First Appellant v First Respondent

PRACTICE AND PROCEDURE - Appeal from Associate Justice - Appeal relating to the exercise of discretion - Supreme Court (Corporations) Rules 2013 (Vic) r 16.5 - Robinson Helicopter Company Inc v McDermott [2016] HCA 22; (2016) 331 ALR 550, applied - House v King (1936) 55 CLR 499, applied.

1 This is an appeal from a decision of an Associate Judge (Reasons)[1] relating to whether the respondents (plaintiffs) ought to have been granted an extension of time for commencing any voidable transaction proceedings against the appellants (defendants). In his Reasons, the Associate Judge made an order pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (Act) extending the time for filing any voidable transaction proceedings against the appellants to 19 June 2020.

2 The appellants contend that the Associate Judge erred in making that order.

3 Cohalan & Mitchell Roofing Pty Ltd (ACN 081 599 528) (in liquidation) (the Company) conducted a residential roofing business from February 1998 to 1 January 2015. Doug Mitchell was the director, secretary and 50% shareholder of the Company. Russell Cohalan owned the other 50%. On 20 November 2015, Mr Mitchell and Mr Cohalan passed a resolution to wind-up the Company.

4 David Iannuzzi and Steven Naidenov were appointed joint and several liquidators of the Company (the Former Liquidators). On 19 April 2017, the Former Liquidators resigned and the creditors resolved to appoint Stephen John Michell as liquidator.

5 By originating process filed on 19 November 2018, the first plaintiff, the Company and the second plaintiff, Stephen John Michell (the Liquidator) applied pursuant to s 588FF(3) of the Act for an extension of time within which to commence a proceeding under s 588FF(1) against the first defendant, C & M Roofing Pty Ltd (ACN 137 883 473) and the second defendant, Cohalan & Mitchell Pty Ltd (ACN 168 857 805). The plaintiffs sought a 12 month extension of time to 19 June 2020.

6 The Associate Judge found that the balancing of the commercial certainty of the defendants and the conflicting interests of the creditors was such that the creditors' interests were more at risk and that they would suffer greater prejudice if an extension of time was not approved.

There are three important factors to consider determining whether an extension of time will be granted pursuant to s 588FF(3)(b) of the Act: delay, a preliminary view of the merits and prejudice.

There has been no delay caused by Mr Michell. He has done considerable work on this liquidation in the 19 months from the date of his appointment. This work has been done even though he has not been funded.

As to the merits on the material before the Court, this seems to a be neutral factor. The prejudice suffered by the creditors outweighs any prejudice of the defendants.

The extension of time requested by the plaintiffs of one year will be granted.[3]

All the work that Mr Michell has undertaken has been done without funding. If there has been any delay, it is not through the efforts of Mr Michell, but may have been caused by the Former Liquidators. I have no evidence before me of what the Former Liquidators did in the 17 months they had the file. The issue of delay is an important issue. In my view, Mr Michell has not caused any delay. However, this issue needs to be weighed up against the other factors: the merits of the claim, and also the prejudice that creditors may suffer or the defendants may suffer if an extension is granted.[4]

9 His Honour relied upon the following evidence to find that if there had been any delay, it was not through any fault of Mr Michell:[5]

(a) The Former Liquidators' unwillingness to assist Mr Michell with the transition of the liquidation of the Company caused a duplication of various tasks, such as conducting the following searches:

(i) searches of financial institutions for accounts held with the Company;

(ii) land title searches;

(iii) searches of the Personal Property Securities Registry;

(iv) searches of the Sheriff's office for any warrants executed against the Company's assets;

(v) a request with the Australian Taxation Office under the Freedom of Information Act 1982; and

(vi) searches of the Roads Authorities for any vehicles registered in the company's name in the prior five years.

