Time limits most commonly missed in relation to liquidation, a claim example and lessons learned.
What's on this page?
Liquidator limitations
| Action | Time limit | Legislation | Extension availability |
|---|---|---|---|
|
Action
Application by liquidator to void transaction |
Time limit
The later of: 3 years from the relation-back day or 12 months from appointment of a liquidator |
Legislation
s.588FF(3) Corporations Act 2001 (Cwlth) |
Extension availability
The court can set a longer period on application made by the liquidator during the 3 years after the relation-back day |
Claim example
A practitioner advised the liquidator of a company on a claim against the Australian Taxation Office (ATO) regarding transactions identified by the liquidator as voidable pursuant to section 588FA of the Corporations Act 2001 (Cwlth).
Section 588FF(3) required that the relevant application by the liquidator under subsection (1)
be made:
- within three years after the relation-back day or
- 12 months after the first appointment of a liquidator for the winding up of the company, whichever was the later
unless a longer period was ordered by a court.
In this case the proceeding against the ATO needed to be instituted within three years of the relation-back day. No proceeding was issued and no extension of time was sought.
While the practitioner gave advice to the liquidator about the claim and other matters regarding the liquidation, it did not mention the limitation period. The practitioner sent a draft proceeding to the liquidator for finalisation seven months before the limitation period was to expire and followed it up for four months.
It then ‘fell off the radar’ until the practitioner received an insolvency report from the liquidator several months after the limitation period had expired. When the practitioner again turned their mind to finalising the proceeding, they realised it was out of time.
Although it could be thought a registered liquidator would be aware of the time limitation, the liquidator did not instruct the practitioner to issue proceedings or seek an extension of time before the limitation period expired.
Lessons
- Do not make assumptions about the knowledge of sophisticated clients regarding issues of law.
- Identify and diarise applicable limitation dates at the start of each matter and advise the client of the dates and importance of acting before then.
- Be careful not to let matters drag on. If the client will not respond to requests for instructions, terminate the retainer.
