Insolvency

‘Skippers, Skimmers and Readers’: Google successful against ACCC once again

3 July, 2023

Ability to seek an extension of time

Section 588FF(3) of the Corporations Act 2001 (the Act) provides liquidators with a mechanism by which to obtain an extension of time within which proceedings against the recipients of voidable transactions may be commenced.

The High Court of Australia has recently considered the application of aspects of this section in two related appeals concerning the winding up of Octaviar Limited (Octaviar) and Octaviar Administration Pty Ltd (Octaviar Administration): Grant Samuel Corporate Finance Pty Ltd v Fletcher, JP Morgan Chase Bank, National Association v Fletcher [2015] HCA 8 (Grant Samuel) and Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10 (Fortress).

Section 588FF(3)(a) of the Act provides that the time for a liquidator to commence proceedings in relation to alleged voidable transactions is the later of either 3 years after the relation-back day or 12 months after the appointment of the liquidator (the Limitation Period). A liquidator can apply under s.588FF(3)(b) for extension of the Limitation Periods, but must do so during the Limitation Periods.

Extensions of time outside of the Limitation Period

In Grant Samuel, the liquidator of Octaviar, during the Limitation Period, successfully made an application under s.588FF(3)(b) for an extension of time to commence proceedings in the Supreme Court of New South Wales. Subsequently, after the Limitation Period has expired, the liquidator sought a variation of the previous order, pursuant to the Uniform Civil Procedure Rules 2005 (UCPR) further extending the time to commence proceedings. That application was successful and the liquidator was afforded a further six months to commence proceedings (the Variation Order).

The appellant in Grant Samuel initially commenced proceedings seeking to set aside the Variation Order but was unsuccessful before the Court of Appeal. That decision was subsequently appealed to the High Court.

The High Court, held that the provisions of the UCPR could not be relied on to extend the time to commence proceedings once the Limitation Periods had expired because, to do so, would be to give preference to State legislation that is inconsistent with the terms of Commonwealth legislation.

The findings of the High Court confirm that if liquidators need further time to commence proceedings against the recipient of voidable transactions, such orders must be sought before the Limitation Periods expire.

“Shelf orders”

In Fortress, the High Court was required to consider whether an order extending time to commence proceedings under s.588FF(3)(b) may be made even in circumstances where the liquidator had not specifically identified the particular transactions which might become the subject of later proceedings. Extensions of time which do not relate to particular transactions are often referred to as “shelf orders”.

The appellants submitted that making shelf orders were contrary to a number of policy factors, such as creating disadvantage for potential defendants and the risk that liquidators will be encouraged not to identify potential defendants or transactions thereby reducing opposition to extension applications.

The Court acknowledged the appellants’ submission and particularly the need to provide commercial certainty for those who have had past dealing with insolvent entities.

Equally, however, the Court recognised that, despite the best efforts of liquidators, it may be impossible to identify particular transactions in respect of which orders for extension of time could be made within the time permitted by s.588FF(3)(a). In balancing the interests of the liquidators and possible defendants, the Court in Fortress noted the broad (non-exhaustive) definition of “transactions” in s.9 of the Act, which could become the subject of voidable transaction applications.

The High Court held that the making of shelf orders is open to the Court and an appropriate way for the Court to mitigate the strictness of the time limits otherwise imposed by s.588FF(3)(a) of the Act.

It is clear from the High Court’s decision that the consideration of these factors is a balancing act to be considered on a case-by-case basis. It should also be remembered that even where an application for an extension of time is made during the Limitation Period, granting an extension is an exercise of the Court’s discretion.

Summary

If liquidators require time beyond the Limitation Period to commence proceedings against parties involved in suspected voidable transactions, such orders must be sought before the Limitation Periods expire. Once the Limitation Period has expired, no further extension can be granted.

In appropriate circumstances, liquidators will be granted “shelf order” extensions, which do not relate to particular transactions.

McCabes’ expertise

Andrew Lacey heads McCabes’ Insolvency Group which offers expertise and experience in corporate and personal insolvency. We deliver commercially relevant advice to businesses of all sizes, insolvency practitioners and individuals.

This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.

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Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Government

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

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The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. 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Published by Leighton Hawkes
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Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

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