Fortress Credit Corporation (Australia) II Pty Limited & Anor v William John Fletcher and Katherine Barnet as Liquidators of Octaviar Limited (Receiver and Managers Appointed) (In Liquidation) and Octaviar Administration Pty Limited & Ors [2014] HCATrans 279 (11 December 2014)

Last Updated: 11 December 2014

[2014] HCATrans 279

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S276 of 2014

B e t w e e n -

FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LIMITED ACN114624958

First Appellant

FORTRESS INVESTMENT GROUP (AUSTRALIA) PTY LIMITED

Second Appellant

and

WILLIAM JOHN FLETCHER AND KATHERINE BARNET AS LIQUIDATORS OF OCTAVIAR LIMITED (RECEIVER AND MANAGERS APPOINTED) (IN LIQUIDATION) AND OCTAVIAR ADMINISTRATION PTY LIMITED

First Respondent

OCTAVIAR LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Second Respondent

OCTAVIAR ADMINISTRATION PTY LIMITED (IN LIQUIDATION)

Third Respondent

FRENCH CJ
HAYNE J
KIEFEL J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 DECEMBER 2014, AT 10.00 AM

Copyright in the High Court of Australia

____________________

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MS R.C.A. HIGGINS, for the appellants. (instructed by Baker & McKenzie)

MR B.W. WALKER, SC: May it please the Court, MR B.A.J. COLES, QC and I appear for the respondents with our learned friends, MR P.J. DOWDY and MR A.K. FLECKNOE-BROWN. (instructed by Henry Davis York)

FRENCH CJ: Thank you. Yes, Mr Jackson.

MR JACKSON: Your Honours should have a copy of our outline of oral argument, together with a couple of documents to which I intend to refer during the course of the submissions.

FRENCH CJ: Yes.

MR JACKSON: Your Honours are not, if I may put it this way, entirely unfamiliar with section 588FF of the Corporations Act.

FRENCH CJ: We think of little else, Mr Jackson.

MR JACKSON: May I go to the heart of the matter? Your Honours, as appears from paragraph 16 of our written submissions, the first respondents, the liquidators of Octaviar Administration, on 3 April 2012 commenced proceedings in the Supreme Court of Queensland against the appellants and others. The proceedings included claims for orders of the kind referred to in section 588FF(1) of the Corporations Act. But, your Honours, as section 588FF(3)(a) – and, your Honours, if I could generally speaking leave out the 588FF - that provision provides - an application under that provision may only be made during a period arrived at pursuant to paragraph (a) or paragraph (b) of that subsection.

Now, paragraph (a)(i) could not apply because the relation-back day was 3 October 2008, and more than three years had elapsed before the proceedings were instituted. Paragraph (a)(ii) could not apply because the first appointment of a liquidator was on 9 September 2009, and that year had elapsed on 9 – or perhaps 8 September 2010. So the application to the Supreme Court of Queensland could not be made seeking the section 588FF(1) orders unless it was made during a longer period which had been fixed for the making of the application pursuant to paragraph (3)(b). The only order purporting to fix such a longer time was the so-called shelf order made by Justice Ward on 19 September 2011, which your Honours can see at page 119, about line 42, the three lines commencing, “Order under s 588FF(3)(b)” et cetera.

Now, your Honours, could I just say one thing about it, and that is that it speaks of “the making of the application”. That should be read, your Honours, as applications generally speaking, not just a particular identified application. The central question, your Honours, is whether there was power to make an order in those terms. Your Honours, may I go immediately to that issue and, in doing so, could I make a preliminary observation, and it is this? The Court is here concerned with the liquidation of companies. It is an area covered by the Corporations Act and it relates particularly to remedies – perhaps rights would be a better description – given to liquidators, and it provides for the times within which the rights so conferred must be exercised.

Now, your Honours, could I go to those provisions and first to section 588FF(1)? Your Honours will see that it empowers a court to make, as it puts it, one or more of the orders listed in the subsection, and the power so conferred is itself constrained by the provisions of subsection (1) in the following respects. One is that the power to make such an order is dependent on the court being “satisfied that a transaction of the company” – your Honours will see the words in subsection (1) – “is voidable”. The second feature is that it must be voidable “because of section 588FE” and, thirdly, the proceedings seeking to arrive at the making of such an order must be on the application of the liquidator of the company.

Now, your Honours, under section 588FE, a transaction will be voidable if it falls into one of the categories listed in that provision. Your Honours, there are several distinct categories, each having its own requirements, each having its own time constraints in relation to the conduct there referred to. There is not one overarching category, and your Honours will see one of the documents we have given your Honours simply is a summary entitled:

Voidable Transactions and Relation Back dates -

and it sets out in summary form the various types of provisions that are contemplated by section 588FE. Could we refer your Honours also to our written submissions in-chief to paragraphs 31 and 32? Your Honours, then one goes to subsection (3) of 588FF. Your Honours will see that it commences with the words “An application under subsection (1)”.

Your Honours, if I might just interpolate, the terms of section 588FF are set out in the reasons for judgment of the Chief Justice in the court below at pages 205 to 207. It may be more convenient in some respects to look at them there, if your Honours wish to. Could I say, your Honours, that if one goes then to subsection (3), it commences with the words:

An application under subsection (1) may only be made –

within the times thereafter specified. Your Honours, the phrase to which I have just referred in the opening words of subsection (3) has two aspects. One is the expression “An application under subsection (1)”. In its ordinary meaning it refers to an application by the company’s liquidator which is for one or more of the orders listed in section 588FF(1). Your Honours, those matters, the subject of an application, are not abstractions but are concepts which take their meaning by reference to a proceeding initiated or to be initiated by the liquidator. Could we note, your Honours, in passing, our learned friend’s submissions in paragraph 34 where they say:

Section 588FF(3) . . . makes no reference at all to any “transaction”, nor to any of its features, or participants.

Well, your Honours, it may be literally true to say that subsection (3) does not use the words “any transaction” but one does see the opening words of subsection (3), namely:

An application under subsection (1) –

and if one goes to subsection (1) what your Honours will see is that the opening words of subsection (1) refer to “transaction” as, indeed, does each of the subparagraphs of subsection (1) except for (i) and (j) which themselves contain references back to the earlier subparagraphs in that provision. So, when one is speaking about an application under subsection (1), it is speaking necessarily of an application in relation to transactions.

The second aspect, your Honours, of the opening words of subsection (3) are that such an application, that is, an application of the nature referred to in subsection (1) “may only be made” within the time specified in subsection (3). Now, your Honours, no doubt the term “made” contemplates “instituted” and, your Honours, so far as – I am sorry, your Honours, no doubt contemplates “instituted” and that takes one then to the terms of paragraphs (a) and (b) of subsection (3). Your Honours, if one goes to paragraph (a), it is clear that it fixes a time limit for the initiation of an application under subsection (1). The time limit is to be the later of the two periods there referred to, namely:

(i) 3 years after the relation-back day; or

(ii) 12 months after the first appointment of a liquidator –

Your Honours, I will come in just a moment, if I may, to the relatively brief legislative history of these provisions. What one sees is that the amendments which took place in the 2007 Act - which added, in effect, what is now (3)(a)(ii) - involved a limited legislative extension of the three-year period earlier provided for and it was done so in order to deal with matters such as those referred to in our learned friend’s submissions in paragraph 11, and if I could take your Honours to that for just a moment?

FRENCH CJ: So the application under this paragraph, referred to in (b), is defined entirely by the text of (b). That is an application for an extension of the time within – and then you say it can only relate to an application under subsection (1)?

MR JACKSON: Yes. Your Honour, I am going to come to that in just a moment, if I may. Yes, that is right, your Honour, yes, we do. What I was going to say, your Honours, was one comes then to subparagraph (3)(b), and in relation to it there are several features which, in our submission, should be noted. The first is that if one reads the opening words of (3) together with (3)(b), what it is saying is that:

An application under subsection (1) may only be made:

. . .