His Honour appeared to accept that the task of Mr Michell reviewing everything again caused delay,[6] despite the Former Liquidators having every right to refuse to provide their administration file to Mr Michell.[7]

(b) Mr Michell being without funds in the Company's liquidation. However, Mr Michell gave evidence that he had not applied for funding and did not explain how he had been limited by lack of funding.[8]

(c) Mr Michell having done a considerable amount of work in excess of $100,000.00 in remuneration.[9]

10 Despite having reviewed the merits of the plaintiff's potential claims against the first and second defendants,[10] as well as having considered the rebuttals put forward by the defendants to the plaintiff's claims,[11] his Honour came to the following conclusion regarding the merits of the plaintiff's potential claims:

On reading Mr Michell's affidavit, listening to his cross-examination, and considering the affidavit of Mrs Mitchell, it is difficult to come to any conclusion in relation to the merits of these claims.

...

In my view, this factor is neutral and neither the plaintiffs nor the defendants are favoured by a consideration of the merits of the claim.[12]

11 Finally on the question of the prejudice and in response to the defendants' submission that 'it would be oppressive to allow Mr Michell further time, especially in the circumstances where the delays were self-inflicted'[13] and that the defendants 'should be able to organise their financial affairs for the future without the fear of future liability beyond a definite period',[14] his Honour said:

In BP Australia Ltd v Brown & Ors,[15] Spigelman CJ (with whom Mason P and Handley JA agreed), when considering s 588FF(3) of the Act, said:

S588FF(3) does not have the effect of requiring all applications to be brought within a short period of time. It does, however, have the effect of requiring those who wish to keep open the option to do so, to determine that they do wish to do so within the three year period and to seek a determinate extension of the period. One thing that must be decided within the three year period is how long the process of deciding whether to pursue voidable transactions will take. Eventually, investigations to overcome deficiencies of information or the pursuit of funding must cease. Parliament has identified a reasonable time for such matters to occur, subject to a single determinate extension of time.

In a context where conflicting interests have to be balanced, the eventual loss of the ability to make a relevant claim can reasonably be regarded as something to be surrendered, in favour of providing certainty to others who have had dealings with the company, including other creditors, so that they can proceed with their business affairs with an assurance that they are no longer at risk.[16]

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 ss 588FF(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."[17]

12 Relying upon the above case and weighing up the benefit to the creditors of allowing the extension of time to the liquidator against the detriment faced by the defendants as a result of the extension, his Honour concluded:

Here, there is no doubt that the defendants will suffer a general prejudice in that there may be possible actions against them. However, there is no evidence before me that there is any deterioration of evidence for the defences of any potential claims against them. Mr Michell is an officer of the Court. He has now been given an affidavit by Mrs Mitchell. If Mrs Mitchell is correct, that there are no merits in this claim, the liquidator will have the opportunity to investigate these claims and there will be no claims brought.[18]

13 On 29 August 2019, the defendants filed a Notice of Appeal seeking the following orders in lieu of the order made pursuant to s 588FF(3)(b) of the Act, extending the time for making any application against the defendants to 19 June 2020:

(a) The proceeding be dismissed.

(b) The plaintiffs pay the defendants' costs of the application heard by Efthim AsJ.

(c) The plaintiffs pay the defendants' costs of the appeal.

(a) In concluding at [57] of the Reasons that there had been no delay caused by the first plaintiff, the learned Associate Judge mistook the facts or failed to take into account material considerations; alternatively, the said conclusion was so unreasonable or plainly unjust that the Court may infer the existence of error.

(b) Consequently, the learned Associate Judge's discretion under s 588FF(3) of the Act miscarried.

15 The appellants submit that the decision to grant an extension was based on the following two reasons, neither of which was good enough to support the decision:

(a) The lack of funding available to the Mr Michell; and

(b) The Former Liquidators having failed to provide any portion of their administration file and provided very little assistance in the transition of the liquidation of the Company, which caused the delay in the investigations into the Company's affairs.[19]

16 As it concerns the lack of funding, the appellants submit that it cannot justify the granting of an extension in the circumstances where the Associate Justice noted at [25] of the Reasons that the plaintiff had not applied for funding as he rarely gets funding, particularly litigation funding, and that the plaintiff did not explain how he had been limited by the lack of funds.[20]

