Proctor : March 2018
36 PROCTOR | March 2018 Commencing voidable transaction proceedings Applying for an extension A liquidator generally has three years in which to commence proceedings to set aside a voidable transaction.1 That period may be extended on application to the court. This article is directed at the procedural requirements for making such an application and the matters which the court will consider in determining the application. Extending time to apply Section 588FF(3) of the Corporations Act 2001 (Cth) (the Act) provides that an application seeking to set aside a voidable transaction may only be made: “(a) during the period beginning on the relation-back day and ending: (i) 3 years after the relation-back day; or (ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.” The determination of the “relation-back day” will vary depending on the nature of the liquidation and the steps leading to the liquidation of the company. It requires an analysis of when the winding-up of the company is taken to begin under Division 1A of Part 5.6A of the Act. In calculating the period “after” the relation- back day, the relation-back day itself is excluded. 2 Therefore, if the relation-back day is 16 March 2015, the date three years after that day is 16 March 2018. An application to extend time under s588FF(3) must be made during the period specified in paragraph (a) of s588FF(3) (the paragraph (a) period). The application need only be filed within that period; an order made outside of the paragraph (a) period pursuant to an application made within that period will still validly extend time.3 However, it is prudent to make the application well prior to the expiry of the paragraph (a) period to allow for any corrective action should it later be discovered to be defective in some way. The court has no power to extend time under s588FF(3) when the application is made outside of the paragraph (a) period.4 Section 588FF(3) “covers the field” such that rules of procedure of the court cannot supplement or vary the period in which an application for an extension of time may be made.5 Procedural requirements for an application to extend time An application under s588FF(3) must be made to a “Court” as defined in the Act.6 That is, only the Federal Court, a Supreme Court or the Family Court of Australia may make an order extending time under s588FF(3). As set out below, the supporting affidavit material should identify the parties to, and the transactions said to be, the voidable transactions in respect of which the extension of time is sought. 7 Given that the parties to those transactions will be affected by the extension of time order sought, the application must name as respondents, and be served on, those parties.8 This would usually be a creditor but may also include a director. There may be circumstances where a liquidator is unable, during the paragraph (a) period, to identify the potential defendants to possible voidable transactions. In those limited circumstances, the court may make a ‘shelf’ or ‘blanket’ order extending time, notwithstanding that particular proposed defendants or transactions to be impugned cannot be identified.9 To support this, the liquidator will need to explain why they have been unable to identify the potential defendants or transactions as at the date of the application, including identifying the steps taken to date to identify the potential defendants and transactions. If a ‘shelf’ order is granted ex parte (or without notice to all potential defendants), there is a risk that the court may later set aside the order on the application of a defendant once the s588FF proceeding is commenced and served.10 This risk is particularly acute where the liquidator has delayed making enquiries, or has not made proper enquiries, prior to making the application.11 Affidavit material in support of application The application should be supported by affidavit material deposing to the following matters: (i) the background to the liquidation and the steps taken by the liquidator to date (ii) the transactions which are the subject of the voidable transaction (to the extent that they can be identified and, if they cannot be identified, the explanation for this) (iii) the parties to those transactions (to the extent that they can be identified and, if they cannot be identified, the explanation for this) (iv) any other persons who may be affected by the extension of time (v) that all persons who may be affected by the extension of time have been served with the application and supporting affidavit material (vi) the reasons for the delay in commencing the s588FF proceedings, and (vii) the duration of the extension sought and the reasons why that length of time is sought including identification of the steps proposed to be undertaken during that period (for example, the nature of the further investigations to be undertaken).