[41] In this case the Court has an express power to declare entry into the Agreement and the Agreement itself not invalid despite the absence of the requisite prior approval. Such a declaration is not a declaration of an existing state of affairs, but rather a declaration which has the legal effect that any relevant invalidity covered by the declaration is cured. In my opinion the Court also has power under s 479(3) of the Act, or by virtue of its implied incidental power (and if need be s 23 of the Federal Court Act ), to approve the Agreement by reference to the criteria in s 477(2B) prior to declaring it, under s 1322(4)(a), to be not invalid. "
26 In my view the approval to be given under s 477(2B) should not be confined to the costs agreement of 16 October 2006. There may well have been fresh retainers of Colin Biggers & Paisley prior to the costs agreement of 16 October 2006, including in relation to the Supreme Court proceedings started on 20 September 2006. It is likely that under any such retainer the obligations of Colin Biggers & Paisley to provide services and the obligations of the liquidators to pay legal costs might extend to a period longer than three months.
27 Despite the caution expressed by Lindgren J in Chamberlain v RG & H Investments Pty Ltd (ACN 000 599 477) [2009] FCA 1531; (2009) 76 ACSR 415 at [24], I do not consider it necessary to make an order under s 1322(4)(d) extending time for applying for approval under s 477(2B).
28 For these reasons the appropriate order is not that sought in the amended summons. The appropriate orders are as set out at para [76] below.
The funding agreement
29 The first agreement of 22 May 2006 recited:
" A. The Insolvency Practitioner has applied to HLS to fund the cost of pursuing and finalising the Proceedings.
B. HLS is prepared to provide funding and an indemnity on the terms of this Agreement. "
30 Clauses 2 and 3 provided:
" 2. FUNDING BY HLS
HLS will pay:-
(i) the Legal Fees and disbursements (subject to a maximum of $385,000);
(ii) any security for the respondent's costs ordered by the arbitrator or the Court (subject to a maximum of $325,000); and
(iii) any Adverse Costs Order (subject to a maximum of $325,000).
3. ADVERSE COSTS ORDER INDEMNITY
HLS will indemnify the Insolvency Practitioner and the Company in respect of any Adverse Costs Order made against them or it (subject to a maximum of $325,0000). "
31 The phrase "Legal Fees and disbursements" was defined as follows:
" ' Legal Fees and disbursements ' - all legal costs and disbursements reasonably incurred by the Lawyers for the sole purpose of advising upon and prosecuting the Proceedings on behalf of the Insolvency Practitioner from the date of this Agreement plus any GST. "
32 Clause 4 provided that the "Lawyers" (meaning Colin Biggers & Paisley and any independent counsel instructed by them from time to time) were to be instructed by the Insolvency Practitioner and not HLS. Clause 4(b) provided that subject to clauses 5 and 7, HLS would not interfere with the conduct of the Proceedings by the Insolvency Practitioner.
33 The "Proceedings" were defined as follows:
" ' Proceedings ' - arbitration proceedings between the Company and Auburn Council before Mr Ian H Bailey SC, as arbitrator. "
34 Clauses 5 and 7 required the Insolvency Practitioner to provide HLS with monthly reports from the Lawyers on the proceedings, to provide advices of any proposal for settlement and to provide invoices from the Lawyers which were to be rendered monthly. Clause 7 dealt with procedures if a settlement of the proceedings were proposed.
35 Clauses 6 and 8 provided as follows:
" 6. CONSIDERATION AND ASSIGNMENT
(a) In consideration of HLS agreeing to provide the funding set out in clause 2 hereof, the Insolvency Practitioner hereby assigns to HLS 40% of the balance of the Resolution Sum (after the reimbursement to HLS of the Funding Costs and the payment of the Insolvency Practitioner's Fees and disbursements, in accordance with clause 8 hereof).
(b) For the removal of doubt, no amount will become due and owing by the Insolvency Practitioner to HLS unless and until receipt of the Resolution Sum and only to the extent of such receipt.
...
