Insolvency Update – March 2007

• Funding by Creditors in Liquidations

• Bowesco Pty Ltd (Receiver and Manager Appointed) v Zohar [2007] FCAFC 1

Funding by Creditors in Liquidations

Creditor funding of liquidator recovery actions has become increasingly popular, and was recently considered by Austin J of the New South Wales Supreme Court in Welded Mesh v APS Group Pty Ltd (2006) 59 ACSR 602; [2006] NSWSC 1080.

Section 564 provides:

1. property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved by the payment or the giving of indemnity by creditors; or
2. expenses in relation to which a creditor has indemnified a liquidator have been recovered;