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[2026] NSWCA 119
appellant. Appeal allowed. The specified declaration and first-instance orders were set aside and the plaintiff’s claim was dismissed. The defendant was released from the undertaking given at first instance....
The Court of Appeal decided that Keybridge did not have to indemnify Mr Bolton for the costs of defending the primary proceedings while those proceedings could still result in a liability that the Corporations Act does not allow a company to indemnify. The deed treated an indemnity and an advance as different things: cl 3.1 was an indemnity, while cl 3.3 dealt separately with advances and possible repayment. The phrase “to the full extent permitted by law” did not create a repayment obligation. The Court rejected Keybridge’s argument that cl 3.1 was limited to a defined period, but that issue did not change the outcome. Constitution cl 10.2 did not provide a separate basis for interim indemnity because it also lacked a repayment obligation.
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5 cited instruments linked from this judgment.
2,304 words · generated 07/10/2026
Keybridge Capital Ltd appealed against orders made by Nixon J requiring it to pay former director Nicholas Bolton’s legal costs of defending proceedings brought by WAM Active Limited on Keybridge’s behalf, together with related proceedings in Italy. The Court of Appeal identified the central practical question as whether Keybridge was obliged under a Director’s Deed to indemnify Mr Bolton for costs already incurred and costs to be incurred in those proceedings [1].
The NSW proceedings were a derivative action. WAM alleged breaches of duty by Mr Bolton and other directors, including concerning a $4.75 million payment to Crotto del Nino S.r.l., a company of which Mr Bolton was the sole shareholder. The transfer was alleged to have occurred on 2 July 2024. The claims included compensation under s 1317H of the Corporations Act 2001 (Cth), or alternatively damages or equitable compensation. The duties said to have been breached were duties owed to Keybridge [9]-[10]. The Italian proceedings involved applications for precautionary seizure orders by Keybridge and WAM, and seizure orders were granted in Milan in about March 2026 [11].
Mr Bolton had been a director during three separate periods: 2011 to 2012, 2013 to 2015, and 2019 to 2025. The Director’s Deed was entered into on 2 January 2013, at the beginning of the second period. The claims in the primary proceedings concerned his conduct during the third period, and no equivalent deed was entered into when he resumed the directorship in 2019 [8], [10].
At first instance, the judge held that cl 3.1 entitled Mr Bolton to be paid his costs, reasoning that Keybridge could recover payments if a later outcome showed that he was not entitled to an indemnity [2], [20]. The judge also found that the proceedings were not “Relevant Proceedings” under the deed, so cl 3.3(a), the advance provision, did not apply. Mr Bolton did not challenge that finding on appeal [2], [4], [22]. Keybridge appealed on two grounds: the construction of cl 3.1 in light of s 199A, and whether cl 3.1 was confined to a defined period [3]. Mr Bolton relied additionally on cl 10.2 of Keybridge’s Constitution [4].
The Court allowed the appeal. It set aside specified first-instance orders and ordered the plaintiff’s claim dismissed. It also released the defendant from an undertaking and ordered Mr Bolton to pay Keybridge’s costs of the appeal. Costs at first instance were left to be determined after written submissions [87]-[88].
The Court began with the statutory scheme. Section 199A(3) prohibits a company from indemnifying an officer for legal costs incurred defending proceedings in which the officer is found to have a liability that falls within s 199A(2). Section 199C(2) makes a purported indemnity void to the extent it contravenes s 199A [29], [31], [38]. Section 212(2), by contrast, addresses certain advances, loans or other payments for legal costs and provides for repayment if the costs become ones that cannot be indemnified under s 199A [32].
The Court considered that Parliament drew a meaningful distinction between an indemnity and an advance [37]. The prohibition under s 199A(3)(a) crystallises when the relevant outcome is reached, including any appeal, but the practical effect is that a true indemnity cannot be paid while the person may still be found to have a relevant liability [39]-[41]. The Court linked this reading to the explanatory memorandum’s concern that ongoing legal costs could not be paid by way of indemnity until the proceedings’ outcome was known, and to the statutory reference to advances as a separate mechanism [28], [41].
The Court then construed the deed as a whole. Clause 3.1 promised to indemnify Mr Bolton “on a full indemnity basis and to the full extent permitted by law”. Clause 3.2 described that indemnity as “irrevocable, unconditional, continuing and principal”, and stated that it remained in force despite “the occurrence of any other thing” [19], [72]. In the Court’s view, that language described a true indemnity, not a conditional advance repayable if the proceedings ended adversely.
Clause 3.3 was headed “Advance of defence costs”. It used the word “advance”, made advances interest free, and provided that an advance would cease to be repayable unless Mr Bolton was later found not entitled to indemnification for those costs [19], [73]-[74]. The Court viewed this as the deed’s separate arrangement for paying legal costs pending the outcome of litigation. It also considered that this distinction helped avoid overlap between two substantially similar payment mechanisms, which would otherwise have had different qualifications and no clear priority [76].
The Court acknowledged that cl 3.3(d) referred to amounts paid under cl 3.1 and required repayment in certain circumstances. It did not consider that reference enough to turn cl 3.1 into an advance. Instead, the Court explained that it could address circumstances where a payment initially appeared indemnifiable but later information showed the liability was not indemnifiable, for example after an amendment to a claim [77].
The Court rejected the argument that “to the full extent permitted by law” implied an obligation to repay. Those words limited the scope of the indemnity. They did not change its character [60]-[62]. This applied both to cl 3.1 of the deed and to cl 10.2 of the Constitution. Because cl 10.2 did not itself provide for repayment, it could not support interim indemnification for the primary proceedings [58]-[62].
The Court therefore accepted Keybridge’s ground 1 argument: until the primary proceedings were finally resolved in Mr Bolton’s favour so that the statutory prohibition could not crystallise, cl 3.1 did not entitle him to the claimed indemnity payments [63], [80]-[81]. Keybridge accepted that an indemnity would be available under cl 3.1 if the proceedings were finally resolved in Mr Bolton’s favour [63].
The judgment explains the statutory background rather than announcing a different legislative rule. Under the earlier s 241 of the Corporations Law, the general prohibition against indemnifying an officer was accompanied by an exception for certain legal costs, including costs where judgment was in the officer’s favour [25]-[26]. The Court noted that, until proceedings concluded, it might not be known whether indemnifying costs would ultimately be prohibited [26].
The Corporate Law Economic Reform Program Act 1999 introduced s 199A. As the explanatory memorandum described it, the revised scheme specified circumstances in which legal costs could not be indemnified, while recognising that a company might make a loan or advance during proceedings and that repayment could depend on the outcome [27]-[28]. The judgment treats the present scheme as preserving the distinction between a prohibited indemnity and a permitted advance that is repayable if the statutory conditions require it [35]-[41].
The Court did not hold that every payment connected with a director’s defence is prohibited until proceedings end. Its analysis turns on characterisation. Section 199A prohibits a payment or agreement properly characterised as an indemnity where it falls within the statutory prohibition. Section 212(2) separately recognises payments by way of advance, loan or otherwise, subject to the statutory conditions, including repayment where applicable [36]-[37], [32].
The Court also explained the limits of the authorities cited to it. In Rickus, the costs were not incurred in proceedings in which Mr Rickus might be found to have a relevant liability, so the prohibition could not apply on those facts [43], [46]. In Note Printing, the deed contained express provisions delimiting the indemnity and an express refund obligation. The Court read the payments there as not being indemnification in the ordinary sense for s 199A(3), and declined to treat that decision as establishing a general rule for all director indemnities [51]-[57].
The judgment’s contractual holding is correspondingly specific. It applies the statutory distinction to the language and structure of this deed, particularly the separate provisions in cll 3.1 and 3.3. It does not decide the full ambit of Note Printing or definitively resolve every possible form of repayable payment arrangement [57].
At [36], the Court said: “if, having regard to all relevant circumstances, an agreement or a payment is properly characterised as an indemnity, it will be prohibited if it falls within the ambit of the prohibition.” In plain English, calling a payment an “advance” or “indemnity” does not settle the question. The Court looks at what the arrangement actually does and then applies the statutory rule.
At [41], the Court said that an indemnity is “precluded for so long as the person may be found to have a liability falling within s 199A(2).” The prohibition formally crystallises at the relevant outcome, but the practical consequence is that an unconditional indemnity cannot be used to pay costs in advance while a prohibited liability remains possible.
At [61], the Court said that “to the maximum extent permitted by law” does not alter the character of a contractual obligation by implying repayment. In plain English, a general phrase limiting an indemnity to what the law allows does not itself create a repayment mechanism.
At [73], the Court concluded that the language and structure of cl 3 indicated that cll 3.1 and 3.3(a) were intended to operate in different circumstances, at least while the outcome remained unknown. Clause 3.1 was the indemnity; cl 3.3 addressed advances pending the outcome.
At [80], the Court applied that construction directly: cl 3.1 could not extend to the legal costs of the primary proceedings pending their outcome. This was the conclusion that resolved ground 1 and led to the appeal being allowed [81].
The Court also stated at [85] that there was “simply no textual foundation” for Keybridge’s proposed time limit on cl 3.1. In plain English, the deed expressly used defined periods where it intended to do so, but did not attach such a period to that indemnity clause.
The reasoning is most directly relevant where a company has promised to indemnify a director for defence costs, the proceedings concern alleged conduct as an officer, and the outcome could establish a liability that falls within s 199A(2). The statutory issue then includes whether the payment arrangement is an indemnity or instead a distinct advance, loan or other payment arrangement contemplated by s 212(2) [29], [32], [36]-[41].
