Assignment and Investigation of a risky claim


316 Group Pty Ltd (in liquidation) (Company) was a special purpose vehicle incorporated to manage a construction contract on behalf of a related party property developer.

The development was financed by a big four bank. In May 2017, the Company’s major creditor, the Australian Taxation Office, successfully applied to the Court to wind-up the Company. Anthony Elkerton of DW Advisory was appointed Liquidator. A significant number of properties were owned by an entity associated with the property developer. The limited documents available suggested that these properties comprised the development that the Company managed. Additionally, the bank had registered a security interest in these properties.

316 Case Study


The liquidation had minimal funds and very few books and records. The director failed to respond to requests from the Liquidator for information. Notwithstanding that the Liquidator had identified potentially significant claims in relation to an unpaid debt and an insolvent trading action, the Liquidator was unable to obtain creditor funding to conduct examinations. Whilst properties owned by the related entity had been identified, given the bank’s encumbrances the equity position in these assets was unknown. It was uncertain whether a judgment debt would be recoverable.

Key issues:

  1. Lack of documents in support of claim;
  2. Questions around recoverability; and
  3. Significant risk of an adverse outcome during the investigation phase.


Whilst it was apparent that there were claims worth pursuing, given the problems identified above, the claims did not meet traditional funding criteria. To allow for each of the key risks to be effectively mitigated, LCM purchased the statutory and contractual claims of the Liquidator and the Company by way of assignment.

The purchase was structured with a fee paid on execution of the assignment deed and a percentage of any recovery to be paid on the successful recovery of funds from the defendants.


The purchase of the claims was predicated on LCM obtaining eligible applicant status to enable examination pursuant to sections 596A and 596B of the Corporations Act 2001 (Cth). This allowed LCM as eligible applicant to investigate and obtain documents from third parties to be in a position to assess recoverability, to minimise costs associated with the investigations and prosecute the claims. The novel approach of the assignee conducting the examinations as Eligible Applicant was an Australian first.


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