The Federal Court in Brereton, in the matter of ICT Century Pty Ltd (In Liquidation) [2025] FCA 107 granted the liquidators of ICT Century Pty Ltd (in liquidation) (ICT) a one-year 'shelf order', or an extension of time to bring voidable transaction claims under section 588FF(1) of the Corporations Act 2001 (Cth). This allows liquidators of EncoreFX (Australia) Pty Ltd (EncoreFX), the largest creditor of ICT, to undertake public examinations to investigate potential proceedings (rather than enabling the ICT liquidators to complete their investigations and commence proceedings).
Key takeaways
- The Federal Court granted liquidators a one-year 'shelf
order', an extension of time to bring voidable transaction
claims under section 588FF(1) of the Corporations Act 2001
(Cth), to allow the liquidators of the company's largest
creditor to investigate potential claims.
- The distinctive feature of application was that the primary
basis upon which the extension was sought, which was not to enable
the liquidators themselves to complete investigations and commence
any proceedings (or obtain funding to do so) but was rather to
allow a third party to undertake its own investigations and form
its own view about any proceedings it may wish to bring.
- The case highlights that courts may be willing to grant shelf orders, in unusual circumstances where it is of benefit to creditors as a whole.
Background
ICT went into liquidation and the immediate catalyst for its failure had been a loss associated with a foreign exchange facility it operated with EncoreFX, amounting to approximately $8 million.
EncoreFX later went into liquidation and EncoreFX was the largest creditor in the liquidation of ICT.
Movement of funds in ICT's accounts and other evidence caused the liquidators of ICT to suspect there may have been 'phoenixing' of the company's business. By the time the liquidation commenced, all of ICTs assets had been disposed of, debts owed to associated entities had been discharged, leaving debts owing to numerous third party creditors.
The investigations undertaken were time consuming, complex and expensive, and the liquidators formed the view that court examinations were required. However, the liquidators of ICT could not obtain funding for the court examinations and informed all creditors of this obstacle to continuing their investigations.
The liquidators of EncoreFX informed the ICT liquidators that they intended to carry out their own public examination of the directors of ICT, and the liquidators of ICT provided the liquidators of Encore FX with documents and information to assist with those investigations.
The liquidators of Encore FX informed the ICT liquidators that they may consider taking an assignment of the claims available to ICT or the liquidators of ICT. However, further time was needed by the liquidators of EncoreFX to complete the court examinations and the investigations.
Issues
Justice Owens considered whether the extension of time was fair and just in the circumstances, and whether it was appropriate to allow a third-party to investigate potential claims.
Following a summary of the settled principles for applications to extend the time to bring voidable transaction claims, Owens J observed this was a distinctive case as the purpose of the application was to allow an extension of time so that a third party (and not the liquidators of the company) could undertake investigations and form a view about any proceedings it may wish to bring (in its own right, or by way of assignment).
The Court granted a one-year extension because:
- the ICT liquidators' inability to commence their own
proceedings was reasonable in the context of the complicated
investigations and that funding was not available for court
examinations. Similarly, the Encore FX liquidators also acted
reasonably in progressing their investigations; and
- that evidence of potential phoenixing of ICT's business invited a suspicion which warranted continued investigations.
Owens J considered that, although unusual, it did not matter that the investigative steps would be carried out by someone other than the liquidators of the company, and that any potential claims would likely be brought (on assignment) by a third party because:
- The liquidators of EncoreFX had a real and direct interest in
the subject matter that did not conflict with the interests of
other unsecured creditors.
- The liquidators of EncoreFX had well-established duties and
responsibilities, and the necessary powers to make any
investigation effective. Furthermore, they were significantly
better resourced, and there was no reason to doubt their skill and
professionalism.
- The proposed examinations were to be conducted in public. So,
the liquidators of ICT could attend and then assess the prospects
of any potential voidable preference claim, and determine whether
they assign the potential claims to EncoreFX, or attempt to obtain
funding or to take no further action.
- The two sets of liquidators had worked cooperatively and were going to continue to do so, to advance the interests of creditors as a whole.
Comment
This case highlights that a court may be willing, in the right circumstances, to grant 'shelf orders' even when the primary basis upon which the extension is sought is not to enable liquidators to complete the investigations and commence any proceedings, or obtain funding to do so, but rather to allow a the liquidator of a third party to undertake its own investigations and form its own view about any proceedings it may wish to bring.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
 |
 |
| Lawyers Weekly Law firm of the year
2021 |
Employer of Choice for Gender Equality
(WGEA) |
