Ball (Liquidator), in the matter of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd”)
[2021] FCA 521
•17 May 2021
FEDERAL COURT OF AUSTRALIA
Ball (Liquidator), in the matter of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd”) [2021] FCA 521
File number(s): QUD 238 of 2020 Judgment of: GREENWOOD J Date of judgment: 17 May 2021 Catchwords: CORPORATIONS – consideration of an application under s 588FF(3) for an extension of the period within which an application may be made by the liquidator under s 588FF(1) of the Corporations Act 2001 (Cth) in relation to the matters contemplated by s 588FE of that Act Legislation: Corporations Act 2001 (Cth), ss 588FE(2), (3)‑(6A), 588FF(1), (3) Cases cited: Carter (Liquidator), in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) [2019] FCA 2076 Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporation Insolvency Number of paragraphs: 39 Date of last submission/s: 8 April 2021 Date of hearing: 14 May 2021 Solicitor for the Plaintiffs: Stacks Law Firm ORDERS
QUD 238 of 2020 IN THE MATTER OF ACN 141 037 229 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK MONEY WEALTH THROUGH PROPERTY PTY LTD”); ACN 164 472 020 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK PUBLICATIONS PTY LIMITED”); AND ACN 601 865 025 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “WHAT THE FOX PTY LTD”)
BETWEEN: MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 141 037 229 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK MONEY WEALTH THROUGH PROPERTY PTY LTD”)
First Plaintiff
MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 164 472 020 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK PUBLICATIONS PTY LIMITED”)
Second Plaintiff
MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 601 865 025 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “WHAT THE FOX PTY LTD”)
Third Plaintiff
ORDER MADE BY:
GREENWOOD J
DATE OF ORDER:
17 MAY 2021
THE COURT ORDERS THAT:
1.The period of time within which the plaintiff liquidator may bring a proceeding against any party in which it is contended that a transaction engaging any one or more of the following companies (in their pre‑liquidation capacity as at the date of the transaction) is voidable because of s 588FE of the Corporations Act 2001 (Cth), is extended to 17 May 2022:
(a)ACN 141 037 229 Pty Ltd (formerly known as “Think Money Wealth Through Property Pty Ltd”);
(b)ACN 164 472 020 Pty Ltd (formerly known as “Think Publications Pty Limited”);
(c)ACN 601 865 025 Pty Ltd (formerly known as “What the Fox Pty Ltd”).
2.The costs of and incidental to this application are costs in the winding up of each plaintiff company.
3.Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
The plaintiff Mr Mitchell Ball, is the liquidator of the three companies described in the heading to these proceedings under the ACN descriptions but which were formerly known, respectively, as “Think Money Wealth Through Property Pty Ltd” (“TMW”), “Think Publications Pty Limited” (“Publications”) and “What the Fox Pty Ltd” (“Fox”).
On 20 July 2017, the members of each company resolved that each company be wound up and that Mr Ball be appointed the liquidator of the company for the purposes of s 491(1) of the Corporations Act 2001 (Cth) (the “Act”).
For the purposes of the “Relation‑Back Day” under the Act, that day in the winding up of each company is 20 July 2017.
On 17 July 2020, the plaintiff filed an originating proceeding seeking an order for the issue of a summons pursuant to s 596A of the Act directed to Juanita Ruth Childs and Charmaine Elizabeth Childs; an order for the issue of a summons pursuant to s 596B of the Act directed to Christine Betty Childs, John Albert Childs, Wayne Fraser and Tamar Fraser in relation to the examinable affairs of each company; other orders directed to the production of documents; an order in relation to a retainer as between the plaintiff and Stacks/Southern Highlands Pty Ltd trading as “Stacks Law Firm”; an order in relation to a “Funding Agreement” and, relevantly for present purposes, an order that the period during which the plaintiff may make any application pursuant to s 588FF(1) of the Act in relation to each company against any party, be extended until such time as the Court directs.
In Mr Ball’s affidavit of 17 July 2020 in support of the application for those orders and, in particular, the order for an extension of time, Mr Ball observes that the affairs of each company are intertwined and accordingly the application is made on behalf of all three entities together.
At paras 13 and 14 of Mr Ball’s affidavit, he sets out factual matters which establish the basis upon which he concludes that the affairs of each company bear upon the other in a close way. It is not necessary in these reasons to set out the details of those matters.
I accept Mr Ball’s affidavit about those matters and his conclusion that it is appropriate and cost efficient for the affairs of the companies to be investigated concurrently.
Section 588FF(1) of the Act provides that where, on the application of a company’s liquidator, a Court is satisfied that a transaction of the company is voidable because of s 588FE, the Court may make one or more of the orders described at subparas (a) to (j) of that section.
Section 588FF(3) of the Act provides that an application under subsection (1) may only be made:
(a) during the period beginning on the relation‑back day and ending:
(i) 3 years after the relation‑back day; or
(ii)12 months after the first appointment of a liquidator in relation to the winding up of the company;
whichever is the later; or
(b)within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.
