FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
1. ORDERS pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (Act) that the time for making an application under s 588FF(1) of the Act in relation to the following transactions be extended up to and including 13 October 2017:
(a) payments made from the Gilbert + Tobin trust account in the name of “Silverbrook Research Pty Ltd” (as recorded in a trust account statement dated 6 August 2014) as follows :
(i) $1 15,595.00 paid to Fiona Inverarity on or about 11 February 20 14;
(ii) $237,512.16 paid to Finity Legal Pty Limited (then known as In Legal Pty Ltd) on or about 11 February 20 14;
(iii) $613,566.00 paid to Chesterfield Lane Pty Limited on or about 11 February 2014;
(iv) $4,849,963.73 paid into Adams Wilson Lawyers Trust Account on or about 13 February 2014;
(b) the assignment of assets of Worldwide Specialty Property Services Pty Limited (in liquidation) (then known as Silverbrook Research Pty Limited) of intellectual property comprising 41 US patents to Mpowa Pty Limited, a related entity.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
introduction AND PROCEDURAL BACKGOUND
1 This is an application by Gregory Jay Parker, in his capacity as liquidator of Worldwide Specialty Property Services Pty Limited (in liquidation) (WSPS), who initially sought an extension of time for making any application under s 588FF(1) of the Corporations Act 2001 (Cth) (Act) for a period of twelve months.
2 More particularly, the interlocutory process filed by Mr Parker on 13 April 2017 sought two substantive orders:
1. An ex parte order that the affidavit of Gregory Jay Parker sworn 12 April 2017 be marked “confidential” and not be released or made accessible to any person without further order of the Court.
2. An order pursuant to section 588FF(3)(b) of the Act that the time for the making of any application in respect of the administration of [WSPS] under section 588FF(1) of the Act be extended up to 16 April 2018.
3 Prayer 1 was sought on the first return of the application. I was not prepared to make it in the terms sought. It ultimately became apparent that the material contained in the affidavit of Mr Parker was not, in truth, confidential, save for one annexure, part of which contained privileged material. Any suggestion that the balance of the material was sufficiently confidential so as to attract a suppression or non-publication order under Part VAA of the Federal Court of Australia Act 1976 (Cth) (FCAA) gave insufficient account of: (a) the fact that the primary objective of the administration of justice is to safeguard the public interest in open justice; (b) the necessity to establish one of the grounds set out in s 37AG of the FCAA; and (c) the necessity to provide procedural fairness to those who opposed the relief sought by Mr Parker.
4 As to prayer 2, during the course of oral submissions, I indicated to counsel appearing on behalf of Mr Parker, Mr Wells, that it did not appear to me that there was justification in making a ‘shelf order’ of the type proposed. My reasons for expressing that view are explained below and, in any event, are evident from my detailed consideration as to whether or not I should exercise my discretion to grant more calibrated relief, the precise form of which was proposed by counsel for Mr Parker after the oral hearing. The relief now pressed, with some minor modification, is in the following form:
An order pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (Act) that the time for making an application under s 588FF(1) of the Act in relation to the following transactions be extended up to and including 13 October 2017:
(a) payments made from the Gilbert + Tobin trust account in the name of “Silverbrook Research Pty Ltd” (as recorded in a trust account statement dated 6 August 20 14) as follows:
(i) $115,595.00 paid to Fiona Inverarity on or about 11 February 2014;
(ii) $237,512.16 paid to Finity Pty Limited (then known as In Legal Pty Ltd) on or about 11 February 20 14;
(iii) $613,566.00 paid to Chesterfield Lane Pty Limited on or about 11 February 2014;
(iv) $4,849,963.73 paid to Adams Wilson Lawyers Trust Account on or about 13 February 2014 (together, (a)(i) – (a)(iv) being the Gilbert + Tobin Transactions);
(b) the assignment of assets of Worldwide Specialty Property Services Pty Limited (in liquidation) (then known as Silverbrook Research Pty Limited) of intellectual property comprising 41 US patents to Mpowa Pty Limited (Mpowa), a related entity (Mpowa Transaction).
5 The matter first came before me on 26 April 2017. At that time, Mr Farrar, the solicitor for Mr Parker, appeared. Mr Farrar informed me that he “had hoped that it would be an ex parte application” but, as he went on to explain, he was aware of the obligation of the plaintiff to notify persons interested that an application for extension was being made. I directed that the interlocutory process be served on a variety of persons identified by the solicitor for the plaintiff and directed those persons to indicate whether they wished to be heard. The persons served did so, and I ultimately made orders pursuant to Rule 2.13(1) of the Federal Court (Corporations) Rules that a number of interested persons be heard on the application without becoming a party to the proceeding.
6 Prior to the commencement of the hearing, the interested persons granted leave and represented at the hearing were: David Brewster, Chesterfield Lane Pty Limited, Fiona Inverarity, Adams Wilson Lawyers Pty Limited, Kia Silverbrook and Janette Lee; in addition, Finity Legal Pty Ltd was granted leave at the hearing (together, the Interested Persons).
7 Of course, all the Interested Persons were connected in some way to transactions which Mr Parker contends may engage the provisions of Part 5.7B, Div 2, of the Act and which, subject to investigation, may give rise to claims for relief including under s 588FF(1) of the Act. As the revised proposed order reveals, those transactions fall into two categories, being the Mpowa Transaction and the Gilbert + Tobin Transactions.
