On 11 March 2015, the High Court of Australia handed down the decision of Fortress Credit Corporation (Australia) II Pty Limited v Fletcher  HCA 10. The matter concerned the Court’s discretion to extend the time within which a company’s liquidator may apply for orders in relation to voidable transactions under section 588FF(3) of the Corporations Act 2001 (Cth) (Act).
Liquidators were appointed to Octaviar Ltd (Receivers and Managers Appointed) (In Liquidation) and Octaviar Administration Pty Ltd (In Liquidation).
In September 2011, the liquidators applied to the Supreme Court for an order to extend the time for commencement of proceedings in relation to voidable transactions under section 588FF(1) of the Act.
Section 588FF(3) of the Act states:
(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 Liquidators were successful in their application and the NSW Supreme Court extended the time for the commencement of proceedings in relation to voidable transactions from October 2011 to April 2012.
On 3 April 2012, the liquidators commenced proceedings against the Fortress Credit Corporation Australia II Pty Ltd (Fortress) for orders under section 588FF(1) of the Act. The Supreme Court of NSW dismissed an application by Fortress to set aside the extension. Subsequently, the Court of Appeal of the Supreme Court of NSW granted Fortress leave to appeal against the earlier decision.
In coming to its decision, the High Court considered whether an order for an extension could be granted in relation to transactions not able to be identified at the time of the order (which are commonly referred to as “shelf orders”) as opposed to transactions specifically identified in the order.
The appellants submitted that an application under section 588FF(1) of the Act must identify a transaction alleged to be voidable pursuant to section 588FE of the Act.
The transaction must be identified, in terms of conduct of the company. It must be arguably capable of inclusion in one of the designated classes of transaction mentioned in s 588FE. The specification of the time that it was done, or of an act done to give effect to it within a relevant period, would also be necessary to the contention that it was a voidable transaction. Parties to the transaction who would be affected by the orders sought would have to be identified and those parties named as respondents.¹
The High Court disagreed with that reasoning and found that:
Lavan Legal comment
Insolvency practitioners will be relieved that this decision confirms the discretion of the Court to make an order to extend the period of time within which liquidators can commence proceedings in relation to voidable transactions where, notwithstanding best efforts, a liquidator may be unable to complete his or her investigations within the time period proscribed by the Act.
¹ Fortress Credit Corporation (Australia) II Pty Limited v Fletcher  HCA 10 at .
² Ibid at .
³ Ibid at .