During a discussion with one of my staff today I had reason to do some reading on up on the definition of what can be deemed as property. From this link I found some commentary by Allens in relation to the 1996 case of Movitor Pty Ltd where a liquidator sought directions from the court as to whether he was able to enter into a litigation insurance funding arrangement to bring an action against Movitor’s directors for insolvent trading. This funding arrangement would result in him sharing 12% of the ‘winnings’ from the action with the funder. This was despite some of Movitor’s creditors being willing to provide funding. Of relevenat is that they were not willing to indemnify the liquidator if that action was unsuccessful.
Whilst the Court found that such an arrangement would breach the rules of champerty and maintenance because the insurer had no ‘genuine commercial interest’, the court took into consideration the liquidator’s powers of sale under section 477(2)(c) of the Law. It determined that a right of action possessed by a company, such as the right to bring an action for insolvent trading, fell within the definition of ‘the property of the company’. This property was able to be ‘sold’ to an insurance company despite that fact that it would otherwise breach the rules of champerty and maintenance.
Given the introduction of the PPSA, it would be interesting to know if such ‘property’ could be captured under a registered security interest? I had previously been of the belief that such actions were not caught by mortgage debenture charges held by banks but this may be something worth revisiting??