Pullen v P2P Transport Ltd[2024] QSC 78

SUPREME COURT OF QUEENSLAND

Overview

1. [1]
   This is an application by the Liquidator of Unicross Nominees Pty Ltd (“Unicross”) to extend the three-year time limitation in which to commence proceedings against P2P Transport Limited for voidable transactions under s 588FF(3)(b) of the Corporations Act 2001 (Cth).
2. [2]
   The extension is required to allow the applicant further time to obtain litigation funding and to potentially conduct public examinations of the relevant officers of Unicross to assess whether a lawful basis for the alleged impugned payments may exist.
3. [3]
   The respondent opposes the application on the following four grounds:

   1. First: The failure to commence proceedings within time is due to inadequate steps being taken by the applicant;
   2. Secondly: There has been no recent or new discovery in the liquidation;
   3. Thirdly: The applicant has not satisfactorily explained how he will fund the proceedings; and
   4. Fourthly: There is no utility in bringing the proceedings as the respondent has insufficient assets to meet any judgment.

4. [4]
   The onus rests with the applicant to demonstrate why the time limitation should not apply.^[1]  For the reasons that follow, I am satisfied that the onus has been satisfied.   

Relevant legal principles

5. [5]
   Section 588FF(1) of the Corporations Act empowers the Court to make various orders in respect of voidable transactions on the application of a company’s liquidator. For example, orders can be made for money to be repaid to the company, the transfer of property back to the company, and disgorgement of benefits received under any voidable transaction.  An application under this section may only be made during the period beginning on the “relation-back day” and ending three years after the “relation back day” at the latest.^[2]  Under s 588FF(3)(b) of the Corporations Act, the Court may extend this time on an application made by the liquidator within three years from the “relation back date”.

6. [6]
   The “relation back date” in this case is 3 December 2020.^[3]  The current application for an extension was filed on 1 December 2023 and was therefore made in time. 
7. [7]
   Section 588FF(3)(b) of the Corporations Act does not prescribe any criteria for the exercise of the judicial discretion to extend time.  Each case turns on its facts, but the discretion must be exercised bearing in mind that the public policy considerations underpinning the legislative provisions include providing certainty to parties involved in potential voidable transactions with the company.^[4]  A presumption of prejudice arises from the delay inherent in the granting of an application under to s 588FF.^[5] The presumption is a rebuttable one. Whether the applicant has successfully rebutted the presumption depends on the circumstances.^[6]
8. [8]
   Apart from the issue of prejudice, some of the non-exhaustive relevant considerations may include:^[7]

   1. the explanation for the delay in bringing the anticipated proceedings; and
   2. a preliminary review of the merits of the anticipated proceedings. Although where in a case like the present, the liquidators’ purpose in seeking the extension of time is to put himself in a position where he can properly decide whether or not to bring proceedings such an inquiry may not always be necessary.

9. [9]
   Overall, the answer to whether an extension should be granted is found by balancing the relevant facts of the case to determine what is just and fair in all of the circumstances.^[8] 

Facts

10. [10]
    Unicross was incorporated on 17 June 1994.  Between 13 December 2017 and 31 July 2019, its sole director was Thomas Joseph Varga. At the time of its liquidation on 3 December 2020, Gregory David Webb was its sole director. 
11. [11]
    The respondent was incorporated on 3 March 2017 and became publicly listed on 13 December 2017. On 30 October 2017, Unicross became a wholly owned subsidiary of the respondent with the companies being part of the P2P Group operating in the taxi industry as Black and White Cabs.  Unicross did not trade but incurred significant expenses as the employing entity for the P2P Group.  Its only significant asset was its fleet of taxis. Mr Webb was appointed a director of the respondent on 3 August 2018 and remains so.  In February 2019, Mr Webb engaged Michale Fingland, a representative of the Vantage Performance Group, to provide business assistance to the respondent.
12. [12]
    On 1 October 2019, trading in the respondent’s shares was suspended on the Australian Securities Exchange; and on 1 April 2020, the respondent voluntarily suspended trading. Then, on 3 December 2020 the following three events occurred:

1. First: The applicant was appointed Liquidator of Unicross by special resolution of its members;

2. Secondly: Tracy Knight and Damien Lau of Bentleys Chartered Accountants were appointed administrators of the respondent; and
3. Thirdly: The applicant agreed to sell Unicross’s taxi fleet to Black & White Taxi Management Pty Ltd.

