HURT & STRICKLAND as Liquidators of TSG PROJECTS PTY LTD (IN LIQ)
[2016] WASC 140
•5 MAY 2016
HURT & STRICKLAND as Liquidators of TSG PROJECTS PTY LTD (IN LIQ) [2016] WASC 140
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 140 | |
| 05/05/2016 | |||
| Case No: | COR:283/2015 | 13 APRIL 2016 | |
| Coram: | MASTER SANDERSON | 13/04/16 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | DAVID ASHLEY NORMAN HURT & KIMBERLEY ANDREW STRICKLAND as Liquidators of TSG PROJECTS PTY LTD (IN LIQ) WA UNIVERSAL RIGGING CO PTY LTD |
Catchwords: | Corporations law Application for extension of time in which to bring preference claim Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) |
Case References: | BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiffs
WA UNIVERSAL RIGGING CO PTY LTD
Other Party
Catchwords:
Corporations law - Application for extension of time in which to bring preference claim - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiffs : Mr C S Williams
Other Party : Mr R C Di Renzo
Solicitors:
Plaintiffs : Solomon Brothers
Other Party : Nova Legal
Case(s) referred to in judgment(s):
BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489
1 MASTER SANDERSON: By originating process filed 4 December 2015 the plaintiff sought an order under s 588FF(3)(b) of the Corporations Act 2001 (Cth) (the Act) extending time within which to commence proceedings under s 588FF of the Act. Section 588FF is in the following terms:
Courts may make orders about voidable transactions
(1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:
(a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;
(b) an order directing a person to transfer to the company property that the company has transferred under the transaction;
(c) an order requiring a person to pay to the company an amount that, in the court's opinion, fairly represents some or all of the benefits that the person has received because of the transaction;
(d) an order requiring a person to transfer to the company property that, in the court's opinion, fairly represents the application of either or both of the following:
(i) money that the company has paid under the transaction;
(ii) proceeds of property that the company has transferred under the transaction;
(e) an order releasing or discharging, wholly or partly, a debt incurred, or a security or guarantee given, by the company under or in connection with the transaction;
(f) if the transaction is an unfair loan and such a debt, security or guarantee has been assigned--an order directing a person to indemnify the company in respect of some or all of its liability to the assignee;
(g) an order providing for the extent to which, and the terms on which, a debt that arose under, or was released or discharged to any extent by or under, the transaction may be proved in a winding up of the company;
(h) an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time;
(i) an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time;
(j) an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable.
(2) Nothing in subsection (1) limits the generality of anything else in it.
(3) 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.
(4) If the transaction is a voidable transaction solely because it is an unreasonable director-related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between:
(a) the total value of the benefits provided by the company under the transaction; and
(b) the value (if any) that it may be expected that a reasonable person in the company's circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c).
3 There was no dispute between the parties as to the applicable principles. The aim of the subsection is to allow the court to mitigate the strictness of the time limits imposed by s 588FF(3)(a) in an appropriate case. What the court is required to do is determine whether it is fair and just in all the circumstances to grant the extension sought having regard to on the one hand the liquidators explanation for the delay and on the other hand the potential prejudice to defendants if the extension was granted. The matters raised in an application for an extension of time would ordinarily include any explanation for the delay in bringing the proceedings; a preliminary review of the merits of the foreshadowed proceedings; and whether the likely or actual prejudice resulting form the grant of the extension was sufficiently substantial to outweigh the case for granting the extension. These principles emerge from a number of decisions including Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489, and BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322.
4 Against that legal framework the relevant facts in the present case can be summarised in the following way. Between 1 August 2012 and the date of liquidation, 7 December 2012, WA Universal Rigging Co Pty Ltd (WAURC) received payments from the company totalling $744,450. Throughout that same six month period WAURC supplied goods and services to the company to the net value of $155,174. As a result of those payments WAURC obtained a net reduction of indebtedness totalling $589,276. Based upon the evidence filed in support of the application as a result of their investigations into the company's affairs the plaintiffs are of the view that the payments made to WAURC constitute an unfair preference.
5 The plaintiffs wrote to WAURC on 4 September 2014 demanding repayment of the sum of $589,276 within 14 days. Thereafter the solicitors for the parties have engaged in substantial correspondence both on an open and without prejudice basis with a view to resolving the matter. On 23 July 2015 the parties also participated in a without prejudice meeting in an attempt to resolve the matter. All this has come to nothing.
6 At various times during the course of negotiations WAURC has asserted the plaintiffs, because they had roles in the external administration of some entities related to the company, could not form an independent view as to the alleged preference claims. The plaintiffs determined prior to commencing an unfair preference claim they would first obtain an independent solvency report. The company did not have sufficient funds to meet the costs of obtaining such a report nor did they have the funds to pursue any unfair preference claim. They therefore sought the assistance of a commercial litigation funder. Their search was successful and on 19 January 2016 I approved the plaintiffs entering into a litigation funding agreement pursuant to s 477(2B) of the Act.
7 Solicitors for WAURC opposed the extension of time being granted. Submissions made on behalf of WAURC essentially relied on two points. First that the plaintiffs were not independent and that they therefore should not be granted leave.
8 In my view there was nothing in the affidavit material which suggested the plaintiffs had a conflict of interest. But even if there was some apprehension that may be the case, the plaintiffs had taken steps to obtain an independent solvency report. That should allay any concerns that WAURC may have.
9 The other matter raised by WAURC has to do with the explanation for the delay in bringing proceedings. They submitted the fact the plaintiffs were waiting on a decision as to litigation funding was not a factor which would justify the delay. This is an argument which has been raised on a number of occasions not necessarily in the context of an application such as this. It is my view a liquidator, or indeed any external administrator, who does not have access to funds and who waits to see whether funding will become available is acting appropriately and that is an explanation for the delay. There is no point in commencing proceedings if they cannot be pursued because of a lack of funding. Of course the point must be reached where the interests of justice would not countenance an extended delay. Each case is dependent on its circumstances. But it does seem to me that in a case such as the present the fact the plaintiffs were waiting for a decision on funding provides a sound explanation for the delay in bringing the application.
10 In my view the plaintiffs made good their case and for the reasons set out above I granted the extension of time. On publication of these reasons I will hear the parties as to costs.
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