8. DISBURSEMENT OF THE RESOLUTION SUM
(a) Upon Resolution, the Insolvency Practitioner will pay the Resolution Sum into a separate account and upon clearance will apply and pay the Resolution Sum in the following manner and order, namely:-
(b) Firstly, in reimbursing HLS for all the Funding Costs paid by HLS;
(c) Secondly, in paying the Insolvency Practitioner's Fees and disbursements;
(d) With the balance thereafter being apportioned and paid as to 60% thereof to the Insolvency Practitioner and 40% thereof to HLS. "
36 "Resolution" was defined as follows:
" ' Resolution ' - when the Insolvency Practitioner receives all or some of the award, settlement sum or judgment sum in respect of the Proceedings and which is not subject to a current appeal. "
37 The "Resolution Sum" was defined as follows:
" ' Resolution Sum ' - the amount or amounts received by way of settlement, award, judgment or order (including costs) in the Proceedings. "
38 "Insolvency Practitioner's Fees and disbursements" was defined as follows:
" ' Insolvency Practitioner's Fees and disbursements ' - the agreed fees and disbursements of the Insolvency Practitioner directly incurred in prosecuting the Proceedings from the date of this Agreement plus any GST. "
39 "Funding Costs" was defined as follows:
" ' Funding Costs ' - the Legal Fees and disbursements and all other costs payable by HLS under this agreement. "
40 Clause 14 provided as follows:
" 14. GOOD FAITH
(d) The Insolvency Practitioner and HLS agree to be just and faithful in their dealings with each other in all matters arising out of or connected with this Agreement; and
(e) the Insolvency Practitioner and HLS will promptly execute all documents and do all other things that either of them reasonably require of each other from time to time to give effect to perfect or complete the provisions of this Agreement and any transaction contemplated by it. "
41 On 3 May 2006, that is, shortly before the first agreement, Colin Biggers & Paisley provided the plaintiffs with a draft budget for completion of the arbitration. It was described as a budget estimate. It was said to contain a contingency spread across the activities described. It estimated the sums required for payment of expert fees, for an expert conclave required in the arbitration, the preparation of written final submissions, the hearing of final submissions, and the arbitrator's fees. The total estimate including GST was $385,000. The defendant agreed to pay the Legal Fees and disbursements up to that amount.
Legal costs are included in Insolvency Practitioner's Fees and disbursements
42 Clause 8 provides for two deductions to be made from the Resolution Sum before the balance is apportioned. The first is reimbursement of the defendant for all Funding Costs paid by it. The second is payment to the plaintiffs of the Insolvency Practitioner's Fees and disbursements. Mr Lockhart SC, who appeared for the defendant, submitted that Legal Fees and disbursements were not to be deducted from the Resolution Sum prior to the balance thereof being apportioned, except to the extent they were Funding Costs paid by the defendant and were to be reimbursed to it.
43 Mr Lockhart SC did not dispute that the costs charged by Colin Biggers & Paisley and the disbursements of that firm, including counsel's fees for which the liquidators were liable, when paid, were a "disbursement" of the liquidators. Mr Lockhart accepted that on a literal interpretation of the phrase "the agreed fees and disbursements of the Insolvency Practitioner", moneys spent by the liquidators on legal costs would be disbursements of the Insolvency Practitioner. However, Mr Lockhart submitted that when the agreement is read as a whole, and is construed against the background that the sum of $385,000 was the estimated budget to complete the arbitration, and this figure included an allowance for contingencies, then the disbursements of the Insolvency Practitioner which could be deducted form the Resolution Sum before the balance was apportioned did not include Legal Fees and disbursements. The defendant was to pay Legal Fees and disbursements up to a maximum of $385,000. The agreement made no provision (so it was submitted) for Legal Fees and disbursements above that sum, because the parties did not expect that sum to be exceeded. To the extent Legal Fees and disbursements were included in Funding Costs paid by the defendant, the defendant was to be reimbursed from the Resolution Sum for such expenses. Otherwise, so it was submitted, Legal Fees and disbursements were not to be deducted from the Resolution Sum before the balance was apportioned.