(b) within such longer period as the Court orders –

and the provision is, in that respect, speaking of an application under subsection (1). That is, your Honours, an application which seeks an order of the nature referred to in that provision in respect of a transaction referred to in 588FE.

Now your Honours, one comes then to the issue which ultimately the Court – and by that, I mean this Court – has to decide. How does, or what is the correct interpretation to be given to paragraph (b)? One view is that which was adopted by the court below, namely, that the provision allows an expansion of the time for making any application which the liquidator might choose to make under section 588FF(1). I am speaking of the ambit of the provision, your Honours, of course. The other is, as we contend, that paragraph (3)(b) requires some specificity in identifying the applications for the making of which a longer period is to be allowed.

Your Honours, could we just say that the Court of Appeal’s view has the consequence that there may be an order under (3)(b), providing that the period otherwise fixed by (3)(a) is extended generally, and that there is no requirement that the order identified – the nature of the proposed application in any way, rather – is simply a matter for the court to determine ultimately as a matter of discretion whether to make the order which is sought.

Now your Honours, that is, of course, a possible – but in our submission – not the better interpretation of the provision. I say it is a possible interpretation because the court below has taken it for a start, your Honours, and it is obviously a possible view of the provision but, your Honours, we would submit it is not the better view of the provision for a number of reasons. The first, your Honours, is that the expression -

An application under subsection (1) -

which is the way in which the provision starts, is a reference to applications for orders of the type specified in subsection (1), and they are based on the specific, but varied, circumstances listed in that provision – listed in 588FE.

Now, your Honours, when there is a challenge to the valid institution of proceedings purporting to fall within those provisions, it is necessary to determine – necessary to look, perhaps I should say – first to see whether the proceeding is in relation to a transaction of the nature contemplated by FE and, secondly, whether the relief sought is of the nature referred to in FF(1). That is a relatively precise inquiry on the papers - if the court still used papers – on the papers, as it were. Your Honours, one simply asks then, was that proceeding instituted within the time fixed by 588FF(3)(a)? That is the first question.

The second question is, if the answer to that is no, a further inquiry is contemplated by (3)(b), and that is, has the court ordered that this application may be made out of time, as it were, out of the time fixed by (3)(a), and was the application for the additional time made within the time fixed by (3)(a), and I add that because your Honours will see the concluding words of (3)(b), that is:

made by the liquidator during the paragraph (a) period.

Your Honours, the point we would seek to make about it is that the provision is not talking in the abstract. It is looking at the specifics, we would submit.

FRENCH CJ: How specific does it have to be in the sense of the identification of the application the subject of the application for an extension under (b)?

MR JACKSON: Well, your Honour, there is, of course, a range of possibilities and they start, of course, with identification of a particular transaction in relation to which – or one can, of course, multiply that and say it refers to a number of transactions. That is just a question of joinder in a sense. But if one goes to the degree of abstraction, as it were, that is involved one is speaking in a context where, in any event, the liquidator has had at least a year to examine the situation.

FRENCH CJ: So the prospective respondent to the application has to be identified?

MR JACKSON: Well, I was just going to come to that now, your Honour. Because one is speaking about provisions that involve transactions there should be an identification of the transaction. Now, identification of transaction or transactions may sometimes be precise; may sometimes be more vaguely expressed. But, having said that, your Honours, if one is aware of the transactions it will at least follow that parties to it, or some of the parties, are capable of identification, perhaps even identification in the alternative. But one can recognise that there may be a situation where not all the parties to it can be recognised at this point, and that is the point at which it may be that an order could be made in relation to a transaction without being able at that point to identify all the parties to it.

Now, in cases like that, the application does have an ex parte aspect to a degree, but in circumstances like that a party not then identified, but where the transaction has been identified, would be entitled to seek to have the order set aside as against them, but the question whether that would succeed would then depend on the material that was before the court on the hearing of that application.

HAYNE J: You speak inevitably of the court as though it were the court which both makes the extension order and the court in which the proceedings are to be instituted. Is that inevitably so?

MR JACKSON: No, no. Well, this case demonstrates that, your Honour, because the proceedings in question were brought in the Supreme Court of Queensland, whereas the order relied on under (3)(b) was made in the Supreme Court of New South Wales. So, no, your Honour, it could be, of course, Federal Court or a Supreme Court making the order under (3)(b).

So that, your Honour, could I just say this in relation to what your Honour put to me? One has a situation where the remedies given pursuant to FE and FF(1) are remedies which are significantly statutorily created, and whilst they have some history in the bankruptcy preference provisions of fraud and so on, not all of them were matters that might result in there being orders made that whatever money or property had been transferred necessarily go back to the liquidators for the general creditors.

So that one is looking at remedies or rights, as I said before, which have a statutory base, but coincident with the conferral of the statutory base is the limitation as to time, time for institution of the proceedings. The conferral on the “Court”, if I can put it that way, in paragraph (3)(b), which is the superior court, conferral on the “Court” of the power to extend in (3)(b) indicates that it is a matter of some importance but it is a power which, in our submission, is limited by, put it this way, the context in which the issue arises.

HAYNE J: We are no longer in the realm which once existed of a court administering a winding-up by its officer, the liquidator appointed by the court in execution of the winding-up by the court.

MR JACKSON: No, your Honour, it is coincidence if that happens rather than a requirement of the law.

HAYNE J: Yes.

MR JACKSON: Yes. Your Honours, I was going to say this, that I think what I was saying was that the provision is not talking in the abstract as dealing with specifics in a sense, but the arguments are, your Honours, on behalf of the respondents and the arguments on which the judgments in the courts below are founded, come down in the end to arguments of inconvenience. Could I elaborate on that in just a moment, your Honours? But what one sees, of course, is that provisions are expressed in the way subsection (3) is expressed - may only be made, and then a time limit for making the application of extension - they are provisions which are, of their nature, ones which may result in one interest being preferred to another; they may not.

But, your Honours, it is a consequence of limitation type periods – provisions - that there will be cases where it would be better from one side’s point of view if there were not such a provision, and better from another side’s point of view that there is. What I was going to say, your Honours, was that the arguments - - -

HAYNE J: Those are not propositions that proceed from the premise that the competing interests can then be identified. I think that if you are dealing with a shelf order, identification of at least one side of the competition is made the more difficult.

MR JACKSON: Yes, your Honour; yes, that is so. Your Honour, I think I am agreeing with - in saying that, it is apparent that there are, broadly speaking, two interests involved. Potential interests of creditors – general creditors – on the one hand, and on the other hand, the interests of persons whose transactions with the company may be the subject of applications.

Now, your Honours, the way in which those interests are balanced may have an element of brutality about it, by the way in which the times are fixed - and I will come to that in just a moment if I may - and a degree of arbitrariness, perhaps. But, what one does see is that the issue of the rights of the – or the position, perhaps would be a better description – of the persons whose potential liabilities in question is one which carries with it the desirability as to most causes of action being brought to an end at a time which is relatively finite. Your Honours, I said that the arguments on behalf of our learned friends and the judgments below - - -

HAYNE J: Is it that the cause of action is brought to an end within a relatively finite period or that the winding-up is to be brought to an end within a relatively finite period?

MR JACKSON: Both, your Honour, in a sense, because if it be that the – sorry, I will just go back one stage, your Honour, in answering that. What you have – and this is going back to what I was saying before about FE – is that you have rights of action given to liquidators, given specifically to liquidators, and exercising or not exercising those rights is something which will be part of the liquidation.

