in an award of substantial damages, there is a good prospect of recovery of such damages, up to an amount of $60 million. 71 Thirdly, if and to the extent that it is appropriate to have regard to the prospects of success of the claims, in my view there is, at least, a low prospect that the claims will be successful. In forming this view I have had regard to the matters discussed in the memorandum of advice prepared by Mr Batt QC and Mr Hosking, and the matters discussed by the parties in their submissions. Of course, at this stage, it is only possible to form a tentative view as to the prospects of success. The position may well appear to be different once further documents are made available and the evidence of witnesses is taken into account. 72 Fourthly, there are limits to the counterfactual analysis that has been undertaken. It may well be that different approaches can be taken as to how to undertake such an exercise and as to the result of any such exercise. I would not rule out, on the basis of this material, the prospect of recovery of substantial damages if the claims are successful. 73 Fifthly, Mr de Tocqueville and ASI have secured litigation funding for the Proposed Proceeding. At the hearing on 18 December 2019, it was initially proposed on behalf of Mr de Tocqueville and ASI that an order be made pursuant to s 241 of the Corporations Act to the effect that PAC enter into a funding agreement with IMF Bentham (Fund 5) Australian Investments Pty Ltd in the form annexed to Mr Saker's second affidavit. However, after PAC raised several concerns with this approach, it was instead proposed by Mr de Tocqueville and ASI that: (a) the funder (IMF Bentham (Fund 5) Australian Investments Pty Ltd) would provide an undertaking to the Court to the effect that it would pay the costs of the Proposed Proceeding and would indemnify PAC in respect of any adverse costs orders; and (b) orders would be sought pursuant to s 241 of the Corporations Act to the effect that any resolution sum would be paid into a controlled money account opened by the plaintiffs' solicitors, to ensure that the funder receives its agreed return (being 30% or 35% of the resolution sum, depending on the timing of settlement or judgment) if the proceeding is successful: see, eg, Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732 (Fiduciary v Morningstar) at [56]-[58] per Austin J. 74 The precise form of undertaking proposed to be given by the funder was initially set out in an annexure to Mr de Tocqueville's and ASI's submissions dated 13 January 2020. It was in a similar form as the first undertaking set out in the introduction to these reasons. Also set out was the form of order sought under s 241. It is not necessary to refer to this in detail, as it was subsequently amended. In PAC's responding submissions, dated 24 January 2020, PAC stated that it did not seek to make any submissions about the proposed undertaking. PAC did, however, make submissions about the orders sought pursuant to s 241. 75 At the mention of this matter on 12 February 2020, I raised with senior counsel for Mr de Tocqueville and ASI whether there was any material as to the financial standing of IMF Bentham (Fund 5) Australian Investments Pty Ltd. It appeared that there was no such material. In these circumstances, senior counsel indicated that IMF Bentham may itself be prepared to give an undertaking (there being no issue as to its financial standing). Alternatively, leave was sought (and granted) to file further affidavit material as to the financial standing of the funder. 76 On 14 February 2020, Mr de Tocqueville and ASI filed further submissions. Attached to those submissions was a revised form of proposed orders that included a second proposed undertaking, to be given by IMF Bentham. It is proposed that IMF Bentham would undertake that, to the extent that IMF Bentham (Fund 5) Australian Investments Pty Ltd does not satisfy any of its obligations pursuant to its undertaking set out in paragraph 1, IMF Bentham would satisfy those obligations forthwith. In light of the proposed undertaking from IMF Bentham, which is a company listed on the ASX with a market capitalisation (as at 12 December 2019) of $818.07 million, I am satisfied that the undertakings have substance. 77 One of the issues raised by PAC concerns the rate of return to the funder. The rate is 30% or 35% (depending on the date of any settlement approval or judgment) of the resolution sum, being the amount payable to PAC pursuant to any settlement of or judgment in the Proposed Proceeding. While this rate may be considered to be high, there is no material to suggest that better terms could be obtained from another funder. The assessment of the prospects of success contained in the memorandum of advice prepared by Mr Batt QC and Mr Hosking suggests that the rate of return is not unreasonable. In the circumstances, I do not consider the rate of return to be unreasonable. 78 It is necessary to consider the terms of the order sought pursuant to s 241 of the Corporations Act: see paragraph 2 of the proposed orders set out in the introduction to these reasons. This order is put forward, principally, to ensure that the funder receives its agreed return if the proceeding is successful. Paragraph 2(c) of the proposed order also involves the payment of certain sums to Mr de Tocqueville and ASI and to their lawyers. While I consider the form of order to be generally acceptable, I consider that certain adjustments should be made, as follows. (a) The order should refer to s 242 as well as s 241 of the Corporations Act. This is appropriate as the order relates, in part, to the costs of the Proposed Proceeding. (b) I consider that the order should be expressed to be "subject to further order", in case minor or unforeseen matters arise. I consider that ss 241 and 242 empower the Court to vary orders made under