FEDERAL COURT OF AUSTRALIA Pilato (Liquidator), in the matter of Energy Services Invironmental Pty Ltd (In Liq) [2018] FCA 987 File number(s): QUD 739 of 2017 Judge(s): GREENWOOD J Date of judgment: 14 March 2018 Catchwords: CORPORATIONS – consideration of an application under s 588FF(3) for an extension of time within which to bring an application under s 588FF(1) of the Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth), ss 588FE(4), 588FF(1), 588FF(3) Date of hearing: 14 March 2018 Date of last submissions: 14 March 2018 Registry: Queensland Division: General Division National Practice Area: Corporations and Commercial Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 16 Solicitor for the Plaintiffs: Taylor David Lawyers ORDERS QUD 739 of 2017 IN THE MATTER OF FRANK LO PILATO AS LIQUIDATOR OF ENERGY SERVICES INVIRONMENTAL PTY LTD (IN LIQUIDATOIN) ACN 099 783 641 FRANK LO PILATO AS LIQUIDATOR OF ENERGY SERVICES INVIRONMENTAL PTY LTD (IN LIQUIDATION) ACN 099 783 641 First Plaintiff ENERGY SERVICES INVIRONMENTAL PTY LTD (IN LIQUIDATION) ACN 099 783 641 Second Plaintiff JUDGE: GREENWOOD J DATE OF ORDER: 14 MARCH 2018 THE COURT ORDERS THAT: 1. The first and second plaintiffs be granted an extension of 12 months to make any application pursuant to section 588FF(1) of the Corporations Act 2001 (Cth) in relation to the first and second respondents, being until 20 February 2019. 2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. EX TEMPORE REASONS FOR JUDGMENT GREENWOOD J: 1 This is an application by Mr Frank Lo Pilato as liquidator of a company called Energy Services Invironmental (In Liquidation). The second plaintiff is Energy Services Invironmental Pty Ltd (In Liquidation), itself. The applicants seek an order that the limited period contemplated by s 588FF(3) of the Corporations Act 2001 (Cth) (the "Act") be extended for such longer period as the Court orders, provided that the application, made by the liquidator, is within the relevant period contemplated by s 588FF(3)(a). 2 The position has moved to one where there is now a minute of proposed order, and under the proposed order the first and second plaintiffs would be granted an extension of 12 months to make any application pursuant to s 588FF(1) of the Act in relation to the first and second respondents, at least until 20 February 2019. The first and second respondents to the application are companies called RAS Larsen Solutions Pty Limited and Cantrillco Pty Limited. 3 The application is supported by an affidavit of Mr Frank Lo Pilato sworn 22 December 2017. The application was filed within time as it was filed on 22 December 2017. The time period contemplated by s 588FF(3)(a) expired on 23 December 2017. Section 588FF(1) of the Act provides that where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of s 588FE, the court may make one of the orders contemplated by subparas (a) to (j) of s 588FF(1). Section 588FF(3) then contains the primary limitation period subject to the question of the court making an order that an application under s 588FF(1) might be brought within such longer period as the court determines appropriate. 4 Section 588FF(1) proceeds on the footing that the application for the various orders or remedies relates to a transaction of the company which is said to be voidable because of s 588FE. The liquidator contends that there is a transaction which falls within s 588FE, and in particular, s 588FE(4). That provision provides that a transaction is voidable if it is an "insolvent transaction of the company" and a "related entity" of the company is a party to it, and it was entered into or an act was done for the purpose of giving effect to it during the four years ending on the "relation back day". I am satisfied that the material prima facie establishes that there is a transaction falling within s 588FE(4) thus engaging s 588FF and, in particular, the extension power. 5 It is necessary because of the nature of the discretion which is at large to say some things about the factual matters briefly. Those facts are these. On 23 December 2014, the liquidator (applicant) was appointed liquidator of the company pursuant to Division 2 of Part 5.5 of the Act. The relation back day for the purposes of the Act is, in this case, 23 December 2014. In particular, the relation back period for the purposes of s 588FE of the Act is the period commencing on 23 December 2014 and ending on 23 December 2017. 6 The company was incorporated on 4 March 2002. Its Director, between 24 May 2002 and 23 December 2014, was Mr Nigel Patrick Wallace. Between 1 May 2008 and 27 July 2012, Mr Peter Jonathan Gwynn was a Director, and between 1 May 2008 and 31 May 2012, Mr Rodney Adkin Larsen, was a Director of the company. 