44 Mr Lockhart submitted that if the position were otherwise "the ratio of risk/return to the funder would be capable of unilateral adjustment by the liquidators to the detriment of the funder, in the event of inaccurate cost estimation causing budget overruns." He submitted that in the event of an unexpected cost overrun, the parties would need to renegotiate their agreement to provide the defendant with the opportunity to require a higher percentage return in exchange for additional funding and hence additional risk. On the other hand, if the liquidators did not wish to renegotiate, they could decide to fund the overrun themselves or from the company's assets, but on the basis that such additional funding would be borne from the liquidators' ultimate share of the Resolution Sum.
45 I do not accept these submissions. The fact that Legal Fees and disbursements are separately defined is not a reason for excluding Legal Fees and disbursements from disbursements of the Insolvency Practitioner in the definition of "Insolvency Practitioner's Fees and disbursements". Separate provisions of the funding agreement required the defendant to pay Legal Fees and disbursements up to the maximum of $385,000. That was a different subject matter from that dealt with in clause 8. The omission from clause 8 of a reference to Legal Fees and disbursements does not imply that the legal costs paid by the liquidator are not to be included in the Insolvency Practitioner's fees and disbursements pursuant to clause 8(c). I agree with the submission of Mr Simpkins SC and Mr Golledge for the plaintiffs that there is no reason to read down the term which appears in clause 8 by reference to the meaning of an entirely different phrase in a separate clause dealing with a different subject matter.
46 This is subject to one possible qualification, although it was not a matter which was the subject of argument. Clause 2 does not say how the defendant is to pay the Legal Fees and disbursements. Clause 4 provides for the Lawyers to be instructed by the Insolvency Practitioner and not by the defendant. If Legal Fees and disbursements were paid by the liquidators who were reimbursed by the defendant, then at least prima facie there would be a double deduction of $385,000 before the balance was apportioned. That is because the defendant would be entitled to be reimbursed that sum as part of its Funding Costs. It would not be an answer to say that a payment made by the liquidators to Colin Biggers & Paisley was not a disbursement of the Insolvency Practitioner because the liquidators recouped the money from the defendant. The liquidators could be expected to recoup all their disbursements from the assets of the company if there were assets available to meet their expenses. The fact that a disbursement was recouped would not mean that it ceased to be a disbursement. However, this issue was not explored in submissions. The answer may lie in a letter of 3 May 2006 from Colin Biggers & Paisley to the liquidators. Mr Lockhart relied upon the letter as forming part of the objective matrix of facts known to both parties. It was that letter which enclosed the draft budget of $385,000. In the letter Colin Biggers & Paisley proposed a procedure that they would render accounts monthly to the liquidators and that the defendant would cause payment to be made within seven days of receiving the accounts from the liquidators. In other words, the agreement would operate sensibly if the accounts rendered by Colin Biggers & Paisley were paid directly by the defendant. In that event the moneys paid by the defendant would not also be disbursements of the liquidators.
47 The plaintiffs submitted that there was nothing commercially absurd or illogical in an arrangement that imposed a limited funding obligation on the defendant, with the consequence that the defendant might not meet all disbursements, but which deducted the actual disbursements, to the extent they were unfunded, from any distribution to the defendant. As counsel for the plaintiffs submitted, that would ensure that the funder shared in what was truly the "net" proceeds of the litigation. I agree with that submission.
48 Nor is it an objection that this gives the liquidators the right unilaterally to alter the assessment of risk and return to the funder. The liquidators had that power in other respects. The liquidators could make decisions which could affect the return to the funder through their control of the conduct of the arbitration. Moreover it was not all fees and disbursements of the Insolvency Practitioner directly incurred in prosecuting the arbitration proceedings from the date of the agreement that would be deducted from the Resolution Sum, but only such of those fees and disbursements as were agreed. Pursuant to clause 14, both parties are required to be just and faithful to each other in seeking to reach agreement on those sums. In my view that obligation would require the defendant to act reasonably in deciding whether to give or withhold its agreement to particular disbursements. The mechanism of required agreement means that the liquidators did not have an unqualified right to change the risk and return assessment of the funder.
