This case shows what happens when a liquidation has possible recovery claims but not enough ready money or records to pursue them cleanly. Profounder Turfmaster had acquired a turf management business, was later wound up on a State Revenue application, and left liquidators trying to reconstruct the position from third-party information and management accounts.
The liquidators wanted to investigate potential voidable transaction and insolvent trading claims. To do that properly, they considered public examinations, specialist legal help and litigation funding. Because the funding agreement and legal engagement were expected to operate for more than three months, the liquidators asked the Court for approval under s 477(2B) of the Corporations Act.
The Court approved the funding agreement and the legal engagement, including with retrospective effect. It accepted that the liquidators had considered funding options, obtained legal advice, and were acting to preserve potential recoveries for creditors. The Court also made confidentiality orders because disclosing litigation strategy, funding terms and proposed claims could unfairly help potential defendants.
For business owners, the lesson is that insolvency is not just about what assets are left in the bank. If books and records are missing, tax debts exist, assets are hard to locate and possible claims need investigation, the cost of recovery can become a major issue. Good records can reduce the need for expensive reconstruction. Poor records can push liquidators toward funded litigation, examinations and confidential court applications.