Occasionally liquidators are not able to complete investigations in time to commence proceedings against parties for certain void transactions within the statutory time periods. There may be a number of reasons why this occurs, with the two most common being a lack of records to conduct investigations and a lack of money in the early part of a liquidation.
Recovery actions under the Corporations Act must be taken within certain time periods or the opportunity to take the actions is lost. Most recovery actions for void transactions must be taken within 3 years of the relation-back day. Relief for these transactions is sought under section 588FF, and that section includes the time-limiting provision:
588FF(3) An application under subsection (1) may only be made:
(a) during the period beginning on the relation-back day and ending:
(i) 3 years after the relation-back day; or
(ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or
(b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period.
The relation-back day is set by the Act, and more recently the section was changed to provide a new liquidator appointed to the company at least 12 months to decide whether to commence actions. This new provisions allows liquidators who are either replacing former liquidators, or have been become liquidators after being voluntary administrators or administrators of a deed of company arrangement sufficient time to commence actions. If it were not for the changes a liquidator appointed more than three years after a voluntary administration commenced would not have the opportunity to commence any of these actions at all.
Occasionally the statutory time period is not sufficient and the liquidators need to make an application to extent that time under section 588FF(3)(b).
Obviously the Court will want to know the reasons for the delay. It will also want to know why the extension should be granted. That is, the court will want to know what the contemplated actions are and who they will be against. Simply telling the court ‘we need more time’ is unlikely to be sufficient.
Worrells recently made such an application and had to include the details of the recovery actions that we were contemplating and the names of the prospective targets. In most cases the liquidator making the application will not be able to say with certainty that l he or she will commence the action. Indeed if they could do that it is likely that the action would already be underway. In effect the extension is required to allow the liquidator time for further investigation and review.
Given that certain parties may ultimately be affected by our application – they may be a party to an action we commence in the future – and although they are not directly affected by this specific application, the court may wish to ensure that they have been served with the application material and have the opportunity to be heard on the matter.
That is the case in our application. We had to show the court that we had served the prospective targets of our contemplated actions with the material and that they had time to respond and be heard if they wished. We also had to show the court that the information that we required in our contemplated actions against family members of the director were not included in the records that were delivered to us and that we have not received sufficient responses to date to be able to conclude our investigations.
Our application was successful.