Nipps v Featherby [No 2]
[2024] WASC 236
•28 JUNE 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NIPPS -v- FEATHERBY [No 2] [2024] WASC 236
CORAM: HILL J
HEARD: 26 JUNE 2024
DELIVERED : 26 JUNE 2024
PUBLISHED : 28 JUNE 2024
FILE NO/S: COR 161 of 2023
BETWEEN: JEREMY JOSEPH NIPPS
Plaintiff
AND
NATHAN JOHN FEATHERBY
First Defendant
SAXON TRAVIS BALL
Second Defendant
MICHAEL RUSSELL DELIU
Third Defendant
MADE SUMARYA
Fourth Defendant
NUEVO ROYALTY LIMITED
Fifth Defendant
MICHAEL GEORGE FREDERICK POVEY
Sixth Defendant
CHARLES DAVID ROSS STRAW
Seventh Defendant
Catchwords:
Corporations law - Application for extension of time under s 588FF(3)(b) of the Corporations Act 2001 (Cth) - Extension sought to allow liquidator further time to consider whether to commence proceedings against the defendants - Whether shelf order appropriate - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 588FF(1), s 588FF(3)(a), s 588FF(3)(b)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | R Young SC |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No appearance |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
| Seventh Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Mills Oakley |
| First Defendant | : | In person |
| Second Defendant | : | In person |
| Third Defendant | : | In person |
| Fourth Defendant | : | In person |
| Fifth Defendant | : | Hall & Wilcox (Perth) |
| Sixth Defendant | : | Hall & Wilcox (Perth) |
| Seventh Defendant | : | Hall & Wilcox (Perth) |
Cases referred to in decision:
BP Australia Ltd v Brown & Ors [2003] NSWCA 216
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Cussen, in the matter of Monarch Towers Pty Ltd (in liquidation) [2023] FCA 192
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489
Grant Samuel Corporate Finance Pty Ltd v Fletcher [2015] HCA 8; (2015) 254 CLR 477
Green v Chiswell Furniture Pty Ltd (in liq) [1999] NSWSC 608
Griffiths v Nillumbik Shire Council [2022] VSCA 212
Matthew David Woods as joint and several liquidator of Brierty Limited (In Liquidation) [2022] WASC 310
Mohen as Liquidator of MBP (WA) Pty Ltd [2023] WASC 81
Nipps (Liquidator), in the matter of Ochre Group Holdings Limited (in liq) (No 3) [2023] FCA 1404
Onefone Australia Pty Ltd v One.Tel [2007] NSWSC 268
Walker and Moloney v CBA Corporate Services (NSW) Pty Limited [2012] FCA 328
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript).
The plaintiff was appointed as liquidator of Ochre Group Holdings Ltd (Ochre) on 14 October 2020 pursuant to a resolution of members.[1] On this basis, the deadline for the commencement of any actions or proceedings under s 588FE of the Corporations Act 2001 (Cth) (Act) was 14 October 2023.
[1] Affidavit of Jeremy Joseph Nipps filed 13 October 2023, 'JJN-1'.
On 13 October 2023, the plaintiff filed an originating process seeking orders pursuant to s 588F(3)(b) of the Act to extend the time for making an application under s 588FF(1) of the Act. The plaintiff is concerned that transactions which occurred in 2020 concerning the sale by Ochre of iron ore royalty rights to Nuevo Royalty Limited may be voidable as unreasonable director-related transactions, pursuant to s 588FE of the Act. The plaintiff has also been investigating the possibility of claims being made against the directors and shadow directors of Ochre for breach of statutory and fiduciary duties, as well as other possible claims against other parties.
An extension is sought to enable the plaintiff further time to consider whether to commence proceedings against the defendants under the Act. The extension is sought for a 12 month period, up to and including 14 October 2024, to enable the liquidator to continue his investigations of these transactions and to consider whether or not to commence proceedings against the defendants.
In support of the application, the plaintiff relied on three affidavits that had been filed by him, being affidavits filed on 13 October 2023, 15 March 2024 and 15 May 2024.
The evidence before me is that a copy of the originating application, together with the affidavit of Mr Nipps filed 13 October 2023, has been served on the defendants.
Procedural history
Briefly, the relevant procedural history of this matter can be summarised as follows. The first and fourth defendants are not presently located in Australia. On 14 December 2023, Forrester J granted leave to the plaintiff to serve the originating process, together with the affidavit of the plaintiff filed 13 October 2023, the minute of proposed orders of the same date and the orders made by her Honour on these parties. Affidavits of service have been filed by the plaintiff.[2] It is apparent from an examination of the court record that neither of these parties have sought to appear or to oppose the application.
[2] Affidavit of service of Brendan Hamish Taylor filed 19 January 2024; Affidavit of service of Jacob Michael Dixon Fowler filed 19 January 2024; Affidavit of service of James Alexander Raymond filed 19 January 2024.
