Conclusion
112In the result leave to appeal should be granted but the appeal dismissed.
113I would make the following orders:
1.Pursuant to s 471B of the Corporations Act 2001 (Cth) grant leave to the applicants nunc pro tunc to bring proceedings CA 2012/395153 against the second and third respondents.
2.Grant the applicants leave to appeal.
3.Direct the applicants within 14 days to file a Notice of Appeal in the form of the Amended Draft Notice of Appeal contained in the Orange Book filed in these proceedings.
4.Appeal dismissed.
5.Order the applicants pay the respondents' costs of the application for leave to appeal and the appeal.
114BEAZLEY P: I have had the advantage of reading in draft the judgment of the Chief Justice. I have also had the opportunity of reading the comments of the other members of the Court with whom I join in agreeing with the orders proposed by the Chief Justice. In my opinion, it has not been established that BP Australia Ltd v Brown [2003] NSWCA 216; 58 NSWLR 322 is plainly wrong. For the brief reasons which I express below, I consider the construction given to the Corporations Act 2001 (Cth), s 588FF(3) in BP v Brown is correct.
115Section 588FF makes provision for the court to make orders in respect of voidable transactions. Section 588FF(1) is directed to the orders that the court may make if it is satisfied there is a voidable transaction. An application under s 588FF(1) in respect of a transaction or transactions must be brought within the time period specified in s 588FF(3)(a) or within the period of any extension ordered by the court under s 588FF(3)(b). An application for an extension of time under s 588FF(3)(b) must be brought within the period specified in s 588FF(3)(a) but need not be determined in that period. There is no controversy about these propositions.
116Properly construed, s 588FF(3)(a)(i) and (ii) specifies the limitation period in which an application under s 588FF(1) is to be brought. Section 588FF(3)(b) provides for a discretionary extension of the time specified in s 588FF(3)(a). Such an application must be made within the time specified in s 588FF(3)(a)(i) or (ii). At least in New South Wales, a further extension may be sought under the Uniform Civil Procedure Rules 2005 (UCPR), r 36.16, provided the original application for extension of time was brought within the time specified in s 588FF(3)(a)(i) or (ii): see JP Morgan Chase Bank, National Association v Fletcher; Grant Samuel Corporate Finance Pty Limited v Fletcher [2014] NSWCA 31.
117Under s 588FF(1) a liquidator must specify the transaction or transactions sought to be impugned. However, the language of s 588FF(1) is not replicated in s 588FF(3). That provides strong textual support for the construction urged by the liquidators. That construction is consistent with the obvious purpose of s 588FF(3) which is to prescribe a time frame in which applications under s 588FF(1) must be brought, subject to the court's discretionary power under s 588FF(3)(b). In this regard, I agree, in particular, with the observations of Macfarlan JA at [123], Barrett JA at [133]-[134], and Gleeson JA at [138]-[139].
118MACFARLAN JA: I agree with the orders proposed by Bathurst CJ and, subject to the following, with his Honour's reasons.
119I agree with his Honour that the decision in BP v Brown is not plainly wrong and that it should therefore be followed. My view is that that decision is in fact correct.
120I recognise that there are, as noted by Bathurst CJ, competing policy considerations that are relevant. However, these are of limited significance in the present case as in my view the imposition on the Court's power conferred by s 588FF(3)(b) of the restriction for which the appellants contend finds no support in the text of s 588FF(3). In any event, being a provision conferring a power upon a court, s 588FF(3)(b) is "to be given no narrow construction" and "is to be construed with all the amplitude that the ordinary meaning of its words admits" (Roy Morgan Research Centre v Commissioner of State Revenue at [11]).
121In particular, I do not consider that an application of the type contemplated by s 588FF(3)(b) may only be made with reference to an application of the type described in the chapeau to s 588FF(3), that is, an application under s 588FF(1). The respective applications are plainly of a different character and nothing in the subsection ties the one to the other. Particularly given the liberal construction required by Roy Morgan Research, the subsection should be understood as indicating that an application of the type referred to in the chapeau may be brought within the general period for applications specified in paragraph (a), with the Court being able to act under paragraph (b) to extend that generally applicable rule so far as it applies to a particular liquidation.
122This construction of the subsection does not defy good sense as the decision to confer the power of extension in broad terms may well have been made to cover the possibility that the process of liquidation and investigation might in particular cases be protracted. It remains in such cases for the Court to weigh the competing interests when requested to grant an extension.
123The present case provides an illustration of the vagaries of liquidations that may have led the legislature to conclude that the Court's power to extend the time for s 588FF(1) applications should be broad. Here the "relation-back day[s]" referred to in subsection (3)(a) and applicable to the two companies in liquidation, OL and OA, were in June 2008 (being in the case of OL, the date of the filing of the Public Trustee's winding-up application) and October 2008 (being in the case of OA, the date that the company was placed into voluntary administration). The three year period under s 588FF(3)(a) for each thus expired in June 2011 and October 2011 respectively. 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 to make applications.
