Australasian Memory Pty Ltd v Brien

COUNSEL : Mr B.A.J. Coles QC/Mr M. Ashhurst - First Plaintiff (Deed Administrator) SOLICITORS : Deacons - First Plaintiff (Deed Administrator) CATCHWORDS : CORPORATIONS - winding up - deadline for applications by liquidator challenging voidable transactions - no liquidator yet appointed - application by administrator under deed of company arrangement for extension of time within which any future liquidator may seek extension of such deadline LEGISLATION CITED : Corporations Act 2001 (Cth) Re Abel Equipment Pty Ltd (1978) 3 ACLR 741 Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 Brown v DML Resources Pty Ltd (No 2) (2001) 52 NSWLR 685 CASES CITED : Brown v DML Resources Pty Ltd (No 6) (2002) 40 ACSR 669 David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 Re J & E Holdings Pty Ltd (1995) 36 NSWLR 541 Star v National Australia Bank Ltd (1999) 30 ACSR 583 DECISION : Order extending time

• 8 - IN THE SUPREME COURT REVISED OF NEW SOUTH WALES EQUITY DIVISION

2275/02 - RE AURA COMMERCIAL INTERIORS PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) JUDGMENT 1 Aura Commercial Interiors Pty Limited ("the company") went into Part 5.3A administration on 19 April 1999. That day is therefore the "relation-back day" by virtue of s.513C. Unless there is an extension of time, today is the last day of the period within which any application under s.588FF(1) of the Corporations Act 2001 may be made seeking to challenge allegedly voidable transactions. This is the effect of s.588FF(3)(a) in light of the fact that the "relation-back day" is 19 April 1999. Provision for extension of the time for making s.588FF(1) applications is found in s.588FF(3)(b). It creates jurisdiction for the court to order that some period longer than the period of three years after the relation-back day apply as the period for making s.588FF(1) applications. An application under s.588FF(3)(b) can only be made by the liquidator and must itself be made within three years after the relation-back day. 2 The plaintiff wishes to keep alive the possibility of s.588FF(1) proceedings even though the three year period is about to expire. The problem is that the company has no liquidator by whom an application under s.588FF(3)(b) can be made, having been in the hands of a deed administrator under a deed of company arrangement continuously since 4 June 1999 as a result of a resolution of creditors passed in May 1999. That deed continues in operation. The plaintiff is the deed administrator. 3 With s.588FF(3)(b) thus unavailable because of the lack of a competent applicant, the question is whether there are other means of keeping alive at least the possibility that any liquidator eventually appointed might resort to s.588FF(1). 4 Section 447A, the comprehensive and far reaching scope of which was confirmed by the High Court in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, was mooted as a possibility but quickly rejected because it permits only orders about how Part 5.3A is to operate, whereas s.588FF is in Part 5.7B. Another possibility examined is s.451D, which says that where for any purpose, including for example "the purposes of a law", an act must or may be done within a particular period or before a particular time and Part 5.3A "prevents" the act being done within the period or before the time, the period is extended or the time is deferred according to how long Part 5.3A prevented the act from being done. Section 451D cannot operate here because it is not sensible to regard the making of a s.588FF(3)(b) application as prevented by Part 5.3A. If it is "prevented" at all, it is prevented by the absence of a liquidator, which is an ordinary and normal incident of the life of the vast majority of companies. 5 The claim ultimately advanced by the plaintiff in his amended originating process is a claim for an order under s.1322(4)(d) that the time within which any liquidator appointed to the company may bring an application seeking to extend time pursuant to s.588FF(3)(b) be extended to 20 April 2003. Section 1322(4)(d) is in the following terms: "Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: …

(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;

and may make such consequential or ancillary orders as the Court thinks fit." 6 The first question in relation to the possible use of this provision in the way in which the plaintiff seeks to use it is whether s.588FF itself leaves scope for that use or, on the other hand, shows itself to be self-contained so far as concerns the matter of extensions of time. I do not think that s.1322(4)(d) could be asserted as a basis on which the court could extend the period for the making of applications challenging voidable transactions under s.588FF(1). This is because that time limit is the subject of the particular extension mechanism provided for in s.588FF(3)(b): see Star v National Australia Bank Ltd (1999) 30 ACSR 583. To address the same issue as it affects the particular order now sought makes it necessary to look at the structure and effect of s.588FF(3) which is in the following terms: "An application under subsection (1) may only be made: (a) within 3 years after the relation-back day; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years."

