Supreme Court clarifies when litigation funding amounts to an abuse of process

Introduction No one needs to be told litigation is expensive. The cost of access to the courts is commonly seen as one of, if not the most, significant barriers to access justice. This is true even for corporates. The decision in PriceWaterhouseCoopers v Walker (PwC v Walker) was concerned with the validity of a litigation funding agreement between a company called SPF No. 10 Limited (SPF), the liquidators of Property Ventures Limited (PVL) and related companies, Messrs Robert Walker and John Marshall.1

SPF was funding litigation by the liquidators against PriceWaterhouseCoopers (PwC) and certain directors of PVL for breach of various obligations. The case against PwC alleged tortious and contractual liability for various failings in discharging its role as auditor of, and adviser to, the PVL Group.2

PwC had made an application for a stay of that proceeding on the grounds that the combined effect of the litigation funding agreement, and the fact that SPF had also taken assignment of a general security agreement over the assets and undertakings of PVL (Allied Assignment) and other respondents, amounted to an abuse of process. In essence, PwC's position was that SPF had effectively taken an assignment of PVL's cause of action against PwC. This application failed in the High Court and Court of Appeal, and was now being advanced in the Supreme Court.3

After the hearing was argued in the Supreme Court, the parties settled. The Court (with the exception of Elias CJ) nonetheless considered it appropriate to deliver judgment on the basis the "appeal involves important issues, on which the court heard full argument".4

Background Mr David Henderson is a well-known, perhaps infamous, property developer. PVL and other companies Mr Henderson was involved with were developing a large site in Queenstown.5 The development failed.6 The remainder of the relevant facts can be stated succinctly:

Five Mile Holdings Limited (FMH) was a company associated with PVL. FMH had borrowed large amounts of money from Hanover Finance Limited (Hanover). This borrowing was secured by a general security agreement over the assets of FML, including the land on which the development was to occur (FML GSA). PVL had guaranteed FMH's obligations to Hanover, which were secured by a general security agreement over the assets and undertakings of PVL (PVL GSA). In 2009 Hanover assigned the PVL GSA to Allied Farmers Investments Limited (Allied). At this time FML was in receivership and owed approximately $98,000,000 to Hanover. After the sale of assets, approximately $39,000,000 was owed to Allied (after the assignment of the PVL GSA). In March 2010 Allied appointed receivers to PVL and in July 2010 it was placed into liquidation owing approximately $69,300,000. In October 2012 SPF and PVL entered into the funding agreement. This agreement was conditional upon SPF entering into an...