those sections. In Fiduciary v Morningstar, Austin J stated at [15] that the Court has "broad supervisory powers under s 241 which appear to permit it to modify its orders and the conditions upon which they were made". Given this, I consider there to be power to express the order as being "subject to further order". It is not my intention, by inserting these words, that the agreed rate of return to the funder would be revisited. That would be inappropriate in circumstances where the funder has given its undertaking on the basis of that rate of return. Rather, the reason for inserting the words "subject to further order" is because unexpected issues may arise in connection with the Proposed Proceeding such that the order would not operate as intended. (c) Where the order refers to the payment of costs in relation to proceedings, I consider it appropriate to insert the words, "provided such costs are not unreasonable". This provides a check on the costs that will come out of any resolution sum. The proviso is expressed in terms that reflect the solicitor-client basis of costs. This basis of costs is appropriate in the circumstances. However, it is also appropriate that there be some check on the costs that are covered by the order, so as to ensure that PAC receives an appropriate portion of any resolution sum. Without the insertion of these words, there is no check on the costs that may be incurred and effectively withdrawn from any resolution sum. (d) I also propose a minor stylistic change to the wording of paragraph 2(c)(ii), such that it would read: secondly, to the Funder, its ancillary costs paid in relation to the D&O Proceeding (provided such costs are not unreasonable), including the costs associated with the provision of any security for costs, the costs associated with taxation of costs, and the costs of and incidental to the originating application dated 3 June 2019 insofar as they were paid by the Funder; 79 In circumstances where the proposed undertakings are premised on an order being made in the form of paragraph 2 of the proposed orders, it will be necessary for the funder and IMF Bentham to consider these adjustments to paragraph 2 and inform the Court whether they are prepared to provide the proposed undertakings on the basis of the adjusted wording of paragraph 2. It will also be necessary for the plaintiffs to consider these adjustments and indicate whether they wish to proceed with their application on this basis. 80 On the assumption that the funder and IMF Bentham are prepared to give the proposed undertakings, and that the plaintiffs wish to proceed with their application, on the basis of the adjustments to proposed paragraph 2 that I have outlined, I consider the litigation funding arrangements to be satisfactory. These arrangements should ensure that PAC is not exposed to the costs of the Proposed Proceeding, and that PAC is indemnified in respect of any adverse costs orders in relation to the Proposed Proceeding. 81 Sixthly, the evidence regarding possible disruption to the business of PAC is weak. The evidence is contained in a memorandum prepared by Mr Greenwood that is annexed to Mr Robinson's affidavit. Mr Robinson does not himself give evidence in his affidavit as to this matter. Thus, there is no direct affidavit evidence to the effect that the Proposed Proceeding is likely to be disruptive to PAC's business. 82 I have had regard to the fact that the PAC board (constituted by the Application Sub-Committee) formed the view that it was in the best interests of PAC not to commence a proceeding against the 2014 Directors in a form and substance substantially the same as that set out in the draft statement of claim, and resolved not to commence such a proceeding. However, it is ultimately a matter for the Court to determine whether or not it is satisfied of the matter referred to in s 237(2)(c). While the position of the PAC board is a relevant consideration, there are other relevant facts and matters, referred to above, that point in the other direction. I note that the material before the Court does not detail why the Application Sub-Committee formed the view that it did. 83 Having regard to the above matters, subject to IMF Bentham (Fund 5) Australian Investments Pty Ltd and IMF Bentham agreeing to provide the proposed undertakings on the basis of the adjusted wording of paragraph 2 of the proposed orders, and the plaintiffs confirming that they wish to proceed on the basis of those adjustments, I am satisfied that it is in the best interests of PAC that Mr de Tocqueville and ASI be granted leave to bring the Proposed Proceeding on behalf of PAC. In summary, the potential 'upside' of the Proposed Proceeding is considerable (a substantial award of damages or a substantial settlement), while there is very little 'downside' in bringing the Proposed Proceeding given the litigation funding arrangements. If, however, the funder and IMF Bentham are not prepared to provide the proposed undertakings on the basis of the adjusted wording of paragraph 2 of the proposed orders, I would not be satisfied that it is in the best interests of PAC that Mr de Tocqueville and ASI be granted leave. 84 It follows that, subject to receipt of those confirmations, I am satisfied of each of the matters referred to in s 237(2). It follows that, subject to receipt of those confirmations, I will grant leave to Mr de Tocqueville and ASI to bring the Proposed Proceeding on behalf of PAC and I will make the proposed orders, subject to the adjustments I have indicated. 85 I will stand the matter down to enable Mr de Tocqueville and ASI to obtain instructions on the adjustments I propose to make to paragraph 2 of the proposed orders. I will deal with the costs of this proceeding in a separate judgment. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

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