7 Section 588FF(3) contains two references to the same period of three years, that is, the period of three years after the relation-back day. One is in s.588FF(3)(a) and the other in s.588FF(3)(b). Assuming no extension of any kind has been granted, the first reference to the three year period sets the deadline for applications by the liquidator challenging voidable transactions under s.588FF(1), while the second reference sets the deadline for the making by the liquidator of an application for any extension of the first deadline.

8 I approach the question whether the court may, by reference to s.1322(4)(d), extend the second of these deadlines (so that the point beyond which it is not open to the liquidator to seek extension of the first deadline is itself deferred to a date more than three years after the relation-back day) on the basis that the restrictive words "may only be made" in s.588FF(3) apply only to constrain the making by a liquidator of an application challenging voidable transactions under s.588FF(1). Although there is, by reason of the existence of s.588FF(3)(b), an indication that general modification provisions are not to apply to that part of s.588FF(3) in which the first reference to the three year period plays a role, there is no such indication in relation to the part in which the second reference to that period plays a role. I may therefore, for present purposes, put to one side the particular constraints arising from the word "only" in the phrase "may only be made" (cf David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Re J & E Holdings Pty Ltd (1995) 36 NSWLR 541) and conclude that nothing in s.588FF itself shows an intention to exclude the operation of s.1322(4)(d). 9 I further conclude that the period of three years, where secondly mentioned in s.588FF(3), is a "period for … instituting or taking any proceeding under this Act" as referred to in s.1322(4)(d); and that the s.1322(4)(d) power is available to extend the period within which an extension of time under s.588FF(3)(b) may be made. These conclusions are consistent with the decision of Austin J in Brown v DML Resources Pty Ltd (No 6) (2002) 40 ACSR 669.

10 With the availability of s.1322(4)(d) thus established, two further questions arise: first, whether the present plaintiff, being the deed administrator, is an "interested person" as referred to at the start of s.1322(4) and therefore has standing to apply under that section; and, second, whether the power can and should be exercised so as to produce the result the deed administrator seeks, namely, extension until 20 April 2003 of the period within which a liquidator may seek to obtain extension under s.588FF(3)(b) of the period for making s.588FF(1) applications. The essential guiding consideration in relation to the second matter prescribed by s.1322 itself is that "no substantial injustice has been or is likely to be caused to any person": see s.1322(6)(c). 11 The expression "any interested person" in s.1322(4) must, in my view, be construed liberally. That and similar expressions (such as "person aggrieved") are intended to exclude only the officious bystander or mere busybody. Everyone with any cogent reason for seeking to be involved, even if it be tenuous or marginal, will generally be within such descriptions - although, of course, the less compelling or less obvious the reason is, the less significance may be afforded to the claim or position of the person concerned. 12 The administrator's report to creditors of 6 May 1999 contained his opinion as to whether there were transactions that appeared to be voidable transactions. The opinion was that there were. The opinion was expressed in discharge of the reporting obligations imposed by Part 5.3A. The question is therefore one in which the administrator properly involved himself. 13 One potential sequel to the present deed of company arrangement is, of course, transition to creditors voluntary winding up under s.446A. In that event, the deed administrator, as he now is, will, in the ordinary course, become the liquidator under s.446A(4). He may therefore be regarded today as a potential liquidator, that being a status that Blackburn CJ was prepared to think made an applicant an "interested person" under a somewhat analogous provision of the uniform companies legislation of 1961-2: see Re Abel Equipment Pty Ltd (1978) 3 ACLR 741. As already noticed, it is a liquidator alone who will have standing to make any application for extension of time the ability to pursue which will be preserved if the present application is successful. 14 A combination of the general responsibilities towards creditors and for the protection of their interests envisaged by Part 5.3A and the status as potential liquidator to which I have just referred are sufficient to make the plaintiff a "person interested" for the purpose of s.1322(4) in the present context. 15 I turn now to the question to which s.1322(6)(c) directs attention, namely, whether substantial injustice will be or is likely to be caused to any person if an order is made extending to 20 April 2003 the period within which an extension application under s.588FF(3)(b) may be made by a liquidator. In addressing that question, I note that there are three persons who, in the assessment of the plaintiff as deed administrator, might possibly be regarded by a liquidator as persons against whom s.588FF(1) proceedings should be initiated. The evidence shows that each of those persons was, on 16 April, served with a copy of the originating process and the supporting affidavit. A covering letter served on each said: "You are being served as a potentially interested person in the proceedings."