The contractual reasoning is especially relevant where an agreement contains separate clauses for indemnification and advances. The Court examined the wording, headings, repayment terms, relationship between provisions and practical overlap between the clauses. Here, the use of “indemnify” in cl 3.1 and “advance” in cl 3.3, along with the express treatment of whether advances could become repayable, supported separate functions [71]-[76].
The decision also addresses a constitution or deed that says an indemnity applies “to the full extent permitted by law” but contains no express repayment mechanism. The Court held that such language constrains the indemnity’s scope but does not itself convert it into a repayable advance [60]-[62].
The case does not establish that a particular differently drafted clause will necessarily be treated the same way. The Court distinguished deeds in Rickus and Note Printing because their terms and the relevant circumstances differed, including express exclusions, refund mechanisms and the absence of a separate advance clause [44]-[47], [51]-[57]. Nor did the appeal determine whether cl 3.3(a) covered the primary proceedings: the first-instance finding that they were not “Relevant Proceedings” was not challenged [2], [4], [22].
The supplied judgment is dated 23 June 2026 and does not cite any later judicial treatment of its own reasoning. On the material provided, it is not possible to say how later courts have treated this decision.
The judgment does, however, explain how the Court of Appeal treated earlier authorities. It agreed with Rickus that s 199A(3) does not “bite” unless a relevant liability is found in the proceedings in which the costs were incurred, but said that this does not establish that a true indemnity may authorise interim payments while that outcome remains possible [46]. It read Note Printing in light of the particular deed before that court and said the decision was not a general principle governing all contractual indemnities [52]-[57].
The Court referred to Wilkie for the concern that a company should not become the final arbiter of the extent of its obligations while a director lacks the means to defend a claim. It considered that the distinct advance mechanism in cl 3.3 addressed that concern in this deed [75]. These are the authorities and relationships stated in the judgment itself; the text supplied does not provide any subsequent cases applying the decision.
The Court expressly left open the full ambit of Note Printing and whether s 199A(3) prohibits every arrangement that might otherwise be described as an indemnity but contains a repayment obligation [57]. Its decision did not require resolution of those broader questions because the Court construed this deed as providing a true indemnity in cl 3.1 and a separate advance mechanism in cl 3.3.
The appeal also did not decide whether cl 3.3(a) could provide an advance for these particular proceedings. The primary judge had found they were not “Relevant Proceedings”, and that finding was not appealed [2], [4]. The Court’s general analysis of advances therefore should not be mistaken for a determination that this deed required Keybridge to advance Mr Bolton’s costs in the primary proceedings.
The Court rejected the proposed temporal limitation on cl 3.1, but that conclusion did not determine the dispute in Mr Bolton’s favour. Ground 1 independently defeated the claim for indemnity while the proceedings’ outcome remained unknown [80]-[86]. The judgment also does not determine the first-instance costs, which were reserved for submissions and decision on the papers [88].
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Keybridge Capital Ltd v Bolton (No 2) [2026] NSWCA 119
Hearing dates: 18 June 2026
Date of orders: 18 June 2026; 23 June 2026
Decision date: 23 June 2026
Before: Stern JA; Ball JA; Free JA
Decision: 18 June 2026:
(1) Appeal allowed.
(2) Set aside the declaration in order 1 made by Nixon J on 21 May 2026, and orders 1, 3-7 of the orders made by Nixon J on 29 May 2026 and in lieu thereof, order that the plaintiff’s claim be dismissed.
(3) Release the defendant from the undertaking given in paragraph 2 of the orders made on 29 May 2026.
(4) The respondent pay the appellant's costs of the appeal.
23 June 2026:
(1) Mr Bolton file written submissions as to the costs of the proceedings at first instance by 5 pm on 30 June 2026, limited to 3 pages.
(2) Keybridge file responsive written submissions as to the costs of the proceedings at first instance by 5 pm on 7 July 2026, limited to 3 pages.
(3) The costs of the proceedings at first instance to be determined on the papers.
Catchwords: CORPORATIONS — directors — whether company obliged under director’s deed or constitution to indemnify former director for legal costs in defending proceedings alleging he had breached his duties as director and in related proceedings — where primary judge held that director entitled under cl 3.1 of director’s deed to be paid his costs of defending primary proceedings on basis that the company had a right to recover those payments if and to the extent that it was subsequently established that the director was not entitled to an indemnity in respect of those costs in which case the company would have a right to recover those costs under cl 3.3(d) — whether cl 3.1 of the deed obliged the company to indemnify the director for costs incurred in the primary proceedings pending it being known whether or not he had a liability to the company falling within the ambit of s 199A(2)(a) of the Corporations Act 2001 (Cth) — whether cl 3.1 of the director’s deed applied only to costs incurred by the director as an officer of the company during a limited period — whether the company’s constitution required that the company indemnify the director for the legal costs of the primary proceedings
Legislation Cited: Acts Interpretation Act 1901 (Cth), s 13(1)
Corporate Law Economic Reform Program Act 1999 (Cth)
Corporations Act 1989 (Cth), s 82
Corporations Act 2001 (Cth), ss 119A, 119C, 212, 1317H
Cases Cited: Bolton v Keybridge Capital Limited (No 2) [2026] NSWSC 604
Bolton v Keybridge Capital Limited [2026] NSWSC 562
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Keybridge Capital Ltd v Bolton [2026] NSWCA 109
Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6
Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
National Roads and Motorists’ Association v Whitlam [2007] NSWCA 81
Note Printing Australia Ltd v Leckenby (2015) 50 VR 44; [2015] VSCA 105
Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited [2010] FCAFC 16; 265 ALR 112
Talbot v NRMA Ltd (2000) 50 NSWLR 300; [2000] NSWSC 608; [2000] NSWSC 887
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17
Category: Principal judgment
Parties: Keybridge Capital Ltd (Appellant)
Nicholas Francis John Bolton (Respondent)
Representation: Counsel:
P Wood with D Krochmalik (Appellant)
J Stoljar SC with T Goldberg (Respondent)
Solicitors:
Gadens (Appellant)
Speed & Stracey Lawyers (Respondent)
File Number(s): 2026/223425
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
This appeal concerned whether Keybridge Capital Limited was obliged under a Director’s Deed, or under Keybridge’s Constitution, to indemnify Nicholas Bolton for legal costs he had incurred, and would incur, in defending a derivative action brought by WAM Active Limited on behalf of Keybridge alleging that he breached his duties as a director of Keybridge (NSW proceedings) and in related proceedings in the Italian Republic (together, the primary proceedings). Mr Bolton was a director of Keybridge over three separate periods. The Deed was entered into at the start of the second of those periods. The claims against Mr Bolton advanced in the NSW proceedings relate to conduct that occurred during the third of those periods. No deed providing for an indemnity was entered into at the start of that third period during which Mr Bolton was a director of Keybridge.
Clause 3.1 of the Deed provided that Keybridge must indemnify Mr Bolton “on a full indemnity basis and to the full extent permitted by law, against all losses, liabilities incurred by [Mr Bolton] as an officer of [Keybridge] or a related body corporate”. Clause 3.3(a) of the Deed relevantly provided that “[Keybridge], on [Mr Bolton’s] request, will advance to [Mr Bolton] reasonable costs incurred or expected to be incurred by [Mr Bolton] (whether legal or otherwise) in defending Relevant Proceedings”. The primary judge held that the primary proceedings did not fall within the ambit of “Relevant Proceedings” as defined in the Deed, and that finding was not challenged on appeal.
Clause 10.2 of the Constitution relevantly provided that Keybridge “must indemnify each Officer on a full indemnity basis and to the full extent permitted by law against all losses, liabilities, costs, charges and expenses … incurred by the Officer as an officer of the company or of a related body corporate”.
At all material times, s 199A(3)(a) of the Corporations Act 2001 (Cth), when read with s 199A(2)(a), provided that a company must not, whether by agreement or by making payment, indemnify a person against legal costs incurred in defending an action for a liability incurred as an officer of the company if the costs are incurred in defending or resisting proceedings in which the person is found to have a liability owed to the company. Subsection 199C(2) of the Corporations Act relevantly provided that anything that purports to indemnify a person against a liability is void to the extent that it contravenes s 199A. Note 2 to s 199A(3) said that “[t]he company may be able to give the person a loan or advance in respect of the legal costs (see section 212)”. Subsection 212(2) of the Corporations Act provided that member approval is not needed for the company to make a payment to an officer of the company by way of advance, loan or otherwise, or to make an agreement to make such payment, in respect of legal costs incurred by the officer in defending a liability incurred as an officer of the company provided that, if s 199A applies to the costs, the officer must repay the amount if the costs become costs for which the company must not give an indemnity under s 199A(3).
The primary judge held that Mr Bolton was entitled under cl 3.1 of the Deed to be paid his legal costs of defending the primary proceedings on the basis that Keybridge had a right to recover those payments if, and to the extent that, it was subsequently established that Mr Bolton was not entitled to an indemnity in respect of those costs in which case Keybridge would have a right to recover those costs under cl 3.3(d) of the Deed. Keybridge challenged that conclusion. The additional or alternative contention that Keybridge was obliged to indemnify Mr Bolton under cl 10.2 of the Constitution was raised, but not determined, by the primary judge and was the subject of a notice of contention filed by Mr Bolton.
