The Facts

In this case the liquidators of Octaviar Administration had obtained an extension to the time for them to bring voidable transaction proceedings under section 588FF(1) of the Corporations Act (Extension Order). Before the expiration of the Extension Order, the liquidators sought a further extension under s588FF(3)(b) or, alternatively, asked the Court to vary the date in the Extension Order pursuant to the Court’s procedural powers under r 36.16 of Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

The Court held that there was no power under section 588FF(3)(b) to make successive applications for an extension of time. However, the Court accepted the liquidators’ alternative argument and ordered that the date in the Extension Order be varied pursuant to the Court’s powers under r 36.16 of the UCPR (Variation Order). 

Within the time period extended by the Variation Order, the liquidators then commenced voidable transaction proceedings under section 588FF(1) against various parties (the Applicants). The Applicants then applied to the Court to set aside the Variation Order.

The Law

Section 588FF(1) allows a liquidator to apply to the Court for orders in respect of voidable transactions, such as the return of money paid by the company in the months prior to its collapse. Section 588FF(3)(a) puts a time limit on such applications. A liquidator can only apply within 3 years after the day the winding up is taken to have begun or within 12 months after the first appointment of a liquidator (whichever date is later).  

Since it is not always realistically possible (or feasible) to commence voidable preference proceedings within the above time limits, section 588FF(3)(b) permits liquidators to make an application during the above time period for an extension of that time period.  

Previous cases have held that there is no power under section 588FF(3)(b) to make successive applications for time extensions as this section only offers an opportunity to apply for a “determinate extension” during the section 588FF(3)(a) time period. [1]

The Decision

In light of the above, the Applicants’ primary argument was that the operation of section 588FF(3)(b) excludes the Court’s ability to allow an extension of time pursuant to its powers under r 36.16 of the UCPR as an exercise of such power would be inconsistent with section 588F(3)(b).

The Court rejected this argument, relying on Gordon v Tolcher [2] as recognising the continued operation of the Court’s procedural rules in this context. Furthermore, whilst recognising successive applications were not possible under section 588FF(3)(b), the Court considered that the power to vary an order was distinct from the power to grant an extension, accepting the liquidators’ argument that the Variation Order was not a new and separate extension application, but simply a variation of the original Extension Order. 

Ultimately, the Court said that an order made in accordance with s588FF(3)(b), and subsequently varied by UCPR r 36.16, complies with the requirements of s 588FF(3)(a), since such an order was made on an application for extension within the required time period.  

Comment

The decision outlines a means to liquidators to further extend what otherwise appear to be final time limitations set by section 588FF(3)(b) extension orders. This would be convenient for liquidators, but mean that parties to potentially voidable transactions, in effect, no longer have the certainty of a single, determinative extension being granted to liquidators. 

The Applicants are seeking leave to appeal the decision so we will watch with interest whether this decision will stand.