Litigation funding continues to rise, both in respect of class actions and more traditional liquidator proceedings. ASIC has now granted further relief to funders and lawyers involved in legal proceedings structured as funded representative proceedings by extending the interim class order relief. The extension of relief which was announced on 29 February 2012 will apply until 30 September 2012 under class order 12/158. The extension will enable the temporary operation of litigation funding schemes and proof of debt funding schemes that are characterised as managed investment schemes without having to comply with the requirements of the Corporations Act.
The relief has been extended to allow additional time for the Federal Government to implement previously announced reforms and avoid interim disruption to the industry.
At the liquidator funding level, examination proceedings have been brought by the liquidators of ABC Learning Centres Limited (for whom we act) in the Federal Court. In ABC Learning Centres Limited, Application by Walker (No. 11)  FCA 40, the plaintiff liquidators sought an order to release them from an undertaking to the Court to enable them to provide documents during public examinations to a liquidation funder. The issue for determination if the principal litigation proceeded was whether charges over assets given by the companies in liquidation in favour of a banking syndicate were voidable for the benefit of the creditors. The liquidation funder required access to certain documents produced by banks under orders for production to make its funding decision. However, the plaintiffs were concerned this may require variation of a confidentiality agreement as not all documents requested by the funder had been used in the examinations.
Cowdroy J held the original undertaking was not binding as the terms were not suggestive that the plaintiffs would be permanently bound. The documents were required for a specific purpose and the use of the documents was to be subject to a further confidentiality undertaking. In determining whether parties are bound by undertaking, there is no 'rigid and exhaustive criteria' for altering existing orders 1.
Lessons from the Case
The Court will vary an undertaking to give discovered documents to a non-party where:
- it is fundamental to assist in the investigation of a valid cause of action;
- the documents are not provided for general disclosure but for a specific purpose;
- the documents fell within the definition of examinable affairs under ss9 and 53 Corporations Act 2001;
- the documents represent a compromise between the parties' competing interests and are subject to a further undertaking by the non-party to ensure confidentiality; and
- the greater public interest in ensuring the liquidators' fulfil their statutory obligation outweighs the interest of maintaining confidentiality of the documents.
The decision substantially enhances the ability of liquidators to access potential litigation funding.Footnote
1 Adam P Brown Male Fashions Proprietary Limited v. Philip Morris Incorporated (1981) 148 CLR 170.
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