Keybridge wins appeal over former director’s legal costs

The NSW Court of Appeal has overturned a decision requiring Keybridge Capital to fund former director Nicholas Bolton’s legal costs, ruling that a corporate indemnity cannot require a company to pay a former director’s defence costs while proceedings that may trigger the statutory prohibition on indemnification remain unresolved.

The Melbourne-based investment firm entered voluntary administration in February 2025, facing a demand for repayment of a $4.6 million loan from one of its subsidiaries, chocolate and toy company Yowie (ASX: YOW), as well as court action by one of its own shareholders, WAM Active (ASX:WAA), a firm controlled by Geoff Wilson. Wilson’s group, which owned over 45% of Keybridge, had been at odds with companies owned by Nicholas Bolton — the former CEO and a director of Keybridge — which owned about 20% of Keybridge. Bolton was also the CEO of Yowie.

The following month, the Court ruled that the appointment of Gideon Rathner of Lowe Lippmann as voluntary administrator of the company was not for an improper purpose, despite finding that he was conflicted due to his previous dealings with the company. Then, in April 2025, the Court ordered that Keybridge’s voluntary administration be brought to an end on the basis that the company was solvent following the offer of a bridge funding facility by WAM Active.

Now, the Court of Appeal has confirmed Keybridge is not required to fund Bolton’s legal costs in a derivative action brought by WAM Active on Keybridge’s behalf. The proceedings allege breaches of duty arising from a $4.75 million payment by Keybridge to Italian company Crotto del Nino S.r.l., which is solely owned by Bolton. Crotto owns a property at Lake Como that was allegedly acquired partly using the transferred funds.

The alleged conduct occurred during Bolton’s third period as a Keybridge director, from October 2019 to February 2025. The director’s deed was entered into at the start of an earlier period of directorship in 2013, and no replacement deed was executed when Bolton rejoined the board.

Justice Nixon had found that Keybridge was required to pay Bolton’s costs under the indemnity, subject to a right to recover the payments if Bolton was later found not to be entitled to indemnification. Justice Nixon ultimately ordered the company to pay Bolton’s legal costs, which already exceeded $210,000 and €80,000.

The Court of Appeal rejected that construction. Justices Stern, Ball and Free held that an indemnity under a director’s deed is legally distinct from a repayable loan or advance for defence costs. Where a director may ultimately be found liable to the company, section 199A of the Corporations Act prevents the company from providing an indemnity until the outcome of the proceedings, including any appeal, is known.

The Court also rejected Bolton’s alternative reliance on Keybridge’s constitution. The words “to the full extent permitted by law” limited the scope of the constitutional indemnity but did not create an implied repayment obligation or convert the indemnity into a permissible advance.

Keybridge’s appeal was allowed. Bolton was ordered to pay the company’s appeal costs, while costs at first instance will be determined following written submissions.

Read the decision here.

Peter Wood of 5 Selborne Chambers, Daniel Krochmalik of 3 St James' Hall Chambers and Gadens acted for Keybridge Capital, while Jeremy Stoljar SC and Tyler Goldberg, both of Eight Selborne, and Speed & Stracey acted for Nicholas Bolton.