Now, if that part of the liquidation comes to an end at a finite time, then the result, one might expect, is that the liquidation itself is likely to come to an end because, your Honours, liquidation apart from pursuit of matters under, say, FE, tends to have – and my learned friend’s argument will no doubt tell your Honours otherwise – but it does tend to have an element of simplicity about it. One is getting in debts owed to the company, identifying who the creditors are, seeing what property there is, can it be disposed of, what is the position of secured creditors and so on, what is left after all that.

Now, one is speaking about companies, which may have been well or poorly managed, and they have their books of account they have to have, so there is a kind of starting point, your Honour, and it is really - - -

HAYNE J: You hope.

MR JACKSON: Well, your Honour, it may be a false start or two, but there is a starting point. The liquidators, of course, are not there just to be marking time. All I am saying, your Honour, is really the resolution of issues under FE and FF is a contributor to the conclusion of the liquidation.

Your Honours, I was going to take your Honours, if I may, to a number of the reasons advanced by our learned friends for why there should be the broader interpretation. They are - if I could just go to our learned friend’s written submissions for a moment - if you go to paragraph 6 and paragraphs 7 and 8(a) the liquidation may be complicated. Various businesses may be involved, again similar references. Much work may need to be done to use the words there “get to grips” in 8(a), “get to grips” with the affairs of the company and related companies and potential claims may not have been identified, paragraphs 8(b) and 13 to 19 of those submissions.

Your Honours, could I just say none of this is very new. There have been major and sometimes very complicated liquidations arising in Australia when there have been economic downturns and when there have been – and even when there have been over-enthusiasms in good times. But on a significant number of occasions since, for example, World War II, if one looks at the 1960s credit squeeze, the “jolt from Holt” as it was called through to that which resulted in a case known at first instance as Re Hennessy’s Self Service Stores which came to this Court on preference issues.

If one looks at the GFC of September 2008, and your Honours will see that 3 October 2008 was the date on which Octaviar Administration was placed into voluntary administration, the point I am seeking to make about that, your Honours, is that the inconvenience or the difficulties that liquidators face is not a novel proposition and must have been recognised, as indeed was, in our submission, by the institution, indeed by the bringing into being of the provisions of subsection (3).

Your Honours, could I just say this in relation to subsection (3)? The history of the provision rather supports our contention. Your Honours should have a document which has a black heading along the top. It starts, in effect, from the right side. It shows a previous section 565 for Corporations Law. You will see the first – this in the second column from the right, you will see the first way in which 588FF(3)(a) was expressed – or (3) was expressed. Then, there was the 2007 change in the third column from the right which added 12 months after the first appointment of a liquidator in relation to the winding-up of the company and that is the provision that has continued in (b).

HAYNE J: So is FF the first injection of something that looks like a limitation of actions provision?

MR JACKSON: It was 2007 – I am sorry, your Honour, it was in the Corporations Act prior to 30 December 2007 - I will get your Honour the date further, I am sorry – in the Corporations Act, and then one sees the change made in 2007 by the Act referred to in footnote 2.

HAYNE J: But before those changes, was there any time limit on recovering - in respect of transactions that would have been void against a trustee in bankruptcy?

MR JACKSON: Yes, I think ultimately six years, your Honour.

HAYNE J: Through the application of the general limitation period?

MR JACKSON: Yes, your Honour.

HAYNE J: Yes.

MR JACKSON: Your Honour, it is referred to in I think the judgment of the Court of Appeal or, if not, it is in Brown. Could I give your Honour the reference in a note if necessary? Your Honours, could I just say that when one looks at subsection (3), your Honours will note the strength of the words “may only be made”. Your Honours will note what is in effect a legislative judgment first found in what is now (3)(a)(i), namely, that such proceedings should be brought within three years. Then there was some, but not a great deal of, elasticity given by the 2007 amendment which introduced (3)(a)(ii) and the consequential changes in wording.

Now, your Honours, it reflected a view that the time ordinarily could not extend beyond four years in total and that a late appointed liquidator was to have up to a year beyond the three years. That that is so can be seen from two documents. One is the Corporations and Markets Advisory Committee report of 7 October 2004, page 109. That is a report entitled “Rehabilitating large and complex enterprises in financial difficulties”. If one goes to the page numbered 109 you will see a Recommendation 50 which was adopted and the reasons for it are there set out. But could I refer particularly to the last paragraph on page 109 and to the top of page 110? It was recognised that the period of a year - your Honours will see at the bottom of the page:

On one view, liquidators should be given adequate time to commence litigation to unwind those transactions. However, the interests of the counterparty to potentially voidable transactions should also be recognised. The proposal to give liquidators three years from the –

Your Honours will see then the proposal and it was said that was a pragmatic way of dealing with those competing interests, and the pragmatism manifested in that, your Honours, came from the Corporations Amendment (Insolvency) Bill 2007, and your Honours will see the explanatory memorandum we have given your Honours, pages 125 and 126, commencing about point 6 on page 125 and going through to paragraph 7.209 on the next page.

GAGELER J: Mr Jackson, in interpreting the results of the legislative judgment that was made in 2007, what weight do we give to the fact that Brown had been decided in 2003?

MR JACKSON: Well, your Honour, one does not – the answer, with respect, your Honour, in one – not a great deal, we would say, in the end. One had the decision in Brown. One had a report from that body to which I referred, which was just a little – I am sorry, it was some, a period in 2004 – 7 October 2004 – where it was said the issue had been raised without particular reference to Brown and we would say really not much. One sees a question being raised, but one had to then consider (3)(b), at least in the light of the amended (3)(a). I do not know that I can take it much further than that. The answer is, we would say, not a great deal really, one way or the other.

FRENCH CJ: Just coming – I am sorry to come back to the – for a moment to the question of specificity of the application, the subject of the extension under (b). On your construction, would one need to identify more than the transaction of the company that is voidable within the meaning of the chapeau to subsection (1) or do you need to identify the orders?

MR JACKSON: Well, your Honour, if I could put what your Honour is asking me into the words of the provision – the application – one is talking about an application under subsection (1).

FRENCH CJ: Yes.

MR JACKSON: That takes one back to subsection (1). One looks then to see whether there is a transaction of a company alleged to be voidable. Now, “voidable” takes its meaning because it goes back to paragraph - section FE, and it would be possible, your Honour, to have – one has to say that an application is to be made for an order or orders falling within those provisions in relation to that transaction. That is probably about - - -

FRENCH CJ: So you would need to identify the orders as well as the transaction?

MR JACKSON: Well your Honour, one is speaking really of a claim that is sought to be made. Now, it has to be a claim – and probably, one could put it as widely as being a claim for an order of a nature referred to – in reality, one would think it would in almost every case be something a little more specific than that, because you would hardly be combining preferences on the hand with some of the other transactions. But, yes, your Honour, it would be – because it would be – if one is not seeking an order under FF(1) then there is no need for leave, no need to comply with the time limit, as it were.

Your Honours, could I go on then to refer also to the fact that, as I mentioned earlier, any application for extension of the time, even after the 2007 amendment, had to be made within the paragraph (3)(a) period. Your Honours, in circumstances of that kind, we would submit, why should one incline to the view that paragraph (3)(b) is there to allow a kind of blanket extension of the time provided for by (3)(a)?

Your Honours, could I say this too. It is also, we would submit, clear that at least one of the purposes of FF(3) is to bring to an end uncertainty about the ultimate efficacy of transactions entered into by a company prior to liquidation. We would submit that the better view of the provisions is to say that the liquidator has the period referred to in (3)(a) to bring applications of the nature referred to in FF(1).

If the liquidator cannot do that and needs more time, the liquidator should be able to indicate what are the transactions in relation to which further time is needed and could we refer to our written submissions in-chief in paragraphs 39 and 40? I used, your Honours, once again the expression “the transactions” but that of course is the language of the statute in FE and F(1).