17 In relation to the finding that it was the conduct of the Former Liquidators that caused the delay rather than the conduct of Mr Michell as a result of the duplication of work, the appellants submit that it was not open to the Associate Judge to make this finding in circumstances where:

(a) the Associate Judge noted at [17] of the Reasons that the Former Liquidators had every right to refuse to provide their administration file because this file was not a record of the Company, having been created by those liquidators, so that the plaintiff was not entitled to receive that file;[21]

(b) the Associate Judge noted at [19] of the Reasons that all requests made by Mr Michell to financial institutions for the production of information had all been responded to by 8 August 2017;

(c) the Associate Judge noted at [20] of the Reasons that under cross-examination the plaintiff admitted that there was no evidence of email correspondence with the Former Liquidators asking them if they had done the above investigations or any telephone notes of such requests;

(d) the Associate Judge noted at [21] of the Reasons that land title searches are done instantaneously and that there was no evidence that the plaintiff had asked the Former Liquidators if any searches had been done;

(e) the Associate Judge noted at [22] of the Reasons that searches of the PPSR are instantaneous; and

(f) the Associate Judge noted at [23] of the Reasons that a letter dated 3 July 2017 from the Sheriff's office in New South Wales to the plaintiff stated that a search of the register showed they were not holding any goods, monies or unexecuted warrants or writs.

18 Further and in addition to the above, the appellants submit that the Associate Judge failed to consider all of the concessions and admissions made by the plaintiff during cross-examination such as there being no evidence of any request to the Former Liquidators to provide assistance or to provide information on what investigations had been carried out and that he could have conducted the relevant searches on the first day of his appointment.[22] In particular, the appellants highlight the fact that the plaintiff conceded that:

(a) prior to consenting to act as Liquidator, he made no enquiries regarding the nature of the business undertaken by the Company;

(b) he made no enquiries about the number of creditors or the quantum of the creditor claims;

(c) he did not have to deal with any administrators, receivers or managers;

(d) he did not have to deal with any secured creditors;

(e) he did not have to deal with any employee claims;

(f) there were no applications to terminate the winding up of the Company;

(g) there was no opposed debtor company arrangement; and

(h) he did not call for proofs of debt.[23]

19 The appellants submitted further that all of these factors contributed to the finding by the Associate Judge himself at [35] of the reasons that it is not a 'complex liquidation'. As a consequence it was contended that there was no basis for the finding that Mr Michell was not responsible for the delay.

20 In further written submissions the appellants contended by reference to authority,[24] that in considering delay and whether it is fair and reasonable in the circumstances to extend the limitation period, policy considerations required consideration of the entire period of the delay and not only the period since the Liquidator was appointed.

21 It was submitted that there was no explanation for the delay during the period of the Former Liquidators.

22 The further written submissions also contend that in considering prejudice, the presumptive prejudice of the appellants was overlooked or not accorded sufficient weight.

23 The respondents submit that the issue of delay is to be based on the period of time available to the Liquidator from the date of his appointment.[25] In other words, the period that the Former Liquidators were the liquidators of the company ought not to be included.[26]

24 In making this submission, the respondents rely firstly upon McCann v Mawson Restructures and Workouts Pty Ltd, in the matter of Walton Construction (Qld) Pty Ltd (in liq),[27] in which Justice Edelman granted an extension of time to the new liquidators within which to bring voidable transaction proceedings. In justifying his decision to grant the extension of time, his Honour stated:

The unfortunate circumstances which lead to the removal of the first liquidators due to their conflict of interest meant that the current liquidators were not appointed to their position until approximately two years and two months ago. They have not had the three-year period that would often apply.[28]

25 Secondly, the respondents rely on Fortress Credit Corporation (Australia) Pty Ltd v Fletcher,[29] in which Macfarlan JA states:

As the joint liquidators of OL and OA were only appointed on 9 September 2009, they had significantly less than two years to conduct their investigations and make applications under s 588FF (1). In many other cases, the relation-back day would be much closer to the date of appointment of the liquidator, giving the liquidator close to three years to investigate and make applications.[30]

