Re Clarecastle Pty Ltd (in liq) - [2011] NSWSC 857

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: In the matter of Clarecastle Pty Ltd (in liq) - Kassem and Secatore as liquidators of Clarecastle Pty Ltd (in liq) In the matter of ACN 050 070 463 Pty Ltd (in liq) - Kassem and Secatore as liquidators of ACN 050 070 463 Pty Ltd (in liq) [2011] NSWSC 857
Hearing dates: 6 May & 29 June 2011
Decision date: 22 July 2011
Jurisdiction: Equity Division - Corporations List
Before: Ward J
Decision:
Applications for extension of time under s 588FF(3)(b) dismissed other than in respect of one identified claim

Catchwords: CORPORATIONS - application for leave pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) to extend the time to bring claims in relation to voidable transactions under s 588FF(1) - whether an extension of time can be granted in relation to the bringing of voidable transaction claims in general or 'blanket' terms - application of test for exercise of discretion in respect of such applications - HELD - decision in BP Australia v Brown binding on a single judge of this Court - discretion should be exercised in favour of particular claim identified against Jasmic Nominees Pty Ltd - otherwise claim for extension of time dismissed.
Legislation Cited: Civil Procedure Act 2005 (NSW)
Corporations Act 2001 (NSW)
Cases Cited: Ansell Ltd v Davies [2008] SASC 203; (2008) 67 ACSR 356
Arnautovic v Nichola [2009] NSWSC 233
Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104
Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (in liq) [2004] NSWSC 1244; (2004) 52 ACSR 103
BP Australia v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Brown v DML Resources Pty Ltd (2001) 52 NSWLR 685
Davies v Chicago Boot Co Pty Ltd (No 2) (2007) 96 SASR 164
Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645
Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608
Greig & Duff as Liquidators of Australian Building Industries P/L (in liq) v Australian Building Industries P/L (in liq) & Anor [2003] QCA 298
Hall v Sherman [2001] NSWSC 810
Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230
HIH Insurance Ltd (in liq), Re McGrath [2004] 22 ACLC 449
Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207
Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516
Matthews v Ipex ITG Pty Limited [2007] SASC 387
McGrath v National Indemnity Co (2004) 182 FLR 309
New Cap Reinsurance Corp v Reaseguros Alianza SA [2004] NSWSC 787; (2004) 186 FLR 175
Re Estate of Knight (a bankrupt); Rocom International Pty Ltd (in liq) v Prentice [2002] FCA 604
Re Harris Scarfe Ltd (in liq) and Harris Scarfe Wholesale Pty Ltd (in liq) (No 3) [2008] SASC 74; (2008) 65 ACSR 616
Rodgers v Commissioner of Taxation (1998) 88 FCR 61
Taylor v Woden Constructions Pty Ltd [1998] FCA 1228
Tolcher v Capital Finance Australia Ltd [2005] FCA 108
Tolcher v Gordon [2005] NSWCA 135; (2005) 53 ACSR 442
Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433
Texts Cited: Austin & Black's Annotations to the Corporations Act
Broderick, Matthew 'Voidable transactions - extending the limitation period under s 588FF(3) of the Corporations Act 2001 (Cth)' (2009) 17 Insolvency Law Journal 121
Ford's Principles of Corporations Law
Category: Principal judgment
Parties: (10/081756)
Ozem Kassem and Bruno Secatore as liquidators of Clarecastle Pty Ltd (in liq)(First Plaintiff)
Clarecastle Pty Ltd (in liq)(Second Plaintiff)
Jasmic Nominees Pty Ltd and Mr and Mrs Shea (Jasmic Interested Parties)
Mr Ross Seller, Mr Patrick McCarthy and
Grant McKenzie Pty Limited (Other Interested Parties
(10/081786)
Ozem Kassem and Bruno Secatore as liquidators of ACN 050 070 463 Pty Ltd (in liq)(First Plaintiff)
ACN 050 070 463 Pty Ltd (in liq)(Second Plaintiff)
Jasmic Nominees Pty Ltd and Mr and Mrs Shea (Jasmic Interested Parties)
Representation: R Harper SC (with M Condon on 6 May 2011) (Plaintiffs)
D R Pritchard SC (Jasmic Interested Parties)
Sage Solicitors (Plaintiffs)
Spinks Eagle Lawyers (Jasmic Interested Parties)
T Castle (6 May 2011) S Anderton (29 June 2011) (Atanaskovic Hartnell) (Other Interested Parties)

File Number(s): 10/081756, 10/081786

Judgment

HER HONOUR : In separate proceedings, each commenced by the filing of an originating process on 1 April 2010, Messrs Ozzem Kassem and Bruno Secatore, in their capacity as liquidators of Clarecastle Pty Limited (in liq) and of ACN 050 070 463 Pty Limited (in liq) (formerly Ladycare Services Pty Ltd) (to which I will refer as Ladycare), have sought orders pursuant to s 588FF(3)(b) of the Corporations Act 2001 (NSW) extending up to 5 October 2011 the time in which to bring applications under s 588FF(1) of the Act in relation to any voidable transactions concerning Clarecastle and Ladycare, respectively, in respect of which proceedings have not yet been commenced. I will refer to these two sets of proceedings (81756 of 2010 and 81786 of 2010) respectively as the Clarecastle and Ladycare Leave proceedings.

The liquidators also commenced on that date three other sets of proceedings in which relief is sought in relation to specific transactions involving one or other of the two companies, as well as orders under s 588FF(3)(b) in relation to any further claims that might be made in respect of transactions made by the relevant company in liquidation involving the defendant(s) to those proceedings. Those proceedings are:

(i) the Jasmic proceedings (81810 of 2010) brought in the name of the liquidators and Ladycare against Jasmic Nominees Pty Ltd (the sole shareholder of Clarecastle), Mr James Shea - the sole director of Clarecastle and a co-director, with his wife, of both Ladycare and its sole shareholder (LCS IT Pty Limited), and his wife, Mrs Jan Shea (as noted, a co-director of both Ladycare and LCS IT). (I refer to the defendants in those proceedings collectively as the "Jasmic parties");

(ii) the LCS IT proceedings (81795 of 2010) brought in the name of the liquidators and Ladycare against LCS IT and Mr and Mrs Shea; and

(iii) the Clarecastle Windsor Village proceedings (81774 of 2010) brought in the name of the liquidators and Clarecastle against Jasmic and Mr Shea;

The Jasmic parties were not joined as parties to either of the Clarecastle or Ladycare Leave proceedings but were served with the originating process and affidavits in those proceedings (it being conceded that they are parties that might be adversely affected by the extensions sought) and have been represented by Senior Counsel (Mr Pritchard SC) on the hearing of the extension applications made in those proceedings.

In the Clarecastle proceedings there was also an appearance for others (to whom I refer as the Other Interested Parties) who had an involvement in one of the transactions the subject of the liquidators' investigations into Clarecastle's affairs. They were represented on 6 May 2011 by Mr Castle, solicitor, and on 29 June 2011 by Mr Anderton, solicitor.

In the Clarecastle and Ladycare Leave proceedings all that is sought is the extension of time for the making of claims in relation to voidable transactions involving those companies and the relief in that regard is framed in broad terms (leading to the criticism by Mr Pritchard of these as 'blanket orders'). In each of the Jasmic, LCS IT and Clarecastle Windsor Village proceedings, various declarations and orders are sought pursuant to ss 180,181, 182, 588FE(3), (4) and (5), 588FH(2) and 1317H of the Corporations Act in relation to transactions or dealings by the respective companies and alleged breach of duties by the directors in relation thereto. As noted, orders are further sought in each of those proceedings, pursuant to s 588FF(3)(b) of the Act, extending the time within which applications under s 588(1) of the Act can be made against the defendants in relation to any further claims that might be made in respect of the transactions the subject of those proceedings.

It is the perceived overlap between the relief sought in what I will call the three specific proceedings (referred to in [2] above) and that in the two more general applications presently before me that prompted the initial submission by Mr Pritchard that the present applications were an abuse of process. At the hearing before me, it was accepted that the same issues broadly arise under the respective s 588FF(3)(b) applications and I have proceeded, (without dissent from the respective parties) on the basis that the applications for relief under s 588FF(3)(b) in the Clarecastle and Ladycare Leave proceedings will resolve the similar applications made under s 588FF(3)(b) in the three specific proceedings (and on that basis I understand that Mr Pritchard does not press the submission as to abuse of process). (I should note, however, that I do not consider that this would preclude an application in the three specific proceedings for amendment of the process to encompass other claims arising out of the same or substantially the same facts as the subject of those proceedings, and which might raise claims for which leave under s 588FF(3)(b) is required, at least where those claims are against parties to whom notice of the present applications was not given.)

The substantive relief claimed in the three specific proceedings relates to various transactions entered into by the respective companies prior to their entry into liquidation:

(i) in the Jasmic proceedings , the liquidators seek declarations that both a write off by Clarecastle (on 30 June 2006) of a loan recorded in its books in the sum of $352,788.00 payable to Clarecastle by Jasmic and the transfer to Jasmic (on 31 December 2006) of a sum of $1,086,516.00 were voidable transactions (whether as insolvent and uncommercial transactions under s 588FB and voidable under s 588FE(3); insolvent transactions entered into with a related party within the meaning of s 588FE(4); insolvent transactions for the purpose of defeating or interfering with the company's creditors within the meaning of s 588FE(5); or insolvent transactions voidable under s 588FF);

(ii) in the LCS IT proceedings , the liquidators seek a declaration that the payment of the sum of $270,000.00 by way of dividend by Ladycare to LCS IT on 30 June 2006 was a voidable (or void) transaction (on the basis that it was a transaction falling within one or other of the statutory provisions referred to in (i) above); and

(iii) in the Clarecastle Windsor Village proceedings , the liquidators seek declarations that the assignment by Clarecastle to Jasmic of an equity interest in what is referred to as the "Windsor Village Partnership" in about July 2006 was similarly a voidable transaction (on one or other of the same bases as the transactions referred to in (i) and (ii) above).

In each of those proceedings, consequential orders are sought for the recovery of the moneys (or asset) so paid (or transferred), whether from the entity to which it was paid (or transferred) or from the directors of the company in liquidation. In the Clarecastle Windsor Village proceedings, as an alternative to the reconveyance which is sought of the Windsor Village Partnership equity interest, an order is sought for the payment of the sum of $601,875.50 pursuant to s 588FF(1) or s 588FH(2). Declarations are also sought as to breach by the relevant directors (in each case Mr Shea and in the Jasmic proceedings also Mrs Shea) of their various statutory and common law duties as directors.

Clarecastle and Ladycare were both placed in liquidation on 5 April 2007, that being the relation-back day as defined under s 9 of the Act for the purposes of the relevant statutory provisions. It is not in dispute that the time within which (absent leave of the Court) proceedings by the liquidators in relation to alleged voidable transactions were required to be brought expired on 5 April 2010. Accordingly, the claims already on foot as to voidable transactions in the three specific proceedings (including the Windsor Village transaction to which Mr Kassem refers in his affidavit in support of the Clarecastle leave application) do not require the leave of the Court. What is now sought is leave to bring other applications or to make other claims in relation to voidable transactions involving those companies, in circumstances where the liquidators' investigation of the affairs of the companies was not complete as at the expiry of the period within which such claims were to be brought (and, in at least some respects, is not presently complete).

