In the matter of Plutus Payroll Australia Pty Ltd (in liquidation)

[2020] NSWSC 1438

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Plutus Payroll Australia Pty Ltd (in liquidation) [2020] NSWSC 1438

Hearing dates:

28 May 2020

Date of orders:

28 May 2020

Decision date:

28 May 2020

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Time for seeking orders in relation to voidable transactions entered into by Company extended until 6 June 2021. Confidentiality order made in relation to liquidator’s affidavit.

Catchwords:

CORPORATIONS - Winding up - Voidable transactions - Application for orders under s 588FF Corporations Act 2001 (Cth) for an extension of the period within which an application may be brought against certain persons in respect of voidable transactions – Where delays caused by funding issues, non-compliance with document production and COVID-19 difficulties.

PROCEDURE – Non-publication order – Where liquidator’s affidavit supporting extension application discloses lines of inquiry that may prejudice investigations.

Legislation Cited:

- Corporations Act 2001 (Cth), s 588FF

- Court Suppression and Non-Publication Orders Act 2010 (NSW), ss 7 and 8

Cases Cited:

- Fortress Credit Corporation (Australia) II Pty Limited v Fletcher [2015] HCA 10; (2015) 254 CLR 489

- Re Octaviar Ltd (Recs and MgrsApptd) (in liq) [2012] NSWSC 1460; (2012) 271 FLR 413

Category:

Procedural and other rulings

Parties:

Timothy Bryce Norman and Salvatore Algeri in their capacity as joint and several liquidators of Plutus Payroll Australia Pty Ltd (in liq) (First Plaintiff)
PPA Contractors Australia Pty Ltd (in liq) (Second Plaintiff)
PPA Services Australia Pty Ltd (in liq) (Third Plaintiff)
PP Aus Holdings Pty Ltd (in liq) (Fourth Plaintiff)
PP Australia NSW Pty Ltd (in liq) (Fifth Plaintiff)
PP Services (WA) Pty Ltd (in liq) (Sixth Plaintiff)
PPA (SA) Pty Ltd (in liq) (Seventh Plaintiff)
PPA NT Pty Ltd (in liq) (Eighth Plaintiff)
RAM Enterprises Australia Pty Ltd (in liq) (Ninth Plaintiff)
SAI Solutions Australia Pty Ltd (in liq) (Tenth Plaintiff)
BRW Services Pty Ltd (in liq) (Eleventh Plaintiff)

Representation:

Counsel:
J Hynes (Plaintiffs)

Solicitors:
MinterEllison (Plaintiffs)

File Number(s):

2019/316438 (004)

Judgment – ex tempore (Revised 23 June 2020)

Nature of application and affidavit evidence

1. By Interlocutory Process filed on 11 May 2020, the Plaintiffs, Messrs Norman and Algeri in their capacity as joint and several liquidators (“Liquidators”) of Plutus Payroll Australia Pty Ltd (in liq) ("Plutus") and other companies seek orders under s 588FF(3)(b) of the Corporations Act 2001 (Cth) extending the time within which they may apply for orders in relation to voidable transactions entered into by Plutus and those other companies in the schedule to that Interlocutory Process. The primary relief sought is an order extending that time for nearly twelve months, to 6 June 2021, although an alternative order is sought extending the time for particular transactions specified in the affidavit evidence in support of the application.

2. The Liquidators rely on a lengthy affidavit of Mr Timothy Norman dated 11 May 2020 which refers to his appointment as one of the joint and several liquidators of Plutus and other entities. Mr Norman provides a helpful summary of the matters covered by that affidavit, to which I will refer in outlining the general scope of that affidavit, without needing to set out his detail at length. Mr Norman there refers to the limitation periods which apply in respect of potential recovery proceedings, which he seeks to have extended. He explains, at some length, the reasons for delays that have been experienced by the Liquidators in undertaking investigations in relation to potential voidable transaction claims, which include the size and complexity of the relevant liquidations; difficulties and delays in obtaining access to documents; further delays in conducting examinations, which were initially deferred by reason of limitations to funding, the deferral of these examinations by reason of production of additional documents by the Australian Federal Police; and a further deferral by reason of constraints on examinations during the COVID-19 pandemic.