7 Mr Lo Pilato, in his affidavit of 22 December 2017, says that sometime shortly after the commencement of the liquidation, the company received from Mr Wallace some financial reports, and they were financial reports for the financial years ending 30 June 2012, 2013 and 2014. 8 On the basis of an examination of those reports, Mr Lo Pilato formed the view that the company was unable to pay its debts as and when they became due and payable as from 31 January 2011. Mr Lo Pilato, then, in his affidavit turns to consider the transactions in question, and he deposes to and exhibits to his affidavit documents which go to a business sale contract which reveals that the business was sold to the two respondent companies, which I will call respectively "RAS" and "Cantrillco". The examination of that documentation shows that the stock and work in progress was valued at $0, notwithstanding that the 2012 financial report recorded stock and work in progress at 30 June 2012 at $111,951.00. 9 The plant and equipment was sold for $378,175.00, notwithstanding that the financial accounts for the year ending 30 June 2012 revealed that the fixed assets of the company were valued at $599,353.00. It seems that the relevant financial information for those two items in the financial record for 30 June 2012 shows an amount of $711,304.00. However, the business contract shows that the company received, on 9 August 2012, $533,175.00 and Mr Lo Pilato deposes that the Director, Mr Wallace, advised, through his solicitors, that that was the consideration received under the business sale contract. There seems to have been a disposition of the business of the company at an undervalue, which brings the transaction into peril under s 588FE(4) of the Act. 10 Now, as to the question of the extension of time, these matters should be noted. Mr Lo Pilato says that although he did receive some financial information from Mr Wallace about the company, as earlier described, staff of the liquidator have been pressing for further information to be provided. The liquidator, however, did not receive the additional financial information until 21 December 2017. Mr Lo Pilato says that, not having received all of the company's books and records, has hindered his investigations and inquiries into the affairs of the company, and especially in relation to five matters he identifies at para 32 of his affidavit. It is not necessary to set out, in these brief reasons, each of those features. 11 It is enough to note that the liquidator has formed the view that the failure to produce the records until 21 September 2017 has hindered the proper discharge of his financial obligations and has made it difficult to form views about the relevant matters. Between 23 December 2014 and 21 September 2017, staff of the liquidator were pressing Mr Wallace to provide information, in particular, in relation to the sale of the business, and the financial records of the company. Mr Lo Pilato says that the failure to produce these records is: "the primary reason for delay in progressing the investigations, and a claim, in relation to the sale, of the Business". 12 I accept all of that evidence from Mr Lo Pilato. 13 Apart from these matters, the liquidation is unfunded but that position has moved to one where there is a prospect that a litigation funder will fund an investigation of the relevant matters. It seems to me that that is a relevant matter to take into account. 14 The discretion under the section is at large and is informed by a question of what is thought by the Court, in all the circumstances of the case, to be fair and reasonable. It should also be noted that in this context, the application was served upon the two relevant respondents who would have an interest in the possibility of proceedings being brought under s 588FF(1) on the footing of contentions based upon s 588FE(4). 15 Those two companies have put on a submitting notice by which they say that they do not want to be heard on the question of costs on the basis of any costs of and incidental to the application, and they simply submit to any order the Court may make on the substantive application itself. 16 In addition to that, the earlier proposed order is a consent order to be made with the consent of those parties and I note the letter from the solicitors for those parties to that effect dated 16 February 2018. Having regard to all those considerations, I make orders in terms of the minute of proposed consent order. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 14 March 2018