Yesterday, the High Court handed down its decision in the Octaviar litigation concerning the time limits imposed by the Corporations Act for the commencement of proceedings for voidable transactions (Grant Samuel Corporate Finance Pty Limited v Fletcher & Ors and JP Morgan Chase Bank, National Association & Anor v Fletcher & Ors [2015] HCA 8).
Section 588FF(3) of the Corporations Act provides that a liquidator may only commence voidable transaction proceedings:
- within 3 years of the relation-back day or 12 months after the appointment of the liquidator, whichever is the latest (section 588FF(3)(a)); or
- within such time as the Court otherwise orders pursuant to an application made by the liquidator within the period specified in (a) above (section 588FF(3)(b)).
In this case the liquidators of Octaviar had obtained an order from the Supreme Court of New South Wales to extend the time for the commencement of voidable transaction proceedings. That application was made within the period specified in section 588FF(3)(a).
After the expiry of the time prescribed by section 588FF(3)(a), but before the extension period expired, the liquidators made a further application to extend the period in which to bring voidable transactions proceedings. The Supreme Court granted the extension.
The liquidators of Octaviar then commenced voidable transaction proceedings against a number of parties who in response applied to set aside the claims on the basis that the second extension of time was invalid and that the time for commencing voidable transaction proceedings had expired.
The Supreme Court dismissed the defendants' challenge, accepting the liquidators' argument that Rule 36.16(2)(b) of the Uniform Civil Procedure Rules (which provides the Court with power to vary existing orders) permitted the Court to vary the original extension order by changing the date.
The defendants' appeal to the Court of Appeal was dismissed. The defendants then appealed to the High Court.
Yesterday the High Court overturned the Court of Appeal decision finding that the second extension order made by the Supreme Court was invalid and thus the proceedings against the defendants were commenced out of time. The High Court held that Rule 36.16(2)(b) of the Uniform Civil Procedure Rules did not permit the Court to make an order extending the time for bringing voidable transaction proceedings if that application for extension was made after the time limit prescribed by section 588FF(3)(b) of the Corporations Act.
The High Court also handed down its judgment yesterday in the related proceedings of Fortress Credit Corporation (Australia) II Pty Ltd & Anor v William John Fletcher and Katherine Barnet as Liquidators of Octaviar Limited (Receiver and Managers Appointed) (In Liquidation) and Octaviar Administration Pty Ltd & Ors [2015] HCA 10. In that decision the High Court found that a court may make an extension order pursuant to section 588FF(3)(b) without identifying particular transactions to which the extension order is to apply, thus allowing transactions that were unidentified at the time of the making of the extension order to be the subject of subsequent voidable transaction proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
