Deal Type: Assignment
Claim Type: Insolvency
Claim Size: $7.1m
Jurisdiction: Australia – WA
The Allmine Group Limited (the “Group”) was an ASX listed group of companies consisting of 17 wholly and partly owned subsidiaries incorporated in Australia, Fiji, New Zealand, South Africa, Hong Kong and Liberia.
Construction Industries Australia Ltd (the “Company”), a subsidiary of the Group operated a construction services business in Western Australia. Liquidators were appointed to the Group on 20 June 2013, with receivers also appointed to the Group on 21 June 2013.
In 2017 the Liquidators commenced proceedings pursuant to Section 588FA of the Corporations Act to set aside alleged unfair preference payments made by the Company to the Australian Tax Office (“ATO”).
Prior to the commencement of the proceedings the liquidators entered into a litigation funding agreement with a funder who withdrew funding shortly after the commencement of the proceedings. This left the liquidators in a difficult position and meant that they needed to progress the matter on a speculative basis with limited resources.
An expert report on solvency was prepared by the liquidators, however, the defendants identified technical deficiencies with the report. Given the lack of resources, the liquidators struggled to resolve these technical issues and were unable to reach a settlement given the defendant’s aggressive approach to defending the claim.
After two failed mediations the lawyers acting for the liquidators had substantial outstanding WIP and were uncomfortable with progressing the claim without additional resources and funding. Given the assetless nature of the Company and the lack of funding, the liquidators could not resolve these issues and were faced with significant adverse cost exposure risk.
LCM was approached by the liquidators to see if LCM could provide a solution given the quality of the underlying claim. Upon reviewing the documents, LCM was able to gain comfort around the issue of solvency and the steps needed to progress the claim to trial.
Given the specific issues involved with this claim (historical adverse costs exposure, outstanding WIP, retirement of one liquidator and requirement for a new law firm) an assignment was proposed. The assignment would see an amount paid by LCM upfront to cover outstanding WIP, an indemnity for historical adverse cost exposure provided by LCM plus an interest granted back to the liquidator for a share in any successful outcome. This structure would also allow LCM as the new plaintiff to file new solvency evidence from a well resourced independent expert.
The proposal was accepted by the liquidators and court approval to the assignment of the claim was granted pursuant to Section 477(2B) and 100-5(2). We understand that this was the first such approval since the adoption of the new assignment provisions in Insolvency Schedule to the Corporations Act.