26 The respondents further submitted that only where the new set of liquidators are part of the same firm as the previous liquidator, as was the case in Marsden (liquidator) v CVS Lane PV Pty Limited, in the matter of Pentridge Village Pty Limited (receiver and manager appointed) (controller appointed) (Marsden),[31] should the delay be explained on the basis of the whole period of the liquidation rather than the point from which the new liquidator is appointed.[32] As Mr Michell, the new liquidator, was not a member of the Former Liquidator, then the delay should be assessed from the time of his appointment.

27 The respondents therefore contend that the Associate Judge adopted the correct test by only considering the conduct of Mr Michell and that there was no error on the part of the Associate Justice in concluding that Mr Michell had not caused the delay.[33]

28 As to the cause of delay, the respondents submitted that Mr Michell had not caused the delay for the following reasons:

(a) the Former Liquidators did not pursue matters relevant to the liquidation such as the funds comprising the Great Southern Distribution, the refund of lump sum payments into the respective superannuation funds conducted by Mr Cohalan and Mr Mitchell and the payments in relation to the wages and superannuation by the Company to Kathy Cohalan and Kelly Mitchell;[34]

(b) the lack of funding available to Mr Michell limited his ability to participate in the public examinations in the bankruptcy or to conduct of the public examinations in the liquidation which would have assisted Mr Michell in undertaking his investigations with respect to the identified claims;[35]

(c) the Former Liquidators were not cooperative with Mr Michell, who despite not being entitled to receive the administration file of the Former Liquidators, was entitled to the company records in the possession of the Former Liquidators which had not been received as of 1 May 2019;[36] and

(d) the two month delay in undertaking searches need to be considered in the context it occurred, namely that Mr Michell needed time to process files received from the Former Liquidators prior to requesting further information,[37] the fact that searches should have been undertaken by the Former Liquidators and the lack of cooperation from the Former Liquidators.[38]

29 Finally, on the issue of whether the creditors would suffer a greater prejudice if an extension of time were not granted and despite not strictly being a ground of appeal, the respondents submitted that no argument was put or evidence led by the appellants of the form stipulated in New Cap Reinsurance v Reasegouros Alianza Sa,[39] as to their course of business, change of personnel, record keeping, which might bear on the probability of there being presumptive prejudice.[40] Therefore, Associate Justice Efthim was, it was submitted, correct in finding that there was no evidence before him that there had been or would be a deterioration of evidence for the defence of any particular claims against them.[41]

The Court's discretion under s 588FF(3) of the Act[42]

30 Section 588FF(3) confers a discretion on the court when considering an extension of time. In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (Fletcher),[43] the High Court noted that:

The function of s 588FF(3)(b), which reflects its immediate purpose, is to confer a discretion on the court to mitigate, in an appropriate case, the rigours of the time limits imposed by par (a) ... The section provides for the exercise· of discretion by the court. Questions of what is a· reasonable or an unreasonable prolongation of uncertainty and the scope of such uncertainty are more appropriately considered case-by-case in the exercise of judicial discretion than globally in judicial interpretation of the provision.[44]

31 Fletcher does not prescribe considerations which must be made, however French CJ, Hayne, Kiefel, Gageler and Keane JJ reflect on Spigelman CJ's analysis in Sub nom, Brown[45] and state that discretion involves:

a balancing of the requirement of commercial certainty on the part of those who had past dealings with the corporation against the conflicting interest of the creditors of the company.[46]

32 In exercising its discretion, the court must consider what is fair and just to all parties involved.[47] When balancing the commercial considerations of the parties and creditors under s 588FF, a court will usually consider the following factors:

(a) the liquidator's explanation for the delay to commence proceedings within the three year period;

(b) a preliminary view of the merits of the proceeding; and

(c) any prejudice which may be suffered by the defendant if the extension is granted.[48]

33 In relation to the third factor, that is prejudice, it is worth noting that 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.[49] There needs to be a balancing of the prejudice suffered by the defendants if the extension is granted against the prejudice to the creditors' interests if an extension is not granted.

