Federal Court of Australia

Cormack, in the matter of K.N.D Associates Pty Ltd (in liquidation) [2026] FCA 674

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (‘the Act’), the time for the second and third plaintiffs in their capacity as joint and several liquidators of the first plaintiff to bring proceedings pursuant to the Act be extended until 15 November 2027.

2.    The costs of this proceeding are costs in the winding up of the first plaintiff.

3.    Pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), Annexure AC-09 to the affidavit of Adam Cormack affirmed on 12 May 2026 be suppressed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript) 

SARAH C DERRINGTON J:

INtroduction

1    Mr Adam Cormack and Mr Jonathon Colbran (together, the plaintiffs) are the liquidators of K.N.D Associates Pty Ltd formerly trading as Gymea Bay Aged Care (in liquidation) (the Company). By the originating process filed on 12 May 2026, they seek a “shelf order” pursuant to s 588FF(3)(b) of the Corporations Act 2001 (Cth) (the Act), that is, an order that the time for the making of an application under s 588FF(1) of the Act be extended up to and including 16 November 2027 with respect to any voidable transaction involving the Company and including voidable transactions involving various persons and entities.

2    The plaintiffs rely on two affidavits. The first is an affidavit of Mr Cormack affirmed on 12 May 2026. I am satisfied that Annexure AC-9 to that affidavit ought to remain confidential because it contains details of the funding agreement into which the plaintiffs have entered. Therefore, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), and on the grounds specified in s 37AG(1)(a) of that Act, I order that Annexure AC-9 remain confidential until further order of the Court.

3    The second affidavit was affirmed by Ms Natasha Guthrie on 14 May 2026. It is an affidavit as to service on the putative defendants. Those defendants are:

(a)    Mr Sidharath Kumar Gupta;

(b)    Ms Anju Gupta;

(c)    Ms Parveen Kumar Gupta;

(d)    GUP Commercial 2 Pty Ltd as trustee for GUP Commercial 2 Trust (GUP Commercial); and

(e)    GUP Commercial Pty Ltd as trustee for GUP Commercial Trust.

All parties were called at the commencement of the hearing on 15 May 2026 and there was no appearance by any of the persons served.

4    The plaintiffs also relied on an outline of submissions dated 14 May 2026.

Background

5    The Company was incorporated on 16 February 1982 but did not trade until in or about June 2022 when it acquired, and became the approved provider of, an aged care facility operating from property at 128 Coonong Road, Gymea Bay, New South Wales 2227.

6    Mr Gupta was first appointed as director and secretary of the Company on 23 March 2022 and Australian Securities and Investments Commission records show that he has been continuously appointed as sole director, sole secretary and shareholder since 1 November 2022.

7    The Company did not trade for long. On 16 May 2023, the Former Liquidators were appointed jointly and severally to the Company by resolution of Mr Gupta, pursuant to ss 491 and 495 of the Act. On 16 May 2023, the Former Liquidators received a report on Company activities and property from Mr Gupta. In evidence was the Former Liquidators’ first report to creditors dated 19 May 2023. The Former Liquidators appear to have formed the view that Mr Gupta may have allowed the Company to trade while insolvent and may have allowed or caused the Company to fail to maintain financial records that would enable true and fair financial statements to be prepared and audited.

8    On 12 July 2024, the largest unsecured creditor, being the Department of Health, Disability and Ageing (DHDA), requested that the Former Liquidators convene a meeting of creditors to consider a resolution to remove the Former Liquidators.

9    In their further report dated 19 July 2024, which was also in evidence, the Former Liquidators explained to the creditors the nature of the investigations they had undertaken up to date and informed the creditors that a meeting would be convened to consider a resolution to remove the Former Liquidators.

10    Following a meeting on 7 August 2024, it was resolved that the plaintiffs be appointed as the liquidators of the Company.

11    The plaintiffs have also issued a report to creditors dated 7 November 2024. In that report, they disclose their concern about a Business Sale Agreement (BSA) dated 20 May 2022, which was entered into by the Company and a related entity, GUP Commercial, to purchase an aged care facility and associated freehold. As described in the affidavit of Mr Cormack, the plaintiffs’ concerns relate to the Company entering into an interdependent business sale agreement for the purchase of the aged care business for $3.3 million, which provided, amongst other things, for an offsetting of employee entitlements, residential care subsidies and refundable accommodation deposits against the purchase price. The total liabilities offset were approximately $5.2 million.

12    Simultaneously, GUP Commercial entered into an interdependent Land Sale Contract to acquire the freehold property from which the aged care facility operated for a purchase price of $1 million. No monetary consideration was, however, paid by GUP Commercial, as the purchase price was offset under the terms of the BSA. After payment of all legal costs associated with acquiring the aged care business and freehold, the Company received net funds of $896,186.03, representing the excess liabilities over sale in accordance with the BSA and the Land Sale Contract. As the plaintiffs submit, in effect, the Company funded GUP Commercial’s acquisition of the property through a reduction in the amount otherwise payable to the Company.

13    In their report, the plaintiffs also expressed concern about payments totalling $2.025 million made to related entities. They informed creditors that they had been examining potential causes of action against the Company’s director (Mr Gupta) for alleged breaches of statutory and fiduciary duties, as well as considering possible claims against additional parties. The nature of those investigations are set out in detail as an annexure to that report, and indicate that the plaintiffs have been very active over the time period since their appointment.