There were three key issues on appeal, namely whether:
(i) as contended by Keybridge, cl 3.1 of the Deed obliged Keybridge to indemnify Mr Bolton for legal costs incurred in the primary proceedings pending it being known whether or not Mr Bolton had a liability to Keybridge falling within the ambit of s 119A(2)(a) of the Corporations Act;
(ii) as contended by Keybridge, cl 3.1 of the Deed applied only to costs incurred by Mr Bolton as an officer of Keybridge during a limited period, being either the Relevant Period or the Access Period as defined in the Deed, both of which would exclude the costs of the primary proceedings; and
(iii) as contended by Mr Bolton, cl 10.2 of the Constitution required that Keybridge indemnify Mr Bolton for the legal costs of the primary proceedings.
The Court (Stern JA, Ball JA and Free JA) gave the following reasons for orders it made at the conclusion of the hearing on 18 June 2026, allowing the appeal:
As to the legislative scheme
(1) Reading s 199A of the Corporations Act in its legislative history and context demonstrates that it was Parliament’s intention that there be a distinction between an indemnity for legal costs on the one hand, and a loan or advance for legal costs on the other; the former is prohibited if it falls within the ambit of s 199A(3), but the latter falls outside of that prohibition and is expressly permitted by s 212(2): [35]-[37].
(2) Under s 199A(3)(a) of the Corporations Act, the point at which the prohibition crystallises is the instant when there is the outcome that a person is found to have a liability under s 199A(2), noting the definition of outcome under s 199A(4) includes the outcome of any appeal. This means that the practical, if not the legal, effect of s 199A(3) is that a payment or agreement properly characterised as an indemnity falling within s 199A(3) is precluded for so long as the person may be found to have a liability falling within s 199A(2): [38]-[41].
(3) The intermediate appellate cases in which s 199A(3) of the Corporations Act has been considered do not stand for the proposition that an indemnity, properly so called and as that term is understood in s 199A(3), can authorise payments which may fall within s 199A(3) pending the possibility of the prohibition in s 199A(3) crystallising: [42]-[57].
Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited [2010] FCAFC 16; 265 ALR 112; Note Printing Australia Ltd v Leckenby (2015) 50 VR 44; [2015] VSCA 105, considered.
As to issue (i)
(4) The terms of cl 3 of the Deed indicate that its overall purpose was to provide for an indemnity, and payments to Mr Bolton on account of relevant legal costs, in a manner which was compliant with s 199A: [38], [69].
(5) The language and structure of the Deed suggest that the parties intended cll 3.1 and 3.3(a) to operate in different circumstances, at least pending the outcome of litigation in which a liability may fall within the ambit of s 199A(2) of the Corporations Act being known. Clause 3.3(a) meets any concern that a company could become the final arbiter of the extent of its obligations because directors lack the means to defend themselves: [71]-[76].
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17, referred to.
Rickus; Note Printing, distinguished.
(6) The definitions in cl 1.1 of the Deed demonstrate that the parties considered the periods of time for which certain obligations and entitlements should extend. There was no reason to construe cl 3.1 as if it were intended to supplement cl 3.3(a) insofar as that clause only provides for advances on account of the legal costs of Relevant Proceedings: [68].
(7) The words “to the maximum extent permitted by law” in cl 3.1 of the Deed do not alter the character of the indemnity provided by implying a repayment obligation: [61].
(8) An indemnity under cl 3.1 of the Deed is an indemnity as understood in s 199A(3). It can only be provided to the extent permitted by law and thus could not extend to the legal costs of Mr Bolton in the primary proceedings pending the outcome in those proceedings becoming known. The primary judge erred in holding otherwise: [80]-[81].
As to issue (ii)
(9) The primary judge was correct to hold that cl 3.1 was not limited to any defined period in the Deed. There was no textual foundation for Keybridge’s contention to the contrary: [82]-[86].
As to issue (iii)
(10) Clause 10.2 includes no express or implied repayment obligation. It does not require that Keybridge indemnify Mr Bolton for the legal costs of the primary proceedings pending the outcome of those proceedings being known, as such indemnity would contravene the prohibition in s 199A(3): [58]-[62].
Rickus, referred to.
THE COURT: This appeal against declarations and orders of Nixon J on 21 and 29 May 2026: Bolton v Keybridge Capital Limited [2026] NSWSC 562 (Bolton (No 1)) and Bolton v Keybridge Capital Limited (No 2) [2026] NSWSC 604 (Bolton (No 2)) primarily concerns the proper construction of a Director’s Deed dated 2 January 2013, entered into by Keybridge Capital Limited, the appellant, and Nicholas Bolton, the respondent. The question of practical significance raised by the appeal is whether, as the primary judge found, Keybridge is obliged under the Director’s Deed to indemnify Mr Bolton for legal costs which he has incurred, and will incur, in defending a derivative action brought against him by WAM Active Limited, on behalf of Keybridge, in which it is alleged that Mr Bolton breached his duty as a director of Keybridge (NSW proceedings) and in related proceedings in the Italian Republic (Italian proceedings). As the parties have not drawn any distinction in this regard as between the NSW and the Italian proceedings, for convenience when referring to both, we will do so compendiously as the primary proceedings.
In Bolton (No 1) the primary judge held that Mr Bolton was entitled to declaratory relief regarding his entitlement under cl 3.1 of the Director’s Deed to be paid his costs of defending the primary proceedings, on the basis that Keybridge had a right to recover those payments if, and to the extent that, it was subsequently established that Mr Bolton was not entitled to an indemnity in respect of those costs. His Honour also held that Mr Bolton was not entitled to declaratory relief regarding his entitlement under cl 3.3(a) of the Director’s Deed to an advance of legal costs in defending “Relevant Proceedings” as the primary proceedings did not fall within the definition of that phrase in cl 1.1 of the Director’s Deed. He also found that Mr Bolton was entitled, under cl 3.1 of the Director’s Deed, to be paid his presently incurred costs in the primary proceedings. His Honour directed that the parties confer regarding the proposed form of orders. After a further hearing on 28 May 2026, in Bolton (No 2) his Honour then made orders reflecting the terms of his judgment in Bolton (No 1).
Keybridge made two broad contentions on appeal. First, it contended that the primary judge erred in Bolton (No in holding that cl 3.1 obliged Keybridge to indemnify Mr Bolton for costs incurred by him in defending a claim of a type to which subss 199A(2)-(3) of the (Cth) are directed (which we will call ). Second, it contended that his Honour erred in in holding that cl 3.1 applied to liabilities incurred by Mr Bolton as an officer of Keybridge based on his conduct at any time during which he was such an officer (which we will call ).
[37] In 2024, WAM Active Ltd, which is a shareholder in Keybridge, made an application in this Court seeking leave to bring a derivative action on behalf of Keybridge against Mr Bolton, two other directors of Keybridge, and Crotto del Nino S.r.l.. WAM alleged various breaches of duty by Mr Bolton as a director of Keybridge, including in respect of a transaction by which an amount of $4.75m was paid by Keybridge to Crotto.
[38] Crotto is a company registered in Italy, and Mr Bolton is its sole shareholder. Crotto owns a property in Lake Como, which was allegedly purchased using, in part, the amount of $4.75m that it received from Keybridge pursuant to the impugned transaction.
[39] On 20 September 2024, WAM obtained a freezing order from this Court in respect of Mr Bolton’s assets in Australia. In granting this relief, Black J found that WAM had “established a seriously arguable case, and potentially a strong case, available to Keybridge for breach of directors' duties or Ch 2E of the Corporations Act or both in respect of Mr Bolton's involvement in the relevant transaction”: In the matter of Keybridge Capital Limited [2024] NSWSC 1215 at [31].
[40] On 27 November 2024, I granted leave to WAM to bring the derivative suit. In doing so, I found that there was a serious question to be tried as to whether the directors had breached their duties to Keybridge*: WAM Active Ltd v Keybridge Capital Ltd (No 2)* [2024] NSWSC 1496 at [229]-[241].
[41] The derivative suit is the subject of the Primary Proceeding.
(Emphasis in original.)
The claims against Mr Bolton advanced in the NSW proceedings relate to the third period when he was a director of Keybridge. The relevant transfer of the $4.75 million is alleged to have occurred on 2 July 2024. These claims are for compensation under s 1317H of the Corporations Act 2001 or, alternatively, damages or equitable compensation against Keybridge’s then directors. The duties alleged to have been breached by Mr Bolton are duties owed to Keybridge.
In the Italian proceedings Keybridge and WAM sought precautionary seizure orders against Mr Bolton and Crotto del Nino S.r.l by reference to the prospective judgment in the NSW proceedings. In around early March 2026, the Civil Court of Milan granted precautionary seizure orders against Mr Bolton and Crotto.
As at the date of the hearings before the primary judge, Mr Bolton had, relevantly, incurred liabilities for legal costs (including his own costs and adverse costs orders) in the sum of €80,026.96 in the Italian proceedings and $210,839.38 in the NSW proceedings.
Mr Bolton made requests for indemnity under the Director’s Deed from Keybridge for his incurred and future legal costs of defending the primary proceedings. These were rejected by Keybridge.
10.1 Persons to whom rules 10.2 and 10.5 apply
Rules 10.2 and 10.5 apply:
(a) to each person who is or has been a director, alternate director or executive officer (within the meaning of rule 9.3(a)) of the company; and
(b) to such other officers or former officers of the company or of its related bodies corporate as the directors in each case determine,
(each an Officer for the purposes of this rule).
