Australian court approves settlement of claims involving Diploma Construction

An Australian court has approved a settlement of claims involving Diploma Construction, a collapsed construction company which has been in liquidation for the past seven years, notwithstanding findings that creditors will not receive any benefit from the commencement and running of the litigation, and that they likely would have been better off had the litigation not been commenced.

The Court criticised the LFA in this case on the basis that there was no incentive for the funder to monitor costs to ensure reasonableness and proportionality. To the contrary, the funder had an interest in the costs being as high as possible and, as a consequence of the terms of the funding agreement, notwithstanding that four sets of proceedings have been ongoing for almost five years, creditors will not receive any benefit from the proceedings.