34 There are two principles that are relevant to this appeal.

35 First, this appeal is governed by r 16.5 of the Supreme Court (Corporations) Rules 2013 (Vic) which adopts rr 77.06.1 to 77.06.9 of the Rules with any necessary modifications. Therefore, an appeal from an associate judge is to be conducted by way of rehearing (rather than de novo). Leave to appeal is not required. Accordingly, in the absence of further evidence or a change in the law, the appellant is ordinarily required to show 'error' on the part of the Associate Judge before appellate power may be exercised.[50]

36 In Robinson Helicopter Company Inc v McDermott,[51] the High Court stated that a court conducting an appeal by way of rehearing must conduct a 'real review' of both the evidence given at first instance and the judge's reasons to determine whether an error has been made in fact or law. If it is determined that the judge has made an error in fact, the court is required to make its own findings of fact and formulate its own reasoning based on those findings. However, the findings of fact from the first instance should not be interfered with unless they are 'demonstrated to be wrong by 'incontrovertible facts or uncontested testimony', or they are 'glaringly improbable' or 'contrary to compelling inferences'.[52]

37 Secondly, the decision of the Associate Judge involved the exercise of a discretion. Accordingly the appellant is required to overcome the threshold requirements set out in House v The King.[53]

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. [54]

39 In the recent decision of Charan v Nationwide News Pty Ltd,[55] the Court of Appeal of the Supreme Court of Victoria refused leave to appeal a discretionary decision of the trial judge in relation to costs. The Court said that '[s]uch a challenge can only succeed if the decision is infected with House v R.[56] The Court held that in relation to various matters it could not be said that 'the mis-weighting was so great as to constitute a failure to bring matters to account at all' which would give rise to an error within the principles of House v The King.[57]

40 For the reasons given below, the appellants have, in my respectful opinion demonstrated error in the decision of the Associate Judge. Delay and prejudice were not accorded sufficient weight in the exercise of his Honour's discretion. Accordingly, the appeal will be allowed.

41 The Liquidator was appointed on 19 April 2017. The Originating Process was filed on 19 November 2018, that is, 19 months later.

42 The Company was originally wound up on 20 November 2015 at which time the Former Liquidators were appointed. They were required to commence any proceeding under s 588FF(1) of the Act by 20 November 2018, that is three years after the relation back day, which in this case is 20 November 2015. As any extension of time is required to be filed within the three year period it is not surprising that the Originating Process was filed at the last minute, that is 19 November 2018.

43 The Former Liquidators had about 17 months to commence a proceeding and the Liquidator had about 19 months to commence a proceeding. Had there not been a change of liquidator, any application for extension of time would almost certainly have been refused. Indeed, this is the position urged by the appellants. Such a significant delay in a relatively straightforward case would be critical and far outweigh any benefit. There would simply be no reason to extend the specific period set out in the Act for the commencement of such a proceeding, particularly in circumstances where the delay by the Former Liquidators is and remains unexplained.

44 Where there is a change of liquidator, it is of course necessary to consider any delay on the part of the new liquidator and the relevant facts and circumstances that occasioned such delay. However, the earlier period and indeed the entire limitation period cannot simply be ignored and considered irrelevant. What is fair and reasonable in the circumstances, such as to justify an extension of the time period, requires a broader consideration of what transpired during the limitation period. To the extent that the authorities diverge on this point, the better view in my opinion, is that as a matter of public policy, the entire limitation period must be considered. To this extent I agree with the submissions on this point made by the appellants and the authorities they rely on.

