Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Limited (in liq)

The case involved the liquidators of Australian Institute of Professional Education Pty Limited (AIPE) seeking approval from the court to enter into a litigation funding agreement and a solicitors’ retainer on behalf of the company in liquidation. The company had been carrying on business as a registered training organisation, providing vocational education and training courses, and had received significant payments under the VET FEE-HELP scheme. The liquidators were appointed in October 2016, and faced potential claims by unsecured creditors in excess of $80 million, including a claim by the Department of Education and Training for overpayments under the VET FEE-HELP scheme. The liquidators proposed to enter into a litigation funding agreement with Litigation Lending Services (LLS) and a retainer with MinterEllison to pursue a cross-claim in the proceedings against the company, seeking recovery of payments made pursuant to the impugned transactions.

The court was required to decide whether to approve the liquidators' entry into the litigation funding agreement and solicitors’ retainer under s 477(2B) of the Corporations Act 2001 (Cth), and whether to make confidentiality orders under ss 37AF(1)(b) and 37AG(1)(a) of the Federal Court Act 1976 (Cth). The key considerations included the liquidators' prospects of success in the proceedings, the interests of creditors other than the proposed defendant, the nature and complexity of the cause of action, the extent to which the liquidators had canvassed other funding options, the extent of the funder's premium, and the risks involved in the claim.

The court found that the liquidators had a reasonable prospect of success in the proceedings, and that the proposed funding agreement was in accordance with market rates and reasonable. The court also found that the proposed agreement was consistent with the expeditious and beneficial administration of the winding up and that the offsetting benefits of the agreement outweighed any prolongation of the liquidation. The court approved the liquidators' entry into the litigation funding agreement and solicitors’ retainer under s 477(2B) of the Corporations Act 2001 (Cth). The court also made confidentiality orders under ss 37AF(1)(b) and 37AG(1)(a) of the Federal Court Act 1976 (Cth) to prevent prejudice to the administration of justice.