The Clarecastle and Ladycare Leave proceedings first came before me for hearing on 6 May 2011. For the reasons outlined in my reasons for judgment in yet a further set of proceedings (158014 of 2010) (those being proceedings in which an application had been made to set aside examination summonses and orders obtained by the liquidators in relation to their investigation of the particular transaction involving Clarecastle in which the Other Interested Parties were involved (the Scotch Whisky transaction) (see [2011] NSWSC 553), to which I will refer as the examination proceedings), I commenced hearing the Clarecastle Leave application on 6 May 2011 but adjourned it part-heard to 29 June 2011. (In relation to the Ladycare Leave proceedings, I did no more on 6 May 2011 than formally to read some of the affidavits relied upon by the liquidators for the Ladycare Leave application.) On 29 June 2011, I completed the hearing of the Clarecastle Leave application together with the Ladycare Leave application (having, in the interim, refused the application for the setting aside of the examination summonses).

In support of the applications made in the respective Clarecastle and Ladycare Leave proceedings, Mr Kassem (one of the two liquidators of the companies) has affirmed four affidavits (one in each of the proceedings on both 31 March 2010 and on 24 September 2010). Affidavits were also read in the liquidators' case from Mr Andrew Rollins, solicitor, sworn on 5 May 2011 (deposing to issues as to the discovery or production of documents by the Jasmic parties in the 3 specific proceedings), from Mr Mark Hutchins, now a partner of Mr Kassem and director of Cor Cordis Pty Ltd Accountants (who has had the day to day conduct of each of the liquidations from about June 2090), sworn on 4 May 2011 (deposing as to the difficulties he has encountered in carrying out investigations of the companies' affairs), and from Mr Tony Carmona, the former Chief Executive Officer of Ladycare, sworn on 16 March 2011 (deposing as to various matters in relation to the Ladycare business, including what he describes as indicative or non-binding indicative offers made for the purchase of that business in late 2006 and the value Mr Carmona believes was attributed by Mr Shea to that business at that time).

When the hearing resumed on 29 June 2011, affidavits were read by the respective solicitors (Mr Rollins and Mr Spinks) going to the complaints that had been made as to discovery of documents. Senior Counsel for the liquidators (Mr Harper SC) sought leave to file two further affidavits sworn by the solicitor acting for Mr Kassem (Mr Charly Tannous): the first (sworn on 28 June 2011) being a confidential affidavit referring to the s 596 examinations that by then had taken place (in private) of Mr Seller and Mr McCarthy pursuant to the orders that I had made in the examination proceedings (and exhibiting notes taken at those examinations) and the second (sworn on 29 June 2011) annexing a draft Statement of Claim being the process that it is said the liquidators will file (in the Ladycare proceedings) if leave is granted on the Ladycare Leave application.

Objection was raised to the lateness with which these affidavits were served (Mr Pritchard noting that the lateness of service of previous affidavit material had been the cause of the earlier adjournment in May this year), but ultimately Mr Pritchard indicated that he was in a position to deal with the matters contained in those affidavits and did not press his objection to the reading of those affidavits.

Where objection was, however, strenuously pressed by Mr Pritchard was as to an application by Mr Harper for leave to adduce further evidence in chief from Mr Kassem (prior to the resumption of his cross-examination) in order to appraise the Court of a matter that had arisen during the adjournment (in relation to the question of funding of the proceedings for which the extension of time had been sought). This evidence was put forward as necessary in order to update the Court and to avoid the situation where the Court might otherwise be asked to determine the extension applications based on an incorrect understanding of the factual position in relation to the funding available to the liquidators. I was informed that the relevant development had occurred only the afternoon before the resumption of the hearing (hence it could not have been the subject of earlier evidence).

In order to determine what prejudice, if any, the Jasmic parties would suffer from the late admission of evidence on this issue, evidence was taken on the voir dire from Mr Kassem and then from Mr Hutchins (and subsequently admitted without objection by Mr Pritchard in the proceedings) as to a communication received by Mr Hutchins at about 4pm on the afternoon before the resumption of the hearing from the largest creditor of Ladycare (the Australian Taxation Office) confirming its willingness to provide funding (retrospectively) for the examinations and for the present leave applications, as well as (prospectively) for a capped amount in relation to the substantive proceedings (a total funding package said to be in the order of $800,000).

For present purposes, therefore, the position is that there was no funding available to the liquidators for investigation of the respective companies' potential claims during the three year period in which they could, without leave, have commenced any voidable transaction proceedings but such funding has now become available. (The lack of funding has not, however, prevented the commencement of the three specific proceedings within the three year period.)

Issues

The issues before me on the current applications are within a relatively narrow compass: balancing the factors applicable on an application of this kind, whether leave should be granted for the extension of time sought in one or both of the Clarecastle and Ladycare proceedings and, if so, should it be granted in the broad terms in which it is sought.

A preliminary issue was raised Mr Pritchard as to the power of the Court to grant an extension of time for the bringing of applications in relation to voidable transactions in general terms (i.e. without identification of the particular transactions or the particular defendants). Mr Pritchard submitted that the power to make orders under s 588FF(3)(b) is limited to orders in relation to one or more identified transactions (and does not extend to the making of 'blanket orders'). In this regard, it is submitted by Mr Pritchard that BP Australia v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 (to the extent that it holds otherwise, and Mr Pritchard suggests there is some ambiguity as to the ratio in Brown ) was wrongly decided. In response, Mr Harper contends that Brown was correctly decided, noting that it has been followed on numerous occasions and that it is in any event binding upon me. (He also submits that it is incorrect to characterise the orders sought in the present proceedings as blanket orders.)

Leaving aside for the moment the question as to the correctness or otherwise of Brown , there was no dispute as to the principles that are to be applied on an application for an extension of time under s 588FF(3)(b), those having been outlined by White J in New Cap Reinsurance Corp v Reaseguros Alianza SA [2004] NSWSC 787; (2004) 186 FLR 175 (at [52]) by reference to the following propositions:

(a) ordinarily, the issues raised on an extension application are threefold:

(i) the explanation for the delay in bringing the proceedings;

(ii) a preliminary review of merits of the foreshadowed proceedings - that 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;

(iii) whether the likely actual prejudice resulting from the grant of an extension is sufficiently substantial to outweigh the case for granting an extension;

(b) where the liquidator's purpose in seeking the extension of time is simply to put himself into a position where he can properly decide whether or not to bring proceedings, a preliminary inquiry into the merits of any consequent proceedings may not always be necessary.

In Arnautovic v Nichola [2009] NSWSC 233 Barrett J (referring to the considerations identified by Austin J in Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 as emerging from the judgment of Finn J in Taylor v Woden Constructions Pty Ltd [1998] FCA 1228 and the decision of the Court of Appeal in Brown ), confirmed (at [7]) that the relevant matters to be considered on an application such as the present are those set out by White J at [52] in New Cap .

White J went on to say (at [53]):

The principles were also considered by the Court of Appeal in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at 356-358. The Court of Appeal described the question as being what was fair and just in all of the circumstances having regard to factors which include the plaintiffs explanation for delay and whether the defendant would suffer prejudice as a result of the extension, other than the prejudice of being required to repay money if the proceedings succeed. (my emphasis)

The relevant factors to be considered in determining whether it is fair and just that leave should be granted are therefore:

(i) the delay in bringing the proceedings and the explanation for that delay;

(ii) the merits of the proposed proceedings (except to the extent that the liquidators' purpose is to investigate whether or not to bring the proceedings); and

(iii) the question of prejudice arising from the grant of an extension.

Summary

In summary, for the reasons set out below, I am of the view that leave should not be granted for the extensions of time sought in either the Clarecastle or the Ladycare Leave proceedings other than in relation to the particular claim identified against Jasmic in paragraphs [57] and [58] of the draft Statement of Claim annexed to the affidavit of Mr Tannous sworn 29 June 2011. I consider that, in circumstances where there was a commercial decision made by the liquidator not to progress at an earlier stage investigations into the companies' affairs, any prejudice now suffered by an inability to pursue claims for other voidable transactions not identified and commenced within the three-year period is self-inflicted and does not outweigh the presumptive prejudice to the Jasmic parties (or other proposed defendants) from the delay.

Had I been otherwise satisfied that the liquidators had established that leave should be granted for an extension of time going beyond the extension I propose to grant, I would nevertheless have limited the leave to the balance of the transactions now identified in relation to Ladycare (as I am not satisfied that any voidable transaction claims have been identified in relation to the Scotch Whisky transaction entered into by Clarecastle or that there is any reason to expect that any such claim). (I am not satisfied that there are exceptional circumstances to warrant a broader extension of the kind that have in other cases been considered necessary for a blanket extension order to be granted in that case). Further, I would have made any such orders subject to notification of those parties that would be likely to be adversely affected by them (and who have not otherwise been formally notified of the application) and I would have given those parties an opportunity to make submissions as to why the relief should not be granted before finalising orders granting the extensions of time.

As to the correctness or otherwise of Brown (a decision of the Court of Appeal of this Court which is binding on me as a single judge of the Court), I note that the weight of authority (and academic consideration) supports the conclusion that an order may be made under s 588FF(3)(b) of the Corporations Act extending the time for the commencement of proceedings in general or "blanket" terms if it is not possible for the liquidator to identify the relevant defendants or transactions as at the time of making the application (even though it is suggested that the circumstances in which this is done will be rare). Therefore, insofar as Mr Pritchard placed emphasis on the need for comity in judicial decisions considering and applying uniform national legislation, that consideration would support the application of Brown as permitting the making of the orders sought in the current case (had I been satisfied that it was otherwise appropriate to grant such leave).

Background

The Clarecastle and Ladycare companies formed part of a group under the control of interests associated with Mr James Shea, a director of both entities. Mr Shea is now in his 70's and, during public examinations carried out by the liquidation in March this year, gave evidence that he is suffering from advanced glaucoma and is nearly blind. (Transcript references were provided to me by both Counsel on the present application after close of submissions in relation to Mr Shea's evidence to his eyesight both now and at the relevant times.)

Clarecastle

According to Mr Kassem's affidavit of 31 March 2010 affirmed in the Clarecastle Leave proceedings, the principal purpose of Clarecastle (incorporated in 1999) was to engage in tax effective investments ([7])). Mr Kassem deposes that his enquiries have revealed that the principal reason it was placed into external administration in 2007 was that the company had invested in a number of investment schemes (for the purposes of creating tax losses in order to minimise tax obligations of related entities that were consolidated with the company for tax purposes) that "lost their tax status" following audits undertaken by the ATO (as communicated by the ATO in February and May 2007), whereupon the commercial purpose of the company ceased.