13. [13]
    The proceeds of the sale of the taxi fleet were used by the applicant to pay priority employee entitlements, with the balance being paid to the secured creditor. Subsequently, the respondent entered into a deed of company arrangement which was completed by 9 July 2021.

14. [14]
    Mr Webb made an initial (voluntary) contribution of $20,000 towards the administration of the liquidation of Unicross.  The only significant recovery after the applicant’s appointment has been the sum of $172,900 for JobKeeper payments but the secured creditor has made a claim to those funds under its security interest.^[9]
15. [15]
    It follows that the investigations into the financial affairs of Unicross have proceeded largely without funding.
16. [16]
    The necessary investigations were described variously by the applicant as “complex” for a variety of reasons, including most relevantly the following three matters:

    1. First: As part of the investigations, it is necessary for the applicant to consider the position of the P2P Group more generally;
    2. Secondly: The management accounts of the group were prepared on a geographical basis and not on a legal entity basis leading to inconsistency in the financial reporting within the group; and
    3. Thirdly: Despite requests, the applicant still has not been able to obtain copies of all of the relevant books and records of Unicross.
17. [17]
    I accept this unchallenged evidence – both as a matter of common sense (given the nature of the liquidation) and because it is supported by other evidence including the following response from Mr Webb to the applicant in early February 2022 after being served with a 530B Notice:^[10]

“…what you require is a substantial amount of work from records of the Companies involved, I was the sole director and do not have the skills to produce this information. The P2P Group has no staff. I can outsource the work to experienced people in the BWC Group but that will come at a cost …and who pays. Unless there are funds available to pay for this work than I am unable to assist. …”

18. [18]
    The applicant’s preliminary view from the available books and records of Unicross is that the company was insolvent from at least 26 November 2018. Despite the impediments, the applicant’s investigations to date have also identified five potential claims on behalf of Unicross:

    1. an insolvent trading claim against Mr Varga, for $1,275,368;
    2. an insolvent trading claim against Mr Webb for $1,609,681;
    3. an insolvent trading claim against the respondent (as holding company of Unicross), for $2,885,049; and
    4. voidable transaction claims against the respondent totalling $1,194,200 (and there may be others) which the applicant described as:
       1. payments totalling $1,117,200 in respect of JobKeeper, amounts to which Unicross was entitled and which it directed be paid to the respondent  (that is, the sum of Jobkeeper payments to which Unicross was entitled between 3 June 2020 and 3 December 2020); and
       2. six payments totalling $77,000 made by Unicross to the respondent between 3 August 2020 and 4 September 2020, which have been effected funds by “Cash flow Boost” payments that Unicross received from the Australian Taxation Office between 30 August 2020 and 3 September 2020.
19. [19]
    The applicant has six years from the date of his appointment to bring any claim for insolvent trading and is well within that period.^[11] It is therefore only the voidable transaction claims that are currently out of time.
20. [20]
    The Commonwealth Government had previously paid over $700,000 to employees of Unicross under its Fair Entitlements Guarantee (“FEG”) scheme.  In June 2022, FEG expressed interest in providing funding to the applicant. After a drawn-out process (including, for some unexplained reason, the applicant not providing a funding application and public examination estimate until nearly five months later), in June 2023 (after more toing-and-froing), FEG advise that initial funding would be provided for counsel to review all material obtained to date and to provide an initial advice about any potential claims Unicross may have. That advice was obtained and provided to FEG on 13 November 2023; but on 21 November 2023, FEG declined to provide funding for a public examination of Mr Webb, Mr Varga and Mr Fingland.
21. [21]
    The applicant’s evidence (without any elaboration) is that he has been trying to obtain funding for the public examinations elsewhere. Despite its general nature, I accept this evidence. The respondent criticised the applicant for not making earlier attempts to approach other funders, but in my respectful view it was not unreasonable for the applicant to have held some hope and to have waited for a response from FEG.  Although I accept the respondent’s submission that the expense of litigation and the limited prospects of recoverability may make it difficult to secure a funder.