14    The current creditor claims against the Company total approximately 6.65 million, and the Company has no apparent assets.

Legal principles

15    Section 588FF of the Act provides:

588FF Courts may make orders about voidable transactions

(1)     Where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:

(a)     an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;

(b)     an order directing a person to transfer to the company property that the company has transferred under the transaction;

(c)     an order requiring a person to pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction;

(d)     an order requiring a person to transfer to the company property that, in the court’s opinion, fairly represents the application of either or both of the following:

(i)     money that the company has paid under the transaction;

(ii)    proceeds of property that the company has transferred under the transaction;

(e)     an order releasing or discharging, wholly or partly, a debt incurred, or a security or guarantee given, by the company under or in connection with the transaction;

(f)     if the transaction is an unfair loan and such a debt, security or guarantee has been assigned—an order directing a person to indemnify the company in respect of some or all of its liability to the assignee;

(g)     an order providing for the extent to which, and the terms on which, a debt that arose under, or was released or discharged to any extent by or under, the transaction may be proved in a winding up of the company;

(h)     an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time;

(i)     an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time;

(j)     an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable.

(2)     Nothing in subsection (1) limits the generality of anything else in it.

(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.

(4)     If the transaction is a voidable transaction solely because it is an unreasonable director‑related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between:

(a)     the total value of the benefits provided by the company under the transaction; and

(b)     the value (if any) that it may be expected that a reasonable person in the company’s circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c).

16    The Court has power to make a shelf order extending time without specifying the particular transaction or transactions to which it would apply: Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; 254 CLR 489 at [3] per French CJ, Hayne, Kiefel, Gageler and Keane JJ.

17    The power is discretionary and in exercising the discretion the Court should consider three factors (Re Cohalan & Mitchell Roofing (in liq) [2020] VSC 222 at [30]-[33] per Sifris J):

(1)    first, the adequacy of the liquidator’s explanation for the delay in commencing proceedings;

(2)    secondly, a preliminary view of the merits of the proposed proceeding; and

(3)    thirdly, a balancing of the case for granting the extension against any actual prejudice to the defendants that is likely to arise from granting the extension.

Consideration

18    I am satisfied that the evidence discloses that the plaintiffs have given adequate reasons for the delay in commencing proceedings. As the plaintiffs have submitted, this is not a case in which either the Former Liquidators or the plaintiffs have failed to take steps to inquire into the affairs of the Company. As deposed to by Mr Cormack, the Former Liquidators undertook a range of investigative activities, including issuing correspondence to all major banks and financial institutions; conducting searches to ascertain the existence of any potential assets of the Company; engaging with the DHDA in relation to the accommodation payment guarantee scheme; writing to employees concerning potential claims for outstanding entitlements; and requesting the production of books.

19    The plaintiffs have likewise taken substantive steps, including obtaining the books and records from the Former Liquidators; requesting further books and records from the Company’s director and from MYOB, the Company’s accounting software; and conducting their own investigations into the Company’s affairs.

20    Further, Mr Cormack deposes that upon their appointment, the plaintiffs ascertained that the Company only had $825.32 in cash at bank. Such an amount was plainly insufficient to enable any meaningful investigations to be undertaken. The plaintiffs invited creditors to consider contributing funds to facilitate further inquiries, including the conduct of public examinations. No creditor agreed to provide such funding, and so the plaintiffs were compelled to seek and obtain funding from external sources.

21    Mr Cormack deposes that it is only very recently, and after a protracted period, that they have been able to secure funding from the DHDA and the Department of Employment and Workplace Relations.

22    It is not appropriate at this stage for the Court to consider the substantive merits of the proposed proceedings. The plaintiffs at this stage are merely seeking an extension of time to conduct public examinations in order to decide whether or not to bring any proceedings. Nevertheless, given the nature of the claims being considered and the factual basis for the proposed claims, and in light of evidence that the Company may have been insolvent as early as 1 July 2022, only a short period after the execution of the BSA, it is appropriate that the plaintiffs be given additional time to conduct their investigations.

23    Obviously, any extension of time prejudices potential defendants. The general prejudice however, that may be suffered by the extension to the limitation period by potential defendants is not outweighed by the prejudice that will be suffered by creditors if the orders sought are not made.

24    Based on the Company’s books and records and the plaintiffs’ investigations to date, the Company’s unsecured creditors total approximately $6,133,961, comprised of:

(a)    a debt to the Deputy Commissioner of Taxation of $96,023.63;

(b)    a debt to Services Australia of $50,000;

(c)    a debt to trade creditors totalling approximately $883,000;

(d)    a debt to the DHDA comprising deposits owed to former residents of $5,049,978 plus interest; and

(e)    money owed to residents totalling approximately $54,500.

In addition, over $500,000 is owed to employees. The only hope for the creditors to recover anything at all is for thorough investigations to occur. In that regard, the length of time of 18 months sought for the extension is also appropriate.

25    Further, in circumstances where this application has been served on each putative defendant and none has raised an issue of material prejudice, the notion of presumptive prejudice should not tell against the making of the order sought: cf Re Cohalahan at [57].

DISPOSITION

26    In all the circumstances, I am satisfied that the justice of the case favours the making of the orders proposed by the plaintiffs and that it is appropriate to exercise the discretion under s 588FF(3) of the Act in favour of the extension of time sought.

Associate:

Dated:    29 May 2026