Liquidators may legitimately pursue litigation with the aid of a litigation funder even where there is little or no prospect of recovery beyond the liquidator's own costs and expenses and the funder's fees, provided the pre-litigation costs were necessary or reasonably justified, the litigation costs were reasonably incurred and proportionate, and the funding agreement was not on manifestly unreasonable terms. There is no obligation to seek court directions as a matter of course before entering a litigation funding agreement, though the duty of skill, care and diligence may require it in some circumstances. The public interest in recovery proceedings is a relevant factor in the exercise of the court's supervisory discretion under s 536. The threshold for ordering an inquiry under s 536(1)(a) does not require a prima facie evidentiary case of lack of faithful performance, but requires something about the liquidator's performance that is a sufficient basis for making an order.
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