49 There is nothing in the agreement that suggests that the parties expected the agreement would have to be renegotiated if the legal costs of the arbitration exceeded $385,000. Further, whilst the parties may have expected the arbitration to be completed within the budget of $385,000, it would be surprising if they did not recognise the possibility of the budget being exceeded. It is clear that they did recognise such a possibility because they stipulated for a limit on the defendant's obligation to fund the Proceedings.
50 In short, the plaintiffs' construction is consistent with the literal words of the definition of "Insolvency Practitioner's Fees and disbursements". A literal construction does not produce a commercially absurd result. There is nothing in the scheme of the agreement considered as a whole, nor in the objective circumstances in which the agreement was entered into, that warrants departure from the literal construction.
51 Question 5 raises as an issue whether amounts payable, but not paid, by the plaintiffs to Colin Biggers & Paisley are disbursements within the definition of Insolvency Practitioner's Fees and disbursements that can be deducted before distribution of the Resolution Sum. No written submissions were addressed to this question, and it was mentioned only briefly in oral argument. The ordinary meaning of disburse is to expend money. There is nothing in the context to suggest that "disbursements" should have a wider meaning of unpaid liabilities. The matters referred to in para [46] confirm that the word "disbursements" means moneys paid.
Costs of the Stay Proceedings
52 The defendant submitted that if legal costs could be included in the "disbursements" of the Insolvency Practitioner, nonetheless, legal costs incurred in connection with the Stay Proceedings were not part of the "Insolvency Practitioner's Fees and disbursements" to be deducted pursuant to clause 8(c) because such costs were not "directly incurred in prosecuting the Proceedings". The "Proceedings" were the arbitration proceedings before Mr Bailey SC as arbitrator.
53 Mr Simpkins SC and Mr Golledge submitted that the costs of the Stay Proceedings were directly incurred in prosecuting the Proceedings, because the purpose of defending the Stay Proceedings was to enable the arbitration to be prosecuted. They submitted that the word "directly" in the phrase "directly incurred in prosecuting the Proceedings" merely excluded disbursements which could be characterised as indirect costs such as the Insolvency Practitioner's overheads. They submitted that the incurring of legal costs was a direct expense and hence a direct incurring of disbursements. They also relied upon the second funding agreement as showing that the parties treated expenditure of costs in the Stay Proceedings as costs of the arbitration proceedings.
54 Mr Lockhart SC submitted that it was clear that the amount recovered under the costs order made in the Stay Proceedings was not part of the "Resolution Sum". It followed, he submitted, that the costs of the Stay Proceedings could not be included within the "Insolvency Practitioner's Fees and disbursements" even if that expression otherwise included legal costs paid by the liquidators. It was common ground that it would be a sensible construction of the funding agreement that if the sum of $400,000 received as costs of the Stay Proceedings were included in the definition of Resolution Sum then the legal costs incurred by the liquidators in the Stay Proceedings should be an available deduction (if the plaintiff succeeded on the contention that "disbursements of the Insolvency Practitioner" could include legal costs). In the same way, it would be a sensible construction of the agreement that if the sum of $400,000 received as costs of the Stay Proceedings were not part of the Resolution Sum, the costs incurred by the liquidators in the Stay Proceedings should not be deducted from the Resolution Sum, as this would give the liquidators a substantial double recovery.
55 Mr Lockhart SC emphasised that the definition of Resolution Sum was an amount received by way of settlement award, judgment or order "in" the Proceedings. The costs received pursuant to the orders of the Supreme Court in the Stay Proceedings were not received by way of settlement, award, judgment or order in the arbitration proceedings.
56 Mr Simpkins SC and Mr Golledge noted that clause 8 contemplated that upon "Resolution" a "Resolution Sum" would be received. Clause 8(a) refers to payment of "the" Resolution Sum, not "any" Resolution Sum. "Resolution" refers to the receipt of an award, settlement sum or judgment sum "in respect of" the Proceedings, not "in" the Proceedings. An harmonious construction of "Resolution", "Resolution Sum" and clause 8(a) would permit the definition of Resolution Sum to include an amount received in respect of the Proceedings, not just an amount received "in" the Proceedings. This is confirmed by the fact that the definition of Resolution Sum contemplates that an amount might be received by way of judgment or order "in" the Proceedings, but the arbitrator could not give a judgment and it is doubtful that an arbitrator can make an order, as distinct from give a direction. Any amount received by way of judgment, would have to be received "in respect of" the Proceedings, not "in" the Proceedings.