After being served with the application, the fifth to seventh defendants gave notice of their intention to appear and oppose the application. However, shortly prior to this hearing, these parties filed consent orders withdrawing their opposition to the application.[3]
[3] Orders of Justice Hill made 21 June 2024.
Legislation and relevant legal principles
The relevant legal principles that govern this application are relatively well settled.
Section 588FF(1) of the Act enables the court to make orders where it is satisfied that a transaction is voidable because of s 588FE of the Act.
Relevantly, s 588FF(3) of the Act provides that:
(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.
In considering whether or not to grant the extension of time sought by a liquidator, the court will generally take into account three matters being:
(a)the explanation for the delay in commencing the proposed proceedings within the three-year period provided for by the Act;
(b)a preliminary review of the merits of the proposed proceeding; and
(c)any prejudice likely to be suffered in the event the extension sought is granted.[4]
[4] Walker and Moloney v CBA Corporate Services (NSW) Pty Limited [2012] FCA 328 [43].
If the purpose of an 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, a review of the merits may be unnecessary.[5]
[5] Green v Chiswell Furniture Pty Ltd (in liq) [1999] NSWSC 608 [15] (Austin J).
In Matthew David Woods as joint and several liquidator of Brierty Limited (In Liquidation), which was cited with approval by Lundberg J in Mohen as Liquidator of MBP (WA) Pty Ltd,[6] Sanderson M observed that the phrase 'preliminary review of the merits' has been explained in a manner which suggests the bar is rather modest for the purposes of this enquiry.[7]
[6] Mohen as Liquidator of MBP (WA) Pty Ltd [2023] WASC 81 [13].
[7] Matthew David Woods as joint and several liquidator of Brierty Limited (In Liquidation) [2022] WASC 310 [33].
The learned Master, in his reasons for decision, referred to Austin J's description in Chiswell Furniture at [15] to the effect that the review involves a consideration of whether the proposed proceeding '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'.[8]
[8] Matthew David Woods as joint and several liquidator of Brierty Limited (In Liquidation) [23].
There is no question that the court has power make an order extending time without specifying the particular transaction or transactions to which it would apply, which is commonly known as a 'shelf order'.[9] The plurality of the High Court in Fortress Credit Corporation explained the policy which underpins the provision and their conclusion in relation to the power to make such orders at [24] and [27] of their reasons.
[9] Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489, 496 [3], [27] (French CJ, Hayne, Kiefel, Gageler and Keane JJ).
As with any order under s 588FF(3)(b) of the Act, the power to make an order, including a shelf order, is at the discretion of the court.[10]
[10] Cussen, in the matter of Monarch Towers Pty Ltd (in liquidation) [2023] FCA 192 [16] (O'Callaghan J).
Disposition
In this case, I am satisfied on the evidence before me that the application for an extension of time was brought within the three year period specified by the Act.
This requirement required any proceedings to be commenced by 14 October 2023. The originating process was filed on 13 October 2023. Where an application is brought within time, the court has power to grant an order extending the time period, notwithstanding the fact that the three year time limit has since expired.[11]
[11] Onefone Australia Pty Ltd v One.Tel [2007] NSWSC 268 [36].
I turn then to the three factors that the court must take into account in considering whether or not to exercise its discretion. I summarise these and my views in relation to them as follows.
Explanation for delay
Senior counsel for the plaintiff emphasised at the hearing before me that this is a complex liquidation. The evidence of the plaintiff is that there are, essentially, five primary reasons for the delay.
First, he has had significant difficulties in obtaining the books and records of the company, despite numerous requests having been made from December 2020. In particular, this includes the absence of any statement of Ochre's financial position after a draft financial report of 2017. The plaintiff's evidence is that he has, to date, been unable to reconstruct the books and records of Ochre.
Second, the absence of books and records has added to the complexity of the liquidation, as it has been necessary for him to spend time on tasks that would not ordinarily be required.
Third, in March 2023, an application was commenced to remove him as liquidator of Ochre, which was ultimately resolved in September 2023. Senior counsel for the plaintiff emphasised that this application required significant resources to be devoted to this application, and not in a singular pursuit of other matters in relation to the liquidation.
Fourth, in February 2023, the plaintiff filed proceedings in the Federal Court to examine a number of people, including each of the first to fourth, sixth, and seventh defendants to these proceedings. Public examinations were conducted in late July 2023 of the second, third, sixth and seventh defendants. However, not all of these have been completed at this stage. The evidence before the court is that the examination summonses of the sixth and seventh defendants have been extended to 29 July 2024.[12] At the time of filing the application, the plaintiff had not received signed copies of the sixth and seventh defendants' transcripts of their initial examination proceedings. In addition, to date, the plaintiff has not been able to examine two key people, namely Mr Featherby and Mr Sumarya, and arrest warrants have been issued by the Federal Court in November 2023.[13]
[12] Exhibit A.
[13] Nipps (Liquidator), in the matter of Ochre Group Holdings Limited (in liq) (No 3) [2023] FCA 1404.
