A mining company chaired by former rugby league player Benny Elias needed to be placed in receivership so it could be managed by people with the “competence and integrity” to keep sensitive matters confidential, the Supreme Court has heard. Mr Elias’s company, Chameleon Mining, was placed in receivership last week by a litigation funding firm that had been supporting the miner in a Federal Court case against Murchison Metals. The litigation funders appointed a receiver to Chameleon last week, after Chameleon announced it was entering a “strategic alliance” with Cape Lambert Resources.
The litigation funders claim Chameleon breached the terms of a $20 million charge it has over the miner, by granting security over its assets to Cape Lambert. It also says the company breached confidentiality provisions in disclosing information to Cape Lambert, when it sought a $6.5 million credit facility as part of its new venture. That money is understood to be in place to potentially pay out ILP, as a termination fee.
Chameleon argued yesterday that as the Singapore-based funders do not have an Australian financial services licence, the receivership should be declared invalid. Rodney Smith SC, for Chameleon said IPL should have considered its legal status.
“Everyone’s a big boy. If you want to carry on a business of litigation funding, you might think it prudent to obtain legal advice as to whether you have to have a licence,” Mr Smith said.
Also, Chameleon argued, even if the company had disclosed information, it would not be grounds for receivership. Ian Jackman SC, for ILP, disagreed and said confidentiality was an “extremely serious issue”.
“We need this company to be managed by people who are able to keep confidential matters confidential,” Mr Jackman told the NSW Supreme Court. “It justifies the appointment of a receiver so this company is managed by somebody with the competence and integrity to manage confidentiality.”
Much of the argument yesterday centred on the financing agreement between Chameleon and the funding firm. Justice David Hammerschlag said IPL could not treat the agreement as a debt or credit facility.
“If this [Federal Court] litigation goes well, and this money is received, your client gets a share. This ain’t no credit facility,” Justice Hammerschlag said.
Mr Jackman said the funder had paid Chameleon’s legal costs – and that should be seen as an advance to be repaid, like a loan.
Mr Elias attended yesterday’s hearing but did not wish to comment on the case.
Justice Hammerschlag has reserved his decision.
Chameleon accepts it may have to pay the legal bills the funders have incurred on its behalf, and a termination fee of not less than $9 million.
A larger question remains as to whether International Litigation Partners will be able to share the spoils of any victory or settlement in the Murchison matter.