Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher

Federal Court of Australia|2024-02-23|Before: Mr J, Halley J

Pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (Act), the time for making an application under s 588FF(1) of the Act be extended up to and including 7 January 2025 with respect to any voidable transaction involving Provest 684 Pty Ltd (in liquidation) (ACN 633 799 998) (Company).
The plaintiff's costs of this application be costs in the winding up of the Company.
Leave be granted to any person affected by these orders to make any application to seek to vary or set aside these orders within 28 days of the making of these orders.
The plaintiff is to notify Philip Stojanovksi (former director of the Company), Jacob John Bradley (director and secretary of the Company from 1 July 2019) and Ziad Ajjawi (former accountant of the Company), of the making of these orders, by providing them with a sealed copy of these orders, together with a copy of the reasons for judgment, by 5.00 pm on Friday, 1 March 2024. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A. introduction 1 The plaintiff, Domenico Alessandro Calabretta, is the liquidator of Provest 684 Pty Ltd (in liquidation) (ACN 633 799 998) (Company). 2 By an originating process filed on 21 December 2023, the plaintiff seeks an order pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (Act) for an extension of time until 7 January 2025 to bring proceedings in relation to voidable transactions under s 588FF of the Act (application). 3 The plaintiff has asked, and the Court has agreed, that the application be dealt with on the papers. 4 The application is supported by an affidavit of the plaintiff, sworn on 20 December 2023 setting out the background to and reasons for the application, and an affidavit of Madeline Furchtmann, a solicitor employed by the plaintiff's solicitors, Deutcsh Partners, sworn on 20 February 2024. Ms Furchtmann provides an update on related examination proceedings commenced in this Court (NSD 1529 of 2023) and gives evidence of the notification of the application to the former director of the Company, Philip Stojanovksi (Former Director). 5 This is an appropriate matter for the provision of short form reasons given there is no opposition to the making of the orders sought by the plaintiff, the application is of a character that is well known to the Court, the relevant principles are well settled, the relevant facts are of a relatively short compass and the Former Director has been notified of the application.

B. principles 6 The power to make an order pursuant to s 588FF(3)(b) of the Act to extend the time to bring voidable transaction proceedings is discretionary: Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489; [2015] HCA 10 at [24] (French CJ, Hayne, Kiefel, Gageler and Keane JJ). In broad terms, the following factors have been considered to be relevant, (a) the adequacy of the liquidator's explanation for the delay in commencing proceedings, (b) where possible, a preliminary enquiry into the merits of the proposed proceedings, and (c) any likely actual prejudice flowing from the grant of the extension sought by the liquidator: Cussen, in the matter of Monarch Tower Pty Ltd (in liquidation) [2023] FCA 192 at [16] (O'Callaghan J); Re Cohalan & Mitchell Roofing (in liq) [2020] VSC 222 at [32] (Sifris J); 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 at [16] (Lee J).

C. Consideration 7 As a threshold matter, I am satisfied that the application for an extension of time to commence voidable transaction proceedings was made within the time period specified in s 588FF(3)(a) of the Act. The application was filed on 21 December 2023. That date was within three years of the relation-back day. In this case the relation-back day is 8 January 2021, being the date on which the special resolution to wind up the Company was passed: item 23 of s 91 and s 513B(e) of the Act. 8 I am satisfied for the following reasons that I should exercise my discretion to make an order extending the time until 7 January 2025 for the plaintiff to bring proceedings in relation to voidable transactions pursuant to s 588FF of the Act. 9 First, the inability of the plaintiff to bring the proceedings within three years of the relation-back day appears to be largely attributable to a lack of cooperation from the Company's former officers and its accountant. The plaintiff gives evidence in his affidavit sworn on 20 December 2023 of the lack of cooperation he has received from the Former Director, the Company's former accountant, Ziad Ajjawi (Accountant), and from Jacob John Bradley who was appointed as a director and secretary of the Company from 1 July 2019 (Director). 10 Second, the plaintiff has taken significant steps in the period since June 2023 to progress potential recoveries from voidable transaction proceedings. These include procuring and reviewing bank traces of the Company's bank accounts with Westpac Banking Corporation, identifying payments out of the Company's bank account for which there is no adequate explanation in the Company's books and records, requesting information from the entities to which such payments were made and commencing proceedings to seek orders for the public examinations of the Director and Former Director. The plaintiff also gives evidence that he intends also to seek orders for the public examination of the Accountant. 11 Third, the plaintiff estimates, on a preliminary basis, that the potential return to creditors from the voidable transaction proceedings he is contemplating commencing, subject to the information he obtains from the proposed public examinations and review of additional documents that he obtains, is in the region of $878,000. 12 Fourth, the plaintiff gives evidence that he has concluded, from his review of the reconstructed accounts of the Company from the limited books and records of the Company that he has been provided, that the Company was insolvent from approximately 30 June 2019 but continued to trade. 13 Fifth, the plaintiff gives evidence that he is not able to conclude whether the pursuit of the proposed voidable transaction proceedings are in the best interests of creditors until he has conducted public examinations of the Director, Former Director and the Accountant and obtained further documents from orders for production in connection with those examinations. 14 Sixth, there does not appear to be any prejudice to any person or entity if the extension is granted, other than the unfortunate delay in the commencement of any voidable transaction proceedings, which would appear to be largely attributable to the lack of cooperation from the Director, the Former Director and the Accountant. The Former Director has been notified by the plaintiff's solicitors of the application and Ms Furchtmann gives evidence that no response has been received from the Former Director to that notification. 15 I note, however, that the notification provided to the Former Director was that these proceedings would be listed for a case management hearing at 9.30 am on 22 February 2024. In light of the vacation of that case management hearing and that the application has been dealt with on the papers it is appropriate that the Former Director, together with the Director and the Accountant (given their interests are also affected by the application) should be provided with a copy of these reasons for judgment and the orders that have been made, and be given leave to make any application they may wish to make to set aside or vary the orders.

D. Disposition 16 For the foregoing reasons, orders will be made substantially in the form sought by the plaintiff, together with orders requiring the plaintiff to serve a copy of these reasons for judgment and orders on each of the Former Director, the Director and the Accountant. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.

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