Liquidators and litigation funding - confidentiality of agreement

In Lion Energy Ltd v Tulloch Lodge Limited (in liq) [2011] FCA 1139, the Federal Court approved a company in liquidation's entry into a litigation funding agreement and the compromise of a claim of the company. The court agreed with the liquidator's assessment that those acts would be in the best interests of the company. However, the court refused to grant an order that the litigation funding agreement be kept confidential as such an order restricting publication was not necessary to 'prevent prejudice to the administration of justice' under the Federal Court of Australia Act 1976 (Cth).

This case is therefore a warning to liquidators contemplating entry into litigation funding agreements. Even if the court approves the decision to enter into such an agreement, it will be unlikely to grant an order to maintain the confidentiality of its terms given the high threshold set by the Federal Court of Australia Act for such a restriction.