124BARRETT JA: I agree that orders should be made as the Chief Justice proposes. I also agree with his Honour's reasons but wish to add some observations of my own concerning Ground 1 of the grounds of appeal.
125In the form in which they have existed since 1993, the voidable transaction provisions in Division 2 of Part 5.7B of the Corporations Act 2001 (Cth) serve the purpose of redressing imbalance to the detriment of the general body of creditors resulting from favourable treatment of certain persons in transactions undertaken while the company was still a going concern.
126The unstated premise is that certain forms of activity in the period leading up to the commencement of winding up interfere with due operation of the pari passu principle by causing to be in other hands resources that should form part of the insolvent estate for the benefit of creditors as a whole.
127The voidable transaction provisions do not create any right of action in the company. Nor do they allow the liquidator to recover. They enable the liquidator, as the official charged with the task of collecting and administering the insolvent estate, to seek the assistance of the court in augmenting that estate for the benefit of creditors by countering the effects of pre-liquidation transactions of certain kinds.
128When I refer to augmenting the insolvent estate for the benefit of creditors, I intend to recognise the reality that, although in a simple s 588FF(1)(a) case, the order is an order for the payment of money "to the company", the right by virtue of which the money is received is a right of neither the company nor the liquidator; that the company has no capacity to mount a recovery action; and that the benefit of the recovery inures wholly for the benefit of the persons who will participate under the winding up. Among early cases under the present provisions in which this was recognised are Tolcher v National Australia Bank Ltd [2003] NSWSC 207; 174 FLR 251 and Tolcher v National Australia Bank Ltd [2004] NSWSC 6; 182 FLR 419. The provisions now in force share with their predecessors the characteristic that they are "only intended to apply in . . . a winding up for the benefit of the general creditors": Willmott v London Celluloid Co (1886) 34 Ch D 147 at 150 per Cotton LJ (and see Re Yagerphone Ltd [1935] 1 Ch 392; N A Kratzmann Pty Ltd v Tucker (No 2) [1968] HCA 44; 123 CLR 295).
129Because the voidable transaction provisions represent part of the machinery that the legislation puts at the disposal of a liquidator to assist in assembling the pool of assets from which claims cognisable in the winding up will be satisfied, the s 588FF(3) time limit is principally concerned with the conduct of liquidators. The section regulates liquidators by instilling a sense of due dispatch in the pursuit of claims with a view to augmenting that pool. Liquidators are told, in effect, that it is their duty, generally speaking, to initiate any voidable transaction proceedings within the specified three year period; and that, if there is good reason to think that further time is needed, they must, before the expiration of the three years, make an application to the court with a view to persuading it that an extension should be granted. The clear expectation is that liquidators will, within the three years, do two relevant things: commence all such recovery actions as available evidence and resources make it feasible and sensible to pursue; and consider whether there are genuine prospects that pursuit of other recovery actions might prove to be feasible and sensible if further time is made available.
130At the same time, s 588FF(3) assures persons who may be affected by voidable transaction claims that a proceeding will not be commenced after the expiration of the specified period unless the liquidator has positively satisfied the court that some longer period should be allowed; and it assures persons with rights to participate under the winding up that the time limit will not have an inflexible and arbitrary operation and may be relaxed in an appropriate case.
131In Brown v DML Resources Pty Ltd (No 2) [2001] NSWSC 590; 52 NSWLR 685, Austin J identified the following as the first four cases in which orders for the extension of time had been made under s 588FF(3): Taylor v Woden Constructions Pty Ltd [1998] FCA 1228 (Finn J), Green v Chiswell Furniture Pty Ltd [1999] NSWSC 608 (Austin J), Re Application of Hall [1999] NSWSC 984 (Hamilton J) and Re Richard Walter Pty Ltd [1999] NSWSC 1179 (Santow J). Austin J noted that the order made in Taylor v Woden Constructions Pty Ltd was limited to a specific s 588FF(1) application, whereas the order in each of the three later cases was in general terms similar to the order he had himself made in the case before him.
132It can thus be seen that there was early acceptance of s 588FF(3) as a provision by which the court might allow a liquidator additional time in which to perform part of his or her function, without regard to any particular proposed application under the voidable transaction provisions. In Brown v DML Resources Pty Ltd (No 2) (above), Austin J said (at [34]-[36]):
"I accept the applicants' submission that a purpose of the statutory reform that produced s 588FF was to prevent liquidators from relegating the recovery of voidable preferences to the end of their work programs. The investigation of voidable transactions should generally be conducted concurrently with their other liquidation work. Nevertheless, there will be some cases where, notwithstanding the most diligent of efforts, the liquidator is so far short of completing his or her investigations towards the end of the time limit that it is impossible to identify particular transactions in respect of which orders for extension of time could be made.