45 In particular, it is worth reiterating the principles which emerge from Re Clarecastle Pty Ltd (in liq),[58] relied on by the appellants and which dealt with the question of delay and its relevance to assessing what is 'fair and reasonable in all the circumstances':

(a) in assessing what is fair and just in all the circumstances, in the context of an extension application under s 588FF(3)(b), regard must be had to first, the public policy underlying the imposition of limitation periods generally; and secondly, in relation to s 588FF(3)(b) in particular;

(b) as to limitations generally, four broad rationales for the enactment of limitation periods can be identified: first, as time goes by, relevant evidence is likely to be lost; secondly, it is oppressive to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed; thirdly, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them; fourthly, it is in the public interest requires that disputes be settled as quickly as possible;

(c) as to the particular context of s 588FF(3)(b):

(i) a broader public interest is served by allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure to having past transactions unravelled and, to quote Spigelman CJ in BP Australia v Brown:[59]

...(c)ommercial life must at some stage rule off the past and focus energy on the future...... the commercial and economic life of the community is sometimes better served by allowing the loss to lie where it falls, so that all concerned may proceed with a high degree of certainty as to their financial position. The passage of time, even the passage of three years, can be seen to legitimately alter the balance of conflicting interests in this regard.

(ii) where conflicting interests have to be balanced, the eventual loss of the ability to make a relevant claim for a voidable transaction may be less important in favour of providing certainty to others who have had dealings with the company, including other creditors, so that they can proceed with their business affairs with an assurance that they are no longer at risk;

(iii) importantly, in Arthur Andersen Corporate Finance Pty Limited v Buzzle Operations (In Liq),[60] Ipp JA expressed the view, that the deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against extending time for service, noting that any prejudice suffered in such circumstances would be self-inflicted. Consistently with this notion, a seemingly deliberate decision on the part of a liquidator not to pursue, in a timely fashion, the investigations for which an extension is sought, is a decision of a similar kind, such that any prejudice occasioned might also be said to be self-inflicted.[61]

46 As was also submitted by the appellants, the above principles were approved in Worldwide Property Service Pty Ltd (in liq)[62] and in the matter of Pentridge Village Pty Ltd (in liq) (receivers and managers appointed) (controller appointed)(Re Pentridge).[63] It is those principles which led Glesson J in Re Pentridge to conclude that the delay 'covers the whole of the liquidation'[64] and with which I agree.

47 Ultimately, the decision in each case must, as the High Court has observed, depend on the facts and circumstances of the case involving a consideration, assessment and weighting of the relevant factors referred to. The fact that in some of the cases referred to by the Liquidator the more limited period has been considered and assessed does not mean or stand for the universal proposition that the entire period cannot under any circumstances be considered or taken into account. The fact that the entire period was taken into account in Marsden[65] because the new and previous liquidators were members of the same firm, does not mean that this is the only circumstance where the entire period may be considered. The fact that in particular cases judges have remarked and considered that the incumbent liquidator did not have the full or entire period to consider any potential proceedings, does not in and of itself mean that an extension of time is fair, reasonable and warranted. It all depends on the circumstances and weighting process referred to.

48 In my view the delay in this case is too long, unreasonable in the circumstances and not sufficiently explained. The same may be said of the period since the appointment of the Liquidator.

49 I do not, with respect, accept that Mr Michell has not caused any delay. In my opinion he does bear some responsibility for the delay. Further, in assessing and weighing the various factors in the exercise of his discretion, I consider, with respect, that the Associate Judge has not sufficiently taken delay into account. Delay, in my view, is a material consideration, all the more so in circumstances where the Associate Judge has considered the merits to be a neutral factor, which of course feeds into the benefit to creditors. Further and apart from the matter of discretion, I consider that the conclusion as to delay has been demonstrated to be wrong by incontrovertible facts or uncontested testimony.

50 First, the unwillingness by the Former Liquidators to assist does not provide an adequate reason for delay, or any significant delay. They were not obliged to assist and as much, with respect, correctly held by the primary judge, they had every right to refuse to provide their administration file. Further, and in any event, there was no evidence of any request by the Liquidator to the Former Liquidators for assistance, or information or documentation. So much was conceded by the Liquidator during cross-examination. In some cases the fact that a liquidator has to start from scratch may well be a reason for delay. This is not such a case and brings me to the next point.