3. Mr Norman also refers to a lack of cooperation by officers and former officers of the companies, which is not necessarily unique to this liquidation but will have greater impact in a complex liquidation involving numerous companies, and to the existence of ongoing and overlapping criminal investigations, which have also required deferral of matters to avoid interference with ongoing criminal proceedings. Mr Norman also refers to issues in respect of funding, which he has obtained on a staged basis, but in some cases after lengthy negotiations with the Australian Taxation Office.

4. In the third section of his affidavit, Mr Norman refers to difficulties and delays in the identification of the available claims, and to the possibility that claims may be available which have not yet been identified. Mr Hynes, who appears for the Liquidators, in turn points out that this extension application has a mixed character, so far as some potential claims against some parties have been identified, although there is not yet sufficient evidence to reach a determination whether to bring them, but in other cases the fact of payments out of a company have been identified, and their initial recipients have been identified, but the deregistration or liquidation of the recipient has presently delayed identification of the ultimate recipients of the payments and of the potential claims against them.

5. Mr Norman also refers to the investigations which have been undertaken to date, and notes that investigations are ongoing as to the possible reasons for, and any defences that may be available, in respect of identified transactions, as well as in respect of other issues as to unidentified transactions. Mr Norman also refers to why an extension of twelve months, as distinct from a shorter period is sought, and I will return to that below. Mr Norman identifies the question of prejudice to the potential defendants, and expresses the view that any such prejudice is outweighed by the benefits to the creditors, and to the wider community, in allowing sufficient time to complete investigations and obtain funding for any proceedings. Mr Norman's affidavit also addresses the question of confidentiality, which has not been addressed in submissions, and to which I will return below.

6. Mr Norman emphasises that this is the most complex insolvency he has dealt with, in his many years of experience, and points to both the character of the insolvency, as occurring in the context of a financial fraud against the Commonwealth, and the losses in excess of $160 million which had been suffered by the Commonwealth in that respect. That does, in my view, provide important context for the complexity of the issues. Mr Norman also refers to steps which have been taken in respect of document production, both in obtaining documents, where possible, from the Australian Federal Police, and by issuing summonses for document production in connection with examinations, although he points out that there has to date only been partial compliance with such document production requirements, with document production ongoing in respect of a number of parties. Mr Norman also refers to difficulties involved in the identification of claims, and I have noted above the particular issues arising from the deregistration of companies that were the initial recipient of payments. Mr Norman identifies several potential claims arising out of the transactions and, to the extent such claims have been identified, and persons who are potential defendants have been identified, then notice has been given to them of this application, as I will note below.

7. Mr Norman also explains why an extension is sought in the form of a general extension for proceedings generally, rather than in respect of specific transactions, because of the ongoing position in respect of his investigation. He indicates, and I accept, that he considers that a 12-month extension is necessary, given the likelihood that further documents will be produced in respect of orders for production and by the Australian Federal Police and the Australian Taxation Office; the hope that examinations will be completed in the second half of 2020, where at least some examinations are expected to occur in the near future, as restrictions related to COVID-19 are relaxed; and the need to take steps to secure funding to commence identified proceedings, which may well be substantial in number and in scale. As I have noted above, Mr Norman expresses the view that there would be less prejudice to potential defendants from the extension sought, than the prejudice to the liquidation and creditors if claims are permitted to lapse. Support for that proposition can be found in the fact that a number of potential defendants have been notified of this application, and none have sought to be heard in it.

8. By a second affidavit dated 26 May 2020, Mr Norman makes a number of corrections to his earlier affidavit, and also provides further information as to those matters where he is seeking to identify the ultimate beneficiaries of payments made to deregistered entities.