Your Honours, in our submission the order made by Justice Ward should have been set aside at least as against us and any application to bring the FF(1) proceedings in Queensland would now be set aside – I am sorry, would now be out of time and the orders we would seek are those referred to at page 248. Your Honours, those are our submissions.

KIEFEL J: Just before you sit down, Mr Jackson, at a practical level, why do you say section 588FF(3)(b) requires that either or both of the transaction and the party be identified for the purposes of the court making the order?

MR JACKSON: Well, your Honour, because, if one looks at the provisions, one is looking to see whether, if I could deal with it in retrospect, as it were, let it be assumed, as in this case, proceedings have been started. One looks to see, first, whether the proceedings are applications under subsection (1) and, your Honours, that is because of the opening words of (3). If one looks to see that they have to be, in order to fall within (1), proceedings dealing with transactions.

So that situation, if one is looking at it after proceedings have been started, one has to see whether they are within that provision. If, on the other hand, one is looking at a time within a period, in order in bringing an application which has to be within a period for an extension, one is looking to see what is the order to be made and the order to be made is that - it relates necessarily to an application under subsection (1) which is an application which relates to orders to be made in respect of transactions.

Your Honour, that is why, in our submission, one needs to identify what one is talking about and in the light of the fact that there has first expired or is about to expire the period referred to in (a), the need for sufficient specificity arises, we would submit, in relation to (b).

HAYNE J: Well, Mr Jackson, does that answer amount to the proposition that by the end of the (3)(a) period, or shortly before the end of the (3)(a) period, the liquidator must have decided whether he or she may wish to apply?

MR JACKSON: Well, your Honour, to say the words “may wish” or “may choose” – one could put it, I suppose, in the form most favourable to a liquidator by saying at that point or by that point the liquidator must have decided whether to pursue particular transactions further or not.

HAYNE J: I put it in terms of may wish to recognise the awful reality of liquidators having funds enough to pursue the proceeding. That was the point of that.

MR JACKSON: To wish to pursue, yes, your Honour, yes. Your Honours, those are our submissions.

FRENCH CJ: Thank you, Mr Jackson. Yes, Mr Walker.

MR WALKER: Your Honours, to pick up two matters that most recently fell from my friend in answer to Justice Kiefel the defence of the proposition that the transactions had to be identified and in answer to Justice Hayne that there needed to be a decision by the liquidator as to whether he or she would pursue particular transactions, the Chief Justice had earlier asked my learned friend questions concerning the exercise involved, that is, what has to be done in order to produce the particularity or identification that is the burden of those answers of my friend which are, we submit, right at the heart of their argument.

Now, before I come to deal with the more detailed response to problems of identification we start, as your Honours can see, by drawing to attention the nature of the power according to the statutory text which in its setting and not necessarily by needing to look at any of the history which is well known and requires little elaboration that this is a power special to liquidators for the definitional function of liquidators - they are, after all, called “liquidators” for obvious reasons explained by my learned friend who perhaps, gilding the lily, described them as essentially a simple task. It is simple to state the task. It is simple to understand the social policy in the train of limited liability trading entities that justifies having that simply stated task. It is notoriously not always so.

Now, one of the reasons for that comes from the very provisions to which my learned friend has referred – they put it in their written submissions “conjured up by the chapeau of subsection (3) of FF”. I refer, of course, to subsection (1) of FF, but you cannot stop there, because the chapeau of subsection (1) of FF drives you back to FE. It does not stop there, because the terms in FE which are, if you like, the pivotal terms about these very important, retrospectively operating alterations to property interests and commercial transactions, completed commercial transactions, they in turn require attention to the provisions from FA onwards.

Those are provisions – I do not need to labour the point – which with considerable detail, reflecting on their face the legislative policy over now generations in terms of dealing with detected shortcomings, to put it mildly, perfidy, to put it more accurately in many cases, in commercial transactions, where an advantage is later sought to be taken of limited liability - those are, in our submission, at the very heart of understanding why something is a transaction within the meaning of FF(1). A transaction is not within FF(1) because it answers the description that the ordinary English gives of the word “transaction”, far from it.

HAYNE J: Why not?

MR WALKER: Well, because it has to be within FE, your Honour.

HAYNE J: But all the Act is doing is dealing with certain antecedent transactions – closed, antecedent transactions – which it says are now going to be undone.

MR WALKER: And defined ones - - -

HAYNE J: Yes.

MR WALKER: They have to be of a kind which, because of FE, empowers the court to make the remedial orders referred to in FF(1). Now, because of FE is because they are particular kinds of transaction. All I am saying – I am perhaps labouring a point too much – is that they are not just any transactions. They are transactions falling within the descriptions set out in FE and themselves defined by the preceding sections, starting with FA. Now, my point is this - - -

HAYNE J: So, what follows?

MR WALKER: What follows is that when one is talking about a particular transaction or identifying a transaction it is very difficult to understand - once you accept that premise, it must be identified - why you would not need all those things that make – I will call it – a dealing or a piece of commercial history a transaction within the meaning of FE. That means you will have to have - the first part of the word “transaction” makes it pretty clear why – you will have to have parties. Now, be it accepted as my friend puts it that maybe there be some doubt that will require – this case provides a good example – the possibility of keeping open an alternative, the payment was either by A, or by A on behalf of B, for example.

Leave aside matters which are familiar and straightforward of that kind, you would need in order to posit a transaction, certainly parties. You would certainly need to be able to talk about the payment or the dealing in property for money or rights which would fit within one or other, maybe more – they might not be mutually exclusive – of the categories which are defined by the provisions involved in FE.

Of course, one then sees that the search for a particular transaction or an identified transaction as a necessary object and component of an order under subsection (3), paragraph (b) of FF produces the perverse outcome that you would need to know everything that you need to know in order to commence under FF, and all within - - -

HAYNE J: All that is missing is Donald Rumsfeld, Mr Walker. Yes, go on.

MR WALKER: I had taken a private vow not to say anything like that.

FRENCH CJ: Well, I was thinking of that, looking at the last line of paragraph 3 of your submission, and they will always be by definition unknown unknowns.

MR WALKER: Unknown unknowns cannot possibly, except in cases where there is reason to believe something exists - so I do not want to get into that taxonomy because it is too rhetorically neat for the very various and complicated reasons by which a court exercising judicial discretion sees that there is, for the purposes of these provisions in aid of orderly liquidation, reason why the three years or the 12 months ought not to supply the time beyond which there cannot be a reaching back to open up transactions of those kinds.

HAYNE J: But is the argument you have just advanced any more sophisticated than this? Some liquidations are very difficult. It may not be possible to identify the antecedent transactions which the liquidator wants to undo within the (3)(a) period.

MR WALKER: No.

HAYNE J: It is as simple as that.

MR WALKER: Yes, and the better for being so, in our submission.

HAYNE J: Why then does the Act prescribe the (3)(a) period and why does it cast the extension in the terms in which it does?

MR WALKER: The first thing, of course, is that the (3)(a) period was promulgated at the same time as the (3)(b) period. We do not need to worry about the addition of the 12 months. That was to recognise in the light of experience that there was more than acceptable arbitrariness according to a political judgment in the three years. But the (a) and (b) came together, and the short answer to Justice Hayne’s question is that the ordinary course, in the absence of needing to persuade a court by reference to the particular winding-up, will be (a).

But circumstances concerning a particular winding-up, precisely because some are difficult and not all are - many are absolutely routine - and that is the answer as to why (a) is provided, because there we know politically the mischief discerned was that what was understood to be the usual permitted period – mostly six years – was having an effect of extending windings-up in a way which led to – I will call it commercial complaint.

Now, these are political matters that do not lend themselves to precise delineation, to precise detection of how they inform the making of the legislation. It is only in the most general sense the background against which it was enacted. But we know that if there is a mischief to be detected, it was the length of time by which these clawbacks could be commenced in courts, no doubt as well as the length of time that then ensued after such proceedings were commenced, would defer to a time which was thought to be unacceptable when the last ribbon could be tied around the last file.