51 Secondly, the investigations and searches required to be undertaken by the Liquidator, in order to establish the basis of any claim, were basic and able to be done quickly. From a review of the relevant documents, and as acknowledged, this is not a complex liquidation and the proposed cause of action is also relatively straightforward both factually and legally. All of the preliminary work could and should have been done well within the 19 month period. This is all the more so given the prior 17 month period of inaction by the Former Liquidators. The work undertaken by the Liquidator as recorded in paragraph [11] of the Reasons are basic and simple tasks, whether or not previously undertaken by the Former Liquidators. So far as the potential cause of action is concerned, this more complex task should, given the Liquidator's coercive powers, have been done much earlier. Indeed much work seems to have been done in September 2017. What happened during the course of the next year is not sufficiently explained. Lack of co-operation with the Former Liquidators, while regrettable, does not assist the Liquidator. Further, having to review the search results is not a cause for delay. In any event, there was not much to review. There is simply no adequate explanation as to why the work was not done earlier. The evidence does not establish a sufficient basis for justifiable delay. In fact it does the opposite.

52 Thirdly, the failure to obtain funding is not suggested as a sufficient reason for delay. It is not.

53 Finally, as referred to earlier, there is no explanation for the earlier period of delay by the Former Liquidators.

54 It is unnecessary for me to deal with the merits of any proposed application as contemplated under the relevant voidable preference provisions. Suffice it to say that on the present material it cannot be said that there is a sufficiently strong case that ought to proceed. Indeed, the learned Associate Judge considered this aspect to be neutral.

55 Part of the claim relates to events that took place in 2012. The contract of sale was entered into on 1 January 2015, over five years ago. Although the Associate Judge referred to the general prejudice that the defendants will suffer,[66] his Honour concluded, without any discussion or analysis, or weighting exercise, that creditors 'will suffer greater prejudice if an extension of time is not approved'.[67] However, this is not necessarily so. Although there is little evidence as to the position of creditors, no creditor had offered to provide the Liquidator with funds or urged the Liquidator to proceed.

56 As submitted in the appellants' outline of submissions,[68] the prejudice to the appellants does not lie merely in the actions which may be taken against them, but includes the absence of certainty in their affairs whilst the liquidator takes further time to decide whether or not to commence proceedings:

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. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost (26). Second, it is oppressive, even "cruel", to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed (27). Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them (28). Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period (29).[69]

57 'Presumptive prejudice' is presumed and does not depend on evidence demonstrating specific prejudice.[70] The prejudice may exist without the defendants or anyone else being aware of it.[71]

58 The Associate Judge's finding that creditors would suffer greater prejudice if an extension of time were not granted[72] overlooked the significance of presumptive prejudice or alternatively did not accord sufficient weight to the expedition required in a proceeding under s 588FF.[73]

59 Finally, in my opinion, it is generally not acceptable or desirable for applications of this kind to be made a day before the limitation period ends. Liquidators are required to be mindful of limitation periods and adequately monitor the pace of investigations and the requirements of any claim. They should accordingly come to court at the earliest possible opportunity.

60 For these reasons I propose to allow the appeal. Orders will be made accordingly.

[1] In the matter of Cohalan & Mitchell Roofing Pty Ltd (in liquidation) (Supreme Court of Victoria, Efthim AsJ, 14 June 2019) (Reasons).

[2] The background, much of which is uncontroversial, is adopted from the Reasons of the Associate Judge.

[16] Reasons [52] citing BP Australia Ltd v Brown & Ors [2003] NSWCA 216, [118]-[119].

[17] Reasons [53] citing BP Australia Ltd v Brown & Ors [2003] NSWCA 216, [171].

[19] Appellants' Outline of Submissions dated 3 March 2020 [6].

[20] Appellants' Outline of Submissions dated 3 March 2020 [7].

[21] Appellants' Outline of Submissions dated 3 March 2020 [8].

[22] Appellants' Outline of Submissions dated 3 March 2020 [16].