Mr Kassem has expressed the view, based on the company's financial records, that Clarecastle was insolvent on and from 30 June 2005. (Pausing there, it is noted by Mr Pritchard that there is no suggestion that the company was insolvent at the time of entry into the Scotch Whisky transaction or became insolvent by reason of entry into that transaction - therefore making any claim based on this as an insolvent transaction difficult to maintain in circumstances where Mr Kassem acknowledged in cross-examination that there was no reason to suspect that the 2001 transaction was for the purpose of defeating creditors (T.33) but was assumed to be for tax minimisation purposes.

The two Clarecastle transactions on which focus has been placed (and which, as at the time the extension application was made Mr Kassem wished further to investigate) are the entry by Clarecastle in 2001 into the Scotch Whisky scheme (recently the subject of investigation by regulatory and other authorities and now the subject of criminal proceedings) and the assignment in 2006 by Clarecastle to Jasmic of an equity interest in the "Windsor Village partnership".

Ladycare

As for Ladycare (incorporated in 1990), Mr Kassem has deposed, in his affidavit of 31 March 2010 affirmed in the Ladycare Leave proceedings, that it operated a business of washroom sanitation services and that, following the issue in September 2005 by the ATO of a notice of amended assessment relating to the company's tax return for the financial year ended 30 June 1999 (in the sum of $1,346,591.95, which remains unpaid), transactions were undertaken between July and December 2006 (characterised by Mr Harper as asset stripping) by which the assets of the business were transferred to related parties (see [10] -[14] of Mr Kassem's affidavit).

The transfer of assets followed the provision of advice to Mr and Mrs Shea by a New Zealand investment bank, HQZ Argentum. (A business of the same kind as that operated by Ladycare is now being conducted by a company incorporated on 6 March 2007 (after Ladycare had changed its name to its current name), the new company being Lady Care Services Pty Ltd (run by Mr and Mrs Shea's son) leading to the conclusion by Mr Kassem that the restructuring of Ladycare's assets and business was part of a calculated "Phoenix transaction".

Mr Kassem has set out, in his 31 March 2010 affidavit in the Ladycare Leave proceedings, the various transactions that he considers to be voidable transactions involving that company. Those are: first, the transfers to other related entities, recorded by way of journal entries, on 30 June 2006 of loan accounts otherwise repayable to the company - being transfers to Jasmic, the Shea Group Trading Trust and the LCS Admin Unit Trust; second, the write-off, again by journal entry, on 30 June 2006 of the balances of related party loan accounts - including the write-off of sums due from LCS Administration Unit Trust, LC Washroom Pty Ltd, Clarecastle and Jasmic - together with the payment of a cash sum of $1,086,516 to Jasmic on 31 December 2006; and third, the payment to Ladycare of the sum of $1.15m by Jasmic on 29 May 2006, which sum was "expensed" as a management and indemnity fee and credited to the loan account of the Shea Group Trading Trust on 30 June 2006. Some, at least, of those transactions are already encompassed in the claims brought in the Jasmic proceedings (namely, the write off of the loan of $352,788 owing by Jasmic and the payment to Jasmic of the sum of $1,086,516).

Mr Kassem has deposed that, based upon his review of the company's records, Ladycare became insolvent on or around 30 June 2006 as a result of entering into the alleged voidable transactions.

Appointment of liquidators

Clarecastle and Ladycare were both placed in liquidation on 5 April 2007, less than a year after the various transactions of which complaint is presently made in the three specific proceedings occurred. (The Scotch Whisky transaction, which is not presently the subject of any proceedings but was the focus of the recent examinations by the liquidators, took place much earlier - in 2001.)

Mr Kassem (or a member of his firm) was initially approached to act as the liquidator of the companies by the accountant then acting for the companies (Mr Michael Roy) (T 34.4). Mr Kassem said in the witness box that he did not recall meeting Mr and Mrs Shea until towards the end of 2009 (T34.33), therefore quite some time after his appointment as liquidator on 5 April 2007. He confirmed that there was a meeting of the companies' members at which the appointment of liquidators to the companies was approved and the appointment was then confirmed at a meeting of creditors on that day (T 35.17). Mr Ozem Kassem and Mr Deryk Andrew were appointed joint liquidators on that day. Mr Bruno Secatore was subsequently appointed as joint liquidator in place of Mr Kassem on 20 March 2008.

Investigations by liquidators

Mr Kassem says that he was provided with some limited documents in relation to the companies on 22 March 2007 (i.e. prior to his appointment). By letter dated 11 April 2007, he wrote to Mr Roy, referring to his appointment as joint liquidator of the companies, enclosing a schedule of the companies' records that had been delivered to the office on 22 March 2007 (being draft financial statements for the period ending 30 June 2006/31 December 2006, respectively, as well as correspondence from the ATO and, in the case of Ladycare, 4 creditors' statements) and asking Mr Roy to advise if he was in possession of any further books and records of the companies. A letter in identical terms was sent on the same day to Mr Shea. Mr Kassem seemed to accept that this was a standard form letter seeking to gather in all the records of the companies (T 35.11). There is nothing to suggest what response there was to that letter or, conversely, any attempt by the liquidators to follow up that request.

The next written communication with either Mr or Mrs Shea (or, for that matter, Mr Roy) on the part of the liquidators appears to have been in October 2009 when Mr Kassem wrote separately to each of Mr and Mrs Shea (on 23 October 2009) in relation to the liquidation of Ladycare, making a formal demand pursuant to s 530A(1) of the Corporations Act that each furnish all records in their possession or under their control in accordance with an attached Notice to Deliver Books of the Company to the Liquidator (or advise of their present location). (A similar letter and Notice was sent to Mr Roy.) Similar demands were issued in relation to Clarecastle including notices issued at this time to some of those involved in the Scotch Whisky transaction - Chambers Finance Limited, the financier, and Mr Patrick McCarthy of Grant McKenzie Pty Limited, the entity involved in the management of the scheme on behalf of the investors.

In the witness box, Mr Kassem said that he did not think there was any written correspondence prior to October 2009 with Mr or Mrs Shea or Mr Roy in relation to Clarecastle (T.36.8) or Ladycare (T 36.15), but would have expected some correspondence to have been sent at about the time that Mr Hutchins took carriage of the file from about September/October 2009 (T 36.42). Mr Kassem did not dispute that no such correspondence (other than the 23 October letter) was exhibited to his affidavits in the respective Leave proceedings (T 37.9). He said that he suspected that Mr Hutchins would have made "the demand" (by which I understood him to be referring to a demand for company records akin to the letter of 23 October 2009) verbally, by telephone or in person, because there had been a number of meetings with Mr Roy from late 2009 (T 37.19). Mr Kassem also said that "the usual response was that there are no further records" (T 37.23) but acknowledged that he had not set out any conversations to that effect in his affidavits (and, indeed, it does not appear that Mr Kassem had the primary carriage of investigations into these matters at the time and therefore any such 'response', unless in writing, would most likely have been made to members of Mr Kassem's staff not to Mr Kassem himself).

In the meantime, between April 2007 and October 2009, it seems that there was some communication by the liquidators in relation to Clarecastle's entry into the Scotch Whisky transaction with Chambers Finance Limited (the entity noted in Clarecastle's books as a creditor of the company in relation to the Scotch Whisky scheme).

By letter dated 1 May 2007 information was sought from Chambers Finance in relation to the transaction.

Mr Kassem accepted in the witness box that nothing in his affidavit disclosed any communications with Chambers Finance in the period 1 May 2007 and 5 March 2009 (T 54.30/35). However, tendered by Mr Castle was a bundle of correspondence (Exhibit 1) that comprises some communications during that time. In particular it appears that Mr Speirs, a director of Chambers Finance, responded to the liquidators' initial query by letter dated 9 July 2007. In that letter (which raises no objection to answering the request for information), Mr Speirs explains the delay in responding as due to the fact that the address to which the letter was sent was no longer current. He then provides certain information as to the loan documentation entered into by Clarecastle in 2000 and 2001 (noting that various documents had been seized in the criminal investigation) and of the whisky secured by the loan documentation. The letter concludes co-operatively with the statement that "You, or Mr Francipane are welcome to email me directly if there is anything further I can clarify". (Mr Francipane was the accountant in Mr Kassem's office with carriage of the investigation at that point.)

On 17 September 2007, in a letter also forming part of Exhibit 1, Mr Francipane seems to have taken up that invitation and emailed to Mr Speirs a further request for information (seeking clarification as to whether it was expected that any of the stocks in the whisky pools in which Clarecastle had invested would be sold that year and as to the volume of alcohol contained in a hogshead). Mr Speirs responded by letter on that same day, providing the information requested and asking Mr Francipane to let him know if there was anything further he required and if he wished to have anything clarified (again, hardly an unco-operative stance). (Reliance on the information so provided seems later to have been placed by the liquidators in the preparation of their 12 May 2010 report to creditors insofar as that report gives a detailed account of how much alcohol a hogshead of whisky normally contains that was seemingly derived from Mr Speir's response).

Mr Castle relies on the above correspondence as gainsaying the suggestion that there was no cooperation given to the liquidators in relation to their investigation into the Scotch Whisky transaction (and Mr Pritchard supported the tender of the correspondence in Exhibit 1 also for that purpose).

Nothing further seems to have been raised with Chambers Finance until 5 March 2009 when Mr Kassem wrote again to Chambers Finance requesting information as to the stock of whisky held by the company, its location, the estimated time that it is likely to be realised and the estimated sale proceeds. Mr Kassem says that he received no response to this query (but again there is no suggestion that the liquidators pressed at the time for a response).

For the period from April 2007 until at least June 2008, Mr Sam Francipane had the day to day conduct of the respective liquidations within the liquidators' office. It does not appear that he performed any work on either of those matters from June 2008. From October 2009, work on the matters was carried out by Mr Hutchins.

Tendered as Exhibit 2 were copies of the Cor Cordis time records in relation to both liquidations, itemising the time spent on the matter over that period.

The Clarecastle time sheets show a number of time entries for Mr Francipane from 5 April 2007 (the date of the appointment of liquidators) through to February 2008 but followed by only one entry for Mr Francipane thereafter (review issues re whisky stock) on 2 June 2008. The Clarecastle entries focus in the main on the Whisky transaction. On the Ladycare timesheets, Mr Francipane's time entries again start from 5 April 2007 and go through to 11 January 2008 (with an entry on 2 June 2008 "review issues of whiskey stock 1.5 hours" - seemingly an incorrect file entry). For Ladycare, the time entries seem to relate largely to dealings with directors; dealing with accountant; meeting (3/5/2007) with accountant; review documents in relation to commercial bond; and then on an application to the AAT and litigation in the County Court of Victoria.

Without adjustment to take into account what seems (from the narrative description on the Ladycare timesheets) to be some wrong attribution of time as between the respective files, it appears that the time spent by Mr Francipane on the two matters (Clarecastle and Ladycare) was in the order of 22.5 and 20.5 hours respectively up to June 2008 (and none thereafter) and that Mr Kassem spent very little, if any, time on the matter in that period (nor, for that matter, did either Mr Andrew or Mr Secatore).

Mr Hutchins commenced work as a consultant with Cor Cordis from about June 2009. The arrangement on which he was retained at that time was that he was remunerated by way of a percentage of recoveries on matters on which he worked (though from about October 2009 this changed and he was put on a monthly retainer). He explained in his affidavit that he reviewed dormant files but says he also acted on some funded matters. Although he commenced work in June 2009, the first time recorded by Mr Hutchins in relation to the Clarecastle or Ladycare matters was from October 2009.

