A recent Supreme Court of Western Australia decision demonstrates the power of litigation funders to appoint receivers over companies that fail to repay outstanding judgment debts, even in circumstances where the litigation funder itself owes significant debts to the Australian Tax Office (the ATO) and the ATO has sought satisfaction of those debts from the company.

In Kupang Resources Ltd v International Litigation Partners Pte Ltd [2014] WASC 371, Justice Allanson considered an application brought by a company for a declaration under section 418A of the Corporations Act 2001 (Cth) that the appointment of receivers was invalid. The receivers had been appointed by a litigation funder that was owed a judgment debt by the company, which was secured under a settlement deed. The ATO had issued statutory notices to the company demanding payment for debts owed by the litigation funder to the ATO, and the company argued that these notices discharged their obligations to repay the judgment debt under the settlement deed. The litigation funder argued that the failure to repay constituted a failure to comply under the settlement deed and gave the funder the right to appoint receivers. 

The court held that the receivers were validly appointed. The service of notices by the ATO did not extinguish the litigation funder's power to enforce the settlement deed (though the enforcement could not alter the Commissioner's rights which prevail over the rights of the litigation funder). It followed that the company's failure to make payments gave the litigation funder the right to appoint receivers over the company in accordance with the terms of the settlement deed.