[23] Appellants' Outline of Submissions dated 3 March 2020 [17].

[24] Clarecastle Pty Ltd (in liq) [2011] NSWSC 857 at [129]-[142] and authorities referred to therein.

[25] Respondent's Outline of Submissions dated 31 March 2020 [19].

[27] [2016] FCA 1152.

[28] McCann v Mawson Restructures and Workouts Pty Ltd, in the matter of Walton Construction (Qld) Pty Ltd (in liq) [2016] FCA 1152, [46].

[29] [2014] NSWCA 148.

[31] [2018] FCA 102.

[32] Respondents Outline of Submissions dated 31 March 2020 [20]-[22] relying on Marsden (liquidator) v CVS Lane PV Pty Limited, in the matter of Pentridge Village Pty Limited (receiver and manager appointed)(controller appointed) [2018] FCA 102, [67]-[68].

[34] Respondents Outline of Submissions dated 31 March 2020 [22]-[30].

[35] Respondents Outline of Submissions dated 31 March 2020 [41]-[43].

[36] Respondents Outline of Submissions dated 31 March 2020 [44]-[47].

[37] Respondents Outline of Submissions dated 31 March 2020 [49].

[38] Respondents Outline of Submissions dated 31 March 2020 [50].

[39] [2004] NSWSC 287 [71].

[40] Respondents Outline of Submissions dated 31 March 2020 [56].

[42] The legal principles governing the operation of s 588FF is respectfully adopted from the Reasons.

[43] [2015] HCA 10; (2015) 254 CLR 489.

[45] [2003] NSWCA 216; (2003) 58 NSWLR 322.

[46] Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 254 CLR 489, [8].

[47] BP Australia Ltd v Brown [2003] NSWCA 216; (2013) 58 NSWLR 322, [4] and [187]; Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1997) 186 CLR 541, 552-553.

[48] Parker, in the matter of Worldwide Speciality; Property Services Pty Limited (in liq) v Worldwide Speciality Property Services Pty Limited (in liq) [2017] FCA 687, [15]-[16]; Walker and Moloney v CBA Corporate Services (NSW) Pty Limited [2012] FCA 328, [43].

[49] BP Australia Ltd v Brown [2003] NSWCA 216; (2013) 58 NSWLR 322, [171].

[50] Re Atwell & Co Pty Ltd (in liq) [2017] VSC 683, [21]-[22] (Kennedy J); Oswal v Carson [2013] VSC 355, [11] citing Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 203-4 [14]. See also, Westpac v Webb [2019] VSC 180, [9] (Digby J); Efektiv Pty Ltd v Hodge [2019] VSC 636, [9] (Forbes J).

[51] [2016] HCA 22; (2016) 331 ALR 550, 558-9 [43].

[53] (1936) 55 CLR 499.

[55] [2019] VSCA 36 (Beach, Niall and Ashley JJA).

[57] By contrast, in Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293, the use of the wrong method of calculating costs was held (Tate and Kyrou JJA) to fall within the principles of House v The King so as to justify appellate intervention.

[58] [2011] NSWSC 857; (2011) 255 FLR 435, [129] - [142] (Ward J).

[59] [2003] NSWCA 216, [113]-[114].

[60] (2009) NSWCA 104, [93] (Ipp JA).

[61] Appellants' Outline of Submissions dated 7 April 2020 [2]-[3].

[62] [2017] FCA 687.

[63] [2018] FCA 102.

[65] Marsden (liquidator) v CVS Lane PV Pty Limited, in the matter of Pentridge Village Pty Limited (receiver and manager appointed)(controller appointed) [2018] FCA 102.

[68] Appellants' Outline of Submissions dated 23 March 2020 [20]-[22].

[69] Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541, 552 (McHugh J).

[70] Re Australian Property Custodian Holdings Ltd (in liquidation) 2015] VSC 745, [103] - [105] (Judd J).

[71] Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541, 551 (McHugh J).

[73] Cf. Re Australian Property Custodian Holdings Ltd (in liquidation) [2015] VSC 745, [105] (Judd J).