Horne v Deputy Commissioner of Taxation

[2005] VSC 409

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

No. 8092 of 2005

In the matters of REDDIN CONSULTING GROUP PTY LTD (in liq);
DAVID REDDIN MANAGEMENT CONSULTANTS PTY LTD (subject to deed of company arrangement); and REDDIN SEARCH PTY LTD (subject to deed of company arrangement)

STIRLING LINDLEY HORNE and BRUNO SECATORE (as joint and several liquidators of Reddin Consulting Group Pty Ltd (in liq) and joint and several administrators of David Reddin Management Consultants Pty Ltd and Reddin Search Pty Ltd)	Plaintiffs
v
DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA	Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 September 2005
DATE OF JUDGMENT:	21 October 2005
CASE MAY BE CITED AS:	Horne v Deputy Commissioner of Taxation
MEDIUM NEUTRAL CITATION:	[2005] VSC 409

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CORPORATIONS – application by liquidators and by administrators for extensions of time in relation to time limitations under s.588FF(3) of the Corporations Act 2001 (Cth) – whether s.1322(4)(b) of the Act may be utilised by administrators to achieve one such extension of time.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D A Klempfner	Saxbys Lawyers
For the Defendant	Ms H M Riley	ATO Legal Services Branch

HIS HONOUR:

1. The plaintiffs are the liquidators of Reddin Consulting Group Pty Ltd (“RCG”) and the administrators of David Reddin Management Consultants Pty Ltd and Reddin Search Pty Ltd (“the Companies under administration”).

1. By originating process dated 5 September 2005 the plaintiffs, as liquidators, seek an order pursuant to s.588FF(3)(b) of the Corporations Act 2001 (Cth) (“the Act”) extending the period within which they may make an application under s.588FF(1) of the Act against the defendant. The period of extension sought is twelve months from the filing of this application or such other period as the Court thinks fit.

1. By the same originating process, the plaintiffs, as administrators of the Companies under administration, in substance seek orders pursuant to s.1322(4)(d) of the Act extending the period within which an application for an extension of time might be made under s.588FF(3)(b) of the Act, by any liquidators who might subsequently be appointed. The period of extension sought is six months from the filing of this application or such other period as the Court thinks fit.

1. I will first deal with the application by the plaintiffs in their capacity as administrators. Applications under s.588FF(1) must be made by liquidators within three years after the “relation-back day”. When a company passes from administration into liquidation the relation-back day as defined, prima facie, is the day of commencement of the administration and not the day of commencement of the liquidation. A consequential difficulty can arise if the three year period has expired before liquidators are appointed because an application for an extension of the three year period must be made within that period.[1] That difficulty potentially arises in the present proceeding because the administration of the Companies under administration commenced on 24 September 2002 and as at the commencement of this proceeding (and on 30 September 2005 when it was heard) liquidators had not been appointed to those companies (although it was likely that this would occur in the near future). The plaintiffs’ attempted solution to the anticipated difficulty was to seek an extension of time under a general provision of the Act dealing with extensions of time (ie s.1322(4)(d)) and the extension of time sought is, in turn, an extension of the period within which any subsequent liquidators may seek to obtain an extension of time under s.588FF(3)(b).

   [1]See s.588FF(3)(b) of the Act.

1. Section 588FF(3) of the Act provides that an application under s.588FF(1) “may only be made” within three years after the relation-back day or within such longer period as the Court orders, on an application made by the liquidator within those three years. There were some decisions of judges at first instance to the effect that s.1322(4)(d) might be utilised in the way in which the plaintiffs seek to use it in this proceeding.[2] It is unnecessary to canvass those decisions because there are now two decisions of appellate courts the reasoning in which makes it clear that s.1322(4)(d) cannot be utilised in this way. In particular, the relationship between the two provisions was comprehensively considered in the judgment of Spigelman CJ in BP Australia Ltd v Brown.[3]  In my view, a judge at first instance ought not to depart from the clear conclusions and reasoning contained in that case.

   [2]See Re Aura Commercial Interiors [2002] NSWSC 380; (2002) 20 ACLC 904 and Sutherland v Dexion Pty Ltd [2003] NSWSC 24; (2003) 173 FLR 123.

   [3](2003) 58 NSWLR 322

1. It was submitted on behalf of the plaintiffs that the facts and nature of the case in BP Australia Ltd v Brown were such that the decision of the Court of Appeal of the Supreme Court of New South Wales did not cover the present situation involving an “anticipatory” application by administrators.  It is true that the particular difficulty or problem faced in the present application was dealt with only in passing,[4] but the express reasoning of Spigelman CJ covers any attempt to utilise s.1322(4)(d) in relation to any of the time limitations in s.588FF(3). I further refer to a decision of the Court of Appeal of the Supreme Court of Queensland to the same effect in Greig & Duff v Australian Building Industries Pty Ltd.[5]  Accordingly it seems to me that the application by the plaintiffs, as administrators of the Companies under administration, must be dismissed. 

   [4]Spigelman CJ suggested, but did not decide, that there was a solution to the difficulty by reference to a defining of the relation-back day as being the date of commencement of the liquidation rather than the date of commencement of the administration.

   [5][2004] 2 Qd R 17; (2003) 21 ACLC 1565.

1. I turn to the application by the plaintiffs in their capacity as liquidators of RCG. They were appointed as liquidators by virtue of a resolution of creditors passed on 24 August 2005. However the relation-back day, prima facie, is 6 September 2002 when they were appointed as administrators of RCG. Accordingly the period for making an application by them as liquidators pursuant to s.588FF(1) would expire on 6 September 2005 unless extended by the Court. The application to extend that period was made within time, namely on 5 September 2005. Given that the liquidators had less than two weeks to consider whether to bring a proceeding against the defendant under s.588FF(1), it is at first blush not an unreasonable application to seek a further extension of the three year period, most of which had expired before they were appointed as liquidators. Further, the affidavits of the firstnamed plaintiff in my view support the need for investigations of the claim against the defendant and provide a reasonable basis for an extension of the three year period.

1. I am not persuaded however that a reasonable period of extension would be as long as twelve months.  An extension of the period until 30 June 2006 ought to be sufficient. 

1. For those reasons it will be ordered that the period within which the plaintiffs, as liquidators of Reddin Consulting Group Pty Ltd, may make an application against the defendant under s.588FF(1) of the Corporations Act 2001 (Cth) is extended to a period expiring on 30 June 2006, and that the originating process herein dated 5 September 2005 is otherwise dismissed.  I will hear the parties on the question of costs.