8 As it turned out, far from proceeding on an ex parte basis, the application was resisted by all the Interested Persons. Mr Parker was the subject of a lengthy cross-examination and extensive written submissions were filed. Before coming to the battleground upon which the Interested Persons oppose the relief sought by Mr Parker, I will commence by recounting some brief (and uncontroversial) background facts and then identify the relevant principles that inform the determination of the application.
BRIEF BACKGROUND FACTS
9 WSPS was incorporated in 1994 and Mr Silverbrook and Ms Lee were appointed directors of the company at that time. Mr Parker was appointed as a liquidator on 16 April 2014. The appointment of Mr Parker was pursuant to a special resolution by members in a creditors’ voluntary winding up. It follows, relevantly for the purposes of this application, that the date upon which the winding up is taken to have begun or commenced is the date upon the resolution was passed, namely 16 April 2014: see ss 91 and 513B(e) of the Act. It was common ground that the time for bringing an application for an extension under s 588FF(3) was during the period 16 April 2014 to 16 April 2017.
10 As can be seen from the text of the section extracted at  below, any application to extend time under s 588FF(3) must be made within the relevant three year period which, in this case, was satisfied by the originating process being filed on 13 April 2017. It is also clear that provided the application is made within time, the Court may grant an order extending time notwithstanding the three year time limit has passed: One Phone Australia Pty Limited v One.Tel Limited (2007) 61 ACSR 429 at .
11 How one should characterise what has occurred during the period after the appointment of Mr Parker and the circumstances leading up to the making of the application is contentious and is examined in more detail below.
12 Section 588FF(3) of the Act provides as follows:
(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.
13 Although there were significant differences in emphasis, in broad terms, the principles concerning the operation of s 588FF(3) were not in dispute.
14 In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489, the High Court considered whether the subsection permits an extension of time to be ordered in relation to transactions which, for one reason or another, are not identified at the time application for extension is made. The Court determined that, in appropriate cases, there was power to make a ‘shelf order’ (that is, orders in a form similar to that sought in prayer 2 on this application). Importantly, for present purposes, in the course of resolving this issue of power, the Court explained the nature of the discretion to be exercised on an extension application (at 505) as follows:
The function of s 588FF(3)(b), which reflects its immediate purpose, is to confer a discretion on the court to mitigate, in an appropriate case, the rigours of the time limits imposed by par (a). That is a discretion to be exercised having regard to the scope and purposes of Pt 5.7B, characterised in the Harmer Report as the continuing "policy" which underpinned its recommendations. That policy included the avoidance of transactions by which an insolvent company has disposed of property in circumstances that are regarded by the legislature as unfair to the general body of unsecured creditors. It is, however, a policy qualified in its application by the requirement that liquidators be placed under a reasonable time limitation for taking action under the voidable transaction provisions. A purpose of that qualification, expressed in "clear and emphatic" terms, is to favour certainty for those who have entered into transactions with the company during the periods in respect of which designated transactions may be voidable… The section provides for the exercise of discretion by the court. Questions of what is a reasonable or an unreasonable prolongation of uncertainty and the scope of such uncertainty are more appropriately considered case-by-case in the exercise of judicial discretion than globally in judicial interpretation of the provision (emphasis added).
15 It is evident textually (and from this contextual explanation of the nature of the discretion), s 588FF(3)(b) does not detail any specific criterion or criteria for the exercise of the discretion. In effect, the approach is to ask what is “fair and just in all of the circumstances”: BP Australia Ltd v Brown  NSWCA 216; (2003) 58 NSWLR 322 at 357 . This is, it seems to me, just another way of asking (to use the High Court’s words in Fortress Credit) whether what is proposed amounts to a reasonable or an unreasonable prolongation of uncertainty? Despite the breath of this question, as Edelman J explained in McCann v Mawson Restructures and Workouts Pty Ltd, in the matter of Walton Construction (Qld) Pty Ltd (In Liq)  FCA 1152 at , the lack of specific guidelines to guide the discretion does not mean that the exercise of discretion is ‘idiosyncratic’.
16 Indeed, the matters informing the exercise of the discretion are, as might be expected, very commonly the same and in Taylor v Woden Constructions Pty Ltd  FCA 1228; BC9805048, Finn J explained that ordinarily, the issues raised on an extension application relevant to the exercise of the Court's discretion under s 588FF(3) are threefold:
(a) First, the explanation for the delay;
(b) Secondly, a preliminary review of merits of the foreshadowed proceeding, that is, an investigation as to whether any such proceeding would be so devoid of prospects that it would be unfair, by granting an extension, to expose others to the continuing prospect of suit (although where the liquidator's purpose in seeking the extension of time is simply to put the liquidator into a position to decide whether or not to bring a proceeding, a preliminary inquiry into the merits may not always be necessary); and
(c) Thirdly, whether the likely actual prejudice resulting from the grant of an extension is sufficiently substantial to outweigh the case for granting an extension,
(see also Green v Chiswell Furniture  NSWSC 608 per Austin J at  and Walker v CBA Corporate Services (NSW) Pty Ltd  FCA 328; (2012) 88 ACSR 153 at 161 per Nicholas J at ).