FRENCH CJ: Would it be right that on your construction a prudent liquidator in a complex liquidation would more likely than not be seeking a shelf order to cover the possibility of, for example, undetected transactions?

MR WALKER: No, but nearly so. Let me explain. Certainly, a literate liquidator reading the statute must turn his or her mind as the time approaches to whether or not there needs to be a consideration of an application for a paragraph (b) order. There is no doubt about that. That would be bad not to consider that possibility.

It does not follow that, what I will call complicated liquidations however, particularly for an experienced liquidator, will necessarily hold out at that time any serious prospect or worthwhile prospect - and one bears in mind funding which is not an extraneous matter but right at the heart of things. It is good money after bad is often the proper way to analyse this. It will often happen that you will know that you do not know everything.

Indeed, one hopes that like most people, liquidators would have an understanding that they probably do not know everything or some of the information they have may be wrong and some of it may have been intentionally wrong but that you have had enough examinations, you are not satisfied that it will be worth further expenditure then it will be completely prudent then for a liquidator to decide I am not going to go any further. I am not going to make an application which is speculative in a number of senses if that word can be used in this context, speculative in the sense of the doubt about whether there is anything solid to be found and speculative in terms of the disproportion between expenditure and return.

It is for those reasons, in our submission, that the enactment of FF(3) in its original form, unaltered in this regard by the change that has occurred since needs to be seen as the enactment simultaneously of the ordinary rule and something that would apply if cause could be shown in a particular liquidation. In our submission - - -

KIEFEL J: When you say cause could be shown in a particular liquidation, that raises the question, does it not, of the extent to which information must be provided to the Court to satisfy the 3(b) - - -

MR WALKER: Unquestionably.

KIEFEL J: So, is it your submission that an application for a shelf order does not need to identify the transaction that is being considered pursued. Put the question of the parties to one side but the transaction itself, is it sufficient for – on such an application for a liquidator to come to the court on your submission and say I am still at large going through the material. I have not even identified a transaction yet but I would like some more time in my liquidation to do so because that seems to me, if that is the case, you are extending the liquidation. You are not really addressing the 3(b) question.

MR WALKER: There is no question that the practical effect of an order under paragraph (b) of subsection (3) of FF, there is no question that that could have the effect of extending the period of liquidation.

KIEFEL J: But it is more particular than that, is it not? If you are saying that – it is one thing to say that that is its effect, but if it is sufficient for a (3)(b) order that a liquidator does not have to identify a transaction that is being pursued but in respect of which no decision is possible as to whether or not it warrants litigation that is quite different from the position which is the area I think we are in, where the liquidator is saying I have not actually identified a transaction - - -

MR WALKER: Yes, it is, yes, I accept they are different.

KIEFEL J: - - - but I am just going through all of the dealings of the company trying to see if there are any there.

MR WALKER: Yes, they are different cases. Can I address the question this way? If there is a transaction in mind which is bereft of some essential information as to permit within time responsible commencement of proceedings, then it will of course behove the liquidator to prove what is appropriate about that in the application for an extension under paragraph (3)(b), no doubt. Indeed, history shows in the reported cases that subsequent applications to set aside have from time to time succeeded precisely because there has been a failure by a liquidator to have brought forward just such information.

However, that is not the only case that paragraph (3)(b), according to the literal breadth of its words, which is very considerable, is designed to meet. As a case it certainly shows that the evident purpose of the provision is to recognise that in particular circumstances it may be justified to go beyond the general limit. That again seems obvious. It also recognises – that case recognises – that the particular circumstances may include, probably, after the application of due diligence – that seems on the reported cases nearly always to be an important, perhaps not always utterly essential element - after due diligence that there is still something missing in terms of knowledge, sometimes funding, mostly knowledge, of something needed before you could responsibly sue.

Now, once that is admitted, that there is a ground, indeed, an obvious purpose in having the provision then making an order under it by reason of a liquidator lacking information, then the only question is, is there for some reason a limit reached on power as the absence of information increases to a certain point. Does there come a point when you are so lacking information that there cannot be an extension? That is why pace my earlier resolution, one can have, perhaps, unhelpful debates about completely unknown unknowns, which are theoretical and we are not interested in.

KIEFEL J: But, if, as you appear to suggest, one reads (3)(b) as providing a general power to give the liquidator more time generally, how does one square that with (3)(a) – in this respect, on what basis do you say the court would proceed to exercise its power under (3)(b) given the restrictions in (3)(a)?

MR WALKER: Could I, as we note we intend to do in proposition 1 of our outline, take your Honours to pages 234 and following of the appeal book, simply to note, adopt and urge, with respect, the way in which Justice Barrett approached these questions of both purpose and application and, in particular, by adopting the explanation of matters given by Justice Austin in Brown. The point made by Justice Barrett in his paragraph 125 firmly seats this as I think it is common ground as being a special provision for the special purposes of the insolvent winding up.

Paragraph 126 advances that by referring to the evident purpose accomplished by the combination of FE with its earlier defining provisions and FF of getting in that which in retrospect should not have been allowed out. Paragraph 127 and 128 strikingly make the point that this is all special to that idea of getting in what should not have been in retrospect allowed out. Paragraph 129 concludes accordingly that it is about, as his Honour puts it:

principally concerned with the conduct of liquidators.

The general rule – the three years; the 12 months – supplies what his Honour calls as the “sense of due dispatch”, and what follows obviously is required of liquidators:

if there is good reason to think that further time is needed, they must –

et cetera. So that is not flexible. If you are going to make that application, you have to make it within that time. The way in which his Honour then concludes that as a description of the evident intent of this part of the legislation at the end of his paragraph 129 on page 236 is one which we respectfully adopt. Paragraph 130 shows that what are sometimes called competing interests are being accommodated on the face of the statute by the general rule and the possibility of particular extension. That is, that which is the bad side of arbitrariness – inflexibility – is avoided; that which is the good side of arbitrariness – clarity in the absence of an application to extend – is provided.

When we are talking about competing interests, there is no competition, as it were, standing against the proposition that the winding up ought to be orderly and we are of course in particular talking about that manner of orderliness provided by a judicial discretion being invited to be exercised to expand a time limit otherwise generally imposed.

In paragraph 131, the judicial history before Parliament looked again in 2007 – as it happens that is just looked again at the provision – is noted, and in answer to Justice Gageler’s question to my learned friend concerning that matter we submit, contrary to our learned friends, that when one looks as it happens conveniently in the passage extracted from Brown in Justice Barrett’s paragraph 132 on page 237 about line 35 down to about line 45 or so, that is language peculiarly apt to be the kind of judicial comment about how to interpret a provision purposively and for the furtherance of statutory objects that gives, in our submission, real weight, much more than a straw in the wind, to the fact that Brown – as well as the other cases – Brown precedes the legislature looking again at this provision and for the purpose of evaluating the appropriateness of time limits in 2007.

All we can say, with all the usual caveats, is that notwithstanding that being the - if I may call it that, with respect - the orthodox view from specialist judge about the matter of interpretation, there was attention paid to ameliorating the time limit question by the 12 month addition but nothing to dispel the reading of the statute that the courts had given it for shelf orders in appropriate cases. At the foot of Justice Barrett’s paragraph 133 on page 238 about line 25 or so, there is a reference to a case we have given your Honours a reference to it. I will not take you to it, but we would respectfully submit - it is a decision of Justice Barrett, as it happens, the HIH Case [2004] NSWSC 165; 205 ALR 643.

