In a recent Federal Court case[1] the Court had to consider whether a liquidator was entitled to an extension of time to bring proceedings pursuant to section 588FF(1) of the Corporations Act due to COVID-19.

Facts

  •  The liquidator had public examinations listed which were cancelled by the Court due to COVID-19.
  • The liquidator wanted to extend the time to bring a claim against the director until after the public examination had taken place.

Legal Principles

 In considering this application the Court considered the following:

  • The liquidator’s explanation for the delay for not taking action within the 3 year period.
  • Any likely prejudice which would be suffered.
  • The merits of any such case – this does not apply if the purpose of the extension of time is to allow the liquidator time in which to properly decide whether or not to bring the proceedings.

The Court held that if it were not for the cancellation of the examination, the liquidator would have been in a position to complete his investigations and would have made the decision prior to the expiry of the three year period.

Should the liquidator have served the application for extension of time on the potential defendant (in this case the director)?

Yes – the Court in this case allowed time for the liquidator to serve the director of the company with the application and make submissions to the Court (which the director declined to do in this case).

Tips

  •  Do not make the application in the last week of the three year period – the Court finds this extremely frustrating.
  •  Serve all parties who may wish to make submissions on the matter (including any potential defendant).
  • Explain the delay – if the liquidator has sat on their hands or had a long period of time where nothing of substance occurred, then the Court will not allow the extension.

Conclusion

 Where there is a good reason (such as being impeded by COVID-19), the Court will allow an extension of the three year period for liquidators to bring certain claims.

[1] Dudley, in the matter of Freshwater Bay Investments Pty Ltd (in Liquidation) [2021] FCA 608

About the Author

Catherine Ballantyne

Partner
A business disputes specialist, Catherine is a trusted advisor to businesses and individuals in obtaining successful outcomes. Businesses rely on Catherine as a trusted advisor as well as lawyer in guiding them through complex litigation and disputes.

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