In some cases, this could be because of the size and complexity of the business and affairs of the company and the volume of work required to administer the insolvency. Re Application of Hall is an example of such a case, and Re Richard Walter Pty Ltd is also a case of complex administration, with the additional fact that the liquidator had to wait for the determination of tax litigation involving the company that would materially affect the course of administration. In other cases, the problem may arise because the three year period is defined (under Part 5.6 Division 1A) by reference to the relation-back day, and can commence to run well before the liquidation of the company actually begins. Green v Chiswell Furniture was such a case, because there the relation-back day was 1 May 1996, the day when the plaintiff was appointed administrator of the company; but he became the liquidator, and was consequently placed in a position to consider voidable transactions comprehensively, only on 21 January 1999, when the creditors resolved that the company be wound up after a deed company arrangement had been in operation, unsuccessfully, for an extended period. Consequently, the liquidator had only a few months to consider whether there were any voidable transactions that were open to challenge.
In circumstances such as these, the liquidator may not be in a position, through no fault of his or her administration, to specify within the statutory time limit each transaction that should eventually be challenged as a voidable transaction. If the Court cannot make orders under s 588FF(3) except in respect of specific transactions, it will be unable to extend time in such cases. The consequence would be to defeat the interests of creditors. The statutory wording does not require such a restrictive construction of the section, and such a construction would be contrary to the purposes for which Part 5.7B Division 2 was enacted. The Court is required by s 109H to prefer a construction that would promote the purpose or object underlying the Corporations Law over a construction that would not promote the purpose or object. The relevant purpose or object is the protection of the interests of creditors by allowing the liquidator to pursue recoveries in respect of voidable transactions, where the Court considers that commencement of proceedings for that purpose would be warranted after the expiration of the statutory time limit."
133These observations correctly identify the purpose of the power to extend time and emphasise the correctness of Spigelman CJ's riposte, "Not necessarily" (in BP Australia Ltd v Brown [2003] NSWCA 216; 58 NSWLR 322 at [201]) to the proposition advanced by Williams JA (in Greig v Stramit Corporation Pty Ltd [2003] QCA 298; (2004) 2 Qd R 17 at [44]) that any liquidator doing his or her job would be able during the three year period to identify transactions that might be challenged. A very clear example of a case in which a liquidator was, in Austin J's words, not "in a position, through no fault of his or her administration, to specify within the statutory time limit each transaction that should eventually be challenged as a voidable transaction" may be found in Re McGrath (as joint liquidators of the HIH companies); HIH Insurance Ltd (in liq) [2004] NSWSC 165; 205 ALR 643.
134Section 588FF(3) is a provision that directs liquidators as to how they are to conduct windings up and places in the hands of the court the ability to deal with circumstances in which, for some good reason shown, the liquidator requires more time to initiate proceedings under the voidable transaction provisions. The section's mechanism for extension of time can be used to deal with an identified application or identified applications that the liquidator proposes making under s 588FF(1) or with some delineated class of s 588FF(1) applications not capable of precise identification and formulation or with all s 588FF(1) applications not capable of precise identification and formulation. Each of these possibilities is accommodated by the words of the legislation.
135It is unnecessary, in this case, to address the issue concerning r 36.16 of the Uniform Civil Procedure Rules to which Beazley P refers at [116].
136GLEESON JA: I agree with the orders proposed by Bathurst CJ and, subject to the matter next referred to, I agree with his Honour's reasons.
137I agree with his Honour that the decision in BP v Brown is not plainly wrong and that it should therefore be followed. Moreover, I concur with Macfarlan JA that the decision is in fact correct. I also agree with Macfarlan JA, for the reasons given by his Honour, that s 588FF(3)(b) should not be given the narrow construction for which the applicants contend.
138I would add one brief observation. The proper construction of s 588FF(3)(b) is not to be approached with a mindset that providing certainty to persons who have dealt with the company after a finite time period is the paramount consideration. A more balanced approach is required having regard to the nature and purpose of the extension power and the variety of circumstances in which a company liquidator may seek an extension of time for commencing proceedings in respect of voidable transactions. The Court is given a discretion to extend time, subject to the assessment of all relevant circumstances, including the liquidators' conduct: BP v Brown at [170] per Spigelman CJ. As Barrett JA observes, the principal concern to which the time limit is directed is the conduct of liquidators.
139The extension power recognises that the rigour expected of liquidators, to identify transactions which might be challenged within the three-year period under s 588FF(3)(a), may not always be achievable through no fault of his or her administration. It is unnecessary to canvas all the possible reasons why, or circumstances in which, this might be so. A number are referred to by Austin J in Brown v DML Resources Pty Ltd (No 2) [2001] NSWSC 590 at [34]-[36], which paragraphs have been extracted in the reasons of Barrett JA at [132] above. It is sufficient to observe that in exercising the discretion to extend time, the competing interests of the general body of creditors interested in the winding up and of persons who are parties to transactions which might later be challenged if an extension is granted, whether or not they have yet been identified by the liquidators, is a relevant circumstance which remains for the Court to weigh in exercising its discretion.