External funding and assignment of litigation proceedings: A further extension to the property available to a liquidator. Anglo–australian contrasts
✍ Scribed by Andrew Hede
- Publisher
- John Wiley and Sons
- Year
- 1997
- Tongue
- English
- Weight
- 707 KB
- Volume
- 6
- Category
- Article
- ISSN
- 1180-0518
No coin nor oath required. For personal study only.
✦ Synopsis
I. Introduction
Traditionally, one of the difficulties faced by a liquidator in recovering funds on behalf of creditors has been the lack of funding available to undertake litigation proceedings. Although the provisions of s. 564 of the Corporations Law (the Law) provide that a creditor of a company who provides an indemnity may be treated preferentially to other creditors, creditors are often unwilling or unable to provide funds to a liquidator given the obvious risks involved.
The lack of funding available to liquidators has often resulted in proceedings not being commenced given the risks which unfunded litigation provide in relation to attracting personal liability to the liquidator for costs incurred by all parties, but particularly the respondent. Additionally, where a respondent is aware that a liquidator has little or no funding for the proceedings, there is a considerable incentive to delay or complicate proceedings. In instances where proceedings are commenced, it is commonplace for these to be settled for a significantly reduced sum given the liquidator's inability to proceed to trial.
Recently, a number of insurance-based litigation funding packages have been developed which provide liquidators with access to funding to meet the costs of litigation. I t has also recently been confirmed that a liquidator has the ability to assign a cause of action which is available to the company to a third party.
Despite the availability of these funding packages, there has been significant legal argument as to whether they offend the laws of maintenance and champerty, and therefore are illegal. This article attempts to analyse the legality of these packages in terms of both Australia and overseas countries, and