- On 11 March 2015, the High Court delivered its decision in Fortress Credit & Anor v Fletcher & Ors  HCA 10.
- The appellant was Fortress Credit. The respondents were the liquidators of Octaviar Administration Pty Limited (Octaviar Administration).
- 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.
- 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:
- during the period beginning on the relation-back day and ending:
- 3 years after the relation-back day; or
- 12 months after the first appointment of a liquidator in relation to the winding up of the company;
whichever is the later; 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 question for determination was whether an extension under s588FF(3)(b) could only be ordered in relation to a transaction or transactions identified in the order, or may apply to transactions not able to be identified at the time of the order. The latter form of order is sometimes referred to as a “shelf order”.
- The “shelf order” was valid.
The facts and the reasoning
- The relation-back day for Octaviar Administration was 3 October 2008, and so the time limited for the commencement of proceedings under s588FF(3) was 3 October 2011. On 19 September 2011, an order was made that the time for the making of applications under s588FF(1) in relation to Octaviar Administration be extended to 3 April 2012. The order granted leave generally without identifying particular transactions or potential defendants.
- On 3 April 2012, acting pursuant to the extension, the liquidators of Octaviar Administration commenced proceedings against the appellant, which challenged the validity of the extension order. The appellants argued that a valid extension order could not be made unless the order identified the potential defendant and the transaction.
- The High Court recognised that there are occasions when, despite best endeavours, a liquidator will not have been able to identify all transactions within the time limits imposed by para (a). The Court refused to interfere with the “shelf order” that had been made and noted that the purpose of such an order was to mitigate the strictness of the time limits imposed by para (a) in an appropriate case.
- Although the High Court has confirmed the validity of a “shelf order”, a liquidator seeking such an order will need convincing evidence to satisfy the Court that the grant of such an order is an appropriate exercise of its discretion.