In the latest chapter of the long running MFS/Octaviar liquidation, the High Court has recently clarified the extent to which liquidators can seek extensions of time to bring voidable transaction claims.
Can liquidators get a second extension that is sought out of time?
Voidable transaction claims must be brought within the time limit in s588FF (generally, three years from the relation-back day), which imposes tight timeframes on liquidators, particularly in complex liquidations. The court may grant an extension of time, provided that the extension is applied for before the initial time limit in s588FF has expired.
A practice had developed where liquidators would sometimes obtain an extension of time (before the three-year period had expired), and subsequently apply for a second extension (after the initial three-year period has expired but before the end of the extended period) by obtaining a variation of the court's first order under the Court Rules (eg in NSW using UCPR 36.16(2)(b)).
This creative use of the Court Rules was decisively rejected by the High Court. It held that the States' Court Rules cannot rise above the strict words of the Corporations Act, which require that any application for an extension of time 'may only be made' during the time limit stated in s588FF. That is, once the three-year period from the relation-back day has expired, no further extensions of time are permitted.
Can liquidators obtain a 'shelf order' extending time?
One way to help deal with strict time limits is for a liquidator to seek a so-called 'shelf order' extending time for voidable transaction claims in respect of any transaction generally, rather than in respect of a specifically identified transaction against a particular creditor. There has been some confusion about the permissibility of this practice. The High Court has now held that it is permitted.
Whilst there are a number of good reasons why shelf orders should not be made (eg certainty for creditors, requiring liquidators to promptly identify claims, etc), the High Court considered that these reasons are matters for the courts' discretion when deciding whether or not to grant a shelf order on a case-by-case basis.