Litigation funding to commence proceedings – will recovery of costs and expenses be enough?

Marsden v Screenmasters Australia provides guidance to liquidators who commence and continue proceedings, pursuant to funding arrangements, when met with arguments that the proceedings will not confer a benefit to creditors.

WHAT HAPPENED?

On 12 December 2014, the liquidators of the Cardinal Group Pty Limited (Cardinal Group) (Liquidators) commenced proceedings against Screenmasters Australia Pty Limited (Screenmasters) for declarations that certain payments made to Screenmasters were either unfair preferences or uncommercial transactions and for the recovery of $49,600.00 plus interest.

This was one of 20 sets of proceedings brought by the Liquidators for the recovery of unfair preference payments in the order of $8 million. Screenmasters filed a defence in the proceedings and then, in an attempt to sidestep the claim, brought an interlocutory application under s 536 of the Corporations Act 2001 (Cth) (the Act) seeking that the court order an inquiry into the