17 During the course of submissions, none of the Interested Parties submitted that the second of these usual considerations, that is, a preliminary view of the merits of any proposed proceeding, was a significant factor in the determination of this application. In particular, despite some evidence by some of the Interested Parties going to the substantive merits and a submission that any case based on the Gilbert + Tobin Transactions should be considered weak, there was no real gainsaying the proposition that the two sets of transactions identified by Mr Parker (that is, the Mpowa Transaction and the Gilbert + Tobin Transactions) were suitable subjects for further investigation. Indeed, they seem to me to be precisely the sort of transactions that should have been (or should be) the subject of a liquidator’s investigation even though, on close analysis, any such investigation could have meant (or could mean) no action is ultimately warranted.
18 Having dealt with the merits of the investigation, I now turn to delay and prejudice in more detail (as inadequately explained delay and prejudice to the Interested Persons emerged as the focus of the opposition to the orders sought).
delay AND PREJUDICE - the relevant principles
19 The question of delay and its relevance to assessing what is fair and just in all the circumstances in the context of an application under s 588FF(3)(b) was canvassed, in some detail, by Ward J (as her Honour then was) in Re Clarecastle Pty Ltd (in liq)  NSWSC 857; (2011) 255 FLR 435 at  to . Her Honour collected a number of cases and statements about delay in a variety of contexts from which the following principles emerge:
(a) in assessing what is fair and just in all the circumstances, in the context of an extension application under s 588FF(3)(b), regard must be had to first, the public policy underlying the imposition of limitation periods generally; and secondly, in relation to s 588FF(3)(b) in particular;
(b) as to limitations generally, four broad rationales for the enactment of limitation periods can be identified: first, as time goes by, relevant evidence is likely to be lost; secondly, it is oppressive to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed; thirdly, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them; fourthly, it is in the public interest requires that disputes be settled as quickly as possible;
(c) as to the particular context of s 588FF(3)(b):
(i) a broader public interest is served by allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure to having past transactions unravelled and, to quote Spigelman CJ in BP Australia v Brown  NSWCA 216; (2003) 58 NSWLR 322 at  to :
…(c)ommercial life must at some stage rule off the past and focus energy on the future…… the commercial and economic life of the community is sometimes better served by allowing the loss to lie where it falls, so that all concerned may proceed with a high degree of certainty as to their financial position. The passage of time, even the passage of three years, can be seen to legitimately alter the balance of conflicting interests in this regard.
(ii) where conflicting interests have to be balanced, the eventual loss of the ability to make a relevant claim for a voidable transaction may be less important in favour of providing certainty to others who have had dealings with the company, including other creditors, so that they can proceed with their business affairs with an assurance that they are no longer at risk;
(iii) importantly (in a passage in which Mr Cook SC, who appeared for those Interested Parties known as the Chesterfield Parties, placed particular emphasis), in Arthur Andersen Corporate Finance Pty Limited v Buzzle Operations (In Liq) (2009) NSWCA 104 (at (), Ipp JA expressed the view, that the deliberate decision to allow a writ to become stale after a limitation period had expired would be a powerful factor against extending time for service, noting that any prejudice suffered in such circumstances would be “self-inflicted”. Consistently with this notion, a seemingly deliberate decision on the part of a liquidator not to pursue, in a timely fashion, the investigations for which an extension is sought, is a decision of a similar kind, such that any prejudice occasioned might also be said to be self-inflicted: see Ward J in Clarecastle at .
20 Ward J in Clarecastle also collected a number of statements about the role of prejudice, which included:
(a) that ordinarily prejudice should be of paramount importance, but the absence of prejudice is not itself decisive; it is rather a relevant factor to be taken into account in the exercise of the general discretion;
(b) whether there is an adequate explanation for the delay is only one factor to be taken into account in considering where the interests of justice lie;
(c) the absence of any specific prejudice to the defendant is of more weight, although prejudice may exist without its being able to be identified because facts which were once known may now be forgotten, or their significance may not now be appreciated.
21 Consideration of delay on the part of a liquidator as part of the discretionary mix can be gleaned from many cases (including the judgment of Finn J in Taylor v Woden). Identifying operative delay and assessing its seriousness is a necessarily fact dependent analysis, but from the cases, reference has often been made to matters such as the complexity of the company’s affairs and records (or lack thereof); the financial resources to fund an investigation; and the complexity of the investigation including whether advice is needed and whether examinations are necessary or desirable.
22 With these principles in mind, I come to what the evidence says about delay and prejudice in this case.
relevant chronology AND FINDINGS
23 During the course of the examination of Mr Parker, I was taken to a large number of timesheet entries which show the work done by Mr Parker or his employees at various times after his appointment. Detailed chronologies were also filed identifying what work was done and when it was done. I do not propose to reproduce all this material but, to provide context as to my findings as to delay, I will rather concentrate on a number of key dates, which are as follows:
7 September 2011
A deed of assignment with Mpowa records the transfer of 41 patents to Mpowa.
41 patents transferred to Mpowa were apparently sold or transferred by Mpowa around this time to a third party.
6 February 2014
The date of the credit of $6,392,867 received into Gilbert + Tobin’s trust account with the description ‘Memjet Operating Companies Settlement of Proceeding. Chq Rec’d dd 06/02/14 Settlement of Proceedings, Chq Rec’d dd 06/02/04’.
13 February 2014
The sum of $4,849,963.73 is deposited into the Adam Wilson’s trust account on behalf of Mr Silverbrook and Ms Lee.