57 Both interpretations of "Resolution" and "Resolution Sum" are available. Neither is so clear as to dictate the answer to the question whether disbursements of the Insolvency Practitioner directly incurred in prosecuting the Proceedings include disbursements incurred in prosecuting the Stay Proceedings.
58 By 5 March 2007 the defendant had paid in excess of $100,000 towards the costs of the Stay Proceedings. Those proceedings were finalised well before the second funding agreement was signed. On 6 June 2007 the liquidators advised the defendant that the total costs incurred in the Supreme Court proceedings were $617,880.80, of which $108,779.90 had been paid by the defendant, $1,318 had been paid by Austin, and the balance of $507,782.90 was unpaid. There were then currently no amounts outstanding with respect to costs incurred in relation to the arbitration. A proposal had been submitted to the Auburn Council to settle the Auburn Council's liability under the costs order. The settlement offer proposed was $530,557.12. It appears that at the time the second agreement was entered into, no settlement had been reached in respect of the costs to be paid by the Auburn Council pursuant to the costs order.
59 Both parties referred to correspondence between the liquidators and the defendant leading up to the execution of the second agreement. The correspondence is silent on the questions of whether the sum to be recovered from the Auburn Council would be included in the Resolution Sum, and is silent as to whether the payments to be made by Austin for costs of the Stay Proceedings, not being the costs funded by the defendant, should be deducted prior to the Resolution Sum being apportioned. At that stage there was no certainty that there would be an award in the arbitration in favour of Austin, although senior counsel for Austin had expressed confidence in a successful outcome.
60 The second agreement, called a side agreement, made on 21 August 2007 relevantly provided as follows:
" BACKGROUND
A. The Insolvency Practitioner and HLS are party to a Litigation Funding Agreement dated 22 May 2006, relating to the Funding Costs of the Proceedings (' the Litigation Funding Agreement ').
B. The Insolvency Practitioner has requested HLS increase the amount of funding for the Funding Costs of and in connection with the Proceedings.
C. HLS has agreed to increase the amount of funding for the Funding Costs of and in connection with the Proceedings on the terms set out in this Agreement.
OPERATIVE PART
1. DEFINITIONS AND INTERPRETATION
(a) The Definitions and Interpretations as contained in Clause 1 of the Litigation Funding Agreement apply to this Agreement.
(b) The funding provided by HLS pursuant to this Agreement is in addition to all or any funding provided by HLS pursuant to the Litigation Funding Agreement.
2. FUNDING BY HLS
HLS will pay:
(i) the Legal Fees and disbursements of the Proceedings up to a maximum amount of one hundred thousand dollars ($100,000.00);
(ii) the Legal Fees and disbursements of any security for costs application brought by or on behalf of Auburn Council; and
(iii) any security for Auburn Council's costs ordered by the Arbitrator of the Proceedings or by the Court.
3. CONSIDERATION AND ASSIGNMENT
(a) In consideration of HLS agreeing to provide the funding set out in Clause 2 of this Agreement, the parties agree to amend the Litigation Funding Agreement as follows:
(i) Clause 6(a) is amended so as to assign to HLS 45% of the balance of the Resolution Sum; and
(ii) Clause 8(d) is amended so as to apportion and pay the Resolution Sum as to 55% thereof to the Insolvency Practitioner and 45% thereof to HLS.
(b) No amount will become due and payable by the Insolvency Practitioner to HLS unless and until the Insolvency Practitioner receives the Resolution Sum, and only to the extent of such receipt.
