IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in Liquidation) [2009] FCAFC 9

IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in Liquidation) [2009] FCAFC 9

All of the consideration payable to IMF under the litigation funding agreement—including both the specified fees and the 35% share of the Resolution Sum—constituted expenses reasonably incurred by the liquidator in the preservation and realisation of the company’s cause of action. Under the Universal Distributing Principle, these expenses were to be paid in priority to secured creditors claiming over the same fund. The primary judge erred in distinguishing between the fixed fees and the 35% share. The appeal was allowed, and declarations were made in IMF’s favour on the priority of payment.

Parties
Appellant (wad 124 of 2008); Fourth Respondent (wad 134 of 2008): IMF (Australia) Limited; First Respondent (wad 124 of 2008); Appellant (wad 134 of 2008): Meadow Springs Fairway Resort Limited (in Liquidation); Second Respondent (wad 124 of 2008); First Respondent (wad 134 of 2008): Balanced Securities Ltd; Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008): Westralian Capital Holdings Pty Limited (in Liquidation); Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008): Knightsbridge Managed Funds Limited (in Liquidation); Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008): Knightsbridge Finance Pty Limited (in Liquidation); Fourth Respondent (wad 124 of 2008); Third Respondent (wad 134 of 2008): Hurly Investments Pty Limited; Fourth Respondent (wad 124 of 2008); Third Respondent (wad 134 of 2008): Timothy Joseph Casey; Fifth Respondent (wad 124 of 2008): Brian McMaster (as liquidator of Meadow Springs Fairway Resort Limited)
Jurisdiction
Australia
Judgment Date
06 February 2009
Procedural Posture
Appeal / Judgment on Appeal From a Single Judge of the Federal Court of Australia
Outcome
Appeal allowed
Legal Topics
Winding Up, Litigation Funding, Priority of Interests, Secured Creditors, Liquidator’s Expenses
Corporations Insolvency Equity Property Law Winding Up Litigation Funding Priority of Interests Secured Creditors +1 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 11 Party arguments 2 Amounts and remedies 7
Sign in to unlock

Parties

IMF (Australia) Limited

Appellant (wad 124 of 2008); Fourth Respondent (wad 134 of 2008)

Meadow Springs Fairway Resort Limited (in Liquidation)

First Respondent (wad 124 of 2008); Appellant (wad 134 of 2008)

Balanced Securities Ltd

Second Respondent (wad 124 of 2008); First Respondent (wad 134 of 2008)

Westralian Capital Holdings Pty Limited (in Liquidation)

Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008)

Knightsbridge Managed Funds Limited (in Liquidation)

Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008)

Knightsbridge Finance Pty Limited (in Liquidation)

Third Respondent (wad 124 of 2008); Second Respondent (wad 134 of 2008)

Hurly Investments Pty Limited

Fourth Respondent (wad 124 of 2008); Third Respondent (wad 134 of 2008)

Timothy Joseph Casey

Fourth Respondent (wad 124 of 2008); Third Respondent (wad 134 of 2008)

Brian McMaster (as liquidator of Meadow Springs Fairway Resort Limited)

Fifth Respondent (wad 124 of 2008)

Procedural Posture

Appeal / Judgment on Appeal From a Single Judge of the Federal Court of Australia

Legal Issues

  1. 1 Whether the remuneration/payments due to a litigation funder under a funding agreement take priority over claims of secured creditors to the same fund arising from the liquidation of a company.
  2. 2 Whether agreements to grant a share of recovery from proceedings to funders constitute expenses reasonably incurred by the liquidator for the purposes of the Universal Distributing Principle.

Ratio Decidendi

All of the consideration payable to IMF under the litigation funding agreement—including both the specified fees and the 35% share of the Resolution Sum—constituted expenses reasonably incurred by the liquidator in the preservation and realisation of the company’s cause of action. Under the Universal Distributing Principle, these expenses were to be paid in priority to secured creditors claiming over the same fund. The primary judge erred in distinguishing between the fixed fees and the 35% share. The appeal was allowed, and declarations were made in IMF’s favour on the priority of payment.

Court Disposition

Appeal allowed

Orders

  • Orders made by the primary judge concerning priorities of distribution set aside.
  • Declaration that the fixed fees and the 35% share of the Resolution Sum are to be paid to IMF in priority to Balanced Securities’ claim.