16 April 2014
Mr Parker appointed liquidator of WSPS
17 April 2014
Requests for books and records and documents made to Mr Silverbrook and Ms Lee under s 530 of the Act
6 August 2014
Mr Parker received the Gilbert + Tobin trust statement showing, inter alia, the 6 February 2014 credit (see above) and the payments to the Chesterfield Parties
14 September 2014
Mr Parker had received $134,738.01 from sale of WSPS's plant and equipment
27 November 2014
Mr Parker chases up an earlier request made to Mr Silverbrook that he provide details of the “other half of the story” in relation to the release of the Memjet settlement funds and IP information
18 December 2015
Mr Parker received $527,874.34 as preference recovery from the Office of State Revenue of New South Wales (OSR)
12 May 2016
Legal Advice received by Mr Parker from an IP lawyer in relation to matters relevant to Mpowa Transaction
21 July 2016
Mr Parker instructed his solicitor, Mr Farrar, “to commence proceedings seeking orders for the public examination of [Mr Silverbrook and Ms Lee]”
5 October 2016
Mr Parker obtains leave to file and serve summonses for examination to Mr Silverbrook and Ms Lee
20 October 2016
Mr Farrar wrote to Court stating that return dates were “not suitable to liquidator and barrister involved.”
24 October 2016
Court wrote to Mr Farrar and asked that he “nominate either a Tuesday or Wednesday in the month of February/March 20 I 7”
28 October 2016
Mr Farrar wrote to Court requesting return dates for production on 21 November 2016 and examination summonses on 15 or 16 February 2017
9 November 2017
Court wrote to Mr Farrar, noting production summonses were returnable on 25 November 2016 and examinations were available on 14 or 28 February 2017 and asking “let me know whether you would like to lock one of those dates in.”
7 February 2017
Mr Farrar replied to Court’s email of 9 November 2016 requesting “suitable dates for 1. The orders for production; 2. Return of the examination summonses.”
8 February 2017
Court informed Mr Farrar that summonses for production can be on any Wednesday and examinations in the week of l April onward on Tuesdays or Fridays.
23 February 2017
Court offered dates in May and June 2017
24 March 2017
Mr Parker issues demands for preference recoveries to Chesterfield Lane Pty Limited
29 March 2017
Mr Parker issues demands for preference recoveries to Ms Inverarity and Finity Legal Pty Limited
13 April 2017
Application to extend time period filed
24 As I noted above, relevant to the exercise of discretion, is how one assesses and characterises what has occurred. Apart from an analysis of the contemporaneous record (important aspects of which are recorded in the above chronology), the next most important aspect to consider is the evidence of Mr Parker.
25 Having reviewed his affidavit evidence and observing Mr Parker being subject to a detailed cross-examination by both Mr Cook SC and Mr Golledge, my principal conclusions are that:
(a) Mr Parker did attempt to take appropriate steps to prioritise his investigations as to possible preference payments including pursuing, in an appropriate fashion, the OSR claim that resulted in the settlement sum being paid in December 2015. Prior to that payment, Mr Parker had appropriately taken steps to find other sources of funding in order to conduct broader investigations and was justified in his hesitancy in commencing any proceedings until he had completed further investigations and was sufficiently in funds to contemplate the commencement of proceedings and, in particular, gaining adequate protection against potential adverse cost orders.
(b) To some extent, a lack of complete or active cooperation by Mr Silverbrook and Ms Lee has contributed to some delay in the progress of the investigations. Notices of Demand requiring delivery record books, documents and property of WSPS under s 530 (and incorrectly under s 483) of the Act, were sent to Mr Silverbrook and Ms Lee promptly in April 2014 and a further request to provide the “other side of the story”, was made in November 2014; it is tolerably plain that there is further information which could have been provided by Mr Silverbrook and Ms Lee in a timely way which was only provided after more than one request by Mr Parker or has not been thus far provided (a matter, demonstrated, in part, by those parts of Mr Silverbrook's affidavit sworn 8 May 2017, to which I was taken and was admitted into evidence: see  below); indeed Mr Silverbrook and Ms Lee had not, even at the conclusion of the application, provided their current residential address to the liquidator despite swearing affidavits which were not in proper form and which omitted details of their address (contrary to the requirements of FCR 29.02) and although an explanation was given as to the omission of these details, which I will not detail in these reasons, I do not regard it as satisfactory. I pause to note that, in recent times, the lack of an address for service caused Mr Parker to incur costs, unnecessary distraction and some minor delay in service.
(c) Immediately after December 2015, it was not unreasonable for Mr Parker to advance his inquiries in a way which prioritised obtaining advice about the intellectual property components of the Mpowa Transaction including taking legal advice; this task was pursued relatively promptly. It was also not unreasonable for him to manage his affairs so that further investigation of the Mpowa Transaction, by way of public examination, would take place in the context of also making more investigations of Mr Silverbrook and Ms Lee, which would be relevant to understanding the commercial background to the Gilbert + Tobin Transactions. In this regard, there was some initial force in Mr Wells' submission that the appropriate first step in seeking very detailed information concerning the Gilbert + Tobin Transactions is the examination of Mr Silverbrook and Ms Lee. Despite this explanation, however, the orders for production ultimately served were concentrated on the Mpowa Transaction and no real effort was made to pursue the Chesterfield Parties for matters outstanding in relation to the Gilbert + Tobin Transactions diligently during 2016.
(d) Mr Parker was reliant on legal advice as to the extension application, when it should be made, and the materials required to be marshalled in order to make it. He also left it to his solicitors to make the ultimate decision as to what matters should be drawn to the attention of the Court on the application.