9. An affidavit dated 27 May 2020 of Mr Jeremy Forbes, a solicitor acting for the Liquidators, refers to the service of the application, and where requested affidavit evidence, on various parties. Mr Hynes fairly acknowledges that some parties have not been able to be served, because of difficulties in identifying their current addresses. A further affidavit of Mr Andrew Clarke, also a solicitor acting for the Liquidators, indicates that a number of parties have confirmed that they have received the relevant material, and have indicated that they do not seek to be heard in respect of the application. None of those parties appeared when the matter was called today.

The Liquidators’ submissions and determination

10. I have in turn had the benefit of very detailed submissions of Mr Hynes who addresses the substance of the evidence to which I have referred above, and identifies the matters relied upon to support the extension that is sought. Mr Hynes refers, first, to the complexity of the insolvency of the Plutus Group as a matter that has delayed the Liquidators’ work and I have referred to that matter above. He refers to the delays suffered by the Liquidators in obtaining access to information, and to the fact that the process of obtaining funding on a staged basis has been complex and, on occasion, time consuming. He refers to the disruption to examination proceedings, to which I've also referred above, arising in part from funding issues, in part from document production issues and, most recently, from the COVID-19 pandemic, and also to the complexity between the potential civil proceedings and existing criminal proceedings in respect of these matters. Mr Hynes also referred to the identification of several direct recipients of payments, and those persons have, as I have noted, been advised of this application, so far as it may affect their interests.

11. Mr Hynes also draws attention to the relevant statutory provisions and, in particular, to the Court's power under s 58FF(3)(b) of the Corporations Act to extend the period within which a relevant claim may be brought, or such longer period as the Court orders in an application brought by the Liquidator during the period specified in s 588FF(3)(a) of the Act. This application has been brought within that period. Mr Hynes draws attention to my summary of the matters that are relevant in an application for an extension order under this paragraph in Re Octaviar Ltd (recs and mgrs apptd) (in liq) [2012] NSWSC 1460; (2012) 271 FLR 413 at [64], where I observed that the time limitations in the section reflect a recognition that the quality of justice may deteriorate where there is delay and, in some circumstances, there will be a need that potential defendants be made aware of claims against them within a reasonable time and the loss of the ability to make a relevant claim can be justified as providing commercial certainty to persons who have had dealings with the company. At the same time, I there noted cases where extensions of time had been granted and observed that:

“The Court should consider whether the liquidators have diligently pursued the object of disposing of the proceedings in a timely way; used, or could reasonably have used, available opportunities under the rules or otherwise to avoid delay, and reasonably implemented the practice and procedure of the Court with the object of eliminating any lapse of time between the commencement of proceedings and their final determination... the liquidators bear the onus of demonstrating why it is just and fair that the time limit prescribed by s 588FF(3) of the Corporations Act should not apply.”

12. Mr Hynes also points out, uncontroversially, that orders extending time without identifying a particular transaction may be made in an appropriate case, at least where it is not possible for a liquidator to identify relevant defendants or transactions with certainty at the time of making the application: Fortress Credit Corporation (Australia) II Pty Limited v Fletcher [2015] HCA 10; (2015) 254 CLR 489 at [24].

13. Mr Hynes also refers to relevant matters in the exercise of the discretion whether to extend the time under s 588FF(3) of the Act, including the extent of the delay and the explanation for it; the merits of the proposed proceedings, unless the Liquidators’ purpose is, as is largely the case here, to investigate whether or not to bring proceedings; and prejudice arising from the grant of an extension. Mr Hynes draws attention to the Liquidators’ detailed explanation of the reasons for the delay, and I am satisfied that the matters to which the Liquidators have drawn attention, including lack of cooperation, complexity, issues as to funding, and the difficulty in obtaining relevant documents, combined with the further difficulties arising from the COVID-19 pandemic are all matters which support the extension sought. Mr Hynes submits that this is a situation where it is difficult to undertake any preliminary assessment of the merits of the potential claims, because matters are still at an investigative stage, even in respect of those transactions which have been identified and where recipients have been identified. It is sufficient to note, as Mr Hynes points out, that here there are many transactions in which payments have been made out of the companies, the justification of which is not readily apparent, and that that suggests that proceedings in respect of those matters may well have merit, depending upon the outcome of the further investigations which the Liquidators are undertaking.