10.2 Indemnity
The company must indemnify each Officer on a full indemnity basis and to the full extent permitted by law against all losses, liabilities, costs, charges and expenses (Liabilities) incurred by the Officer as an officer of the company or of a related body corporate.
…
10.4 Extent of Indemnity
The indemnity in rule 10.2:
(a) is enforceable without the Officer having to first incur any expense or make any payment;
(b) is a continuing obligation and is enforceable by the Officer even though the Officer may have ceased to be an officer of the company or its related bodies corporate; and
(c) applies to Liabilities incurred both before and after the adoption of this constitution.
10.5 Insurance
The company may, to the extent permitted by law:
(a) purchase and maintain insurance; or
(b) pay or agree to pay a premium for insurance,
for each Officer against any Liability incurred by the Officer as an officer of the company or of a related body corporate including, but not limited to, a liability for negligence or for reasonable costs and expenses incurred in defending proceedings, whether civil or criminal and whatever their outcome.
10.6 Savings
Nothing in rule 10.2 or 10.5:
(a) affects any other right or remedy that a person to whom those rules apply may have in respect of any Liability referred to in those rules;
(b) limits the capacity of the company to indemnify or provide or pay for insurance for any person to whom those rules do not apply; or
(c) limits or diminishes the terms of any indemnity conferred or agreement to indemnify entered into prior to the adoption of this constitution.
10.7 Deed
The company may enter into a deed with any Officer to give effect to the rights conferred by this rule 10 or the exercise of a discretion under this rule 10 on such terms as the directors think fit which are not inconsistent with this rule 10.
The Constitution provides that the Company:
(1) must indemnify directors on a full indemnity basis and to the full extent permitted by law against all losses, liabilities, costs, charges and expenses incurred by the director as a director of the Company or a related body corporate (subject to certain specified exceptions);
(2) may, to the extent permitted by law:
(A) purchase and maintain insurance; or
(B) pay or agree to pay a premium for insurance, for each director against any losses, liabilities, costs, charges and expenses incurred by the director as a director of the Company or of a related body corporate; and
(3) may enter into a deed with a director including:
(A) terms consistent with those set out in rule 10 (Indemnity and insurance) and rule 12 (Inspection of an [sic] access to records) of the Constitution; and
(B) such other terms as the Company and director consider appropriate.
Recital C records that “[t]he Director has been a director of the Company since the Appointment Date”.
Recital D records that:
In accordance with the Constitution and the Corporations Act and in consideration of the Director agreeing to continue to act as a director of the Company, the Company has agreed to:
(1) provide access to Board Papers;
(2) indemnify the Director against liabilities incurred while acting as a director of the Company or a related body corporate; and
(3) maintain a D&O Policy in relation to the indemnity,
on the terms contained in this deed.
Appointment Date
the date (whether before or after the date of this deed) on which the Director commenced acting as a director of the Company or a related body corporate (as applicable).
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D&O Policy
a policy of insurance provided and maintained by the Company insuring the Director (among others) against liability as a director and officer of the Company and its related bodies corporate (if applicable).
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liability
a liability of any kind including damages, costs, fees and expenses and any applicable taxes levied in respect of that liability.
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Relevant Period
the period commencing on the Appointment Date and ending on the date the Director ceases to act as a director of the Company or a related body corporate (as applicable).
Relevant Proceedings
in relation to a director:
1 any hearing, conference, dispute, inquiry or investigation of a court, arbitrator, mediator, tribunal or governmental or administrative body; and
2 any procedural step preceding or otherwise relating to such hearing, conference, dispute, inquiry or investigation,
in which the director is involved:
3 as a party, witness or otherwise; and
4 because the director is or was a director of the Company (or a related body corporate) in the Relevant Period.
3.1 Indemnity
The Company must indemnify the Director, on a full indemnity basis and to the full extent permitted by law, against all losses, liabilities incurred by the Director as an officer of the Company or a related body corporate.
3.2 Continuing indemnity
The indemnity in clause 3.1 is an irrevocable, unconditional, continuing and principal obligation of the Company despite:
(a) the resignation or removal of the Director as a director of the Company;
(b) the settlement of any dispute between the Director and the Company or a third party; or
(c) the occurrence of any other thing,
and remains in full force and effect until released by the Director.
3.3 Advance of defence costs
(a) The Company, on the Director’s request, will advance to the Director reasonable costs incurred or expected to be incurred by the Director (whether legal or otherwise) in defending Relevant Proceedings. Any such advance will be interest free.
(b) The Director must furnish the Company with invoices or other relevant evidence of the costs incurred under clause 3.3(a).
(c) If the Company has advanced an amount for costs under clause 3.3(a), the amount of the advance will be in part satisfaction of the Company’s obligation to indemnify the Director and will cease to be repayable unless it is subsequently found that the Director was not entitled to be indemnified for those costs.
(d) If the Company has paid an amount under clause 3.1 or advanced an amount for costs under clause 3.3(a) and it is subsequently found that the Director was not entitled to be indemnified for or advanced those costs, or where the amount advanced by the Company is in excess of the costs for which the Director is entitled to be indemnified, the Director must repay the amount of the payment, advance or part thereof (as applicable) to the Company within 90 days of a request by the Company.
3.4 Conduct of proceedings
(a) The Company may do one or more of the following:
(1) assume the conduct, negotiation or defence of a claim;
(2) institute a crossclaim or a counterclaim in relation to a claim; and
(3) subject to clause 3.5, retain lawyers in relation to a claim to act on behalf of both the Director and the Company,
and, when it does so, the conduct of the claim will be under the sole management and control of the Company or its insurers (acting reasonably).
(b) The Director must:
(1) give notice to the Company promptly on becoming aware of any claim or any circumstances which could reasonably be expected to give rise to any claim against the Director that may give rise to a right to be indemnified under this deed;
(2) take any reasonable action that the Company requests to avoid, dispute, resist, bring an appeal in, compromise or defend any claim or any adjudication of a claim;
(3) not make any admission of liability or payment in respect of or settle or compromise any claim without the Company's prior written consent, which must not be unreasonably withheld;
(4) on request by the Company, render all reasonable assistance and co-operation to the Company in the conduct of any claim, including, but not limited to, giving the Company any documents, authorities and directions that the Company reasonably requires to prosecute or advance any crossclaim or counterclaim in relation to a claim; and
(5) on request by the Company, do anything reasonably necessary or desirable to enable the Company (so far as possible) to be subrogated to and enjoy the benefits of the Director's rights in relation to any crossclaims or any claims against any third party (including any claim under any applicable D&O Policy) and render any assistance that is reasonably requested by the Company for that purpose,
and the Company is not obliged to indemnify the Director under this deed or otherwise where the Director fails to perform any of these obligations to the material prejudice of the Company to the extent that material prejudice causes damage or loss to the Company.
(c) The Director is entitled to be reimbursed by the Company the actual costs of the Director reasonably incurred in taking action or providing assistance under clause 3.4(b).
(d) In acting under clause 3.4(a), the Company must, subject to any requirement of its insurers, have regard to the principle that the reputation of the Director should not be injured unnecessarily.
(e) If the Company does not elect to take control of the conduct of a claim under clause 3.4(a) above, the Director shall ensure that the Company is kept fully informed of any actual or proposed developments (including, without limitation, any meetings) and is provided with copies of all material correspondence and documentation relating to such third party claim or action, and such other information, assistance and access to records and personnel as the Company reasonably requires.
3.5 Legal representation
The Director may engage separate legal or other representation and participate in a claim or proceeding against the Director as a result of or arising from being a director of the Company or a related body corporate. The Company will pay any expenses incurred by the Director in relation to the representation or participation only to the extent that those expenses are:
(a) incurred before the Company assumes conduct of the claim;
(b) incurred with the Company's prior written authority; or
(c) reasonable and incurred in circumstances where:
(1) the Company has refused to authorise representation or participation by lawyers other than lawyers acting also for the Company; and
(2) there is a reasonable likelihood that the interests of the Director and of the Company would conflict if the same lawyers were to act on behalf of both the Director and the Company.
The primary judge found that it was plain from the terms of cll 3.1 and 3.3(d) of the Director’s Deed that the parties intended to ensure that Mr Bolton would be fully indemnified by Keybridge including for the legal costs of defending a proceeding brought against him by Keybridge regarding his conduct as director up until, and unless, he was found to have a liability to Keybridge for which he could not be indemnified under s 199A(3). He would, however, be required under cl 3.3(d) of the Director’s Deed to repay all amounts paid to him pursuant to cl 3.1 in the event that he was found to have such liability: Bolton (No 1) at [88]. The primary judge rejected Keybridge’s contention that the indemnity in cl 3.1 of the Director’s Deed did not cover a liability which arose from Mr Bolton’s conduct as a director during his third period of directorship of Keybridge as there was nothing in the Director’s Deed to support this conclusion: Bolton (No 1) at [89]-[90].
Given that it is for this Court to reach its own view as to construction, a matter to which there is necessarily a unique outcome: see eg Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [49] (Gageler J), it is unnecessary to set out the detail of the primary judge’s reasoning.
His Honour also found that cl 3.3 only gave rise to an obligation upon Keybridge to make payments in respect of the costs of Relevant Proceedings. These, in turn, were defined as proceedings in relation to a director in which he or she is involved as a consequence of being a director of Keybridge (or a related body corporate) in the Relevant Period. His Honour found that the Relevant Period did not extend beyond the point at which Mr Bolton ceased to be a director of Keybridge in either November or December 2015, as the Relevant Period only extended to the date when the director “ceased to act” as a director of Keybridge. There is no appeal against this finding.