(e) Having noted these matters, the dilatory and casual approach to progressing investigations from the date of receipt of legal advice in relation to the Mpowa Transaction as to both that transaction and the Gilbert + Tobin Transactions (which received even less attention) causes some disquiet. It must have been evident from the time information was obtained concerning the intellectual property aspects of the Mpowa Transaction that there was a need to move with some degree of celerity. Instructions were given to obtain summonses for production and for examination in July 2016, and the Court was in a position to offer dates relatively promptly.
(f) Part (although I conclude a minor part) of the delay from August 2016 in examining Mr Silverbrook was later influenced by the health difficulties Mr Silverbrook was experiencing; however, the strong impression I gained is that the delay (during the time from mid-2016 until filing this application) as to the Mpowa Transaction was primarily caused by a general lethargy or torpor on the part of the solicitors and/or a preference for the convenience of legal representatives over pursuing investigations with alacrity; this was coupled with what appears to be a misplaced confidence that the impending and increasingly inevitable extension application could be regarded as a fait accompli which could be filed at the last moment with no real opposition or concern as to how this delay might prejudice others. In the case of the Gilbert + Tobin Transactions, to the matters identified above, one must add the fact that apparent priority was given to obtaining documents in relation to the Mpowa Transaction.
THE CONTENTIONS OF THE PARTIES AS TO DELAY AND PREJUDICE
The submissions of Mr Parker
26 The case advanced by Mr Parker was that he “has attended to his statutory duties and conducted his investigations properly and with diligence” (plaintiff’s submissions at ) and until December 2015 Mr Parker did not have sufficient assets or funds available to him to expend on investigations concerning the affairs of WSPS and, in particular, the Mpowa Transactions and the Gilbert + Tobin Transactions.
27 Following receipt of sufficient funding in December 2015 (by way of repayment of a preference payment made to the OSR), it is contended the liquidator “has continued his investigations, prepared further extensive reports (to creditors and ASIC) undertaken further searches in relation to [WSPS’s] previous and current intellectual property in the United States and commenced proceedings to conduct public examinations and compel the production of documents” (plaintiff’s submissions at ).
28 Mr Parker also points to the fact that, after making previous requests, on 27 June 2016, he received a vast amount of information from Mr Silverbrook, much of which was irrelevant. Why this is said to be relevant is that this material did not reveal clearly the information conveyed to Mr Parker for the first time by an affidavit affirmed by Mr Silverbrook in separate proceedings on 8 May 2017 (which was provided to Mr Parker during the course of this application). Mr Wells referred to various paragraphs of that affidavit and on this application I have admitted those parts of that affidavit to which I was specially referred as evidence on the application (although its receipt is limited as constituting admissions of Mr Silverbrook contained in those paragraphs). The primary relevance of the material tendered is that it is said that Mr Silverbrook gives evidence concerning transfer of assets to Mpowa, being the sort of material that, despite Mr Parker’s request, was not provided earlier.
29 In any event, it is contended that both transactions warrant investigation and, this being so, it was asserted that to avoid prejudice to creditors the Court should exercise its discretion to extend the time to bring proceedings until 16 April 2018, or such other time as the Court considered appropriate in the circumstances.
The Contentions of the Interested Parties
30 The picture painted by the Interested Parties was starkly different. It is contended that despite having, by Mr Parker's own admission, the necessary resources at his disposal since at least December 2015, and despite appearing to have the facts necessary to consider whether he should make any claim against the Interested Parties available to him since August 2014, Mr Parker has been dilatory in pursuing those claims, in particular, as against the Chesterfield Parties; it was not until March this year when he issued demands for payment to those parties.
31 The Interested Parties point to no proper explanation being provided for the delay and suggest that, since December 2015, there is simply no plausible explanation for the delay in commencing proceedings.
32 Additionally the Interested Parties point to reasons why the Court would reject two core contentions made on behalf of Mr Parker: first, that the lack of funds constituted a proper justification for delay; and secondly, the notion that there was acceptable delay from August 2016 (a date upon which the solicitors for Mr Parker caused examination summons to be issued) and the return date of the summonses on 15 March 2017.
33 As to the first of these issues, being the question of a lack of funding, the Interested Parties point to the fact that by October 2014, Mr Parker had received a total of $156,779.04 in funding from an initial contribution to funding by Mr Silverbrook on appointment and from the sale of plant and equipment. A substantial part of the amounts received were used to pay the fees of the liquidator (including in relation to investigation as to possible preference payments to creditors). Indeed, Mr Parker received approval for, and payment of, his fees in the sum of $100,000 by 15 October 2014.
34 It was further contended that the investigation into possible preference actions in relation to the Gilbert + Tobin Transactions should not be considered to be a particularly complex task when one considers that on 6 August 2014 Mr Parker was provided by Gilbert + Tobin with a trust account statement which demonstrated the nature of the payments made, the identities of the recipients and the date of payments - leaving only the questions of insolvency or any defences that may be able to be maintained by the recipients. The Interested Persons point to the fact that as early as 3 October 2014, Mr Parker commenced seeking documents from Mr Wilson (who was a principal of the firm of solicitors to whom trust account payments were made).
35 In those circumstances it is, at best, simplistic to suggest that no real investigations could have occurred until December 2015 when the sum of $527,874.34 was received from the OSR (in settlement of a claim, which, in any event, was premised on the notion that the liquidator must have had a reasonable basis for asserting a date upon which WSPS had become insolvent – this being an integer of any claim under s 588FF(1)).