From a review of the Clarecastle time records, Mr Hutchins' first entry was 8 October 2009 - 5 hours (review books and records/prepare email for accountant and search for valuation of whisky data points), followed by 4 hours (investigations) on 13 October 2009, and then 1.5 hours on 20 October 2009 (issue of notices/undertaking investigations/review financials and company searches). From 6 November 2009 there were numerous time entries for Mr Hutchins in relation to the matter, including for 6 November 2009 (meeting with accountant Michael Roy and preparation for meeting - 1.5 hours). Other members of the office also recorded time in January and February 2010 as referable to the whisky investigation. (On 7 February 2010, there is an entry for Mr Hutchins - 1.5 hours prepare instructions for lawyers, that being the first reference to the involvement of lawyers.)

For Ladycare, Mr Hutchins' time entries commence two days earlier on 6 October 2009 with 3 hours (review books and records/discussion with Michael Roy); 5 hours on 7 October 2009 (review books and records/undertake searches/discuss further information requirements with Michael Roy/ prepare investigation notes for follow up), with some 14 hours in total in October 2009 relating to investigations and the issue of statutory notices; and then discussions on 16 November 2009 with Mr Roy and Mr Francipane and a total of 31 hours reviewing financial records and account reconstruction in November 2009. On 3 December 2009 there is an entry for 3 hours recorded as "preparation note and analysis for Mr Kassem and meeting with Sam [Francipane] and previous advisor [who I assume to be Mr Russell from HQZ, since had it been a reference to Mr Roy it would be consistent with other entries for his name to have been used]".

The above analysis of the time sheets mirrors what the documents show was taking place at that time. On 8 October 2009, Mr Hutchins sent an email to Mr Roy in relation to both companies, setting out what he described as "obvious" information required to complete his investigation and indicating that additional queries would likely flow from this. That email followed an earlier email the day before, in turn referring to a discussion on 6 October 2009, in which Mr Hutchins suggested that Mr Roy hold off sending additional records as Mr Hutchins had "located some books and records".

On 9 October 2009, Mr Hutchins sent an email to Chambers Finance and to Mr McCarthy seeking information in relation to the whisky ventures, from which again it seems that Mr Hutchins had either met or spoken with Mr McCarthy earlier that day (since he expressed appreciation for Mr McCarthy's time, stating that "it was a useful start in developing an appreciation of the past and current status quo of the whisky venture").

Accordingly, it seems reasonable to infer that Mr Hutchins (having started to take steps in the matter only in early October) was at that stage trying to ascertain what information the liquidators already had and what further information might be required. In the witness box Mr Hutchins said that he had spoken with Mr Francipane when he started reviewing the matter, but the latter did not recall much.

From October 2009 through to around March 2010, Mr Hutchins met or spoke with Mr Roy on a number of occasions, with Mr McCarthy on one occasion and, in March 2010, with Mr Roy and a representative from HQZ (Mr Russell).

As noted earlier, formal notices to produce documents were issued to Mr and Mrs Shea and Mr Roy on 23 October 2009 and on that date notices were also issued to Mr McCarthy and Mr Speirs (of Chambers Finance) pursuant to s 530B(4) of the Act for production of documents relating to the scotch whisky transaction. (In relation to the latter, Atanaskovic Hartnell responded by letter dated 30 October 2009 on behalf of Chambers Finance denying that the liquidator was entitled to the documents because they were records of Chambers Finance and not books of the company as defined by Austin J in Hall v Sherman [2001] NSWSC 810 at [47]).

The steps taken in issuing the formal notices to produce documents seem to have been as part of a standard procedure to obtain all relevant documents and not as a response to a perceived lack of co-operation at that date. In the witness box, Mr Hutchins did not suggest a lack of co-operation at that stage.

There is also in evidence a copy of a one page typed bullet point document (p 257 CB) that Mr Kassem says (at [17] of his September affidavit) was provided by Mr Roy during the course of the investigations and which appears to be a summary of the Ladycare Services business and the circumstances in which it was transferred or taken over by a company associated with Mr Shea's son. (I note that filed in court on 29 June 2011 were affidavits from the respective solicitors, Mr Rollins and Mr Spinks, in which issue was taken as to various matters in relation to the provision of discovery but in the course of which Mr Spinks deposes to his recollection being that this bullet point document had been provided in the course of a discussion he thought had been on a without prejudice basis.)

This document suggests that there was some dissatisfaction on the part of Mr Shea with Mr Carmona's performance as CEO; refers to the decision by Mr Shea's son to take over the business that his father due to his health was unable to continue; to the estate planning and business transition advice sought by the Shea family in December 2005 from HQZ Argentum; to the recommendation by the latter that a trading and a holdings trust be established; to the establishment of such trusts; and to the commencement of trading in Shea Group Trading Trust and cessation of trading in Ladycare Services in accordance with HQZ's advice in March 2006.

The document states that there was no goodwill in Ladycare as the contracts were on a month-to-month basis and the company was unable to comply with existing contracts. Non-current assets were said to have been transferred in accordance with a valuation provided.

Mr Carmona's affidavit places in issue a number of the factual statements contained in this document.

There was a suggestion that this had in some way (intentionally or otherwise) misled the liquidators as to the transactions in question (and a different version of events was proffered by Mr Carmona in his recent affidavit). However, there is nothing on the part of the liquidators to say that, but for the information so provided, they would have taken a different course in the investigation of the Ladycare business and affairs. It seems to me that what this reflects is simply that there is a very different view as between the Shea interests and the liquidators as to the construction to be placed on the events that occurred at the time of the company restructuring.

By early 2010 it appears that Mr Kassem had formed the view, based on Mr Hutchins' investigations, that there were transactions that appeared to be voidable against the liquidators from which a recovery for creditors might be obtained (49 cents in the dollar estimated for the Clarecastle matter and 100 cents in the dollar for Ladycare).

By letter dated 28 January 2010, Mr Kassem wrote to Mr Roy in relation to Ladycare, referring to a number of transactions between June 2006 and December 2006 which were deemed to be voidable against the liquidators; outlining the liquidators' observations and conclusions in that regard and providing an opportunity for information to be provided as to why proceedings should not immediately be commenced in relation to those claims. The identified voidable transactions included the write-off of related party loans; the management and indemnity fee; the payment of a dividend by Jasmic; the transfer of cash at bank to Shea Group Trading Trust and Jasmic in December and a bond premium paid to the former also in December. The second claim referred to in that letter was in relation to the transfer of the Ladycare business between June and December 2006.

On 11 February 2010, Mr Kassem wrote to Mr Roy in relation to Clarecastle, in similar fashion to the letter that had been sent in relation to Ladycare, outlining the position following the liquidators' review and asserting that the assignment transaction entered into on 7 July 2006 between Clarecastle and Jasmic in relation to the Windsor Village Partnership investment was a deemed voidable transaction and affording an opportunity for information to be provided as to why there should not be proceedings in relation to the transaction. (There was no reference in this letter to the Scotch Whisky transaction.)

The thrust of both those letters suggested that the liquidators were then in a position to commence proceedings in relation to the alleged voidable transactions so identified.

On 18 March 2010, Mr Hutchins sent an email to Mr Roy referring to a meeting on 9 March 2010 in relation to both matters and seeking further information "to assist in the ongoing investigation enquiries". It was put to Mr Kassem in cross-examination that this was the first occasion when information in relation to the Scotch Whisky scheme was sought (at least in writing) from Mr Roy and Mr Kassem accepted that this was the case (T 39.39).

The above chronology is relevant when it comes to assessing the complaints made by Mr Kassem and Mr Hutchins as to the lack of co-operation or assistance in the course of their investigation of the companies' affairs.

Mr Pritchard notes that Mr Kassem claims that, as at September 2010, more than 843 hours had been committed to investigating the affairs of Ladycare (which, on Mr Pritchard's calculations and assuming a 40 hour week, would amount to 21 weeks' work on Ladycare). A similar calculation for investigations into Clarecastle as at the date of the filing of the application would convert the 490 hours said to have been spent by the liquidators to12 weeks.

By contrast, Mr Pritchard points to the time records that show very little time spent for over 2 years from the commencement of the liquidation (somewhere in the order of 42 hours). (The submission by Mr Pritchard was that the liquidators have had the resources and capacity to act in a substantial manner when it suits but otherwise were prepared to do very little.)

Mr Kassem, in his 24 September 2010 affidavits in the respective proceedings says that since his appointment he has been provided with very limited books and records and that he has not received a satisfactory response to the demands issued. As a result of the lack of information he says that he was unable to progress his investigations into the affairs of the companies.

In paragraph [14] of his September affidavit in the Clarecastle Leave proceedings, Mr Kassem refers back to [55] to [70] of his March affidavit, in which he deposes to a belief that he was not provided with all the information in relation to the assignment of the interest in the Windsor Village partnership as he would expect there to be more source documents [35]; says that the only material received from Mr Shea and Mr Roy were the company's general journals for the period ending 30 June 2005 and 2006; financial statements for those years; financial statements for the Windsor Village partnership for 1999 to 2002 and a deed of assignment 7 July 2006; and asserts at [71] that he has reached the conclusion that Mr Shea or Mr Roy have in their possession further records of the company and are deliberately withholding documents from him "because of their failure to respond to my notices and the limited records provided to date".

In other words, Mr Kassem's complaint of lack of co-operation in production of documents is predicated on his assumption that Mr Shea and Mr Roy must hold further documents.

A similar assertion is made at [72] in relation to Mr McCarthy, namely that he failed to provide any documentation or assistance to substantiate his claims. At [73], Mr Kassem deposes that no information was provided to his office by Chambers Finance following the request made of Chambers Finance. (He does not, however, refer to the earlier correspondence in which information was provided on request.) In his 24 September affidavit at [7], Mr Kassem says: "I am further advised [by Mr Hutchins] that CFL [Chambers Finance] has provided no assistance except to confirm that there is an alleged debt owing by the Company in respect of the purported loan". He deposes that there was no written response to the letter dated 5 March 2009 to Chambers Finance and that he is advised that Mr Speirs has continued to direct him to make enquiries with Grant McKenzie. At [8] of that second affidavit, read only as to the witness' belief, Mr Kassem asserts that it appears that Mr McCarthy "has no intention of cooperating with my investigations into this transaction".

Again, Mr Kassem's complaint as to lack of co-operation in this regard assumes the existence of documents and a refusal to produce them. (In Mr Kassem's second affidavits in the respective proceedings he sets out documents he would expect to be in existence given the nature of the investments.)

At [76] of Mr Kassem's first affidavit in the Clarecastle leave proceedings he deposes that his investigation has been far from satisfactory to date "considering the complexities involved with each transaction and the lack of co-operation from Mr Shea, Mr Roy and parties in connection with the investment schemes outlined in this affidavit". Similar complaint is made in [31] of his affidavit in the Ladycare Leave proceedings.

