1. On 11 March 2015 the High Court delivered its decision in Grant Samuel & Ors v Fletcher & Ors [2015] HCA 8.
  2. The appellants were Grant Samuel Corporate Finance Pty Limited and JP Morgan Chase Bank. The respondents were the liquidators of Octaviar Limited.
  3. The decision concerns the interpretation of s588FF(3) of the Corporations Act 2001 (Cth)  and has significant practical implications for claims brought by liquidators in relation to voidable transactions.
  4. S588FF(3) of the Act  specifies the time within which a liquidator can bring a claim in relation to a transaction that is voidable under s588FE, and is in the following terms:

"An application under subsection (1) may only be made: 

  1. during the period beginning on the relation-back day and ending: 
    1. 3 years after the relation-back day; or 
    2. 12 months after the first appointment of a liquidator in relation to the winding up of the company; 

whichever is the later; 

  1. or within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period."

The Issue

  1. The appeal concerned the validity of an order extending the time within which a liquidator could bring proceedings in respect to voidable transactions.

The Decision

  1. The Court held that the first order for extension was valid, but that a second order for extension was invalid.

The facts and the reasoning

  1. The relation-back day for Octaviar Limited was 4 June 2008, and so the time limited for the commencement of proceedings under s588FF(3) was 4 June  2011, unless the Court extended the time under s588FF(3)(b).
  2. On 30 May 2011, the NSW Supreme Court made an order extending the time for the commencement of proceedings to 3 October 2011.
  3. A further application was made to extend time within the period of the extension, i.e. before 3 October 2011, but after the 3 year period specified in para (a) had expired. On 19 September 2011, an order was made on an application under the NSW Uniform Civil Procedure Rules (UCPR), varying the extension order by changing the date set from 3 October 2011 to 3 April 2012. 
  4. The appellants applied to set aside the order made 19 September 2011 that had extended the time for commencement of proceedings to 3 April 2012. The appellants did not dispute that the UCPR provided a general power to vary an existing order. However, the appellants argued that, by virtue of s79 of the Judiciary Act 1903 (Cth), the UCPR could not be relied upon to authorise the order made 19 September 2011 which varied the order that had been made on 30 May 2011.
  5. S79 of the Judiciary Act 1903 (Cth) provides that the laws of each State or Territory, including the laws relating to procedure, shall “except as otherwise provided by the Constitution or the laws of the Commonwealth”, be binding on all courts exercising federal jurisdiction in that State or Territory. The Corporations Act is of course a law of the Commonwealth. The issue on the appeal was whether the Corporations Act had “otherwise provided” so as to deprive the UCPR of authority for the order made on 19 September 2011 that further extended the date for commencement of proceedings against the appellants.
  6. The High Court held that the only power given to a court to vary the par (a) period is that given by S588FF(3)(b) and that the power may not be supplemented, nor varied by rules of procedure of the court to which an application for extension of time is made. It was held that the rules of courts of the States and Territories cannot apply so as to vary the time dictated by s588FF(3) for the bringing of a proceeding under s588FF(1), because s588FF(3) otherwise provides.
  7. The Court held that the extension order made on 30 May 2011 was within power, and that as a result of that order, proceedings under s588FF(1) could be brought by 3 October 2011, but no further extension could be granted once the para (a) period had elapsed. The UCPR could not be utilised to further extend the time within which proceedings under s588FF(1) could be brought.
  8. In arriving at its decision, the Court noted that the time limits in para (a) appeared to have been a response to many submissions which had been received by the Australian Law Reform Commission complaining of inordinate delay in the commencement of proceedings by liquidators, which had been supported by judicial observations critical of delays in winding up of insolvent companies. These concerns had also been noted in the Harmer Report which recommended that liquidators be placed under a more rigorous, though reasonable, time limit.
  9. Accordingly, the High Court set aside the order made on 19 September 2011 that had varied the extension order by changing the date set from 3 October 2011 to 3 April 2012. The effect of the High Court’s order is that the liquidators of Octaviar Limited are now precluded from bringing a claim against Grant Samuel Corporate Finance Pty Limited and JP Morgan Chase Bank in relation to voidable transactions of the type mentioned in s588FE.