Of course, it is probably notorious how large and complex that was as a winding-up or winding-down but that is, when one considers, in particular, the nature of the committee whose extrinsic material was gone to by my learned friend, that is precisely the kind of matter which the legislators obviously had in mind when they considered the question of trying to shorten the times of windings-up. So an expectation perhaps of six years being brought back to three years and, at the same time, recognising that there may be particular cases, and I stress particular cases, that is, particular liquidations, which would justify a different approach.

HAYNE J: Well, the three-year idea had been on the table at least since the Harmer Report.

MR WALKER: Quite so.

HAYNE J: A general insolvency inquiry at paragraph 688 records that:

The Commission proposed . . . that a liquidator should have three years to commence such an action –

of this kind. The exposure draft legislation had provided in clause AT, that is antecedent transaction 8:

an application under identified sections shall not be made by the liquidator after the expiration of three years from the relevant day unless the Court by order so allows.

MR WALKER: Exactly. From the very beginning it had been, as I say, the political project of trying to shorten things by bringing closer the commencement of actions which can, notoriously, of course, be themselves lengthy litigation and always hand in hand with the recognition that particular cases may justify something longer, always.

HAYNE J: What stands in contrast between the exposure draft and what we are faced with is that the law as it now stands is that the application shall be made within the three years, not simply at large.

MR WALKER: I am not sure, with respect, that the pre-history of this legislation contemplated that many years after the event an application to extend could, as it were, nunc pro tunc be made.

HAYNE J: That may be a fruitless debate, I suspect.

MR WALKER: That is one of the reasons why it is difficult often to trace what I will call the advisory and political statements through into the enacted text, given particularly we do not always get access to what I might call all the drafting instructions. So what we know is we have from the beginning in enacted texts, if you like, a double aspect of expedition or due dispatch, you either do it within the time or you tell the Court you cannot do it within the time – within that time and that, obviously, is a spur to dispatch.

HAYNE J: The competition in constructions is a competition between saying generally, it is hard, and saying, I want to pursue X.

MR WALKER: That is right, exactly. And we say of the I want to pursue X problem is that there is nothing in the enacted texts, nothing in any reported case and nothing, with respect, in a pragmatic common sense approach which enables one to know when you say identify or particular case, what is necessary, what are the specifics that are necessary in order to qualify? It cannot be everything necessary in order to sue. That would be absurd because, in effect, the best opposition to extensions is by people who say, you do not need an extension, you can sue now and I should not have to wait for any longer time, you have got everything you need. So we can put that to one side.

HAYNE J: Well, in the context of unpicking antecedent transactions which otherwise are closed why should one not require particularity of that kind - - -

MR WALKER: Because when one looks at the - - -

HAYNE J: - - - for the purpose of disturbing that which is closed?

MR WALKER: I understand. With respect, that is the policy of the law question at the heart of the interpretive dispute, given that the text will support either interpretation. Now, forgive me for this repetition, but in answer to Justice Hayne’s question, can I briefly note the nature of the kind of transactions we are talking about? They are named in FE, which is called up by FF(1), and they are then defined in FA and onwards, and they are all of them - for reasons that are evident from those enacted texts - they are all of them transactions of a kind which, for obvious reason, there has been a legislative judgment, should not have the security, stability or certainty which, minus their defining characteristics, such transactions would otherwise have.

KIEFEL J: Is your argument for a more general power in relation to (3)(b) strengthened by, if it were accepted, that the application under (3)(b) had to be brought within the (3)(a) period? That is to say, that the certainty and the time limitation expressed or desired by (3)(a) - - -

MR WALKER: It is only deferred to whatever date is supplied by the (3)(b) order.

KIEFEL J: Yes, but I am - - -

MR WALKER: It will then occur.

KIEFEL J: The problems in a liquidation going on for too long and for closed transactions not being opened, is exacerbated if the (3)(b) application did not have to be brought within the (3)(a).

MR WALKER: Absolutely, absolutely.

KIEFEL J: That is why I am saying - - -

MR WALKER: Yes, is the answer.

KIEFEL J: - - - your argument is reinforced by that.

MR WALKER: We say the scheme demonstrates - - -

KIEFEL J: That that is to be the critical determining factor, the limitation period.

MR WALKER: Yes, and that if the liquidator needs more time, he or she should be given it, if sufficient cause is shown - - -

KIEFEL J: But the key step required then - - -

MR WALKER: - - -and that application must be made - - -

KIEFEL J: Within the (3)(a) period.

MR WALKER: - - -within that (3)(a) time; must be made.

KIEFEL J: Yes.

MR WALKER: And upon a (b) order being made, everyone will then know, including people anxious for what some may think are ill-gotten gains, they will know, unless I am sued by next February I am home.

KIEFEL J: And because it is limited to that point in time the court can then assess whether or not this would go on for too long, that there is no prospect of a transaction being identified.

MR WALKER: Exactly, exactly, and I imagine - - -

KIEFEL J: Which suggests that part of this – the problem that we are confronting at the moment may have to be addressed by a judge perhaps doing more in relation to an application under (3)(b) than some shelf orders may have warranted in the past.

MR WALKER: I cannot say I have read all of them but I have read all ones that are reported.

KIEFEL J: No, but they seem to be very short judgments often.

MR WALKER: Your Honour anticipates me, and I am not able to say from what I have read that there has been as full exploration as the nature of the judicial discretion that I am referring to and relying upon might suggest is appropriate. But, to be fair, many of these applications will have been decided by a mode of procedure which will include dialogue between Bench and Bar which may be in a transcript but does not get caught up in ex tempore reasons. So, I do not want to suggest that there are obviously deficient exercises of discretion on the record. That would not be fair.

HAYNE J: Who can then complain about the deficiency?

MR WALKER: I am jumping ahead, but if I may do so – it is out of the order now of the outline. There is no doubt, it seems to be common ground, that anyone can complain about any deficiency or, indeed, just simply resist on the merits, who either should have been given an opportunity to contradict or, not being then known of later is shown to be a person affected by the order. This case is the latter one.

HAYNE J: And the differential outcome result where time is not extended for you but remains generally available?

MR WALKER: The distributive effect comes with the nature of this judicial discretion. May I demonstrate it this way? If, at the time of an application, there has already been a number of FF(1) proceedings commenced but the juggernaut moves on in a complicated liquidation, and there is still more to be discovered about things, it is known there is more to be discovered, and the liquidator points to, indeed, relies upon, what has been done as a demonstration of his or her alacrity, industry and general organisation for the good of the body of creditors. So, you actually point to the fact – I have been able to lodge 17 FF(1) proceedings, file them, but the resources and the scope and the obstacles placed in the way by previous offices et cetera, are such that I really need more time and, indeed, the ones that I do know about and have been able to commence are precisely the ones et cetera.

Your Honours, if there is a slight variant added, namely if he said, “And I’ve got five more ready to go, ready to be filed”, it would be absurd to suggest that it would be beyond power, not within the text which gives such a broad discretion for the judge to say, “Well, I’m going to extend, but not for those five. I don’t want you hanging around with those five. You can commence those five within time and the sooner you commence them the better because I want this liquidation to be wound up precisely because it is big and complicated. We should be making initiative to finish it as soon as possible. So those five are excluded from the order I’m about to pronounce”, and then an order is pronounced as, for example, Justice Barrett pronounced it in HIH, extending the time for FF(1) proceedings to be brought with respect to alleged transactions caught by FE.

Another distributive effect which is to recognise the categories explicit on the face of the statute might be, in light of the evidence, in light of the argument concerning the nature and stage of the particular winding-up, it might be to focus – restrict the extension only to certain kinds of FE transactions. It may only be, for example, directors’ loans are the only thing left to be looked at, and that would obviously be appropriate because the discretion to make the order would never be construed by this Court as somehow forcing a court to decide between an excessive order or no order at all when a restricted order would be one that hits the spot.

