Liquidators may obtain an extension to the time for them to bring Voidable Transaction Proceedings under Section 588FF(1) of the Corporations Act (Extension Order). Section 588FF(1) allows Liquidators to apply to the Court for Orders in respect of Voidable Transactions, such as the return of money paid by the Company in the months prior to its collapse. Section 588FF(3)(a) puts a time limit on such applications. Liquidators can only apply within 3 years after the day the Winding Up is taken to have begun or within 12 months after the first appointment of Liquidators (whichever date is later).
However, Liquidators may apply to the Court to extend time to bring Voidable Transaction Proceedings. The extension of time application must also be filed within the same time limits set out above. Section 588FF(3)(b) permits Liquidators to make an application during the above time period for an extension of that time period.
In the Federal Court’s decision in Marsden (Liquidator) v CVS Lane PV Pty Limited Re: Pentridge Village confirms that time will be extended for Liquidators who are unable to bring Voidable Transaction Proceedings within the relevant timeframe due to a lack of funding. This Case requires Liquidators to justify subsequent claims which could otherwise have been brought at an earlier stage if funding had been available.
The Court will generally consider the following whether to extend time to bring Voidable Transaction Proceedings:
- “the liquidator’s explanation for the delay in bringing voidable transaction proceedings;
- the merits of the foreshadowed voidable transaction proceedings; and
- any prejudice that would flow from the extension of time.”
In the above Case the Liquidator made an Application for Extension for the reasons that the Liquidator required time for further investigations and the public examination of the Company’s Officers in order to consider bringing Voidable Transactions Proceedings. The two Entities who opposed the Voidable Transactions Proceedings explained that the Liquidator did not sufficiently explain the delays in taking action. The Court however granted the extension on the reasons of the delay, merit of the claims and no specific prejudice towards the defendants.
The above findings are useful for Liquidators who are not properly funded to bring Voidable Transactions Proceedings in time. A lack of funding is generally a sufficient explanation for Liquidators not taking steps which they could have otherwise taken if properly funded.