In his affidavits in support of the respective extension applications, Mr Kassem bases his application for an extension of time on two matters - the perceived lack of cooperation with his investigation to date and the nature and complexity of the issues involved ([82] in the Clarecastle affidavit, [76] in the Ladycare affidavit). Mr Kassem sought at least 18 months to complete the Clarecastle investigation (12 months in the Ladycare case), obtain legal advice on evidence and alleged voidable transactions, determine whether there are any possible causes of action and to commence appropriate proceedings against the parties concerned.

At some stage in early 2010 (or perhaps late 2009) Mr Kassem approached solicitors to act on a speculative basis in relation to the commencement of proceedings. (In the witness box Mr Kassem said that he had approached solicitors in late 2009 or early 2010 but the time sheets suggest that instructions for the solicitors were not prepared until early 2010.)

On 12 May 2010, the liquidators reported to the creditors of the respective companies referring to "detailed investigations in relation to the company from a combination of books and records of the company and third party information sources". (For Ladycare alone the costs for time spent were $233,974.50, including about $130,0000.00 on various investigations).

Though the creditors of Clarecastle were noted in Mr Kassem's affidavit as being Ladycare ($538,205); Chambers Finance ($1,426,650); Jasmic ($22,788); and the ATO and Mr Shea (both for unknown amounts), Mr Pritchard contends that in fact the only 'real' creditor of Clarecastle is Jasmic (on the basis, as I understand it, that a proof of debt had not been noted as having been lodged for Ladycare and that the Chambers Finance debt was secured over the whisky). (Mr Castle referred me to the loan documentation that suggests, contrary to what had been put to and accepted by Mr Kassem in cross-examination on 6 May 2011, that the loan in relation to the Scotch Whisky investment is not a limited recourse loan. The report to creditors notes from the liquidators' review of the agreement indicates that security for the loan appears to be limited to a legal mortgage over the scotch whisky investment.)

The report to creditors as at May 2010 identified the claims under investigation as the Windsor Village partnership claim and the Scotch Whisky claim (the latter not suggested to be a voidable transaction claim).

As to the position with Ladycare, the largest creditor (as noted in the report to creditors) is the ATO. The ATO had, on 14 September 2005, issued a notice of amended assessment in relation to the company's tax return for the 1998/9 financial year resulting in a liability to the ATO of over $1.3 million. The ATO claims to be owed $1,440,975.77.

Proposed Ladycare proceedings

I note that when the matter was before me in June 2011, the liquidators had put on evidence as to the particular transactions in respect of which they wish to make voidable transaction claims - as set out in a draft statement of claim annexed to the 29 June 2011 affidavit of Mr Tannous.

In that regard it is relevant to note that the only s 588FF claim identified against the Jasmic parties in that draft pleading (ignoring a typographical error in the paragraph numbering in the draft Statement of Claim) relates to a payment by Ladycare on 3 August 2006 of $623,252 to Jasmic (said to be a voidable transaction because it was entered into during the 2 years ending on the relation-back day) that was an uncommercial transaction and was an insolvent transaction [57] or [58] was voidable pursuant to s 588FF(4) or (5) or was with intent to defraud creditors.

Otherwise the draft pleading makes a series of allegations in relation to transactions to which other entities (albeit connected or associated with Mr and/or Mrs Shea or the Shea group) are involved (none of those entities, as I understand it, having been given notice of the present application).

Briefly, those voidable transaction claims are as follows:

In Part D of the draft pleading, a transaction involving Waltlo Pty Ltd (a company of which Mr and Mrs Shea are said to be sole directors) - it is alleged that it owed Ladycare the sum of $2,646,839 and interest, which was purported to be written off 30 June 2006;
In Part E of the draft pleading, a transaction involving LCS IT (of which Mr and Mrs Shea are directors and which is a party to the LCS IT proceedings) in its capacity as trustee of the Victoria Unit Trust - in relation to the sum of $136,636 allegedly owed to Ladycare as at 30 June 2005 and written off 30 June 2006;
In Part G of the draft pleading, a transaction involving Tama Pty Limited (a company of which Mr and Mrs Shea's son is the sole director) as trustee of the Tamarama Unit Trust - in relation to the sum of $474,749 said to have been owed as at 30 June 2005 and written off on 30 June 2006;
In Part H of the draft pleading, a claim in relation to various transactions recorded in the journals of the company - the commitment on the part of Ladycare to pay a management and service fee of $1.15m to Australian Custodians Ltd and Providential Trustees Limited as trustees of the Shea Group Trading Trust to pay a management and service fee (a letter of 17 May 2006 seeking payment from Ladycare in respect of that claim being said to be part of the 'scheme'); the credit of an amount to the loan account of Shea Group Management Trust on 30 June 2006 ; and then on 3 August 2006, the payments by Ladycare to Tama of $424,051 and to Jasmic of $623,252; the making of journal entries on 31 December 2006 whereby those transactions were allocated to the loan account of Jasmic and Ladycare transferred $1,086,516 in purported discharge of its liability to Jasmic, on which date Ladycare transferred $78,095 to the Shea Group Trading Trust);
In Part I of the draft pleading, the Ladycare dividend in favour of LCSIT OF $270,000 (that being the subject of a claim in the LCSIT proceedings); and
In Part P of the draft pleading a claim against Enviro LCS (a company incorporated on 29 May 2006 with Mr and Mrs Shea as its directors and members), which is said to have received the benefit of transferred assets from Ladycare with the knowledge of a breach of fiduciary duty but is alternatively pleaded as a voidable transaction.

Each of the above transactions is said to be an insolvent and uncommercial transaction and voidable pursuant to s 588FE(3) or alternatively (4) or (5). Orders are sought pursuant to s588FF and otherwise (including under s 37A Conveyancing Act, setting aside the transactions). Breaches of statutory, common law and fiduciary duties are alleged. Equitable compensation or a declaration that assets are held on trust is sought (as well as a further extension to commence proceedings to 5 February 2012). (I note that at least the dividend claim in Part I and the transaction the subject of Part H involving a payment to Jasmic in December 2006 of $1,086,516 already appear to be part of the claims made in the proceedings on foot and for which leave under s 588(3)(b) would not be necessary. Insofar as the August 2006 payment of $623,252 is a part of that overall transaction, it might be thought to be encompassed by the existing claim in the Jasmic proceedings or a potential amendment to that claim.)

The draft Statement of Claim also contains other allegations for which an extension of time under s 588FF(3)(b) would not be necessary and has not been sought:

In Part F of the draft pleading, a claim against LCS in its own right for the sum of $8,204 as a debt or under contract (based on the amount disclosed in the company accounts) or as money had and received and/or pursuant to a restitutionary claim;
In Part J of the draft pleading, claims against Mr and Mrs Shea as directors of Ladycare for breach of their duties as directors (statutory, common law, fiduciary) not to gain an advantage for themselves or someone else or to cause detriment to the company;
In Part K of the draft pleading, a claim in relation to the transfer of fixed assets to Enviro LCS (it being said that the Ladycare directors took no steps to cause Enviro to pay the purchase price or to obtain security for the payment of the purchase price, in breach of their duties as directors);
In Part L of the draft pleading, a claim in relation to the transfer of other assets (goodwill and benefit of contracts) to Enviro LCS for no consideration, again said to be in breach of directors' duties;
In Part M of the draft pleading, a claim that the rejection of an offer to purchase the business of Ladycare, was in breach of their duties as directors (seemingly based on Mr Carmona's evidence although that referred only to indicative offers, as I read his affidavit);
In Part N of the draft pleading, that the declaration of the dividend in the sum of $270,000 and dissipation of Ladycare's assets was in breach of their duties as directors;
In Part O of the draft pleading, that in relation to loans to related parties and the compromise or discharge of debts owed by Waltlo, LCS as trustee for Victoria Unit Trust, LCS in its own right and Tama as trustee of Tamarama Unit Trust, the directors of Ladycare were in breach of directors' duties.

As pointed out by Mr Pritchard, insofar as the draft pleading includes claims otherwise than voidable transactions with a standard 6 year limitation period (such as the claims under s 37A of the Conveyancing Act and directors' duty claims), no leave is required or, at the most, leave is required to amend in respect of pleadings already on foot in accordance with orthodox principles. In that regard, it has been said that s 588FF(1) operates to the exclusion of the general power in s 1322(4)(d) of the Corporations Act but does not exclude the operation of court rules which would allow the amendment of proceedings to include additional transactions ( Rodgers v Commissioner of Taxation (1998) 88 FCR 61; Davies v Chicago Boot Co Pty Ltd (No 2) (2007) 96 SASR 164).

Mr Harper submits that there has been a clear identification of the alleged voidable transactions (referring to [16] of Mr Kassem's 31 March affidavit) and notes that there is a commonality (at least in most cases) of Mr and Mrs Shea as directors and/or shareholders of the relevant entities proposed to be the subject of the claims contained in the draft pleading.

With the above factual background in mind, I turn to the issues for determination.

(i) Correctness of Brown

For the reasons adverted to earlier, this is not an issue for determination in this Court, given that the decision of the Court of Appeal is binding on me. However, I note the submissions that were made, particularly in the context that it is suggested there is some ambiguity in the reasoning in Brown .

Mr Pritchard submits that the subject leave applications seek ' blanket' extensions (the orders not being confined to a specific transaction or defendant), and that such a blanket extension of time application cannot validly be made. In that respect, the Jasmic parties do not accept the correctness of the Court of Appeal's decision in Brown.

In Brown , an application had been made pursuant to s 588FF(3) for an order in terms that "the period prescribed by s588(3)(b) of the Corporations Law within which any application in respect to voidable transactions of [the company in liquidation] under s 588FF be extended to [a specified date]" . At first instance ( Brown v DML Resources Pty Ltd (2001) 52 NSWLR 685 at [693] - [694]), Austin J considered a submission that s 588FF(3) did not permit the making of a general order for an extension of time to make an application under s 588FF(1) against any creditor. It was submitted that the application must be made with respect to a specific person and a specific transaction. Austin J at [33] said:

In my opinion the applicants' submission places an unduly restrictive interpretation on s 588FF(3). The statutory language does not literally require the construction that they advance. It is true that subs (1) speaks of a particular application concerning a single transaction, and the opening words of subs (3) refer to the specific application identified by subs (1). But subs (3) refers to the application under subs (1) only in order to say that such an application must be made within the period of time that subs (3) sets. Subsection (3) does not say, as it might readily have said if the applicants' contention were correct, that the application under subs (1) may only be made within a longer period than three years if the Court allows that application to be brought later. Instead, it sets the time limit for making an application under subs (1) as three years after the relation-back day, or such longer period as the Court orders on an application under subs (3) - that is a different application whose purpose is only to extend the time period. Consistently with the wording of subs (3), the application to extend the time limit can be an application to extend the time limit within which a particular subs (1) application can be made, or a broader application that applies to the particular subs (1) application under consideration and to other applications as well. I see no reason why the other applications cannot be described by category rather than in specific terms, provided that the description is clear.