36 It is further noted that by 18 March 2016, in relation to the Mpowa Transactions, the investigations must have been sufficiently complete to have allowed Mr Parker, through his solicitors, to issue a demand against Mpowa on the basis that an assignment was a voidable transaction within the meaning of Part 5.7B of the Act.
37 In short, it was submitted, that there was no substance in the contention that Mr Parker was unable to investigate the Mpowa Transaction or the Gilbert + Tobin Transactions by reason of being deprived of funds prior to December 2015 and the position as to a lack of timely investigation after that time is even less explicable.
38 As to the second of the issues identified at  above, being the suggestion that some delay was occasioned by the Court, the Interested Parties point to both the contemporaneous documentation and the true picture that emerged following the cross-examination of Mr Parker. As can be seen from the chronology, what appears to have happened is that:
(a) On 5 October 2016, Mr Parker obtained leave to file and serve summonses on Mr Silverbrook and Ms Lee together with summonses of production to Ms Inverarity and Adams Wilson Lawyers.
(b) On 9 November 2016, the Court informed Mr Farrar that the return of the summonses could occur on either 14 February or 28 February 2017. It appears that a three-month delay then occurred until 7 February 2017 when Mr Farrar responded to the Court asking for available dates for orders for production and the return of examination summonses. This delay is of some significance as Mr Parker agreed that by October 2016 it was apparent that he would be unable to complete his investigations in sufficient time in order to bring proceedings within the statutory limitation period. It followed that it must have been known, from at least October 2016, that an application for extension ought to be made and yet it was not made until days before the expiration of the limitation period.
39 The Chesterfield Parties also made the point that it was necessary to consider the position of those parties separately. The Chesterfield Parties point to the fact that the evidence given under cross-examination was that the only missing information for Mr Parker’s investigations, after receiving the trust statement in August 2014, was whether the recipients of those funds had no reasonable grounds for suspecting the company was insolvent and that, despite this, Mr Parker made no enquiries of them as to that remaining question. The Chesterfield Parties also point to the fact that Mr Parker conceded that there was no impediment to him making enquiries of Ms Inverarity and Mr Brewster during 2016, the focus of production, when process was eventually issued, was directed to the Mpowa Transaction, and Mr Parker did not attempt to seek to investigate the recipients’ knowledge of the financial position of WSPS at relevant times.
40 In summary, all the Interested Parties contended that the delay in prosecuting any claims and the delay in bringing the extension application was both significant and deliberate and any prejudice to the position of Mr Parker was self-inflicted; moreover, the Chesterfield Parties point to the fact that a further deliberate decision was made to put the Gilbert + Tobin Transactions “on the back burner” and direct attention to the Mpowa Transactions (although both transactions could have been pursued simultaneously). This is said to give rise to an important point of distinction between the Chesterfield Parties and the other Interested Parties.
41 Finally, all the Interested Parties made the submission that if an extension was given in the circumstances of this case, with an egregious delay that is essentially unexplained, then it is difficult to conceive of a circumstance where an extension application made by a liquidator would be refused.
42 The submissions of the Interested Parties as to prejudice had three aspects.
43 The first was the general vexation and cost that is caused by allowing further time to the liquidator to bring claims after the expiry of the limitation period. Although no specific forensic disadvantage could be pointed to, it was not necessary to point to specific prejudice in this regard.
44 The second point, connected to the first, was that the extension of the limitation period would, in substance, deprive the Interested Parties from what was described as the benefit they had received from the expiry of the three-year limitation period. The application is made in the context of a deliberate legislative choice to limit claims to a three-year period.
45 Thirdly, the separate point was made (which I will call the Alternative Remedies Contention) that in balancing questions of prejudice that may be occasioned by a failure to extend the time for bringing applications to recover money for the benefit of creditors, there were other remedies available to the liquidator with regard to both the Mpowa Transaction and the Gilbert + Tobin Transactions. As Mr Golledge, who appeared on behalf of Mr Silverbrook and Ms Lee put it: “the refusal of an extension will not mean that [the Mpowa] transaction cannot be the subject of a claim on behalf of creditors (for breach of duty) if [Mr Parker] ultimately decides one is appropriate. Further, claims for insolvent trading (if such claims are available) can be brought without the need of any extension order under s 588FF of the Act. This is not a case where the refusal of the Application will result in creditors missing out on potential benefits of substantial claims” (submissions at ).
46 It is convenient to note at this point that an aspect of the Alternative Remedies Contention was common ground between all counsel who appeared: indeed, Mr Wells accepted that it is “quite true” to say that there are other causes of action that are available to the liquidator with regard to the Mpowa Transaction and the Gilbert + Tobin Transactions, not only a claim for damages or equitable compensation against Mr Silverbrook, but also causes of action against third parties who knowingly assisted in those breaches or was the beneficiary of any money received following those breaches (T97).
BALANCING THE RELEVANT CONSIDERATIONS
47 As I have noted above, the question of whether an extension should be given to Mr Parker in this case in the form originally proposed by Mr Parker is not difficult. This is not a case when there is any problem in identifying the transactions that are required to be further investigated by Mr Parker. Mr Parker accepted as much during the course of his cross-examination and also accepted that the only two transactions that he wished to investigate were the Mpowa Transaction and the Gilbert + Tobin Transactions.