There was no dispute between the parties as to the relevant principles of contractual construction as set out by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52] (French CJ, Nettle and Gordon JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] (Kiefel, Bell and Gordon JJ); and Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6 at [27] (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ).
As Keybridge contended, the following aspects of those principles were of particular significance in this case. First, the meaning of a commercial contract must be determined by asking what a reasonable businessperson in the position of the parties would have meant by the language used. In answering that question it is necessary to have regard to the text, context and purpose of the contract. Second, the contract must be given a meaning which avoids commercial nonsense or commercial inconvenience, or capricious or unjust results. Third, it is not the court’s task to redraft the contract to produce what it considers to be a more commercial or just result, albeit that text, context and purpose, considered together, may indicate that the parties intended to depart from the literal or ordinary meaning of the words used, and it is permissible to do so to avoid an inconsistency between a provision and the rest of the instrument. Fourth, a commercial contract must be read as a whole, Fifth, preference should be given to a construction that supplies a compliant operation, such that if the words of a contract are capable of two meanings, one lawful and the other unlawful, the former should be preferred.
241 Company not to indemnify officer or auditor
(1) A company or a related body corporate must not:
(a) indemnify a person who is or has been an officer or auditor of the company against a liability incurred by the person as such an officer or auditor; or
(b) exempt such person from such a liability.
(1A) A constitution, or any other instrument, or an agreement or arrangement, is void in so far as it provides for a body corporate to do something that subsection (1) prohibits.
(2) Subsection (1) does not prevent a person from being indemnified against a liability to another person (other than the company or a related body corporate) unless the liability arises out of conduct involving a lack of good faith.
(3) Subsection (1) does not prevent a person from being indemnified against a liability for costs and expenses incurred by the person:
(a) in defending proceedings, whether civil or criminal, in which judgment is given in favour of the person or in which the person is acquitted; or
(b) in connection with an application, in relation to such proceedings, in which the Court grants relief to the person under this Law.
…
As is apparent, as regards the prohibition in s 241(1), no distinction was drawn between indemnification of a liability to pay damages or compensation and indemnification of a liability to pay costs. Instead, the ambit of the prohibition was clarified in s 241(3), by, in effect, providing that the overarching prohibition in s 241(1) did not apply in circumstances in which, relevantly, judgment was given in favour of the person or they were acquitted. As is obvious, until the conclusion of such proceedings, it could not be known whether or not the giving of an indemnity as to costs would or would not ultimately be prohibited.
Section 199A was introduced by the Corporate Law Economic Reform Program Act 1999 (Cth). The explanatory memorandum to the Corporate Law Economic Reform Program Bill explained that key features of the new regulatory arrangements proposed by that Bill included:
Recasting section 241 dealing with indemnification for legal expenses to confine the matters for which a company or related body corporate may not give an indemnity for legal expenses to legal expenses incurred:
- in defending or resisting a proceeding in which the person is found to have a liability for which the company may not indemnify the person; or
- in defending or resisting criminal proceedings in which the person is found guilty; or
- in defending or resisting proceedings brought by ASIC or a liquidator for a Court order if the grounds for making the order are found by the Court to have been established; or
- in connection with proceedings for relief to the person under this Law in which the Court denies the relief.
(Emphasis in original.)
Restrictions on indemnities and insurance for officers and auditors
[6.8] The draft provisions clarify the legal costs exception to the statutory prohibition on a company or related body corporate indemnifying or exempting an officer or auditor of the company, from liability incurred in that capacity.
[6.9] It is proposed that the provisions concerning indemnification be rewritten to state all circumstances in which indemnification and exemption of officers or auditors is not permitted. As is currently the case, it is proposed that exemptions in respect of officers or auditors by the company, for a liability owed to a company, will not be permitted at all. Indemnification will be permitted in circumstances other than those expressly prohibited.
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[6.11] Proposed subsection 199A(2) sets out the circumstances in which it is proposed to prohibit an indemnity by the company, for a liability owed to the company. The proposed provision does not apply to a liability for legal costs.
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Prohibition on an indemnity for legal costs
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[6.16] One of the concerns about the operation of the indemnity provisions has been that a person is not entitled to an indemnity until the outcome of the relevant proceedings is known. Substantial liability may be incurred (for example, on-going legal costs) during the course of a proceeding, which are unable to be paid to the indemnified officer, until the outcome of the proceedings is known. To address this, as indicated in Note 2 to the proposed section 199A, the company may be able to give a person a loan or advance in respect of legal costs. Once the outcome of the proceedings is known, the person would be either obliged to pay back the loan or advance, if not entitled to an indemnity, or may retain the loan moneys as the indemnity to which the person is now entitled.
199A Indemnification and exemption of officer o****r auditor
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When indemnity for liability (other than for legal costs) not allowed
(2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:
(a) a liability owed to the company or a related body corporate;
(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 961M, 1317H, 1317HA or 1317HB, 1317HC or 1317HE;
(c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.
This subsection does not apply to a liability for legal costs.
When indemnity for legal costs not allowed
(3) A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred:
(a) in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or
(b) in defending or resisting criminal proceedings in which the person is found guilty; or
(c) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or
(d) in connection with proceedings for relief to the person under this Act in which the Court denies the relief.
Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.
Note 1: Paragraph (c)—This includes proceedings by ASIC for an order under section 206C, 206D, 206E or 206EAA (disqualification), section 232 (oppression), section 961M, 1317E, 1317G, 1317H, 1317HA, 1317HB, 1317HC, or 1317HE, 1317HC or 1317HE (civil penalties) or section 1324 (injunction).
Note 2: The company may be able to give the person a loan or advance in respect of the legal costs (see section 212).
(4) For the purposes of subsection (3), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.
Notes form part of the Act: Acts Interpretation Act 1901 (Cth), s 13(1).
Section 199C provides (and has provided at all times since 2 January 2013):
199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void
(1) Sections 199A and 199B do not authorise anything that would otherwise be unlawful.
(2) Anything that purports to indemnify or insure a person against a liability, or exempt them from a liability, is void to the extent that it contravenes section 199A or 199B.
212 Indemnities, exemptions, insurance premiums and payment for legal costs for officers
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Payments in respect of legal costs
(2) Member approval is not needed to give a financial benefit if:
(a) the benefit is for a related party who is an officer of the public company or entity; and
(b) the benefit is the making of, or an agreement to make, a payment (whether by way of advance, loan or otherwise) in respect of legal costs incurred by the officer in defending an action for a liability incurred as an officer of the public company or entity; and
(c) either:
(i) section 199A does not apply to the costs; or
(ii) if section 199A applies to the costs—the officer must repay the amount paid if the costs become costs for which the company must not give the officer an indemnity under that section; and
(d) to give the benefit would be reasonable in the circumstances of the public company or entity giving the benefit.
We make a number of observations about this legislative scheme.
First, s 199A must be seen against the background of the general law principle that a director, as an agent of a company, is entitled to be indemnified against losses and expenses incurred in the due performance of the office: Talbot v NRM**A Ltd (2000) 50 NSWLR 300; [2000] NSWSC 608; [2000] NSWSC 887 at [20], cited with approval in National Roads and Motorists’ Association v Whitlam [2007] NSWCA 81 at [90]. This is subject to a requirement that the director is acting reasonably: Talbot at [24] and [27]. As the primary judge observed in Bolton (No 1) at [53]-[55], this general law principle is subject to s 199A. As to the significance of this general law principle in a contractual context, it was observed in Whitlam at [96] that any implied contractual term for indemnity must not contradict any express term of the contract and must satisfy the tests in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283; [1977] UKPCHCA 1.
Second, in ss 199A(2) and (3), by contrast to the position under s 241 of the Corporations Law, Parliament separated out the prohibitions as regards indemnities for liabilities other than legal costs on the one hand, and indemnities for legal costs on the other. This necessarily resulted in some differences in the language used in s 199A(3), setting out the ambit of the prohibition, when compared to that in s 241(3) of the Corporations Law, which set out the ambit of the exception to the prohibition in s 241(1). Save that the ambit of the liabilities covered by the prohibition has altered (having regard to the difference between s 241(2) of the Corporations Law and s 199A(2)) the practical operation of the prohibition on giving an indemnity for legal costs is the same. There is no prohibition on a person being indemnified for legal costs if a person is found not to have a relevant liability, by which we mean a liability which cannot itself be the subject of an indemnity.
Third, the prohibitions in ss 199A(2) and (3) are upon providing an indemnity by agreement or by making a payment against a liability (we will refer to these as a prohibited indemnity). That means that if, having regard to all relevant circumstances, an agreement or a payment is properly characterised as an indemnity, it will be prohibited if it falls within the ambit of the prohibition.
Fourth, when ss 199A and 212 are read together, it is apparent that Parliament has drawn a distinction between an indemnity, on the one hand, and a loan or advance on the other. The former may be prohibited under s 199A(3), but the latter falls outside of that prohibition and is expressly permitted by s 212(2).
