According to the retainer, entered into in June 2022, Francom Legal was to complete “high-volume legal work” by filing and serving up to 600 statements of claim, lodging and filing up to 260 caveats, and carrying out enforcement of up to 480 statements of claim per annum.

Under the terms of the retainer, Prospa could not terminate unless Francom Legal materially breached the terms or the “forward debt sale agreement” was terminated by Prospa. If the latter, Prospa must give Francom Legal three months of written notice.

The sale agreement was terminated in October 2022, and there were some discussions between the parties in the immediate aftermath about the termination of the retainer, but it was agreed that it would continue subject to some minor variations.

However, the following March, Prospa purported to terminate the retainer by email with immediate effect. The next month, it contended Francom was given three months’ notice.

In submissions, Francom contended that Prospa’s right to terminate the retainer had to be exercised immediately upon termination of the sale agreement or within a reasonable time following termination.

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Prospa contended there was no time limit on its right to terminate following the termination of the sale agreement.

Ultimately, Justice Peter Brereton found Prospa was entitled to terminate the retainer at any time after it terminated the forward flow debt sales agreement, which occurred in October 2022.

In light of proper construction of the retainer, Justice Brereton also found Prospa validly terminated the retainer by June 2023.

On submissions made as to the commercial purpose, Justice Brereton considered this required “speculation”, particularly the interaction between the retainer and the sale agreement.

“It is not at all obvious that any demonstrated commercial purpose is achieved by conferring upon Prospa a right to terminate only within a short time frame,” Justice Brereton said.

“It is, if anything, more likely to serve a commercial purpose if, once the sale agreement falls by Prospa’s hand, Prospa is able to also bring the retainer to an end at the time of its choosing, with Francom getting the benefit of three months’ notice.”

The case: Francom Legal Pty Ltd v Prospa Advance Pty Ltd [2025] NSWSC 466