Before the appeal from his Honour's decision was determined, a similar issue came to be considered in the Queensland Court of Appeal in Greig & Duff as Liquidators of Australian Building Industries P/L (in Liq) v Australian Building Industries P/L (in Liq) & Anor [2003] QCA 298. There, Jerrard JA said (at p 1585, [111]):

I agree with the view expressed by Williams JA that s 588FF(3) does not, as a general rule , authorise blanket applications made ex parte without any identification in the application (or order made) of any person or persons against whom an application may ultimately be made for any one of the variety of orders provided for in s 588FF(1)(a) - (j). (my emphasis)

...

It seems incongruous that s 588FF(3) should be construed as allowing a (necessarily very specific) "application under subs (1)" to be made within such extended period as the Court orders, on an application brought ex parte in the broadest possible terms. Instead, s 588FF(3) will be construed more consistently with the particularity required in s 588FF(1) if s 588FF(3) is construed to require that any foreshadowed "application under subs (1)", for the bringing of which an extension of time is sought, should itself be described in the application made "under this paragraph" for that extension.

Williams JA had said at [45]:

Those arguments highlight a number of criticisms made above of the reasoning of Austin J in Brown No 2 . The answer, in my respectful view, is not to say that no creditor need be served with the application for an extension of time, but rather that any creditor sued outside the three year limitation period must have been made a party to the application for an order extending time. Surely any liquidator doing his or her job competently would at least be able to say towards the end of the three year limitation period what transactions might be challenged. Austin J in Brown No 2 at 694 referred to the situation which existed in Green v Chiswell as indicating that in some situations the liquidator may not be in the position to do that. I doubt, however, that that would be so in the circumstances which arose in Green v Chiswell . There the relation back day was 1 May 1996 when administrators of the company were appointed. Then those administrators were appointed liquidators on 21 January 1999 only a couple of months before the three year limitation period expired. But surely in such a situation, particularly where there was an identity between the administrators and liquidators, it would be known within the three year period what transactions were suspect. That would clearly be a case where an extension would be granted, but the creditors affected thereby would have to be served with the application and given the opportunity of making submissions as to why such an extension should not be granted . (my emphasis)

On appeal, in Brown , Spigelman CJ said at [170] - [173] that:

[170] The power to extend the time limit for commencing proceedings is intended to provide for the circumstance in which a liquidator is not in a position to commence proceedings within three years of the relation-back day, for whatever reason, subject to the assessment of the Court of all relevant circumstances, including the liquidator's conduct. It is not difficult to envisage a circumstance in which a liquidator is still ascertaining the identity of the recipients of benefits under possible voidable transactions and cannot give the Court an indication of the creditors to be targeted. The power should be broad enough to allow, in those circumstances, for an order granting an extension of time in general terms.

[171] The requirement of commercial certainty on the part of those who have had past dealings with the corporation is to be balanced against the conflicting interest of the creditors of the company. The Court, through the discretions it exercises under s588FF(3) and s588FF(1), is in a position to control unwarranted delay by liquidators. Subject to reasonable expedition on the part of a liquidator, and to adopt the reasoning of Doyle CJ in Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 at 659, the creditors are entitled to:

"... the benefit of having the affairs of an insolvent company properly investigated and administered in an orderly fashion in terms of the provisions of the law."

[172] Such an orderly administration is one of the underlying purposes of the legislation. Pursuant to s5C of the Act and s15AA of the Acts Interpretation Act 1901, the Court must prefer a construction that would promote the purpose or object underlying the Act. The purpose or object of orderly liquidation is best served by recognising that diligent liquidators may not be able to identify a full list of targets for applications under s588FF(1) within the three year period specified in s588FF(3).

[173] There is nothing in the words of s588FF(3)(b) which ties the character of the extension application to the specificity of what is required in an originating process for an order under s588FF(1). For the reasons I have mentioned, it is not appropriate to construe the section as if it did do so.

Later in his Honour's judgment, his Honour considered the import of Greig and said (in a paragraph as to which Mr Pritchard submits there is some ambiguity) (at [200]):

I have concluded above that the court does have power to grant an extension of time in general terms by specification of categories. I have left open the issue of the right of persons, who are not targeted or even identified at the time of the application, to move the court to set aside the order extending time. Some of the reasoning in Greig approaches the issue in a different way.

The starting point for Mr Pritchard's submission in this regard is that, in Brown , the primary point of the appeal was the interpretation of s 1332(4)(d) (not 588FF(3)), reference being made to the observation at [77] by Spigelman CJ that "in a sense, the section that falls to be construed on appeal is not 588FF(3) itself but s1322(4)(d)".

Insofar as the Chief Justice accepted that Austin J was correct in the conclusion that an application under s 588FF(3)(b) seeking a general order for an extension of time to make an application under 588FF(1) against any creditor is a valid application and an order in those terms is a valid order, Mr Pritchard submits that the conclusion to which Austin J came was not in fact that a blanket application with no specificity could be made but rather that ([168]):

Consistently with the wording of Subs (3), the application to extend the time limit can be an application to extend the time limit within which a particular subs(1) application can be made or a broader application that applies to a particular subs(1) application under consideration and to other applications as well. I see no reason why the other application cannot describe by category rather than in specific terms provided that the description is clear.

In this regard, the distinction seemingly drawn by Mr Pritchard is that between an application in which claims are described by category (which Austin J considered was permissible) and an application in general terms against any party. (Nevertheless, as Mr Pritchard notes, the finding made (at [170]) in Brown was that the power under s 588FF(3)(b) was broad enough to allow for an extension of time in general terms (in circumstances where a liquidator is still ascertaining the identity of the recipients of benefits under possible voidable transactions and cannot give the Court an indication of the creditors to be targeted). (Mr Pritchard notes that the analysis at [160] in Brown was not raised before Austin J; rather it was raised for the first time before the Court of Appeal and the response to the submission at that stage was that if that issue had been raised below the application could have been amended to make provision for a claim in relation to specific transactions.)

Mr Pritchard submits that the decision in Brown is wrong for a number of reasons. First, by reference to the wording of the section (on the basis that s 588FF(1) contemplates an application for one or more specific orders being made and s 588FF(3) is directed to "an" application under subsection (1) - a submission considered and rejected in New Cap ). Second, on the basis that the reasoning (at [45]) in Grieg (requiring the defendant to have been made a party to the application) is inconsistent with the prospect of a blanket application being permissible. Third, the suggested inconsistency in the fact that in Brown the Court (at [136]) had declined to decide whether or not all persons affected by an order under 588FF(3) need be notified yet on the other hand the Court held the power should be broad enough to call for an order in those circumstance (at [170]). Fourth, that the construction in Brown is inconsistent with the finding that the strength of the proposed application should be considered and this cannot be done in a blanket application (though I note that in New Cap it is recognised that this factor may not be relevant where what the liquidator is seeking by the extension is time to investigate possible claims).

Mr Pritchard also raises public policy considerations, some of which seem to overlap, in submitting that the construction preferred in Brown would create a number of unjust or undesirable outcomes (including that potential defendants would be disadvantaged by not being identified in s 588FF(3) applications; that liquidators would be encouraged not to identify potential defendants thereby reducing the prospect of opposition (at least in the first instance); that, having regard to accepted notions of natural justice, there may be a multiplicity of litigation by successive defendants applying to re-agitate leave applications of which they had not been given notice in the first instance; the possibility of inconsistent outcomes on applications to set aside the grant of leave by respective defendants, since each application would need to have regard to the factors that need to be taken into account such as the strength of the case against that defendant and the prejudice to that defendant; that there would be no finality as defendants who could claim that they were fairly identifiable but not identified might cause ongoing challenges to any leave granted; that liquidators would not have certainty themselves and prospective defendants may seek to have leave revoked after it has been granted and after proceedings have been commenced; that the interests of creditors could not be served by such uncertainty and the potential for wasted costs to be incurred; and that applications would be decided by reference only to the evidence that the liquidator elected to put before the Court.

The position in Brown has been followed on various occasions. In HIH Insurance Ltd, Re McGrath (in liq) [2004] 22 ACLC 449, Barrett J made an order on an application for leave "extending to a date 12 months from the date of filing this application, or such other period as the Court thinks fit, the period within which the plaintiffs may make an application under s 588FF(1) of the Act with respect to any voidable transaction involving the HIH Companies which have not been identified by the liquidators as at the date of the filing of this application". In that case, however, the liquidators had given evidence of the very considerable tasks which they faced in investigating the affairs of the companies in the group having regard to the complexity of the business and affairs of the group, the need for continued liaison with regulatory and investigatory bodies and the difficulty in obtaining access to relevant information and documents. The order was granted by Barrett J, though excluding from the general extension of time, those transactions which the liquidators had already identified as allegedly voidable transactions.

In New Cap , White J considered a submission by the defendants that if an order under s 588FF(3)(b) were sought in general terms then the applications falling within such an order must be described by category and the description of each category must be clear. In New Cap the order sought in the Originating Process was for an extension of time in respect of any claim of any description which fell within Pt 5.7B. White J noted that both before Austin J and the Court of Appeal in Brown it had been submitted that s 588FF(3) did not permit the making of a general order for an extension of time to make an application under s 588FF(1) against any creditor and that such an application must be made with respect to a specific person and a specific transaction. His Honour noted that Spigelman CJ, with whom on this matter the other members of the Court agreed, had held that an application for a general order for an extension of time to make an application under s 588FF(1) against any creditor was a valid application and that an order in those terms was a valid order and then said at [19] - [20]:

[19] It is not obvious to me why the clarity of the description of a claim in an application under s 588FF(3)(b) should be a criterion of validity. Prima facie, the validity of an application should depend on whether the claim made, whether clearly or ambiguously, when properly construed, is within the provision . I doubt that [the sentence in his Honour's judgment that "I see no reason why the other applications cannot be described by category rather than in specific terms, provided that the description is clear"] forms part of the ratio of the decision either of Austin J or the Court of Appeal. (my emphasis)

[20] A comparison with the order made in Brown v DML Resources Pty Ltd and para 33 of his Honour's judgment shows that Austin J was of the view that the description of an application being "in respect of any voidable transaction of [the company] under s 588FF" was a sufficiently clear description by category. The category of "voidable transactions" covered all of the transactions in Div 2 of Pt 5.7B. It covered all of the transactions in respect of which an order could be made under s 588FF(1). Therefore the reference to "category" does not require an identified sub-set of voidable transactions in respect of which an extension is sought.

In summary, it was submitted that the position in relation to the whisky venture no financial records of note had been produced, despite demands; that no persons associated with the venture had co-operated in providing information to the liquidators; and that documents relevant to the venture had been seized by investigative bodies, who would not release any information to the liquidators. Thus, Mr Harper submitted that even "the most well funded of inquiries would have come to nought in the face of the lack of co-operation of those behind the venture and the unavailability of records as a result of the seizures effected by investigative bodies."

However, examinations have since taken place in relation to the Scotch Whisky scheme and (although I think they had not been completed at the time of the extension applications in June 2011,) it does not seem that any claim in relation to voidable transactions has yet been identified. I accept that the authorities suggest that it is not necessary to review the merits of a claim where the reason for the extension is that the liquidators' enquiries are not complete. Nevertheless, where there is no articulation of any real basis on which it is suggested there may be a voidable transaction (and it is not suggested here that anything of relevance occurred after the entry into the scheme and in the period up to the placement of the company in liquidation) then this is a factor to take into account in exercising a discretion to permit a blanket extension for any such claim.

