In the matter of Movitor Pty Ltd (Receiver and Manager Appointed) (in liquidation) Sims, A M (Applicant) [1996] FCA 205

In the matter of Movitor Pty Ltd (Receiver and Manager Appointed) (in liquidation) Sims, A M (Applicant) [1996] FCA 205

A liquidator has the power under s 477(2)(c) of the Corporations Law to enter into an agreement for the sale or other disposition of a share in litigation proceeds in return for funding assistance, and such agreements, if entered into as a bona fide exercise of the liquidator's statutory powers with fully informed creditor approval, do not contravene the rules against maintenance or champerty.

Parties
Applicant: Anthony Milton Sims; Company (subject of Liquidation): Movitor Pty. Ltd. (Receiver and Manager Appointed) (In Liquidation) (ACN 006 724 036); Amicus Curiae: Australian Securities Commission
Jurisdiction
Australia
Judgment Date
15 March 1996
Procedural Posture
Application for Directions by Liquidator / Final Decision and Orders
Outcome
Application granted; direction made in favour of the applicant liquidator.
Legal Topics
Liquidators—powers and Duties, Champerty and Maintenance, Third Party Litigation Funding, Assignment or Disposition of Litigation Proceeds, Statutory Powers of Sale/disposition
Insolvency Law Company Law Bankruptcy Law Liquidators—powers and Duties Champerty and Maintenance Third Party Litigation Funding Assignment or Disposition of Litigation Proceeds Statutory Powers of Sale/disposition

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Parties

Anthony Milton Sims

Applicant

Movitor Pty. Ltd. (Receiver and Manager Appointed) (In Liquidation) (ACN 006 724 036)

Company (subject of Liquidation)

Australian Securities Commission

Amicus Curiae

Procedural Posture

Application for Directions by Liquidator / Final Decision and Orders

Legal Issues

  1. 1 Whether the liquidator has power under the Corporations Law to enter into a contract of insurance (litigation funding) in respect of actions for the benefit of the insolvency administration;
  2. 2 Whether such an agreement is void as constituting champerty or maintenance;
  3. 3 Whether 'property of the company' under s 477(2)(c) of the Corporations Law includes a share in the fruits of an action;

Ratio Decidendi

A liquidator has the power under s 477(2)(c) of the Corporations Law to enter into an agreement for the sale or other disposition of a share in litigation proceeds in return for funding assistance, and such agreements, if entered into as a bona fide exercise of the liquidator's statutory powers with fully informed creditor approval, do not contravene the rules against maintenance or champerty.

Court Disposition

Application granted; direction made in favour of the applicant liquidator.

Orders

  • Declaration that the applicant has power under the Corporations Law to enter into a contract of insurance with Lumley General Insurance Limited pursuant to the Lumley Debt Retrieval Agreement dated 1 March, 1995, in respect of the claims to be brought against the directors of Movitor Pty. Ltd. and against Ausind...
  • Direction that confidential exhibits, submissions and reasons be kept confidential until 4.00 p.m. on 25 March, 1996 and not be open to inspection by anyone before then without leave of a Judge.