The background legal proceedings in Rickus involved a claim by the Motor Trades Association of Australia Industry Superannuation Fund Trustee against Mr Rickus, the Chairman of the board of directors of the Trustee, which included a claim for breach of an equitable duty of confidence owed to the Trustee. That claim was abandoned, and the Trustee was ordered to pay Mr Rickus’ costs of the proceedings. Mr Rickus then filed a cross-claim seeking a declaration that, under a deed of indemnity entered into between him and the Trustee or, alternatively under the constitution of the Trustee or at common law, he was entitled to be indemnified by the Trustee in respect of legal costs he incurred before the proceedings were commenced. Thus, at all times, that claim arose in circumstances in which there was no possibility of the costs having been incurred in proceedings in which Mr Rickus was found to have a relevant liability. The prohibition in s 199A(3) could not, in those circumstances, apply to the costs.
The deed in Rickus included an indemnity for legal costs in cl 2.2. Two features of this indemnity are important. First, under cl 2.2 the Trustee was obliged to indemnify the officer “to the maximum extent permitted by law”. Second, cl 2.2 expressly excluded legal costs from the ambit of the indemnity if they were incurred in circumstances falling within s 199A(3)(a)-(d). As will be seen, those terms are materially different from those in the Director’s Deed between Keybridge and Mr Bolton.
In Rickus at [40] (albeit in relation to equivalent exclusions mirroring the terms of s 199A(2)) the Full Court observed that the two features we have just identified were not necessary as the indemnity would in any event have been void to the extent that it contravened s 199A. That may be so, but it is nonetheless readily explicable why commercial parties might wish to avoid provisions in such deeds being invalidated given that there would be considerable uncertainty as to whether the effect of s 199C(2) would be simply to deny the effect of such provisions in prohibited circumstances or whether the provisions would themselves be invalidated if they provided for a prohibited indemnity.
As regards the scope of s 199A(3)(a), the Court in Rickus at [41]-[42] held that the prohibition does not “bite” unless a relevant liability is found in the same proceedings as those in which the costs were incurred and thus does not apply if the officer successfully defends the proceedings, or they are settled or abandoned without any finding of liability. We agree. But it does not follow that an “indemnity”, properly so called, can operate to authorise payments pending the possibility of that occurring.
As regards Mr Rickus’ claim for an indemnity under the constitution of the Trustee, the relevant provision (art 88(2)) was that “[t]o the extent permitted by law” the Trustee must indemnify an officer against, relevantly, legal costs. The Court held at [84]-[86] that the phrase “to the extent permitted by law” picked up the preclusions mandated by s 199A(3)(a), but that Mr Rickus’ claim was not prohibited by s 199A(3)(a) as no finding of liability was made in the proceedings.
Both parties, in their submissions, relied heavily upon the Victorian Court of Appeal’s decision in Note Printing. That case concerned a request by Mr Leckenby, who had previously been the chief executive officer of Note Printing Australia Ltd (NPAL), to the company to be “indemnified” for his ongoing legal costs in defending criminal proceedings. The Court held that, under the deed between Mr Leckenby and NPAL, he was entitled to that “indemnity” pending the outcome of those proceedings. As we explain below, the Court was careful to emphasise that in this context the making of payments did not involve indemnification as ordinarily understood.
The deed which provided for that indemnification was, relevantly, in the following terms:
Clause 2.2
To the fullest extent permitted by law, NPAL hereby indemnifies the Officer against each and every liability for legal costs and expenses the Officer may incur or for which the Officer may become liable in defending an action for a liability incurred as such an officer of NPAL unless such costs and expenses are incurred:
(a) in defending or resisting proceedings in which the Officer is found to have a liability for which he or she could not be indemnified pursuant to clause 2.1 [that is, where the liability is owed to NPAL or a related body corporate, or arises out of a pecuniary penalty order or the like, or arises out of conduct involving a lack of good faith on the part of the Officer]; or
(b) in defending or resisting criminal proceedings in which the Officer is found guilty;
(c) in defending or resisting proceedings brought by the Australian Securities and Investments Commission or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or
(d) in connection with proceedings for relief to the Officer under the [Corporations] Law in which the court denies the relief.
Clause 2.3
If the Officer becomes liable to pay an amount in respect of which the Officer is indemnified under this Deed, NPAL must, subject to clause 6, indemnify the Officer by paying that amount to the person to which that amount is due within 30 days from the date that the Officer provides satisfactory evidence to NPAL that the Officer is liable to pay that amount.
Clause 2.4
It is not necessary for the Officer to incur expense or make payment before enforcing the Officer’s rights of indemnity under this Deed.
Clause 2.5
Subject to the other provisions of this Deed, the indemnities provided by clauses 2.1 and 2.2:
(a) are irrevocable;
(b) continue irrespective of one or more previous applications of the clause; and
(c) continue in full force and effect without limit in relation to any claim in respect of the matters the subject of this indemnity whether arising during or after the term of the Officer’s appointment as an officer of NPAL.
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Clause 6.2
If it is established in relation to a Claim that:
(a) the Officer is not entitled to be indemnified under clauses 2.1 or 2.2, NPAL is thereupon relieved from each and every obligation under clauses 2.1 or 2.2 in respect of that Claim and the Officer must refund to NPAL all amounts incurred by NPAL under this Deed in respect of that Claim within 30 days of NPAL providing to the Officer details of such amounts; or
(b) the Officer has failed to perform an obligation referred to in clause 3.2 to the material prejudice of NPAL in relation to that Claim, NPAL is thereupon relieved from each and every obligation under this Deed in respect of that Claim,
but NPAL’s liability in respect of any other Claim shall not be affected by the operation of this clause.
Clause 3.1 provided that NPAL was entitled, subject to the consent of the officer, to take steps including to “assume the conduct, negotiation or defence of a Claim”.
As with Rickus, there are important features of the deed in Note Printing that, as will become apparent, are not seen in the Director’s Deed in the present case. First, cl 2.5 of the deed in Note Printing was expressed to be “[s]ubject to the other provisions of this Deed”, and in that way, the indemnity was expressly made subject to cll 2.2 and 6.2. Second, cl 2.2 of the deed in Note Printing (as in substance with the deed in Rickus) expressed the ambit of the available indemnity for legal costs by reference to the substantive content of sub-paragraphs (a)-(d) found in s 199A(3). This necessarily had the effect that any indemnity did not extend to legal costs that could not lawfully be indemnified under s 199A(3). Third, cl 6.2 of the deed in Note Printing relieved NPAL of the obligation to indemnify immediately upon the happening of an event in cl 2.2. Again, this delineated the ambit of the indemnity, such that it could not apply within the ambit of a prohibition in s 199A(3). Fourth, the deed in Note Printing did not include any separate provision requiring advances on account of legal costs in certain circumstances.
The language of cl 2.2, in particular that it did not include any qualification to the effect that the payment of defence costs was postponed until the outcome of proceedings was known, and the objects it intend ed to secure, led Tate JA (with whom Whelan and Ferguson JJA agreed) to find at [67] that “the parties to the Deed are to be taken to have intended to make an arrangement which conferred upon Leckenby the maximum protection available while respecting, in particular, the prohibition in s 199A(3)(b)”. That was a conclusion having regard to the deed in issue in that case. Contrary to what appeared to be suggested in Mr Bolton’s submissions, her Honour was not establishing a general principle as to how contractual indemnities given by companies to directors should be construed.
Having regard to the ambit of the indemnity, at [64] Tate JA affirmed the primary judge’s characterisation of the obligation under cl 2.2 of the deed as being, in effect, “an agreement to make a payment ‘otherwise’ than by a strict indemnity, loan or advance, within the meaning of s 212”. Thus, Note Printing was not a case where the relevant obligation was found to be an indemnity falling within the ambit of s 199A(3). In this regard, and consistent with our observation at [36] above that whether or not a payment or agreement falls within the ambit of s 199A(3) involves a question of characterisation, her Honour observed at [65] that the label given to the obligation was of little consequence.
Her Honour’s statement at [65] that s 199A(3)(b) permitted “payments” to be made “up until, and unless, a guilty verdict is reached providing that there is an obligation to repay any such payments in the event of a guilty verdict and that the Deed provides for just such an arrangement” must be read in the context of her Honour’s characterisation of payments under the deed in that case. Her Honour was not saying that a payment properly characterised as an “indemnity” for the purposes of s 199A(3) was permissible. Her Honour’s use of the word “payment” and not “indemnity” here is telling.
Finally, I do not accept that if NPAL is permitted to ‘indemnify’ an officer under cl 2.2(b), in the sense explained by the judge, for his or her legal costs in defending criminal proceedings before the outcome is known, the prohibition in s 199A(3)(b) is left with no real work to do. Absent the obligation to refund in the event of a guilty verdict, an agreement to make payments for the legal costs incurred in defending criminal proceedings would clearly violate the prohibition in s 199A(3)(b). This would be indeed a traditional form of indemnity, to hold the promisee harmless, or make good his or her loss, despite a successful criminal prosecution. As I have indicated, the ordinary meaning of the words of s 199A(3)(b) would clearly outlaw such an agreement. Hence the significance of the obligation to refund.
(Footnote omitted.)
Implicit in the passages from Note Printing set out above is the important recognition that an indemnity cannot itself entail an obligation to return the payment in particular circumstances, and that absent such an obligation, an agreement to pay legal costs pending the outcome of the proceedings would be prohibited by s 199A(3).