Ladycare

As to Ladycare, the liquidators believe that a series of transactions occurring from March 2006 through to 30 June 2006 amount to asset stripping in the context of a classic "Phoenix transaction" whereby the benefit of the company's business was assumed by a company operated by a relative of Mr and Mrs Shea (their son).

In March 2006, Ladycare's business operations were transferred to the Shea Group Trading Trust and the non-current assets were transferred to Shea Group Holdings Trust. Mr Kassem summarised the results of the transactions in his affidavit of 24 September 2010, noting that the net asset position of the company as at 30 June 2005 (as recorded in the company's financial statements for the year ended 30 June 2006) included a significant portion of related party loans that were due to the company and which haven been written off by way of journal entries during the 2006 financial year. Mr Kassem believes that these journal entries were processed to reflect significant losses which would reduce the net asset position of the company and allow the company's business to be transferred for no consideration. As at 31 December 2006, the company's balance sheet disclosed as assets only a commercial bond and a current tax asset, both said to have nil realisable value.

The financial statements from which this conclusion was drawn were, according to Mr Kassem, not available to him prior to the commencement of the leave proceeding or the related party proceedings commenced at the same time. Mr Kassem asserts, and for the purposes of this application I accept that it is arguable, that a strong case exists that Ladycare "deliberately disposed of its assets to defeat a claim from the ATO", Mr Kassem basing that conclusion on the fact that, despite the "multitude" of payments said to have been made to related parties and for the benefit of Mr Shea's interests, no money was paid to the ATO in respect of the tax determination (which Mr Kassem notes was not the subject of any challenge from Ladycare).

Mr Kassem estimates that success in relation to recovery of the related party transactions would return as much as 100 cents in the dollar to the creditors. It is submitted that as the ATO is Ladycare's largest creditor, the fruits of any successful litigation will pass to the community at large.

Mr Pritchard notes that the liquidators have already commenced proceedings in relation to the payment made to Jasmic in June 2006 and the payment made to LCS IT Pty Ltd by way of dividend , so that leave is not needed for those claims.

Further proposed proceedings

In considering the merits of the proposed proceedings for which leave by way of a extension of time is sought, consideration also needs to be given to the claims identified in the draft statement of claim sought to be filed in the Ladycare proceedings.

Mr Pritchard submits that there is insufficient information as to the transactions so identified to determine even on a preliminary basis their prospects of success . However, at least on the face of the proposed pleading it could not be said that such claims would be likely to be struck out as having no foundation if the underlying facts on which they are based could be proved.

(iv) Prejudice

Mr Harper notes that there has been no evidence (other than by Messrs Seller and McCarthy) by any interested party as to actual or specific prejudice, notwithstanding the opportunity to file and serve further evidence since 6 May 2011.

On the question of the prejudice arising from delay, McHugh J in the Brisbane Health case, noted that:

.... The enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates". Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo , "what has been forgotten can rarely be shown". So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose.

...

The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions.

... A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case. The purpose of a provision such as s 31 is "to eliminate the injustice a prospective plaintiff might suffer by reason of the imposition of a rigid time limit within which an action was to be commenced." But whether injustice has occurred must be evaluated by reference to the rationales of the limitation period that has barred the action. The discretion to extend should therefore be seen as requiring the applicant to show that his or her case is a justifiable exception to the rule that the welfare of the State is best served by the limitation period in question. Accordingly, when an applicant seeks an extension of time to commence an action after a limitation period has expired, he or she has the positive burden of demonstrating that the justice of the case requires that extension . (my emphasis)

Mr Harper submits that the absence of any specific prejudice should be given great weight and that it effectively neutralises any argument as to prejudice in the present case.

In Brown (at [119]), Spigelman CJ noted that, when balancing the requirement for commercial certainty on the part of those who have past dealings with the company and the conflicting interest of the creditors of the company:

The eventual loss of the ability to make a relevant claim can be reasonably regarded as something to be surrendered in favour of providing commercial certainty to other who have had dealings with the company.

Mr Harper submits (as adverted to earlier) that from a public policy perspective, the absence of records to date means that the creditors of the companies can have no satisfaction that the companies' affairs have yet been adequately investigated (citing Brown in this regard).

Mr Pritchard submits that if the liquidators are correct in their claim regarding the Windsor Village Partnership (which is not admitted), then the interests of the only real creditor (Jasmic) are adequately protected and in any event, it is questionable (having regard to costs of litigation and the uncertainty of any recovery) whether it is in the interests of creditors for further litigation to proceed when it appears that enormous costs are being incurred to recover $22,000.00 in circumstances where even that proof of debt is not supported by any evidence.

In relation to Ladycare, it is said that the one creditor (ATO) appears to be owed $1,440,975.77 and that the claim in the Jasmic proceedings and LCS IT proceeding claim $ 1,709,304.00, such that if the liquidators succeed on these claims, then all creditors can be paid from the proceedings.

Mr Pritchard submits that the prejudice to Mr and Ms Shea is that, by reason of the liquidators undertaking their duties in piecemeal fashion they are becoming involved in successive proceedings (3 to date), rather than the liquidator putting forward one claim containing all actions. It is said to be unfair to require a defendant to be "peppered" with claims many years after the event and that the multiplicity of actions should be discouraged.

On the question of prejudice to the interested parties for whom Mr Castle appeared, that was largely put in relation to the then forthcoming examinations summonses (and the prejudice arising from the fact that evidence would be compelled to be given in advance of the pending criminal trials against Messrs McCarthy and Seller). That prejudice has been considered and, to the extent I considered appropriate, dealt with by the orders I made in the examination proceedings. There seems to be no further specific prejudice to which those parties point (other than the presumptive prejudice arising from delay).

As to the issue of presumptive prejudice, in Agricultural & Rural Finance (at [192]) Tobias JA said:

Although I accept the principle of presumptive prejudice is applicable to a case such as the present, I do not think that it should carry much weight when balancing the various factors which the court is required to take into account in the re-exercise of the relevant discretion.

I have already noted above the dicta of White J in New Cap (at [55]) in this regard in which his Honour observed that the absence of prejudice is not itself decisive but is, rather, a relevant factor to be taken into account in the exercise of the general discretion.

As I have had occasion elsewhere to note ( In the matter of Pan Pharmaceuticals Ltd (in liq) [2011] NSWSC 561 at [77]), the High Court in Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 at [29] emphasised the prejudice likely to be occasioned by delay:

Delays in the courts are a major cause of disquiet not only among those who resort to the courts but also among judges and all others associated with the courts. Delay will almost always impede the proper disposition of any case that does not come to trial promptly. Memories fade; records may be lost. The impediments are many, varied and obvious. (my emphasis)

In the present instance, the delay in commencing the proceedings beyond the time period in which they were required (absent leave) to be brought when measured by reference to the time at which the application for leave was brought was only small, but when measuring the impact of that delay it must be remembered that the time from the events in question is now some 5 years at least (it is not apparent how long the time from the relevant events in relation to any claim involving the Scotch Whisky transaction would be since it is not clear to what the claim would relate -any voidable transaction claim in relation to the 2001 transaction being disavowed). (And it is necessary to bear in mind the reason for the delay (which, it seems to me, is largely due to a policy decision by the liquidators not to expend funds on an inquiry into claims in an unfunded liquidation where no cause for investigation or potential claim had apparently been uncovered by the initial investigation into the company's affairs. Reasonable or not, that forensic decision is one that must have been made knowing the potential consequences.)

That said, it seems to me that the prejudice likely to be suffered by the Jasmic parties (if there were to be an extension of time to bring proceedings in relation to alleged voidable transactions arising out of the restructuring of the Ladycare business and the related company loans of the kind foreshadowed in Part H of the draft pleading) must be considered in light of the fact that there are already proceedings on foot in which claims relating to those transactions are being raised. They will in any event be exposed to the cost of proceedings in relation to those matters and their recollection of events, diminished as it may be, will necessarily be tested in those proceedings whether or not leave is given in the present proceedings.

Therefore, it seems to me that the prejudice likely to be suffered by the Jasmic parties as a result of an extension of time to bring voidable transaction claims in relation to matters that are already the subject of or related to matters the subject of proceedings against them is considerably diminished.

I should note, however, as to prejudice, that the proposed claims sought to be made involve other parties (such as Waltlo, LCIS IT, Tama and Enviro LCS) to whom notice was not given of the proposed application (and even if they had indirect notice through Mr and Mrs Shea, there was no identification of the particular claim sought to be made against them).

In the ordinary course a party whose interests may be adversely affected by an extension of time should be joined as a defendant to the application ( Greig ; McGrath v National Indemnity Co (2004) 182 FLR 309). Insofar as there is a series of individual transactions now sought to be impugned, it is submitted by Mr Pritchard that the parties to those transactions (with the one exception of the Jasmic payment that seems already to be the subject of the proceedings brought against Jasmic or sufficiently related thereto to make it perhaps likely that an amendment might be made to encompass that transaction in the existing proceedings) have not been given proper notice of the application. Mr Pritchard thus submits that the question of prejudice must be considered in the context of the foreshadowed application against entities to whom notice of the claim was not given and that although (as Mr Harper submits) those entities may have been on notice of investigation of matters such as directors' duty claims would not have been on notice of the particular claims now sought to be maintained.

Conclusion

When considering the delay in the present case, the liquidators' position was that it was explicable due to the:

lack of funding (though the impact of this was really only that a conscious decision seems to have been made, in accordance with the liquidators' practice, only to investigate up to a certain point and there was no investigation of any means by which the liquidators' further investigations could have been funded in the interim - any prejudice in now not being able to maintain a voidable transaction claim would seem to me to be self-inflicted in the sense that this expression was used in Buzzle );
complexity of the companies' affairs (though the Ladycare restructuring was not itself regarded by Mr Hutchins as a transaction of any complexity and, in any event, this did not preclude the commencement of proceedings in Ladycare or in relation to the Windsor Village transaction - the real difficulty seeming to me to arise from the lateness of the time at which the liquidators commenced to make serious efforts to investigate the position);
lack of information available to the liquidator (again, this seems to some extent to be a product of the manner in which the investigations proceeded largely in a formulaic way issuing standard form requests for documents and not pursuing those requests; in relation to the complaints as to the manner of discovery, this seems to me to be as to production in a manner not identified by reference to particular transactions but in any event there is evidence from the solicitors acting for the Jasmic parties that production was in the form sought and that there was no complaint at the time); and
lack of cooperation (but the evidence suggests that there was a measure of cooperation both on part of the Sheas and their accountant, Mr Roy, and on the part of McCarthy and Chambers Finance. In particular, Mr and Mrs Shea made available not only Mr Roy but an adviser from HQZ Argentum to provide information in relation to the Ladycare transactions. Mr Hutchins did not accept the information given by the respective accountants or advisers as helpful (and seemed to go so far as to suggest that there was an attempt to present the transaction in a misleading fashion as very complex when he considered the structure to be simple and his objection was to the lack of information as to its commercial purpose), but that seems to be a criticism as to the information he was given not a lack of cooperation in its provision. The liquidators were critical of the responses given in the course of the examinations of those involved with the Jasmic interests (reference being made in submissions to an "intransigent inability to recall" on the part of Mr Shea), but it seems that equally the explanation might be that the Sheas left matters in the hands of their advisers (hence their inability now to be of much assistance in identifying what took place) and that Mr Roy himself did not have a clear idea or does not now have a clear idea of the intricacies of a restructuring done on the advice of other advisers. Again, a criticism as to the lack of understanding of the parties involved in the transaction is not the same as lack of cooperation in the investigations.)

