Goodridge v Leveraged Equities Limited: application for special leave to appeal

Mr Goodridge has lodged an application for special leave to appeal to the High Court in respect of the Full Federal Court's decision in Leveraged Equities Limited v Goodridge.¹

Background

On 18 January 2011, the Full Court of the Federal Court handed down its decision in the case of Leveraged Equities Limited v Goodridge. The appeal decision overturned a controversial first instance decision of the Federal Court concerning the enforcement of a margin loan against the borrower, Mr Goodrige.²

The first instance decision, which found in favour Mr Goodridge, appeared to challenge established legal principles regarding the novation and assignment of contracts. Among other things, it suggested that it was impossible for a contracting party to prospectively authorise the novation of a contract to a third party without the participation and knowledge of that contracting party. There was concern that, if applied more broadly, this decision potentially undermined the validity of existing loan transfers, securitisations and other commercial transactions which may have been novated or assigned.

On appeal, the Full Court of the Federal Court unanimously overturned the first instance decision on all points, thus restoring clarity to the established legal principles governing assignment and novation of contracts. The appeal decision and its implications are discussed in detail in our previous client update.

Application for special leave

However, it appears that the matter is not yet settled. On 11 February 2011, Mr Goodridge lodged an application for special leave to appeal the decision of the Full Court of the Federal Court to the High Court.

The application submits that the Full Court of the Federal Court erred in finding that:

• there was a valid novation of Mr Goodridge's margin loan agreement;
• there was a valid assignment of the rights or obligations of the lender under Mr Goodridge's margin loan agreement; and
• the lender  was authorised to sell Mr Goodridge's securities under the margin loan agreement, or that Mr Goodridge authorised the sale.

Next steps

An application for special leave is the first step in appealing a decision to the High Court, however there are no guarantees that leave will be granted.

In considering whether to grant the application for special leave, s 35A of the Judiciary Act 1903 (Cth) states that the High Court may have regard to any matters that it considers relevant but must have regard to whether:

• the proceedings involve a question of law that is of public importance;
• there is a different in opinion between different courts or within one court, as to the state of the law; and
• the interests of the administration of justice require the High Court to consider the appeal.

It is likely to be at least three months before the application for special leave is listed for hearing. If special leave is granted, the High Court will then consider the merits of the case.

Johnson Winter & Slattery will provide updates as the application progresses.