Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher  FACFC 89 concerned the powers of liquidators in Australia. In 2009, joint liquidators were appointed to Octaviar Limited (Octaviar) and Octaviar Administration (Funder). Fortress claimed to be a secured creditor of Octaviar under a charge, and was owed approximately $71 million. The liquidators arranged for Octaviar and the Funder to enter into funding agreements that provided for the Funder to fund an investigation into the actions of Fortress and to commence litigation against Fortress.
As the Funder was in liquidation, an application was made to the Court for approval of the funding agreements. This was granted at first instance, with the judge noting that the power of liquidators to enter into funding agreements was well accepted. Fortress applied for leave to appeal this decision, claiming that the approval meant that the value of Fortress's security would be diminished. On appeal, the Court found that Australian legislation did not support the provision of litigation funding by a liquidator to an entirely unrelated litigant, when that litigation was undertaken simply on the prospect of obtaining a monetary benefit.
In New Zealand, several High Court cases have recognised that funding arrangements may be made by liquidators. However, the Courts suggest that liquidators should seek to have these approved by the Court under sections 260A or 284 of the Companies Act 1993.
See Court decision here.