Australian Resources
[2002] NSWSC 135
•4 March 2002
Reported Decision:
41 ACSR 69
New South Wales
Supreme Court
CITATION: Australian Resources [2002] NSWSC 135 CURRENT JURISDICTION: Equity Division FILE NUMBER(S): SC 1759/02 HEARING DATE(S): 04/03/02 JUDGMENT DATE: 4 March 2002 PARTIES :
Australian Resources Ltd (in liquidation)
Ariminco Mining Pty Ltd (in liquidation)
Martin John Green as liquidator - PlaintiffJUDGMENT OF: Barrett J
COUNSEL : Mr B.A. Coles QC/Mr P.J. Dowdy - Plaintiff SOLICITORS: Henry Davis York - Plaintiff CATCHWORDS: CORPORATIONS - extension of period for challenging allegedly voidable transactions - principles to be applied - risk of subsequent adverse order if liquidator uses extension to pursue persons already identified LEGISLATION CITED: Corporations Act 2001 (Cth) CASES CITED: Brown v DML Resources No 2 (2001) 39 ACSR 219
Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608
Taylor v Woden Constructions Pty Ltd (unreported, FCA, 23 August 1998)DECISION: Extension granted
IN THE SUPREME COURT REVISED
OF NEW SOUTH WALES
EQUITY DIVISION
BARRETT J
MONDAY, 4 MARCH 2002
1759/02 – MARTIN JOHN GREEN AS LIQUIDATOR OF AUSTRALIAN RESOURCES LTD (IN LIQUIDATION) and ARIMINCO MINING PTY LTD (IN LIQUIDATION)
JUDGMENT
1 The plaintiff, as the liquidator of each of Australian Resources Limited and Ariminco Mining Pty Ltd, makes application under s.588FF(3)(b) of the Corporations Act 2001 (Cth) for extension until 14 March 2003 of the period within which applications under s.588FF(1) may be made in relation to any transaction of either company considered to be voidable under s.588FE. The period which applies in the absence of such an extension is a period of three years after the relation back day (see s.588FF(3)(a)).
2 In this case the relation back day is 14 March 1999 which is the day on which the plaintiff became the voluntary administrator of each company. He subsequently became the liquidator but in the meantime, that is to say on the day following the day on which he was appointed administrator, receivers were appointed, presumably by a secured creditor. Those receivers took control of the assets and business of the company and importantly, for present purposes, its books and records.
3 The receivership continued until December 2000 with the result that until that time the plaintiff did not have access to the books and records and was not, therefore, able to make the kind of assessment necessary to enable him to decide the question of seeking orders under s.588FF(1). When the books and records did become available, they were not, it appears, complete and in any event were contained in some 500 boxes which meant that there was a great effort required, on the part of the liquidator, in coming to grips with the position of each company. The liquidator's appreciation of matters was enhanced by examination of officers and others able to give information but that process was not completed until December 2001.
4 `1A further obstacle placed in the liquidator's way was that funds of some $3 million, which would otherwise have been available to him to pursue necessary investigations and enquiries, were tied up as a result of injunction proceedings and did not become available to the liquidator until towards the end of 2001. Now having the benefit of those funds, the liquidator has been able to seek some expert advice which he considers relevant to following up certain possibilities of the s.588FF action.
5 This account will be sufficient to show that whereas s.588FF(3) works on a general assumption that three years should be sufficient for a liquidator to make final decisions and come to final conclusions about attempts to attack transactions made voidable by s.588FE, the liquidator of these companies has laboured under disadvantages, resulting in his having had significantly less than three years in which to undertake that task. In practical terms, it is clear that he has had less than one full year of access to the funds and information needed and that, of itself, is a powerful consideration when it comes to granting this application.
6 Mr Coles has drawn my attention to the cases in which the relevant principles are discussed. The most commonly cited description of them appears to be that given by Austin J in Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 which in turn draws heavily on the decision of Finn J in Taylor v Woden Constructions Pty Ltd (unreported, FCA, 23 August 1998). The position is summarised by Austin J as follows:
(a) ordinarily, the issues raised on an extension application are threefold:“Considerations relevant to the exercise of the Court’s discretion under s.588FF(3) were stated by Finn J in Taylor v Woden Constructions Pty Ltd (Federal Court, 23/8/98, unreported). The following propositions, with which I respectfully agree, emerge from that case:
- (i) the explanation for the delay in bringing proceedings;
(ii) a preliminary review of merits of the foreshadowed proceedings – that is, an investigation as to whether such proceedings would be so devoid of prospects that it would be unfair, by granting an extension, to expose the other party to the continuing prospect of suit;
- (iii) whether the likely actual prejudice resulting from the grant of an extension is sufficiently substantial to outweigh the case for granting an extension;
- (b) where the liquidator’s purpose in seeking the extension of time is simply to put himself into a position where he can properly decide whether or not to bring proceedings, a preliminary inquiry into the merits of any consequent proceedings may not always be necessary.”
7 The present case is principally within Austin J’s paragraph (b), with the result that (a)(ii) need not be considered. Paragraph (a)(i) is obviously satisfied for reasons I have already given. When it comes to paragraph (a)(iii), I wish to make particular comment.
8 The subsequent decision of Austin J in Brown v DML Resources No. 2 (2001) 39 ACSR 219 highlights the position of persons who, at the time of an extension of this kind, have already been singled out by the liquidator as what one might call “targets” of reasonably well formulated claims under s.588FF. His Honour emphasised that for an application of this kind to be dealt with (as this one has been) in the absence of such a person obviously causes prejudice to that person which would form the basis of a successful application by the person for relief should advantage be taken of the extension in prosecuting proceedings against the person. In other words, persons already so identified before the extension is granted and who have had no opportunity to be heard on the extension application must, as a practical matter, be proceeded against by the liquidator within the unextended period if the liquidator is to have any real prospect of resisting claims by them to have the ex parte order set aside.
9 I canvassed with Mr Coles the possibility of excluding from the ambit of the s.588FF(3)(b) extension all proceedings against such persons already identified (and I am told that there are some) but, on the whole, I think the practical realities are sufficiently appreciated by the liquidator and will be kept in mind so that, if he proceeds against those persons, he will do so within the unextended period, conscious that he will expose himself to an almost certain prospect of adverse orders if he attempts to take unfair advantage of what is, in terms, a blanket extension.
10 I make orders 1 and 2 in the originating process, leave to file which in court has been given and which I now sign and date for identification and place with the papers.
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