In Day v The Official Assignee as Liquidator of GN Networks Ltd (in Liq) [2016] NZHC 2400, the High Court rejected a claim that the funding arrangement at issue constituted maintenance or champerty.

In 2014, an unsecured creditor of GN Networks Ltd (GNN), Mr Day, issued proceedings in the Auckland High Court against Babbelbek Finance Limited (Babbelbek) for amounts received by Babbelbek during the receivership. Mr Day's litigation was funded by a third party. Babbelbek applied to strike out (or alternatively to stay) Mr Day's claim (or parts thereof) as an abuse of process.

The basis for Babbelbek's claim was two-fold:

  • First, that the funding arrangement amounted to maintenance and champerty
  • Second, that Mr Day's rights as a creditor had been assigned to him and that the assignment was void as it constituted an assignment of a bare right to sue.

Faire J rejected those claims. The funder did not have any control over the litigation and did not stand to profit from it. Nor was the assignment a bare assignment of a cause of action. To the contrary, Faire J considered that Mr Day had "a genuine commercial interest in the litigation" and that the assignment was merely an attempt by him to obtain further rights, in addition to those that he already had.

See the Court's decision here.