Those three persons are named as defendants in the plaintiff's amended originating process. They had notice that the present application would be before the court today. 16 I also note that the plaintiff, if successful in obtaining the order he now seeks, will cause a copy of the order to be served on each of the three persons to whom I have referred and on ASIC, as well as causing notification of the order to be published in The Sydney Morning Herald and the New South Wales Government Gazette. These steps are designed to ensure that the three particular persons are aware of the continuing possibility of extension of the time for transactions involving them to be challenged and to go some way towards bringing that possibility to the notice of others who may have an interest. In fact, the plaintiff seeks an order requiring him to take these steps. The plaintiff also seeks an order granting all defendants liberty to apply on seven days notice to vary or dissolve the other orders, including the order extending time. This is a further recognition of the position of persons affected. 17 The factors to which I have referred, while going to due notice and awareness and thus relevant to the question of prejudice to which s.1322(4)(d) directs attention, are by no means the end of the matter. If the period of three years referred to in s.588FF(3)(b) is extended to four years, the three named persons, as well as any others who may be identified as parties to transactions arguably within the scope of s.588FF(1), will be denied the safe haven they will achieve tomorrow by the effluxion of time in the absence of the s.1322(4)(d) extending order. 18 It seems to me nevertheless that such prejudice as these persons may, for that reason, suffer will not amount to "substantial injustice". The s.1322(4)(d) order itself will not subject any person to any immediate burden or consequence. If a liquidator moves within the extended s.588FF(3)(b) period to seek an order for the extension of the time within which resort may be had to s.588FF(1), that attempt on the liquidator's part will of necessity be subjected to close scrutiny. This is because the attempt will entail what amounts to a re-opening of a gate that is already well and truly shut. 19 If the court makes today an order under s.1332(4)(b) extending the period of three years referred to in s.588FF(3)(b), s.588FF(3)(a) will still operate to preclude, after tomorrow, any application by a liquidator to challenge allegedly voidable transactions; and that position will continue unless and until changed by a further order of the court. If, relying on the extension effected by the s.1322(4)(d) order, a liquidator in three, six or nine months time seeks the exercise of the court's discretion with a view to re-opening, via s.588FF(3)(b) application, the gate which the legislation had already caused to close, two realities will, I think, come to the fore. 20 The first reality is that the court will be mindful of the need for persons affected (including, if they are still considered potential targets, the three to whom I have already referred) to have an opportunity to make submissions on the question whether the already dead possibility of s.588FF(1) applications should be brought back to life. The importance of ensuring that potentially affected persons have adequate notice of a s.588FF(3)(b) application clearly identified by Austin J in Brown v DML Resources Pty Ltd (No 2) (2001) 52 NSWLR 685 will merit particular emphasis in such a case. The second reality is that a liquidator attempting to enlist the assistance of the court to effect such a resuscitation will face a more difficult task than a liquidator merely seeking extension of an unexpired period. It is one thing to keep alive an existing exposure to the possibility of adverse consequences; it is quite another to re-create an exposure which the law has caused to come to an end. On one view of the operation of the section, re-creation may be impossible, but I do not wish to be taken to express any view on that at this stage. 21 These considerations concerning the nature and likely course of any subsequent application by which a liquidator attempts to obtain an enlarged time within which to launch s.588FF(1) proceedings satisfy me that the making of the order now sought will not cause, and is not likely to cause, "substantial injustice" to any person. 22 On the positive side, it can be said that, from the perspective of the creditors with whose interests both Part 5.3A and Part 5.7B are concerned, securing of the possibility that any liquidator may, during the next year, mount a case for an extension of time within which that liquidator may seek to challenge allegedly voidable transactions will be beneficial. A meeting of creditors held on 10 April 2002 resolved that action should be taken to attempt to keep that possibility alive. 23 I am satisfied that the plaintiff has made out a sufficient case for limited relief by way of the particular order he seeks under s.1322(4)(d) and that the court has jurisdiction to make that order. I make orders 3, 4, 5 and 6 in the amended originating process. The orders may be taken out forthwith. **********

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