48 Part of the reason why the High Court in Fortress Credit was prepared to accept that a ‘shelf order’ was appropriate was a recognition that s 588FF(3)(b) operates where the liquidator is unable, for whatever reason, to bring proceedings within the prescribed period, including where there is insufficient information available to the liquidator to identify the particular transaction or transactions which may be the subject of further detailed investigation. This is not the case here.
49 The High Court also expressly recognised that one of the considerations which may inform the approach to the exercise of discretion where applications are made for a ‘shelf order’ under s 588FF(3)(b) is the disadvantage to potential defendants not identified in the order and whether it is reasonable in those circumstances for such an order to be made.
50 In my view, there has been more than adequate time to identify, even in a very preliminary way, those transactions which may be subject to investigation and potential action. Given the delay in this case and the current state of investigations, if an order is to be made it is just and fair that it be calibrated to the particular transactions that have been identified by Mr Parker and in respect of which Mr Parker has indicated, in his evidence, that his investigations are ongoing. Accordingly, it was for these reasons that I indicated that I was not disposed to make an order in the form originally proposed by Mr Parker.
51 As I indicated at  above, Mr Parker now seeks a refined order and I now turn to consider whether, given the questions of delay and prejudice that have been raised by the Interested Parties (both generally and also the additional matters raised in the case of the Chesterfield Parties), such an order should be made in respect of one or both sets of transactions.
52 The first matter to consider is delay. To suggest, as the Interested Parties do, that the present delay was in the worst category of case which would mean that it would be difficult to conceive of an extension application being refused if this application was granted is, to my mind, a very considerable overstatement. Although, as I have explained, I think the delay last year in proceeding with the investigation of the Mpowa Transaction and, even more significantly, the Gilbert + Tobin Transactions was regrettable and ought not have occurred, the overall conduct of the administration cannot be regarded as being wholly deficient. The picture presented by the chronology and the findings in  is very different from a liquidator who has neglected his duty during the whole course of an administration. In particular, the preliminary work done prior to receipt of the funds from the OSR cannot be the subject of justified criticism and although there was delay in the second part of 2016 (when Mr Parker seems to have relied on the solicitors to push matters along), the conduct is not such as to constitute, as suggested, an example of a worst case (such as a complete want of attention to the orderly process of the liquidation).
53 Despite this, as I have found, there is a delay in the period I have identified which I do not believe has been adequately explained and this important factor must be placed in the discretionary mix. In the case of the Chesterfield Parties, I agree that this delay was somewhat worse because of the decisions not to engage with making direct enquiries of the Chesterfield Parties and to prioritise the Mpowa Transaction investigation – but, ultimately, the proper investigation of both transactions required understanding the overall commercial background to both transactions, and the directors at the relevant time were best placed to provide that information in the context of answering questions at a public examination when questioning would be directed to both sets of transactions. The other aspect of delay is the decision to delay making the application (or, perhaps more accurately, the failure to make a decision) to seek a s 588FF(3) order until the last minute when it should have been plain as a pikestaff that an extension was needed months before.
54 The existence of delay is, however, only part of the picture. An overall evaluative assessment of what is fair and just in all of the circumstances must take account (amongst other things) of the effect of the delay in the particular circumstances of a case, and must be considered contextually.
55 As I explained at , speaking generally, the question of delay primarily has importance in these applications by reason of: first, considering whether it is fair and just to visit upon a possible defendant a case where there may be some prejudice caused by the passage of time and; secondly, the desirability of allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure without past transactions being stirred up and possibly being disturbed when they otherwise could legitimately be regarded as being settled.
56 As to the first of these matters, the evidence does not disclose any particular prejudice to the Interested Parties in the sense that they cannot point to some particular forensic disadvantage that has been occasioned by the passage of time. Although I am conscious of the warning in the cases that prejudice may exist even although it is unable to be now identified, the fact is, in this case, it seems unlikely that there will be any significant change in the ability of any of the Interested Parties to meet any case that is brought some months following a short extension than would have been the case if an action had been commenced timeously. Although prejudice occasioned by passage of time cannot be totally discounted, this is not an example of a strong case where specific prejudice can be identified.
57 As to the second of these matters, what can been seen by a survey of the cases is that a real focus of delay as a discretionary factor is that it is considered inimical to the public interest to disturb the ability of individuals to have confidence in the settlement their affairs. Revisiting transactions which are otherwise settled by effluxion of time undermines the ability of potential defendants to utilise their resources on the basis that claims can no longer be brought.
58 This is why the submission made by the Interested Parties (which I have described as the Alternative Remedies Contention) cuts both ways.
59 Although the Alternative Remedies Contention was advanced by the Interested Parties as a reason to discount any prejudice that would be caused to the general body of creditors if the extension to the limitation period was not granted, it also is relevant to assessing the real prejudice to the Interested Persons.
60 It can hardly be said that the affairs of those who have had some connexion to the Mpowa Transaction and the Gilbert + Tobin Transactions have become settled or that there is an expectation on behalf of any of the Interested Parties that the matters that surround those transactions could not be the subject of investigation and possible disputation. Not surprisingly, there was no evidence that any of the Interested Parties could legitimately have been working on the basis that there could be no further enquiry into the transactions and that the possibility of some sort of action being taken in relation to them could be discounted by reason of expiry of the three-year period. Those acting for the Interested Parties were well aware that Mr Parker could conceivably invoke other claims which would not be statute barred. This is not to say that the public policy as to the desirability of commercial certainty can be put at naught, but the Alternative Remedies Contention does tend to diminish its significance in the present circumstances.