Accordingly, the expiration of the period contemplated by s 588FF(3)(a)(i) is 19 July 2020. However, that period may be extended for such longer period as the Court orders on an application by the liquidator made within the period ending 19 July 2020.
The present application was made within time.
Section 588FE of the Act addresses the topic of “voidable transactions”.
Subsection (2) addresses transactions which are voidable because they are insolvent transactions of the company as that term is understood for the purposes of the Act.
Subsection (3) addresses a transaction which is voidable because it is an insolvent and uncommercial transaction as those terms are understood for the purposes of the Act.
Subsections (4), (5), (6) and (6A) of the Act address, respectively, a transaction which is voidable because it is an insolvent transaction of the company engaging a related entity of the company as a party; a transaction which is voidable because it is a transaction made for the purpose of defeating creditors; a transaction which is voidable because it is an unfair loan to the company made at any time on or before the day when the winding up began; and a transaction which is voidable as an unreasonable director‑related transaction of the company and one entered into within the period described in s 588FE(6A)(b) of the Act.
Mr Ball as liquidator of each company is investigating a range of matters which might give rise to a challenge to a transaction on one or more of the grounds described in s 588FE giving rise to an application for orders falling within s 588FF(1) of the Act.
The history of aspects of the steps taken by Mr Ball in his administration of each company and the scope of the investigations he has undertaken and proposes to undertake are set out extensively in his affidavit of 17 July 2020. It is not necessary to set out the content of those matters in this affidavit. I accept Mr Ball’s evidence on these matters.
As to the application for an extension of time under s 588FF(3)(b) of the Act, the following matters should be noted.
The considerations going to the exercise of the discretion to extend the time within which an application may be brought within s 588FF(1) of the Act, are reasonably well understood. In Carter (Liquidator), in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) [2019] FCA 2076, Gleeson J at [13]‑[16] made these observations:
13In exercising the discretion under s 588FF(3)(b), the Court is required to consider what is fair and just in all the circumstances: BP Australia Limited v Brown & Ors [2003] NSWCA 216; (2003) 58 NSWLR 322 (BP Australia) at [187]. The applicant for the extension must satisfy the Court that it should be granted: BP Australia at [183].
14 The matters that ordinarily inform the exercise of the Court’s discretion are:
(1)the liquidator’s explanation for the delay in taking action within the three year period provided for by the statute;
(2)the merits of the foreshadowed proceeding, assessed by a “preliminary review”; and
(3)any likely prejudice that would be suffered if the extension of time is granted: Parker, in the matter of Worldwide Specialty Property Services Pty Limited (in liq) v Worldwide Specialty Property Services Pty Limited (in liq) [2017] FCA 687 at [15]-[16]; Walker and Moloney v CBA Corporate Services (NSW) Pty Limited [2012] FCA 328; (2012) 88 ACSR 153 (Walker) at [43].
15In Marsden (liquidator) v CVS Lane PV Pty Limited, in the matter of Pentridge Village Pty Limited (in liq) (receiver and manager appointed) (controller appointed) [2018] FCA 102 at [60]-[61], I noted:
[60] Concerning merits, what is required 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”: Walker at [44] citing Green v Chiswell Furniture Pty Ltd (in liq) [1999] NSWSC 608 at [15]. However, a review of the merits may be unnecessary if the purpose of the application for an extension of time is to allow the liquidator time in which to properly decide whether or not to bring the proposed proceedings: Walker at [44].
In Taylor v Woden Constructions Pty Ltd [1998] FCA 1228, Finn J said:
Where the liquidator is not in a position to consider the merits but has proper grounds for inquiring into the matter because of suspicion it invites (or that is cast on it) or of the explanation it requires, then provided he can satisfactorily explain his delay in inquiring sufficiently into the matter, he should not be closed out from an extension because he is unable to say he has a meritorious claim. In some instances ... it will be sufficient if he can say “I do not know if I do, but there is reason to inquire”.
16The principles of natural justice require that, if potential defendants to a s 588FF(1) application have been identified by the liquidator, they ought to be given an opportunity to be heard on the application for an extension of time under s 588FF(3): ASIC v Karl Suleman Enterprizes Pty Ltd (In Liq) [2004] NSWSC 1244; (2004) 52 ACSR 103 at [7].
Concerning the circumstances as to why it was not possible for Mr Ball to be in a position to commence proceedings to pursue possible claims under s 588FE of the Act within the period ending 19 July 2020, Mr Ball deposes to these matters.
Mr Ball was appointed the liquidator on 20 July 2017.
Between July 2017 and December 2019, Mr Ball made various requests for the books and records of each company as described in his affidavit as earlier mentioned.
In December 2019, Mr Ball sought the assistance of the Australian Securities and Investments Commission (“ASIC”) in obtaining access to the books and records of each company. Despite various requests made by Mr Ball and steps taken to engage with ASIC on that matter, Mr Ball has only been provided with limited books and records for each company. Nevertheless, Mr Ball conducted investigations into the affairs of each company as described in his affidavit of 17 July 2020.