Fifth, the plaintiff has sought the production of documents from a number of parties and considers that at this stage, not all relevant documents have been produced, including by the defendants to these proceedings.
Notwithstanding these matters, the plaintiff says that he has acted reasonably in considering what claims can be brought in respect of the iron ore royalty rights sale, including seeking legal assistance from 2021, undertaking specific and targeted investigations, and conducting examinations and issuing notices to produce.
In my view, the evidence that has been adduced by the plaintiff has demonstrated there are adequate reasons for the delay in commencing any proceedings.
Merits of the proposed proceedings
In this case, the liquidator is seeking an extension of time to decide whether or not to bring any proceedings. Given this, it is not necessary that the court undertake a detailed review of the merits of the proposed proceedings.
It is sufficient to state that the supporting affidavits set out the nature of the claims being considered and the factual basis for those claims. The evidence of the plaintiff, as summarised by senior counsel for the plaintiff at the hearing before me, sets out the circumstances which make it clear that it is appropriate for an investigation to be made by the plaintiff to assess whether or not he should commence proceedings under the Act to claw back or restore funds to Ochre, for the benefit of all of its creditors.
Prejudice
I am conscious that an extension of time may cause prejudice to the defendants and to others in the sense that they remain exposed to the possibility of a suit for a further period of time. The principle of general or presumptive prejudice reflects the adverse effect of the passage of time in preparing any defence to a claim that might be brought. The defendants are facing potential legal proceedings that would require an examination of their conduct and various transactions that allegedly took place from about January 2020.
The general prejudice that could be suffered by the defendants is a factor that the court must take into account. The court accepts that delay leads to prejudice, and prejudice is heightened where the matter involves complicated transactions which are examined in detail many years after the event.[14] There is, of course, a general public interest in ensuring that litigation is brought and prosecuted in a timely fashion. Provisions such as s 588FF(3)(a) of the Act, as with statutory limitation periods more generally, represent a judgment by the legislature that a right of a party to pursue a cause of action is not unlimited.[15]
[14] See BP Australia Ltd v Brown & Ors [2003] NSWCA 216 [118] - [119] (Spigelman CJ, Mason P and Handley JA agreeing).
[15] Griffiths v Nillumbik Shire Council [2022] VSCA 212 [64] (J Forrest AJA), referring to Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541, 522 - 533 (McHugh J).
In this case, the defendants have not appeared today at the hearing to oppose the application by the plaintiff. The fifth to seventh defendants' opposition to the application has now been withdrawn.
In my view, on balance, the fact that there may be general prejudice to the defendants from an overall delay in commencing any proceedings does not materially weigh against the making of the orders that are sought.
Additional matters
There are two further matters that I have had regard to in considering whether or not to exercise my discretion to make the orders sought by the plaintiff. The first is the length of the extension of time. The second is whether it is appropriate in the circumstances of this case for a shelf order to be made, or whether a more tailored order is appropriate.
Length of extension
It is important to emphasise that once an extension has been granted under s 588FF(3)(b) of the Act and the extension period lapses, no further extension can be sought.[16] Once an order is made by the court under s 588FF(3)(b) of the Act, it cannot be supplemented or varied by the rules of the court. The restriction in the operation of this provision is a relevant matter that I take into account in determining whether a 12 month extension is appropriate.
Whether a shelf order ought be made
[16] Grant Samuel Corporate Finance Pty Ltd v Fletcher [2015] HCA 8; (2015) 254 CLR 477 [24] (French CJ, Hayne, Kiefel, Bell, Gageler and Keane JJ).
The court acknowledges that there can be prejudice that arises from the making of a shelf order. In this case, the transactions being considered by the liquidator might be described as creditor-defeating style transactions. In these types of cases, less weight is given to the prejudice that might arise from the perspective of a third party.[17]
[17] Mohen as Liquidator of MBP (WA) Pty Ltd [51].
In assessing whether it is appropriate to make the shelf order that is sought, I again refer to the fact that no further extensions are capable of being sought by the liquidator under the Act.
There is no doubt that the court has power to make a shelf order, and that this is a valid exercise of the power to extend time in s 588FF(3)(b) of the Act. This was recognised by the High Court in Fortress Credit Corporation.[18]
[18] Fortress CreditCorporation (Australia) II Pty Ltd v Fletcher [27] (French CJ, Hayne, Kiefel, Gageler and Keane JJ).
In the circumstances of this case, particularly in circumstances where the investigations have not been completed, I am satisfied that it is appropriate to make the shelf order sought by the liquidator.
Conclusion
For these reasons and in the circumstances of this case, I am satisfied that the justice of the case favours the making of orders sought by the plaintiff and that it is appropriate to exercise my discretion to grant the extension sought.
On this basis, I consider that orders should be made in terms of orders 1 and 3 of the plaintiff's minute of proposed orders filed 13 October 2023.
Exhibit A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
28 JUNE 2024
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