So, distributive effect, cut in different ways, is obviously within the nature of the power invoked by an application by a liquidator who was able to point to where he or she does need more time and where he or she does not need more time. Applications obviously for so-called shelf orders should as a matter of best practice always include, as it were, the question does it need to be so comprehensive? In other words, it should only be as wide as the material suggests. But we are talking about power. We are not talking about best practice in particular cases.

It is for the reasons that Justice Barrett summarises in his paragraph 134 on page 238 following the reference to HIH that, in our submission, the appeal should be dismissed because each of the cases that his Honour there posits – and ours of course is the last one – or all “applications not capable of precise identification and formulation” that applies to this case.

Now, it may well be appropriate to say that something which is in theory the broadest possible formulation should not be the first resort by those proposing orders or deciding to make them. But the question of power, in our submission, is a different one and for all the reasons that his Honour has put and Justice Austin has identified, the very case which explains the purpose of having the extension of time hand in hand with the general limit is the one that justifies a shelf order, because the very case is one where, with the best will in the world but impeded by the usual circumstances that do impede obtaining information in a winding-up, it is seen that the general body of creditors could very well stand to be greatly benefited by property of a particular kind being got in from persons whose involvement has not yet been the subject of sufficient information to the liquidator to permit litigation to be brought.

The very case which a winding-up is designed to permit a liquidator to pursue is the one that justifies the shelf order nature because otherwise there would be for perverse reasons, not certainty given, as our learned friend’s argument, as if we are talking about people in the general.....of commerce needing to go about their business with their property and business transactions undisturbed, we are talking about people who may fall within one of the categories referred to in FE, totally different and special.

FRENCH CJ: We are talking about them and we are talking about people who may not fall into those categories but whose transactions may be under a shadow. There is a larger group of transactions.

MR WALKER: Yes, yes.

FRENCH CJ: Are we at risk – just looking at 138 - are we at risk of sliding into the territory of judicially constructed desirable policies which are then, as it were, transmuted into a legislative policy which informs construction?

MR WALKER: Your Honour said 138 Justice Gleeson’s reasons?

FRENCH CJ: Yes.

MR WALKER: Yes.

FRENCH CJ: But generally in the territory you have been talking about.

MR WALKER: As to his Honour’s second sentence in that paragraph, referring to an inappropriate mindset, with respect, bearing in mind the reference to “paramount”, that seems unexceptionable. I suppose, the rest of my answer to the Chief Justice is that well, of course, we are construing an enacted text. Of course, there is purpose. You do not have to search far for purpose here. The fact that there are what some people call opposite or conflicting interests is obvious. Every time limit provision creates its own contest between people, winners and losers. No, our argument does not court the danger that the Chief Justice asked me about because we are simply looking at very general words of discretion in paragraph (b) of subsection (3). We are looking at the nature of the cases that FF(1) posits through the hinge of FE and then back with FA and following.

We can see that they are the kinds of things which in ordinary circumstances will often have obscurity where facts can reasonably be thought to be possibly capable of being obtained within another period. For all of those reasons, it is precisely the case where you would not be able, in any meaningful sense, to identify or particularise that there should be the power which has been, perhaps unfortunately, nicknamed the “shelf order”. But, obviously, it is a power to be exercised judicially and, hence, the “who knows what might be there” approach by a liquidator might be expected to always lose, as it should. There has to be a reason given and it will not be a reason to say, well, nobody ever knows everything about anything, which is absurd.

Your Honours, in proposition 3, as my learned friend has anticipated, we have drawn to attention that subsection (3) is not built around transactions. It is rather a general rule that applies to all proceedings about any such transaction. It applies across the board. So each and every one of them must answer the description of being brought within the time limit which is not a time limit transaction by transaction under subsection (3)(a). It is a time limit by reference to the winding-up and ultimately its commencement.

It is to be remembered in relation to time limits that there is another family of time limits involved here that you will see in each of the provisions gone through in the list in FE. There are different, if you like, relations back for each of those particular kinds of transactions. They are inflexible and they show the considerable retrospectivity of the exercise.

They rather tend to counter the notion that this Court should, as it were, have a tenderness for the argument the appellant has advanced to the effect that there has been a failure in the court below to give proper weight to the need for commercial certainty, et cetera, et cetera, because the provisions in question reach back for a varying number of years and in some cases for a lot of years. They are overtly retrospective in effect by reason of the special, if you like nefarious or unfair character of the situation if they were not disturbed. They recognise the setting in which pari passu ought to be the principle for the limited liability insolvency distribution and they recognise from the very beginning that the general rule ought to be susceptible to extension if cause be shown to a judge in a particular case.

When one looks at the statute in that light which, in our submission, is the only available way to read it schematically and the way in which appeals to Justice Austin and Justice Barrett in particular, for reasons which we submit are substantively attractive, then there is really no room for some resurgent concern for the lack of certainty suffered by people in the appellants’ position. That, as it were, comes with the territory of arguably being within an FE category.

My learned friend said - I am now up to our proposition 4 - I think I remember the phrase correctly, that there was a range of possibilities available in answer to the Chief Justice’s question, what is the degree of specificity, or how does one know whether you have by a description, supplied what the appellants’ argument says is necessary in order to ground power. Now, I stress, to ground power, not in order to make an attractive occasion for the exercise of the discretion, not in order to ensure that the order is not more comprehensively expressed than it needs to be, but a question of power.

Now, it does not come from the text at all, because the only source our friends adduce for a textual source is subsection (1), being referred to in subsection (3) but subsection (1), not least because it goes back to FE and the defining sections before that, shows that in order to identify a particular transaction you have to have everything.

The point about the description of the transaction as listed in FE is that we are not talking about a transaction as a simple dictionary might - namely, a sale or a loan – we are talking about a sale or a loan with particular characteristics, defining characteristics, which are of the kind that make them appropriate for this retrospective undoing. That is why, in our submission, the search for enough specificity but not too much on the appellant’s part must fail.

Now, when I say by not too much, because their argument seems to recognise that you do not have to show that you have a case ready to go in order to get an order which is surely premised on the fact that it is not ready to go and that you do not know whether you have got a case ready to go and that the court ought to give you more time before you go, but recognising that proving too much, they have set up the occasion for seeing from the enacted text where the limit is to be found. They propose it is to be found in specificity of something particular or identified, but they cannot, when pushed, describe it in terms which is anything less – is anything less – than the kind of description entirely adequate for the commencement of proceedings. After all, you can commence proceedings in the alternative.

As to proposition 5, all I need to add is my learned friend used the supposed model of a simple winding-up as what he called the starting point in order to understand the interpretation of these provisions. I repeat that it is clear from the travaux preparatoires to which reference has been made – it is clear, in fact, on the face of these provisions, particularly the evident complexity explicitly contemplated by the categories of transactions referred to in FE – it is evident that it was recognised from the very beginning that there may be cases where by reason of lack of knowledge there needed to be more time for the discovery of matters.

HAYNE J: I suppose we have to at least acknowledge that the word “transaction” unsurprisingly is defined for the purpose of paragraph (7)(b). I wait for the day when the definite article is defined as including the indefinite article except where the contrary is provided, but it is coming. The transactions are readily identifiable, are they not?

MR WALKER: The transactions? They must be for an FF(1) proceeding to be brought.

HAYNE J: Yes, and - - -

MR WALKER: They are catalogued in FE, the defining sections.

HAYNE J: Why will the liquidator not know whether he or she wishes to attack this conveyance, this loan, et cetera?

MR WALKER: No, no - your Honour, that is rather like – yes, of those about which enough is known, the answer to that rhetorical question is obvious. You know enough, get on with it. No further time. On the authorities, knowing whether you can pay your lawyers is one of the things, the absence of which may justify an extension of time.