Throughout these various steps Mr Ball has been without sufficient funds to carry out a comprehensive investigations into the affairs of each company and into particular transactions.
Nor has Mr Ball been able to retain solicitors to advise him in relation to the transactions or to pursue potential claims.
In September 2019, Mr Ball approached Stacks Law Firm and a litigation funder to discuss the provision of funds to support the investigation of potential claims available to him concerning particular transactions.
In February 2020, Mr Ball conducted interviews with directors and former directors of each company to ascertain further information relevant to the potential merits of any claims before deciding whether it is in the interests of creditors to proceed. Those interviews included interviews with Ms Charmaine Childs, Juanita Childs and Christine Childs.
In February 2020, Mr Ball reached agreement with Stacks Law Firm and a litigation funder to investigate and pursue potential claims.
Orders were made in these proceedings on 7 October 2020 requiring the plaintiff to serve copies of the Court’s order of 7 October 2020, the originating application and the affidavit of Mr Ball of 17 July 2020 (being the non‑confidential affidavit) on each of the potential defendants to proceedings in reliance upon s 588FE and s 588FF(1) of the Act, namely Juanita Ruth Childs, Think Money Pty Ltd (“TM”) and Rivermont Pty Limited (“Rivermont”).
Copies of those documents together with a covering letter were served on Juanita Childs on 13 November 2020 and on TM on 18 November 2020.
Although a case management conference in relation to the application for an extension of time was called on for hearing on 26 November 2020, there was no appearance by or on behalf of either Juanita Childs or TM.
On 9 December 2020, Mr Malan of FC Lawyers advised Stacks Law Firm that Mr Malan had instructions to accept service on behalf of Rivermont of the originating process, the Court orders made on 7 October 2020 and orders made by the Court on 29 October 2020 addressed to Rivermont for the production of documents. Those documents were provided to Mr Malan on 9 December 2020.
On 18 December 2020, Stacks Law Firm provided a copy of Mr Ball’s affidavit of 17 July 2020 to Mr Malan. On 18 December 2020, Deputy Registrar Lynch adjourned the applications for the issue of examination summonses to a date to be fixed.
Mr Ball is presently seeking advice from counsel as to further steps to be taken, including further examinations, in order to further investigate potential voidable transaction claims against particular parties the subject of examinations pursuant to orders for summonses which would be the subject of proceedings contemplated under s 588FE for orders under s 588FF(1).
Mr Ball contends that despite his efforts to investigate potential claims available to him, he was unable to complete the necessary investigations and determine by 19 July 2020 whether to commence proceedings. That circumstance arose, he says, by reason of the failure of the directors of each company and past directors to fully cooperate with his investigations, including by failing to provide requested material. He says that he was unable to complete his investigations and determine whether to commence proceedings also due to insufficient funds in the winding up of each company to enable detailed investigations into potential claims to be conducted. Mr Ball says that that circumstance was only overcome in February 2020 following the agreement reached with Stacks Law Firm and a litigation funder.
In Mr Ball’s affidavit of 17 July 2020, he says that he has undertaken a detailed analysis of the solvency of each company and is of the opinion that each company was insolvent at all material times since incorporation up to the date of Mr Ball’s appointment as liquidator. Mr Ball deposes that he has undertaken a detailed analysis of various payments that may give rise to voidable transactions under s 588FE(4) of the Act in relation to each company including payments made to a former director, Juanita Childs; payments made and received between the companies; and payments made to and received by the companies from related parties, TM and Rivermont. As to these matters, see paras 74‑78, 80‑85 and 88‑112 of Mr Ball’s affidavit of 17 July 2020.
Based upon these investigations, Mr Ball contends that potential voidable transaction claims have sufficient merit to support an extension of the timeframe contemplated by s 588FF(3)(a) of the Act and, in the alternative, the claims have sufficient merit to warrant the further investigation that Mr Ball is carrying out by way of the adjourned applications for the issue of summonses and the orders for production. Mr Ball contends that a sufficient period of time to enable the completion of examinations, the consideration of the strength and merits of potential claims and whether proceedings are to be commenced, is nine months from the making of an order for an extension of time. Mr Ball also contends that there is no substantial injustice or prejudice likely to be caused to any person if an extension of time is granted. Further, all potential defendants identified by Mr Ball are on notice of this application and have been served with the material. No submissions have been received from any of those potential defendants in opposition to the present application.
I accept the evidence of Mr Ball in support of the application. None of Mr Ball’s evidence is contested or challenged. No submissions have been lodged in opposition to the proposed order. The factual matters addressed by Mr Ball address the considerations relevant to the exercise of the discretion and support the exercise of the discretion. Accordingly, pursuant to s 588FF(3)(b), the period of time within which an application may be brought under s 588FF(1) is extended so as to end on 17 May 2022.
The costs of and incidental to this application are costs in the winding up of each plaintiff company.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood. Associate:
Dated: 17 May 2021
1
8
1