4. OTHER EVENTS
In the event that:
(a) Auburn Council prosecutes an appeal, other than a holding appeal, of the decision of His Honour Justice Einstein dated 6 March 2007, and/or
(b) Auburn Council makes any interlocutory application(s), other than an application for security costs, in respect of or relating to the Proceedings,
then HLS agrees to pay the Legal Fees and disbursements in relation to or in connection with any such application(s) and the parties agree to amend the Litigation Funding agreement as follows:
(i) Clause 6(a) is amended so as to assign to HLS 50% of the balance of the Resolution Sum; and
(ii) Clause 8(d) is amended so as to apportion and pay the Resolution Sum as to 50% thereof to the Insolvency Practitioner and 50% thereof to HLS.
(c) No amount will become due and payable by the Insolvency Practitioner to HLS unless and until the Insolvency Practitioner receives the Resolution Sum, and only to the extent of such receipt. "
61 Although clause 2(i) was expressed as a future obligation of the defendant, the defendant had already satisfied its obligation under clause 2(i) at the time the agreement was signed.
62 Mr Lockhart SC emphasised the use of the words "and in connection with" in recitals B and C. Those recitals support the defendant's position that costs incurred in the Stay Proceedings were incurred "in connection with" the arbitration proceedings, but they were not costs incurred in prosecuting the arbitration proceedings. Mr Simpkins SC and Mr Golledge emphasised clause 2(i) which required the defendant to pay the Legal Fees and disbursements "of the Proceedings" up to a maximum of $100,000, when it was common ground that that obligation had been satisfied by the payments made by the defendant towards the costs of the Stay Proceedings. That indicated, so counsel contended, that the parties treated the costs of the Stay Proceedings as costs "of the Proceedings".
63 I accept that clause 2(i) shows that the parties treated the payments by the defendant towards the costs of the Stay Proceedings as payment of Legal Fees and disbursements "of the Proceedings" so that they formed part of the Funding Costs to be recouped first out of any Resolution Sum. However, it does not follow that the parties should be taken as thereby intending that the costs of the Stay Proceedings paid by the liquidators should be treated as disbursements incurred by them in prosecuting the arbitration proceedings. There is a significant difference in the definitions of "Legal Fees and disbursements" and "Insolvency Practitioner's Fees and disbursements" relevant to this question. A sum paid for legal costs falls under the definition of "Legal Fees and disbursements" if it is paid for the sole purpose of prosecuting "the Proceedings". There is no requirement in that definition that the sums so paid be incurred "in prosecuting" the Proceedings. It is enough that they be incurred for the sole purpose of prosecuting the proceedings whether they be incurred "in" those proceedings, or be incurred in some other proceeding for the purpose of prosecuting the Proceedings.
64 I do not accept the plaintiff's submission that the phrase "directly incurred in prosecuting the Proceedings" in the definition of "Insolvency Practitioner's Fees and disbursements" delineates merely a purpose for which fees and disbursements are incurred. This is in contrast to the definition of "Legal Fees and disbursements".
65 In my view, whilst the defence of the Stay Proceedings was necessary if the arbitration proceedings were to be prosecuted, and the costs of the Stay Proceedings were incurred for the purpose of allowing the arbitration proceedings to be prosecuted, such costs were not incurred "in" prosecuting the arbitration proceedings. I therefore conclude that the costs expended by the liquidators in defending the Stay Proceedings are not an allowable deduction from the Resolution Sum.
66 That conclusion being reached, the sensible commercial construction of "Resolution Sum" is that it includes only the award, including the award for costs, made in the arbitration proceedings, and not the sum received pursuant to the order for costs in the Stay Proceedings. The defendant did not contend otherwise.
Implied term
67 The next question is whether it is an implied term of the first funding agreement that the defendant would act reasonably in determining whether to agree to any particular fees or disbursements being recoverable as "Insolvency Practitioner's Fees and disbursements". The plaintiffs submitted that such a term is to be implied either as a term implied ad hoc on the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 or as a term implied in law. In either case it would be necessary to establish that the term was not only reasonable, but also necessary. The basis for the implication was said to be that in its absence it would be open to the defendant to refuse its agreement to any amount claimed by the liquidators for disbursements incurred by them for any reason, or no reason at all except thereby to increase the amount payable to the defendant pursuant to clause 8(d) of the funding agreement.