It follows that, had it been necessary to do so, we would have rejected Mr Bolton’s contention that Note Printing is authority for the proposition that an indemnity (as that term is understood in s 199A(3)) can be given in respect of legal costs which may, once the outcome of the proceedings is known, be a prohibited indemnity under s 199A(3). True it is that, at [38]-[42], Tate JA agreed with Mr Leckenby’s contention that the prohibition in s 199A(3)(b) was “expressed in the future perfect tense” such that it does not arise unless and until a finding of guilt occurs. However, that finding says nothing about whether or not an indemnity which, properly construed, continued beyond the point of a finding of liability (or guilt) would contravene s 199A(3). In any event, given our conclusions as to the proper construction of the Director’s Deed, it is unnecessary for us to reach any conclusion as to the ambit of Tate JA’s conclusions in Note Printing, nor as to whether or not s 199A(3) prohibits such an indemnity.
In support of his notice of contention Mr Bolton contended that cl 10.2 provided a standalone indemnity which, having regard to the words “to the full extent permitted by law”, did not contravene the prohibition in s 199A(3)(a). He submitted that the effect of those words was that the indemnity under cl 10.2 should be construed as importing a qualification to the indemnity such that Keybridge was obliged to reclaim any payments made under cl 10.2 if and to the extent that a prohibited liability was ultimately found. He relied in this regard upon the observation of the Court in Rickus at [40] that the deed in that case did not need to include qualifications to reflect the terms of s 199A(3) as the prohibitions in s 199A(3) would in any event have operated to render void any purported contractual indemnity which would have contravened s 199A(3).
Mr Bolton’s contention misunderstands both what was said in Rickus at [40] and the effect of s 199C(2). The phrase “to the maximum extent permitted by law” cannot be read as a qualification on the nature of the right given by the indemnity, so that it ceases to be an indemnity as ordinarily understood. By its nature, an indemnity is unconditional in the sense that a director will not be indemnified against a liability if the obligation to indemnify itself includes an obligation to return a payment made pursuant to the indemnity. That point is recognised by Note 2 (at [29] above). There is nothing in Rickus at [40] that suggests that the Court read s 199C(2) as having the effect of altering the nature of a contractual indemnity such that it ceased to be properly characterised as such. Rather, the effect of s 199C(2) is on the ambit of an indemnity, making it void to the extent that its ambit strays into what is impermissible. We read Rickus at [40] as reflecting that understanding.
In these circumstances, the words “to the maximum extent permitted by law” do not alter the character of the contractual obligation by implying a repayment obligation. They constrain the ambit or parameter of any contractual indemnity such that it cannot extend to circumstances within the prohibition in s 199A(3), but they do not fundamentally alter the character of the obligation.
Given that cl 10.2 of the Constitution includes no repayment obligation, it cannot operate to provide an indemnity to Mr Bolton for the costs of the primary proceedings. To do so would contravene the prohibition in s 199A(3)(a).
Under ground 1, Keybridge’s contention was simple. It contended that until such time that it is clear that Mr Bolton will not in the primary proceedings be found to have a liability as described in s 199A(2), his entitlement to be paid sums by Keybridge on account of his costs of those proceedings arises only under cl 3.3(a), and not under cl 3.1, of the Director’s Deed. Counsel for Keybridge accepted, however, that if the primary proceedings are finally resolved in Mr Bolton’s favour, such that the prohibition in s 199A(3) cannot crystallise, he will then be entitled to an indemnity in respect of his legal costs of the primary proceedings under cl 3.1. We accepted this contention, and on this basis, allowed the appeal.
Mr Bolton’s contention to the contrary was that the indemnity in cl 3.1 extended to cover his legal costs in the primary proceedings and that this did not contravene the prohibition in s 199A(3). In this regard he relied in particular on two matters.
First, he submitted that cl 3.3(d) makes it clear that Keybridge is obliged to repay any amount paid under cl 3.1 if it is subsequently found that Mr Bolton was not entitled, under s 199A(3), to be indemnified. Thus, he said, the indemnity does not fall foul of the prohibition in s 199A(3). In this regard, he relied upon what he contended should be taken from both Rickus and Note Printing, namely that an indemnity does not contravene s 199A(3) by providing for payments pending the outcome of proceedings being known, provided that, properly construed, the Director’s Deed includes an obligation upon Mr Bolton to repay any such sums to Keybridge. He also submitted that both of these cases supported his contention that cl 3.1 of the Director’s Deed could be both unqualified and unconditional, yet at the same time be subject to a repayment obligation, and that cl 3.1 (for that reason) did not contravene the prohibition in s 199A(3).
Second, he submitted that the words “to the full extent permitted by law” in cl 3.1 themselves import and impose on him a repayment obligation, as otherwise the indemnity in cl 3.1 would not be permitted by law. We have already rejected Mr Bolton’s contention to similar effect as regards the proper construction of cl 10.2 of the Constitution. Our reasoning in that regard necessarily entails a rejection of Mr Bolton’s analogous submission as regards cl 3.1 of the Director’s Deed.
For the reasons that follow, we also rejected Mr Bolton’s first submission.
At the time the parties entered into the Director’s Deed, Mr Bolton was a director of Keybridge. It is apparent from the definition of “Relevant Period” in cl 1.1 (above at [18]) that the parties intended the Director’s Deed, in some respects, to apply during or in respect of events that occurred during the period of his directorship or within defined extensions of that period. That is also apparent from the definitions of “Relevant Proceedings” (above at [18]) and of “Access Period” in cl 1.1, defined to extend to the later of seven years after Mr Bolton ceased to be a director or the date any Relevant Proceedings are resolved. These definitions demonstrate that the parties turned their minds to the periods of time for which certain obligations and entitlements should extend, and in some circumstances chose the period up until when Mr Bolton ceased to be a director of Keybridge. The parties must have been cognisant of the fact that, if Mr Bolton were to cease acting as a director of Keybridge, and then later to resume his directorship, it would be open to him to negotiate a fresh Director’s Deed with Keybridge covering matters such as the ambit of any indemnities or entitlements to payments on account of legal costs. In these circumstances, we see no reason to construe cl 3.1 as if it were intended to supplement cl 3.3(a) insofar as cl 3.3(a) only provides for advances on account of the legal costs of Relevant Proceedings.
Turning to ground 2, the essence of Keybridge’s contention was that the Director’s Deed dealt with a number of interrelated subjects, being access to board papers, directors’ and officers’ (D&O) insurance, and indemnities. As regards all of these, Keybridge contended that the Director’s Deed provided that Keybridge’s obligations, and conversely Mr Bolton’s entitlements, arose only during limited periods.
Thus, Keybridge’s obligation to keep board papers, Mr Bolton’s entitlement to access board papers and the obligation upon Keybridge to maintain a D&O policy were all limited to the Access Period, defined as set out at [68] above. As regards indemnities, Keybridge relied in this regard upon the availability of payments under cl 3.3(a) for Relevant Proceedings, which, as already noted, are defined by reference to the Relevant Period.
Keybridge contended that it would, in this context, be inferred that the parties also intended that the indemnity in cl 3.1 only extended for a limited period, being either the Relevant Period or the Access Period. Both periods expired well before the date upon which Mr Bolton’s liability arose.
As the primary judge observed, there is simply no textual foundation for Keybridge’s contention in this regard. That is very telling, particularly given that where the parties intended to constrain their obligations and entitlements by a defined period, they expressly did so.
For that reason, we would have rejected ground 2.
Our orders, as made at the conclusion of the hearing, were as follows.
Appeal allowed.
Set aside the declaration in order 1 made by Nixon J on 21 May 2026, and orders 1, 3-7 of the orders made by Nixon J on 29 May 2026 and in lieu thereof, order that the plaintiff’s claim be dismissed.
Release the defendant from the undertaking given in paragraph 2 of the orders made on 29 May 2026.
The respondent pay the appellant's costs of the appeal.
Mr Bolton asked that we defer making any orders as to the costs of the proceedings below, and instead timetable written submissions as to these and make a decision on the papers. Keybridge did not oppose that course. Accordingly, we direct that:
Mr Bolton file written submissions as to the costs of the proceedings at first instance by 5 pm on 30 June 2026, limited to 3 pages.
Keybridge file responsive written submissions as to the costs of the proceedings at first instance by 5 pm on 7 July 2026, limited to 3 pages.
The costs of the proceedings at first instance to be determined on the papers.
**********
Keybridge Capital Ltd
Bolton (No 2)
[2026] NSWSC 604
[2026] NSWSC 562
[2026] NSWCA 109
[2015] VSCA 105
(1977) 180 CLR 266
(2017) 261 CLR 544
(2014) 251 CLR 640
(2023) 276 CLR 500
(2018) 264 CLR 541
(2015) 256 CLR 104
(2015) 50 VR 44
(2000) 50 NSWLR 300
(2005) 221 CLR 522
Appeal allowed. The specified declaration and first-instance orders were set aside and the plaintiff’s claim was dismissed. The defendant was released from the undertaking given at first instance. The respondent was ordered to pay the appellant’s appeal costs. First-instance costs were to be determined on the papers after written submissions.
By notice of contention Mr Bolton sought to uphold his Honour’s declarations and orders on the additional or alternative basis that cl 10.2 of Keybridge’s Constitution requires that Keybridge indemnify Mr Bolton for the legal costs of the primary proceedings. Mr Bolton did not challenge the primary judge’s conclusion that cl 3.3(a) did not apply to the primary proceedings on the basis that they are not “Relevant Proceedings” as defined in the Director’s Deed.