61 It follows that it would be incorrect to characterise these transactions as being definitively ‘settled’ in the relevant sense and this reduces (at least to some extent) the practical prejudice, in the present case, caused by the delay. The present circumstances are in contrast to a case where the only possible relief that could be called in aid is the cause of action which is the subject of the extension application.
62 Having said that, the Alternative Remedies Contention does emphasise the undisputed fact that other remedies are available as a factor mitigating any prejudice to creditors if the extension application was refused (and further investigation does, in the end, warrant action). Although there is some force in this argument, it would be premature of me to come to a definitive view as to the respective merits of such alternative causes of action. The relevant question, it seems to me, is whether it is just and fair in all the circumstances to refuse the application when this causes prejudice to the general body of creditors by depriving the liquidator of the ability or option, should he be so advised, of bringing an action under s 588FF(1) of the Act. Although other causes of action (such as breach of statutory or fiduciary duties) are still available to the liquidator, they are quite different to the statutory causes of action in respect of voidable transactions, and (potentially at least) more circumscribed in relation to claims against third parties as to proof of knowledge and the extent of any involvement of third parties in any breaches of duty. It again seems to me to be a considerable overstatement to accept at this stage that no prejudice could be occasioned to creditors if the revised application, limited as to scope and duration, was not granted.
63 For these reasons, having regard to what is fair and just in all the circumstances and what amounts to a reasonable or unreasonable prolongation of uncertainty, I consider that the appropriate course is to provide for a limited extension for a short period in order to allow Mr Parker to complete his investigations and to make a determination as to what, if any, causes of action should be advanced in relation to both the Mpowa Transaction and the Gilbert + Tobin Transactions. In doing so, I have considered each transaction separately and reach the same conclusion with regard to each set of transactions notwithstanding what I consider to be the additional delay with regard to the Chesterfield Parties in relation to the Gilbert + Tobin Transactions.
64 It follows that I propose to grant the modified relief sought by the liquidator.
TWO matters of concern
65 As would have already been evident, the delay in investigation for the period I have identified and in making this application has caused me concern, although delay it is only one factor which I have taken into account in considering where the interests of justice lie. Additionally, there are two other matters to which the Interested Parties drew attention and which have caused me some disquiet.
66 The first is the state of the affidavit evidence that was initially filed in support of the application. It is fair to say that the true picture as to delay only emerged following the involvement of the Interested Parties and through the cross-examination of Mr Parker. Certainly if the only affidavit evidence read on the application for an extension on an ex parte application was as originally served by Mr Parker, then it would not have suitably or adequately identified the true picture of delay in late 2016 and early 2017 and the reasons for it. I hesitate in placing too much emphasis on this matter in the exercise of my discretion because the matter was, in the end, opposed and if Mr Wells had appeared ex parte on the application I am confident (notwithstanding the form of the affidavit material) that he would have drawn all relevant material to my attention, but it is a matter of concern that the initial affidavit was prepared in the way it was.
67 The final matter is one that is not directly relevant to the evaluative assessment I have made but is the evidence given by Mr Parker as to making demands. In the context of Mr Cook SC (at T51-52) cross-examining Mr Parker concerning the failure of the liquidator to make reference to demands in the principal affidavit filed in support of the application, the following evidence was given:
… But you didn’t think you needed to tell his Honour that you were sufficiently on top of the facts, as it were, to issue a formal demand against those parties?---They were just demands. They weren’t commencing proceedings or anything. I issue lots of demands, actually, all the time.
Notwithstanding that one of the bases upon which you brought this application was because you told his Honour that you needed more time to investigate whether there were claims against my clients?---And I – and I do. I continue to.
So his Honour should read your demands as a simple [try on] and you had no faith in those demands but you just send them out for good luck. Is that the case?---That - - -
Is that what a responsible liquidator would does [sic], Mr Parker? Issue demands - - -?---I pursue all avenues, yes.
Yes. So you send - - -?---Yes. No, I do send demands out to relevant parties.
Of course you do once you have a proper basis for doing so?---It doesn’t mean I’ve got a complete basis to doing so. If I’ve got even a partial basis, I will issue demands.
And even if you’re not convinced that the demand is proper, you will still send it out as a responsible liquidator. Is that your evidence?---Yes, with a view to potentially recover funds for the benefit of creditors. Yes.
68 A liquidator holds an important statutory office. It is a matter of concern that any liquidator would make demands of third parties for the recovery of monies when the liquidator did not have, at the time the demand was made, a proper basis for making that demand. Notwithstanding that Mr Parker was motivated by the laudable motive of seeking to maximise the recovery of monies for creditors, this is insufficient to justify demands being made in the hope that a third party will effectively accept the demand as a ‘fair cop’. If this is a common practice then, in my view, it should be deprecated. A demand should only be made by a liquidator if the liquidator believes, on reasonable grounds, that there is a proper legal and factual basis to make such a demand.
NSD 1327 of 2016
Third Interested Person:
Fourth Interested Person:
Mpowa Pty Limited ACN 153 099 168
Fifth Interested Person:
Adams Wilson Lawyers
Sixth Interested Person:
Chesterfield Lane Pty Ltd
Seventh Interested Person:
Eighth Interested Person:
Finity Legal Pty Ltd