The question in this case is whether where it is known there is a whole lot of material that may have come in only by dint of dogged examinations and searches for reconstructing of inadequate documentation, where inter-jurisdictional inquiries have to be made – perhaps overseas – and where resources have been well directed but have been not able to cover the whole field of material, in the nature of things there will be parts of the company’s business involving the real and substantial possibility of transactions falling within FE about which the liquidator cannot yet tell the court.

One of the ways to frame the question for this Court in this case is has Parliament, by the general words of subsection (3)(b), proceeded on the basis, well, that is too bad. If despite best efforts and, indeed, if in light of obstacles raised by the very kind of people who may be counterparties to FE transactions, if not enough is known for you to be able to say what is the

transaction and to specify and identify the particular transaction falling within FE, then there will be no FF(1) proceeding ever available.

In our submission, for all the reasons that Justice Austin pointed out in Brown, that would be a very odd contradictory reading of that provision which was in from the beginning for the time limits, and there is nothing in the extrinsic materials to support such a reading. There has certainly been nothing suggested in judicial musings on purpose other than the one Queensland decision to which reference has been made and of which explanation has been attempted in New South Wales and South Australia. Even that case, obviously, is a case which recognises the possibility of circumstances in a liquidation being such as to justify an extension because not enough is known, because not enough is known.

Really, what the appellants are presenting is an argument that says there is some reason, it is tagged certainty, why, even where the liquidator has tried his or her best, and even if the failure to be able to commence is because of the counterparties – the putative counterparties’ failure to operate – even so there cannot possibly be an extension because the transaction cannot be identified, and apparently identified does not mean enough told about it in order to show that you can sue but no explanation is attempted as to how much less than that may be suffered before you will not have sufficiently identified in order to bring within power. That is not the mark, in our submission, of a power provision. That is the mark of a discretionary factor.

As to propositions 7 and 8, we have said now all we want to add in that regard. Proposition 9 may be boxing at shadows, bearing in mind the way the submissions have fallen out. It is certainly, in answer to Justice Hayne’s earlier question to me, a reason why affected parties can be heard to distributively lift the effect of such an order from them. Proposition 10, I fear, is by now excessive repetition on our part. May it please the Court.

FRENCH CJ: Thank you, Mr Walker. Yes, Mr Jackson.

MR JACKSON: Your Honours, may I answer first the question that your Honour Justice Hayne asked - give a reference to the six-year period prior to - your Honours will see that referred to in our submissions in-chief, paragraph 34, but also it is referred to by Chief Justice Bathurst in the Court of Appeal in paragraphs 20 to 22 of his reasons at pages 207 to 209 of the appeal book. It was apparently by analogy with the time provision in the Bankruptcy Act.

Your Honours, could I come then to our learned friend’s argument that the provisions picked up by 588FE are complicated provisions. Your Honours, the liquidators are professionally skilled people. It is their business to know what are the types of transactions to which FE and FF(1) apply. It is often the way in which the company will obtain any substantial sum of money to pay to creditors. Liquidators know that time is running in relation to FF(1) applications.

Your Honours, that is really what the position is in relation to matters - liquidators know that the time runs under subsection (3)(b)(i). Your Honours, could I just say this – our learned friend referred a lot to what was said by Justice Barrett at page 235 in paragraph 126 or 125 and following, I think. Could I just go to paragraph 127 at page 235. Now, your Honours will see – and I have to say his Honour elaborates upon it in the next paragraph, 128 – that he uses the phraseology in 127 that:

The voidable transaction provisions do not create any right of action in the company. Nor do they allow the liquidator to recover.

Then, your Honours, will see the different version of the matter that his Honour there puts in the remainder of that paragraph. The position, of course is, that, with respect, has a certain blandness about it, blandness in the sense that what one has is that you see in the provisions picked up by 588FE various transactions in relation to which there may or may not have been any disentitling conduct apart from the fact that they happened at the particular time by the person against whom the relief is sought. What one is seeking is that the liquidator is given rom the fact that they happened at the particular time by the person against whom the relief is sought.

What one is seeking is that the liquidator is given a right – a right by way of a right to start an action for the relief that is referred to in those provisions in order to obtain money for the creditors. Your Honours, to describe it as simply seeking the assistance of the court is accurate enough but what one has to recognise is that is seek the assistance of the court by obtaining money by litigation. That is why there is a kind of analogy with limitation provisions.

Could we just go back to the question your Honour Justice Gageler asked should one do about the fact that there was legislation after Brown’s Case. Let us say two things about it, your Honours. The legislation, of course, changed. The issue that was thought to give rise to the need for there to be a longer period for liquidators was – that need was legislatively assuaged by the introduction of the extra year for liquidators and, your Honours, one does have to read the provisions in the light of that change.

What the change meant was that the requirement to institute proceedings during the period in (3)(a) was emphasised, we would submit, by the newer provision and, of course, even if one takes the view that one can rely on – one can treat the later legislation as accepting earlier decisions, there is always subject to the qualification that is not to perpetuate error and one can see that in the various decisions on that issue.

KEANE J: But, Mr Jackson, where you have a provision that is, everyone accepts, avowedly a pragmatic balancing of competing interests and where there is a decision that is followed by amendment of the very provision in question in a way which does not manifest dissatisfaction with the earlier decision, why is not the practical and pragmatic approach, if you like, to recognise that the legislature is satisfied?

MR JACKSON: Well, your Honour, could I just say this, that assuming the legislature read the decision, what one sees in fact is that the legislature was adopting an approach to the problem that is said to give rise to the need for a broad interpretation of paragraph (b) by saying we will give the liquidators a year, in any event, so that it can go up to a maximum of four years and, your Honours, the fact of doing that means that that provision has to be read with (b) – (a) has to be read with (b), of course, and it gives a new approach to (b).

When I say new, I mean different from that which has gone before. I am not suggesting novelty in it, but the better approach, in our submission, is to say look, when the issue came before the legislature they added another year to (a) and that makes it less likely that there is to be an entirely free power under (b) to extend all the time in (a).

Your Honour Justice Kiefel, I think, referred to is there a particular relevance of the fact that the application under (3)(b) must be brought within the (3)(a) period. Your Honour, the question is, of course, what is to be made. What it made in terms of the application under (3)(b) is for an extension of the time within which an application of the nature referred to in (1) is to be made.

Your Honours, in our submission, it does not affect it in any sense adverse to our argument by the fact that the application has to be made within the (3)(a) period. Indeed, the fact that it has to be made within the (3)(a) period, we would submit, rather supports the propositions we are advancing, namely that one is talking about something which is at that point something relatively specific.

Your Honours, our learned friends - an issue in that regard also arises in this respect. If one is speaking about an order that simply extends the time that is provided for by (3)(a) in any case, then of course you do have the period – I am sorry, you have the matter referred to, your Honours, in

our submissions in reply at paragraph 11. One does have the difficulty in saying what is the certainty that exists in relation to that period.

Your Honours, could I say one thing about our learned friends – or one thing about the reference I think your Honour the Chief Justice made to page 239, and paragraph 138 in Justice Gleeson’s reasons. Your Honours, we have not submitted that certainly is a paramount consideration. That is not the submission we make. It is a consideration.

Your Honours, if I could go for a moment to our learned friend’s outline of propositions to the Court and in particular to proposition 5. Your Honours will see the proposition is in the last part of it:

that that period will not invariably be adequate for commending all s 588FF(1) proceedings.

Well, your Honours, that supports, in our submission, the contention that at that point one should be able to identify what remains. Finally, your Honours, we rely upon our submissions in reply, our written submissions in reply. Your Honours, those are our submissions.

FRENCH CJ: Yes, thank you, Mr Jackson. The Court will reserve its decision. The Court adjourns to 9.30 tomorrow morning in Sydney and 9.30 tomorrow morning in Melbourne.

AT 11.52 AM THE MATTER WAS ADJOURNED