The NSW proceedings were originally listed for final hearing before Brereton J commencing on 23 June 2026 with a time estimate of four days. In those circumstances, on 9 June 2026 Stern JA ordered that this appeal be prepared and heard with expedition: Keybridge Capital Ltd v Bolton [2026] NSWCA 109, and, at the conclusion of the hearing on 18 June 2026, we made orders allowing the appeal (and consequential orders to give effect to this, see [87] below) and that Mr Bolton pay Keybridge’s costs of this appeal. The commencement of the hearing has now been postponed to 29 June 2026.
These are our reasons for making those orders.
Fifth, the effect of s 199C is that anything that purports to provide a prohibited indemnity is void to the extent of the contravention. That would have the effect of invalidating either the relevant payment, or agreement, to that extent. That aspect of the legislative context is plainly relevant to the correct construction of any agreement by which a company indemnifies its directors.
Sixth, the prohibition in s 199A(3)(a) is in a curious form. The point at which the prohibition crystallises is the instant when there is the “outcome” that a person is found to have a relevant liability (noting that in s 199A(4) the outcome of the proceedings for the purposes of s 199A(3) includes the outcome of any appeal in the proceedings).
However, once crystallised, the prohibition catches any indemnity by payment or agreement against legal costs incurred in defending or resisting the proceedings. The effect of this is that any agreement or payment which is properly characterised as an indemnity, in respect of the costs of proceedings in which a director defends or resists a relevant liability, is void.
This has the practical, if not the legal, effect that a payment or agreement which is properly characterised as an indemnity is precluded for so long as the person may be found to have a liability falling within s 199A(2). That readily explains Note 2 to s 199A(3), directing attention to s 212. It also explains why, in the explanatory memorandum at [6.16], concern was expressed as regards “the operation of the indemnity provisions” because legal costs would be “unable to be paid … until the outcome of the proceedings is known”.
This understanding of the proper ambit of what Tate JA said in Note Printing is also supported by what her Honour said at [69]:
The terms of cl 3 of the Director’s Deed indicate that its overall purpose was to provide for an indemnity, and payments to Mr Bolton on account of legal costs incurred or to be incurred by him, in a manner which was compliant with s 199A. So much is clear from the expression “to the full extent permitted by law”. We would thus infer that the parties were well aware of the terms of the Corporations Act 2001 that were applicable to the provision of indemnities for, or advances on account of, legal costs incurred by Mr Bolton as a director of Keybridge.
Against that background, we turn to the language and structure of the Director’s Deed.
Whilst some of the language used (in particular in cl 3.3(d)) sits a little uncomfortably with our conclusion, we are persuaded that the proper construction of cl 3 is that it confers upon Mr Bolton an indemnity, properly characterised as such, in cll 3.1 and 3.2, and in cl 3.3 makes separate provision, by way of advances, for payments on account of legal costs incurred by Mr Bolton in proceedings which fall within the ambit of s 199A(2). It follows that, contrary to Mr Bolton’s contention, cl 3.1 does not provide an indemnity as regards his legal costs for so long as the proceedings (in which the costs are or will be incurred) may fall within the ambit of s 199A(2) such that an indemnity would, if a relevant liability were found, contravene s 199A(3).
The first key matter supporting this construction is the language of cll 3.1 and 3.2. They cannot properly be read as conferring anything short of an indemnity in the sense of an unqualified and unconditional promise to indemnify Mr Bolton in respect of losses and liabilities as defined in cl 1.1. Clause 3.2 is in no uncertain terms. Not only does it provide that the indemnity in cl 3.1 is an “irrevocable, unconditional, continuing and principal obligation”, it also provides that an indemnity with those characteristics continues despite “the occurrence of any other thing” and “remains in full force and effect until released by the Director”. Moreover, unlike, for example, the deed in Note Printing, here the parties chose not to make cl 3.1 “subject to” cl 3.3. That suggests that they intended cll 3.1 and 3.3 to have separate areas of operation.
Added to this is the particular way in which cl 3.3 makes provision for advances to be made on account of defence costs, noting that cl 3.3 adopts the language of s 212 (“advance”) and not that of s 199A (“indemnify”). No equivalent provision was included in the deeds in issue in either Rickus or Note Printing. Clause 3.3 indicates that the parties to the Director’s Deed intended to make express provision in that deed as to when and how payments could be made on account of legal costs incurred by Mr Bolton pending the outcome of those proceedings. This understanding of cl 3.3 flows from the terms of cl 3.3(a), whereby the parties to the Director’s Deed used the language of “advance” rather than “indemnify”, and in referring to the advance being “interest free” made it clear that any moneys advanced would be subject, at least in the first instance, to a repayment obligation. Thus, both the language and structure of cl 3 suggest that the parties intended cll 3.1 and 3.3(a) to operate in different circumstances, at least pending the outcome of the litigation becoming known.
The terms of cl 3.3(c) also give a clear indication that the parties intended cl 3.3 to make provision for the payment of costs pending the outcome of litigation, in circumstances in which an indemnity might be prohibited under s 199A(3). Thus, in cl 3.3(c), the parties provided that those costs “will”, noting the future tense, cease to be repayable, “unless it is subsequently found” that Mr Bolton was not entitled to an indemnity in respect of them. The operation and intent beyond cl 3.3(a)-(c) is readily apparent. It is to ensure that a director is not out of pocket on account of legal costs pending it becoming known whether or not the director is found to have a liability falling within s 199A(2), such that the prohibition in s 199A(3) crystallises. The distinction in cl 3.3(c) between an amount for costs “advanced” under cl 3.3(a), and “the Company’s obligation to indemnify the Director” also supports our construction.
In this way, cl 3.3 meets the concern identified by Callinan J in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [52], cited by Tate JA in Note Printing at [66], that a company could become the final arbiter of the extent of its obligations because directors may lack the means to defend themselves. As to this, we note that no equivalent of cl 3.3 was included in the deeds in issue in Rickus or Note Printing.
Unlike the construction of cl 3.1 contended for by Mr Bolton, our proposed construction of cl 3 of the Director’s Deed avoids what would otherwise be a marked tension between cll 3.1 and 3.3(a). Both would require payments by Keybridge on account of Mr Bolton’s legal costs, but the former would be an unqualified obligation whereas the latter would be qualified by a reasonableness obligation and be subject to cl 3.3(b). Thus, the Director’s Deed would provide two different mechanisms by which legal costs could be advanced, which significantly overlap but which are different in material respects, with no guidance as to which should take precedence where legal costs have been incurred in Relevant Proceedings. That makes no commercial sense. We do not think that that is what the parties could have intended. Contrary to Mr Bolton’s contentions, this tension is not resolved by the fact that cl 3.3(a) extends beyond costs incurred and provides for advances on account of costs “expected to be incurred”, nor is it explicable on the basis that the parties intended directors to be able to choose between cll 3.1 and 3.3 in order that they are given the “maximum protection under the law”.
As we have already observed, the inclusion within cl 3.3(d) of provision for amounts paid under cl 3.1 to be repaid upon request by Keybridge appears not to fit easily with our characterisation of the indemnity provided under cl 3.1. However, we think that the inclusion of a reference to cl 3.1 in cl 3.3(d) can be explained on the basis that it is to cater for the possibility that it may subsequently emerge that Mr Bolton was not entitled to be indemnified in respect of legal costs that have been paid by Keybridge. That could occur, for example, if Keybridge provides an indemnity in respect of legal costs of defending a third party claim against Mr Bolton (by paying those costs) and an amendment to the claim subsequently makes it apparent that any liability arising from the claim would arise out of conduct not in good faith and so would fall within the prohibition in s 199A(2)(c).
Our proposed construction also means that what would otherwise appear to be unworkable provisions in cll 3.4 and 3.5 can work harmoniously with cll 3.1 and 3.2. On Mr Bolton’s construction, at least on their face, cll 3.4 and 3.5 provide an unqualified entitlement in Keybridge (at its election) to assume the conduct or defence of a claim, subject only to the requirement that “when it does so” it must act reasonably. This would enable Keybridge to assume conduct of proceedings brought by it against the director. However, on our construction, cll 3.4 and 3.5 have no application in respect of claims which may give rise to a liability that cannot be the subject of the indemnity under cl 3.1, including claims by Keybridge against a director. In claims of that type, under cl 3 the director has the responsibility for defending the claim but is entitled to an advance of legal costs under cl 3.3 in doing so.
Finally, we deal with Mr Bolton’s contention that it is unlikely that commercial parties would have intended that Mr Bolton not be entitled to an indemnity for his legal costs of defending proceedings such as the primary proceedings. Whilst that may be so, it does not assist Mr Bolton as to construction. There is no basis to construe the Director’s Deed on the basis that commercial parties in the position of Mr Bolton and Keybridge on 2 January 2013 intended the Director’s Deed to provide all relevant indemnities to Mr Bolton should he resign as a director of Keybridge (or become disqualified as a director) and subsequently be reappointed as a director of Keybridge. Mr Bolton could readily have entered into a further deed upon being reappointed as a director of Keybridge on 13 October 2019 and, having regard in particular to the definition of Relevant Proceedings in the Director’s Deed, we would infer that reasonable parties in the position of Mr Bolton and Keybridge would have assumed that this would happen.
It necessarily follows from our construction as set out above that an indemnity under cl 3.1 is an indemnity falling within the ambit of that word in s 199A(3). It can only be provided to the extent permitted by law, and cannot thus extend to the legal costs of Mr Bolton in the primary proceedings pending the outcome in those proceedings becoming known.
On that basis, we allowed Keybridge’s appeal on ground 1.