Extra Time! - Extension Of The Limitation Period For Voidable Transaction Claims

In a recent case of Mohen as liquidator of MBP (WA) Pty Ltd [2023] WASC 81, the Supreme Court of Western Australia considered an urgent application by the liquidator (Liquidator) of MBP (WA) Pty Ltd (the Company) for a 12-month extension of the time for the liquidator to commence any proceedings for voidable transactions under the section 588FF of the Corporations Act 2001 (Cth) (Act).

The Liquidator was appointed on 12 May 2020.  Following his initial investigations, the Liquidator entered into a deed of settlement with one of the directors of the Company.  However, the deed of settlement was not performed and was terminated at some time later in 2022.  The Liquidator then resumed his investigations, but given the deadline for the commencement of voidable transaction proceedings applied for a 12 month shelf order to preserve his ability to commence any appropriate proceedings once his resumed investigations were completed.

Justice Lundberg heard the matter on 17 March 2023 and delivered an ex tempore judgment at the conclusion of the hearing, granting the application.


The Company owned and operated a commercial laundry business between about May 2003 and June 2019.  It was ultimately placed into external administration on 26 March 2020, and then into liquidation on 12 May 2020.

In the course of his investigations, the Liquidator identified two material matters – the suspected transfer of the Company’s assets to a related entity and the suspected transfer of the Company’s business to another entity. 

The Liquidator subsequently carried out a public examination of one of the directors of the Company (Director) in relation to these matters in the Federal Court of Australia.  This process led to the Liquidator and the Director entering into a deed of settlement, and the Federal Court proceedings were then stayed and were ultimately dismissed.

Unfortunately, the deed of settlement was subsequently terminated, and in October 2022 the Liquidator initiated steps to commence a second round of public examinations in the Federal Court and to seek production of documents from third parties.  A summons seeking production of documents was filed by the Liquidator in November 2022, and a summons for further examination of the Director was issued on 2 March 2023 with the examination due to take place on 4 May 2023.

Given the expiry of the limitation period for the commencement of any voidable transaction proceedings on 26 March 2023, the Liquidator commenced proceedings on 13 March 2023 seeking an extension of 12 months pursuant to section 588FF(3)(b) of the Act for the Liquidator to commence any such claims.

It is important to note that the Liquidator’s application was for a general extension of time for any potential voidable transaction claims (as opposed to specified claims against identified respondents), also known as a shelf order.

Legislation and Principles

Pursuant to section 588FF(3)(a) of the Act, a liquidator has three years from the “relation back day” or 12 months after their appointment (whichever is later) to apply to the Court for orders and declarations with respect to voidable transactions under section 588FE of the Act. 

However, pursuant to section 588FF(3)(b) of the Act, the Court has the authority to grant an extension of time for commencing proceedings.

In this case, the Court noted that the principles guiding the decision to grant an extension of time under section 588FF(3)(b) are relatively settled, being as follows:

  • The power of the Court in relation to section 588FF(3)(b) is unqualified and is in the discretion of the Court. 
  • However, an indeterminate extension cannot be granted and there must be a fixed definite period set for making the substantive applications.
  • Although applications are generally made on an ex parte basis, notice should be given to persons affected by the application as they have a right to be heard on the application.
  • There are three matters which must usually be considered in relation to an application under section 588FF(3)(b):
    • Explanation for the delay – the Court must evaluate the reasons provided by the liquidator for the delay in commencing proceedings.
    • Merits of the proposed proceedings – the Court must undertake a preliminary review of the merits of the proposed proceedings.  However, this may be unnecessary of the application is to allow the liquidator time in which to properly decide whether or not to bring the proposed proceedings.  Further, the threshold for this review is low, involving a consideration of whether the proposed proceeding ‘would be so devoid of prospects that it would be unfair, by granting an extension, to expose the other party to the continuing prospect of suit’.
    • Prejudice to the parties – the Court must balance the potential prejudice to the interested persons if the extension is granted.
  • The Court has power make an order extending time without specifying the particular transaction or transactions to which it would apply, commonly known as a ‘shelf order‘.  Whether such an order is justified in a particular case is to be assessed by reference to the facts of that particular case.


The Court in this instance granted the Liquidator’s application, and noted the following matters:

  • The Court was satisfied that there were adequate reasons for the delay in commencing proceedings under section 588FF(1).  These delays were principally attributed to the following, of which there was evidence before the Court:
    • deficiencies in the books and records of the Company;
    • the entry into and subsequent termination of the deed of settlement between the Liquidator and the Director, and the lengthy ‘stay’ of the examination process caused by these events;
    • the fact that the Liquidator was conducting further public examinations necessary to assist the Liquidator in better understanding the potential claims he may have at his disposal; and
    • the fact that the Liquidator had been experiencing funding difficulties (although by the time of the application those difficulties had been addressed through a litigation funding arrangement).
  • A detailed review of the merits of the proposed claim was not required in this case as the extension was being sought to allow the Liquidator to properly decide whether or not to bring proceedings.  However, the Court was satisfied in any event on the material before it that the potential claims were not frivolous or vexatious.
  • As to prejudice, while there may be general prejudice to the interested parties involved due to the overall delay, there was no evidence of any specific prejudice threatened to any of the interested parties, and the general prejudice arising from the extension did not materially weigh against the making of the extension order sought.
  • The length of the extension (12 months) was justified given the date listed for the further examination of the Director, and the likely further work that would be required to consider the prospective claims and to prepare and commence any proceedings.
  • And finally, the Court was prepared to make a “shelf order” in the circumstances of the case.  In this respect the Court considered, among other things that:
    • the Liquidator had some degree of uncertainty about the actions undertaken by the Director, particularly in respect of the alleged transfer of the Company’s business for a negligible sum;
    • it was possible that further targets and different claims would be identified by the Liquidator as a result of the further public examinations, which the Liquidator would be precluded from pursuing if the ‘shelf order’ was not made;
    • the prejudice which might arise from the making of a shelf order needed to be considered in the context of the types of claims being considered by the Liquidator in this case.  If the claims under consideration were claims arising from legitimate commercial activity, then the concern re the making of a shelf order might be greater.  However, the claims under consideration appear to be creditor-defeating type transaction.  In this type of case, less weight should be given to the prejudice which might arise from the potential third party defendant’s perspective; and
    • the Liquidator would not be able to seek any further or additional extensions of time under the statutory framework.

Lavan Comment

This decision provides a useful refresher on the applicable principles in relation to applications for extensions of time under section 588FF(3)(b).

It also provides a useful example of the evidence that should be put before the Court when such an application is made.

If you have any questions regarding the time limit on commencing voidable transaction claims, extensions of time under section 588FF(3)(b) of the Act, or any of the matters arising from this case, the experienced Lavan team is here to help.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.