As to the relevant period of delay, Mr Harper submits that it was at most 8-9 months during which time there was no activity on the part of Mr Francipane and the commencement of activity by Mr Hutchins; Mr Pritchard says that the delay is in effect the 2 and a half year period from the liquidators' appointment in April 2007 to the taking of steps from October 2009. I am of the view that the effective delay in relation to the investigations is the latter period (since the steps taken by Mr Francipane seem to have been somewhat formulaic in the sense of going through the motions (at least so far as the time sheets reveal) and Mr Hutchins was clear that he had obtained little assistance from the steps taken in that earlier period).

The relevant delay, for the purposes of an extension application under s 588FF(3), is the delay in the bringing of proceedings. That time started to run from the expiry of the three-year period. That is not a lengthy period of delay. However, the presumptive prejudice resulting from that delay is the deterioration in memory in the time that has elapsed since the transactions that would be the subject of the voidable transaction proceedings if the period for bringing the proceedings were to be extended and the likelihood of that prejudice must be assessed by reference to a greater period of time. (As Brown makes clear, the statutory time limit involves a legislative balancing of the prejudice arising from delay in this regard.)

In the present case, the reason for the delay in bringing the proceedings largely seems to be the relative inactivity of the liquidators for two and a half years of the three-year period available to them (due to the policy decision not to expend large funds on an unfunded liquidation). Mr Harper submitted that this was not an unreasonable approach. I accept the force of that. In the same fashion, Tobias JA in Tolcher accepted that it was responsible for a liquidator not to incur costs in proceedings until knew litigation funding in place. However, by analogy with the reasoning in Buzzle , where the decision is made not to pursue more than preliminary investigations unless something is discovered in those investigations that might make investigation worthwhile and not to seek funding (or to make an application to the ASIC fund for assistance) to do so, then that is a forensic decision made by the liquidators and in those circumstances the liquidators must bear the risk that there will be no extension granted.

The facts seem to me to suggest that had an exercise of the kind carried out by Mr Hutchins in October 2009 been commenced at an earlier stage then there is every possibility that the liquidators could have obtained the same kind of speculative funding arrangements as they were able to do in early 2010. This reinforces the conclusion that the situation in which the liquidators now find themselves is as a result of decisions consciously taken by them and hence any prejudice is self inflicted.

As to the merits, I accept that an arguable case seems to be shown in relation to the Ladycare transactions and the Windsor Village partnership transactions.

The position is very different in relation to the Scotch Whisky transaction - initially the position was that an extension was necessary in order to enable a n investigation of the position (Mr Kassem having made it clear in the witness box in May this year that he did not know what particular claim there might be; did not know if there was in fact any whisky or the like); but since then examinations have taken place in relation to this issue and there is still no articulation of any voidable transaction claim. There cannot be a voidable transaction claim in relation into the entry into the 2001 transaction per se (unless the 10 year time period applied - and at T 33 Mr Kassem disclaimed any suggestion that it was considered that the transaction was entered into for purpose of defeating creditors; saying that he considered it bore the hallmarks of a transaction entered into for tax minimisation purposes). Mr Harper confirmed in closing submissions that there is not a claim to set aside the transactions but that what the liquidator is enquiring into is whether there is a voidable transaction in relation to the performance of the whisky transaction or during the period thereafter. However, nothing has been put to me to suggest that there is a basis for such a claim and given the delay to date I see no reason to grant a further extension to carry out what seems to be little more than a fishing expedition in that regard.

As to the question of prejudice, Mr Harper emphasises that no evidence of actual prejudice (other than the effect on the forthcoming criminal trials of Messrs Sellers and McCarthy) had been adduced. However, presumptive prejudice of the kind identified in Brisbane Health is, of course, a presumption of actual prejudice.

For his part, Mr Pritchard does not accept that there is no evidence of specific prejudice in any event, referring to the evidence of Mr Shea's advanced glaucoma as constituting actual prejudice. In that regard, while I accept that a medical condition of this kind is likely to make the giving of evidence by Mr Shea more difficult, this is not the same kind of prejudice as that which occurs where a witness has died or where there is a medical condition suffered which affects the witness' memory. That said, prejudice to some extent from the inevitable (or at least very likely) deterioration of memory (exacerbated by the fact that Mr Shea is an elderly witness) should I think be inferred.

However, in circumstances where the Jasmic parties are already embroiled in claims relating to the transactions the subject of the leave application, and will no doubt be required to give evidence in relation to the restructuring of the Ladycare business for the purpose of other claims, any prejudice in respect of the deterioration of the quality of their memory is already present and it does not seem likely to me that this will be greatly exacerbated by the addition of a further voidable transaction claim in relation to those matters.

Balancing the various considerations referred to above, my conclusion is that the applications for extension of time to commence voidable transaction proceedings in both the Clarecastle and Ladycare Leave proceedings should be dismissed other than in relation to the claim foreshadowed against Jasmic in paragraph [57] and [58] of the draft Statement of Claim (since I consider that the issues raised by it will be issues of the kind already raised in the proceedings on foot or which could be brought without leave).

I note that this still leaves the liquidators in the position where there remain claims in relation to the conduct of the respective companies' affairs and it may well be that an extension of time in relation to particular transactions can be sought in the context of an application for amendment to the existing proceedings. Further, insofar as the applications for an extension of time in the 3 specific proceedings involve parties other than the Jasmic parties (who were not represented on this occasion) it seems to me that the findings above would not preclude an application for amendment of the existing proceedings to include claims against those parties and an extension of time in that regard (particularly since different issues relevant to the weighing of the delay and prejudice considerations might well arise in relation to those other parties).

Orders

For the reasons set out above, I propose to make the following orders:

1. Pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth), I extend the time for the bringing of a voidable transaction claim of the kind identified in paragraphs [57] and [58] of the draft Statement of Claim annexed to the affidavit sworn 29 June 2011 of Mr Charly Tannous in these proceedings, against Jasmic Nominees Pty Limited.

2. Save as above, I dismiss the applications for an extension of time pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth), brought in proceedings 81756 of 2010 and 81786 of 2010.

I will hear submissions as to costs and as to the form of the proposed orders at an appropriate time.

**********

Amendments

31 January 2012 - Paragraphs renumbered from [102]

Amended paragraphs: Various

Decision last updated: 31 January 2012

Medium Neutral Citation:	In the matter of Clarecastle Pty Ltd (in liq) - Kassem and Secatore as liquidators of Clarecastle Pty Ltd (in liq) In the matter of ACN 050 070 463 Pty Ltd (in liq) - Kassem and Secatore as liquidators of ACN 050 070 463 Pty Ltd (in liq) [2011] NSWSC 857
Hearing dates:	6 May & 29 June 2011
Decision date:	22 July 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ward J
Decision:	Applications for extension of time under s 588FF(3)(b) dismissed other than in respect of one identified claim
Catchwords:	CORPORATIONS - application for leave pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) to extend the time to bring claims in relation to voidable transactions under s 588FF(1) - whether an extension of time can be granted in relation to the bringing of voidable transaction claims in general or 'blanket' terms - application of test for exercise of discretion in respect of such applications - HELD - decision in BP Australia v Brown binding on a single judge of this Court - discretion should be exercised in favour of particular claim identified against Jasmic Nominees Pty Ltd - otherwise claim for extension of time dismissed.
Legislation Cited:	Civil Procedure Act 2005 (NSW) Corporations Act 2001 (NSW)
Cases Cited:	Ansell Ltd v Davies [2008] SASC 203; (2008) 67 ACSR 356 Arnautovic v Nichola [2009] NSWSC 233 Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (in liq) [2004] NSWSC 1244; (2004) 52 ACSR 103 BP Australia v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Brown v DML Resources Pty Ltd (2001) 52 NSWLR 685 Davies v Chicago Boot Co Pty Ltd (No 2) (2007) 96 SASR 164 Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645 Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 Greig & Duff as Liquidators of Australian Building Industries P/L (in liq) v Australian Building Industries P/L (in liq) & Anor [2003] QCA 298 Hall v Sherman [2001] NSWSC 810 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 HIH Insurance Ltd (in liq), Re McGrath [2004] 22 ACLC 449 Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207 Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 Matthews v Ipex ITG Pty Limited [2007] SASC 387 McGrath v National Indemnity Co (2004) 182 FLR 309 New Cap Reinsurance Corp v Reaseguros Alianza SA [2004] NSWSC 787; (2004) 186 FLR 175 Re Estate of Knight (a bankrupt); Rocom International Pty Ltd (in liq) v Prentice [2002] FCA 604 Re Harris Scarfe Ltd (in liq) and Harris Scarfe Wholesale Pty Ltd (in liq) (No 3) [2008] SASC 74; (2008) 65 ACSR 616 Rodgers v Commissioner of Taxation (1998) 88 FCR 61 Taylor v Woden Constructions Pty Ltd [1998] FCA 1228 Tolcher v Capital Finance Australia Ltd [2005] FCA 108 Tolcher v Gordon [2005] NSWCA 135; (2005) 53 ACSR 442 Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433
Texts Cited:	Austin & Black's Annotations to the Corporations Act Broderick, Matthew 'Voidable transactions - extending the limitation period under s 588FF(3) of the Corporations Act 2001 (Cth)' (2009) 17 Insolvency Law Journal 121 Ford's Principles of Corporations Law
Category:	Principal judgment
Parties:	(10/081756) Ozem Kassem and Bruno Secatore as liquidators of Clarecastle Pty Ltd (in liq)(First Plaintiff) Clarecastle Pty Ltd (in liq)(Second Plaintiff) Jasmic Nominees Pty Ltd and Mr and Mrs Shea (Jasmic Interested Parties) Mr Ross Seller, Mr Patrick McCarthy and Grant McKenzie Pty Limited (Other Interested Parties (10/081786) Ozem Kassem and Bruno Secatore as liquidators of ACN 050 070 463 Pty Ltd (in liq)(First Plaintiff) ACN 050 070 463 Pty Ltd (in liq)(Second Plaintiff) Jasmic Nominees Pty Ltd and Mr and Mrs Shea (Jasmic Interested Parties)
Representation:	R Harper SC (with M Condon on 6 May 2011) (Plaintiffs) D R Pritchard SC (Jasmic Interested Parties) Sage Solicitors (Plaintiffs) Spinks Eagle Lawyers (Jasmic Interested Parties) T Castle (6 May 2011) S Anderton (29 June 2011) (Atanaskovic Hartnell) (Other Interested Parties)
File Number(s):	10/081756, 10/081786