68 However, the funding agreement includes clause 14 which requires the parties to be just and faithful to each other in all dealings arising out of or connected with the agreement. The defendant did not dispute that clause 14 applied where its agreement was sought to the deduction of disbursements incurred by the liquidators from the Resolution Sum. As I said in para [48] I cannot envisage how it would be consistent with the defendant's acting justly and faithfully to the plaintiffs that it unreasonably withhold its agreement to the deduction of particular disbursements from the Resolution Sum.
69 The plaintiffs sought to amend the separate question to ask whether it was an implied or an express term of the agreement that the defendant act reasonably in determining whether to agree to any particular fees or disbursements being recoverable as Insolvency Practitioner's Fees and disbursements. I do not think that the question should be so amended. In part this was because, as Mr Lockhart SC submitted, counsel had not come to the hearing prepared to argue the scope of clause 14. In part it is because the hearing of the separate question is not the appropriate vehicle for making a decision as to the operation and effect of clause 14. It may well be that a decision as to whether or not the defendant complied, or failed to comply, with clause 14 if it refused its agreement to the deduction of particular disbursements, would be decided having regard to whether the defendant was acting reasonably. But the question for decision would not be whether it was acting reasonably, but whether it was being just and faithful in its dealings with the plaintiffs. That question should be addressed in the context of the particular disputes which might give rise to any disagreement. It should not be decided in the abstract.
70 It suffices to say that the alleged term is not an implied term of the agreement because the implication is not necessary. I refuse the application to amend the separate question.
Whether funding agreement void for uncertainty
71 The plaintiffs submitted that if the power to give or refuse agreement to a particular item of expense is not qualified by the implication of a term "such as that suggested", then the contract was deficient because its operation would depend upon further agreement between the parties in circumstances where there was no mechanism by which that agreement could be compelled. The plaintiffs submitted that such a contract would be void as a mere agreement to agree. This argument was not elaborated. When the question of clause 14 was raised during argument as an answer to the implication of a term, no submission was made that the whole of the funding agreement would be void if the alleged term as to reasonableness were not implied, but the defendant was bound by clause 14 in determining whether to give or refuse its agreement to a particular item of expense. The plaintiffs do not argue that the contract was void as an agreement to agree if the term of reasonableness were implied. Having regard to the limited ground of the submission, to clause 14 and to the fact that the agreement to agree relates to only one aspect of the funding agreement, I do not accept that the agreement is void for uncertainty.
Expert's fees incurred by Austin before the funding agreement
72 The final issue concerns the payment of invoices totalling $39,960.56 to a firm known as Evans & Peck for experts' fees. Invoices for those fees were rendered by Evans & Peck in August, September and October 2003, that is, well before the funding agreement. It was common ground that the invoices were paid after the funding agreement was entered into. Mr Hutchison deposed that Evans & Peck required the pre-appointment invoices to be paid before further assistance would be provided in the arbitration. The plaintiffs contended that the words "from the date of this agreement" in the definition of "Insolvency Practitioner's Fees and disbursements" qualify the words "prosecuting the Proceedings", not the words "disbursements ... directly incurred". They submitted that in consequence a disbursement incurred before the date of the agreement is a relevant disbursement if it relates to the prosecution of the proceedings after the date of the agreement.
73 I do not agree. In my view the words "from the date of this Agreement" qualify the entire phrase "agreed fees and disbursements of the Insolvency Practitioner directly incurred in prosecuting the Proceedings". If the disbursements were incurred before 22 May 2006, they are not within the definition of "Insolvency Practitioner's Fees and disbursements".
74 The fees of the experts in question were not incurred by the liquidators. It was Austin itself which incurred the fees in 2003. In my view those fees, although paid by the liquidators out of the company's assets after the date of the agreement, were not disbursements of the liquidators incurred in prosecuting the Proceedings from the date of the agreement.
Orders
75 For these reasons I refuse the plaintiffs' application to amend question 3. I answer the separate questions as follows. (The answer to question 2 was agreed to be consequential upon the answers to the other questions. I will deal with it last.)