14. It seems to me that the Liquidators are correct that there will be limited prejudice to the potential defendants from an extension of time, particularly where potential defendants can be in little doubt that these matters are the subject of ongoing inquiry, and have the opportunity to prepare for any proceedings which may be brought, and there would conversely be significant prejudice to the liquidation, creditors, and the wider public interest if proceedings could not be brought in respect of insolvent transactions in circumstances of this kind.

15. For all of these reasons, I am satisfied that the orders sought should be granted, and that they may properly be granted in the form of a shelf order, and that the 12 month period that is sought is justifiable in the circumstances, where this is a liquidation of extreme complexity and difficulty. I am also satisfied that this is a proper case in which to make an order that the Liquidators’ costs be paid out of the property of the companies, where this application is brought in order to advance the liquidation.

Non-publication order

16. The Liquidators seek an order under s 7 of the Court Suppression and Non-Publication Orders Act 2010 (NSW) in respect of Mr Norman's affidavit dated 11 May 2020, which is the most substantial of the affidavits relied on in respect of the application. Mr Hynes fairly accepts that not all parts of that affidavit raise potential risks to the conduct of the liquidation, but submits that some parts are of that nature, so far as they identify potential lines of inquiry, or steps that may need to be taken before proceedings are commenced, and that access to that information could advantage potential defendants and, at worst, frustrate the ability to take those further steps. It seems to me that the substance of those affidavits does deal with matters that are confidential and capable of causing prejudice to the liquidation if they are disclosed and, in those circumstances, there is little utility in seeking to mask parts of that affidavit, as distinct from addressing it as a whole.

17. The Court has power to make a suppression and non-publication order under s 7(b) of the Court Suppression and Non-Publication Orders Act 2010 upon the basis set out in s 8(1)(a) of the Act, namely that such an order is necessary to prevent prejudice to the proper administration of justice so as to preclude publication or other disclosure of the affidavit. I am satisfied that that order is warranted on that basis, because such prejudice would arise if a liquidator was unable to approach the Court in an application of this kind, so as to seek such an extension, without his or her disclosure of the state of his or her investigation, prejudicing the future conduct of that investigation or consequential proceedings. For that reason, I am satisfied that the administration of justice, by way of access to justice, is promoted by making an order that will avoid such adverse consequences, by preventing access to and publication of such information. I will, however, make that order in a somewhat more extended form than is sought in the Interlocutory Process, with appropriate qualifications which would permit an application to vary that order if properly based.

Orders

18. I therefore make the following orders:

1. Order, under s 588FF(3)(b) of the Act, that the time for the making of an application in respect of Plutus Payroll Australia Pty Ltd (in liq), or any of the companies listed in schedule 1 to the Interlocutory Process dated 11 May 2020 ("Companies") be extended to 6 June 2021.

2.    Order that, subject to any further order of the Court, the Plaintiffs' costs of this application be paid out of the property of the companies.

3. Order that, until further order, which may only be sought on two business days’ notice to the Plaintiffs, pursuant to s 7(b) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) upon the ground of s 8(1)(a) of that Act, being that such an order is necessary to prevent prejudice to the proper administration of justice, publication, or other disclosure of Mr Norman's affidavit dated 11 May 2020 be prohibited, and Mr Hynes' submissions be prohibited, and such documents be placed in a sealed envelope marked that access not be permitted without leave of a Judge of the Court made with two business days’ notice to the Plaintiffs. This order applies throughout the Commonwealth of Australia.

4.   The exhibits are to be returned.

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Decision last updated: 20 October 2020