Analysis

22. [22]
    The focus by the parties in this case was on issues of delay, commerciality and general prejudice.
23. [23]
    There are a few months of unexplained delays in the timeline of the liquidation. For example, it was only about 18 months after his appointment that the applicant was approached about the possibility of FEG funding.  The applicant’s case is that the delay by the applicant in advancing the voidable transaction claims can be attributed to the complex nature of the affairs, the impediments to the investigations and the difficulties in obtaining funding.^[12]  I accept this unchallenged evidence as an adequate explanation for the delay. But whether there is an adequate explanation for the delay is only one factor in considering where the interests of justice lie.^[13]
24. [24]
    The applicant submitted that the potential (time-barred) claims have sufficient substance to warrant the continuing investigation of them. I accept the applicant’s unchallenged evidence of there being a prima facie case against the respondent for voidable transactions. A liquidator’s primary duty is to act in the best interests of the creditors. At first blush, the benefit to creditors in this case seems an obvious one, given that claims apparently represent over a quarter of creditors’ claims in the liquidation.  But the commerciality of maintaining proceedings is another ingredient for the melting pot. The unchallenged evidence from Helen Michael, the financial controller of the P2P Group, which I accept, is that the financial position of the respondent at the present time is dire – and but for the support of its major creditors it would be insolvent. It is therefore reasonable to infer, as I do, that as things stand, the respondent is unlikely to meet any judgment obtained against it.

25. [25]
    The respondent could not point to any particular prejudice that will follow should an extension be granted. This is unsurprising, given that there are other claims against the respondent and Mr Webb still within time.  Rather, the respondent relied on the presumptive prejudice from the delay which it maintained (and I accept) was not rebutted by the applicant. While prejudice may exist without the defendant’s knowledge, “the absence of any specific prejudice to the defendant is of more weight.”^[14] 
26. [26]
    This case is finely balanced.  But overall, and despite the apparent impecuniously of the respondent, I am satisfied on the balance of probabilities that it is just and fair to allow a short six-month extension (until 9 November 2024) for the applicant to commence any proceedings for voidable transactions against the respondent for the following five reasons:

    1. First: The explanation for the delay is plausible and adequate in the circumstances of this case;
    2. Secondly: The need for the extension is a reasonable one;
    3. Thirdly: The interests of creditor’s warrant the applicant being given more time to explore the viability of a substantial and prima facie existing claim against the respondent – a company whose affairs are part of a relatively complex broader corporate structure;
    4. Fourthly: Other claims against the respondent and its director that are not statute barred have been identified; and
    5. Fifthly: While the general presumptive prejudice to the respondent is a relevant factor to be taken into account in the exercise of the court’s general discretion it is not necessarily of “paramount importance.”^[15]

Conclusion

27. [27]
    I order that:

1. The application is allowed;
2. An extension of time of six months (until 4.00pm 9 November 2024) for the application to bring proceedings under s 588FF(1) of the Corporations Act 2001 is granted.

28. [28]
    Given the applicant required the indulgence of the court and the respondent was unsuccessful in its opposition to the application, my preliminary view is that the appropriate order as to costs is that the applicant’s costs of the application be his costs in the winding up of Unicross.  I will, however, allow the parties until 4.00 pm on Thursday 23 May 2024 to exchange and file (by emailing to my associate) written submission as to costs of no longer than two (2) pages – or another order as to costs (and the form of the substantive order) if they agree. Otherwise, the orders as foreshadowed will be made.