Commissioner of Taxation v Runcity [2025] FCAFC 152 is the most recent decision arising from litigation involving disqualified liquidator, David Iannuzzi. In previous decisions, Mr Iannuzzi was found to have mismanaged the liquidation of 23 companies and was banned from practising as a liquidator for ten years. Eight of those companies (Companies) were deregistered between 2015 and 2016. Upon appointment of new liquidators (Liquidators), the Companies were reinstated to assist in the recovery prospects for creditors. The recent appeal was required to determine whether the period that the companies were deregistered should be included in calculating the limitation period for voidable transactions.
Key Takeaways
- The time that a company is deregistered will continue to count toward the calculation of the limitation period for voidable transaction proceedings.
- Section 601AH(3)(d) empowers the court to ‘make any other order it considers appropriate’; however, the provision can only be used to make orders related to the reinstatement of a company.
- Section 588FF(3)(b) is the only statutory mechanism available for extending the limitation period for voidable transactions.
- If creditors of an insolvent company suspect the liquidator is deficient or delinquent they can take steps including inspecting the liquidator’s books, appointing a committee of inspection and applying to the court in relation to the conduct of the liquidator.
Litigation History
In 2017, the Deputy Commissioner of Taxation commenced proceedings against Mr Iannuzzi. The final orders were made in 2019. Stewart J made the following orders by consent, two of which became relevant to the appeals. In summary:
Order 3: when calculating the limitation period for voidable transactions, the period of time that a company was deregistered should be disregarded. Practically this meant that when the Liquidators calculated the limitation period after the relation-back day for pursuing voidable transactions, a period of time that a company was deregistered did not need to be included in the calculation.
Order 4: If the Liquidators make an application to the court about a voidable transaction, the defendant to that proceeding is free to apply to the court to amend or set aside Order 3 as it applies to them as a defendant.
Following these orders, the relevant entities were re-registered and independent liquidators were appointed to them. The Liquidators then commenced proceedings in the Supreme Court of New South Wales to make orders in respect to voidable transactions pursuant to Order 3. Relying on Order 4, defendant Companies brought interlocutory applications to avail themselves of the voidable transaction proceedings. Some of the defendant Companies also participated in an appeal to the Federal Court.
Relevant Provisions
Reinstatement of Deregistered Companies
- Section 601AH empowers the court to reinstate the registration of a company if it is satisfied that it is just to do so. Relevantly, subsection (3)(d) provides that the court may ‘make any other order it considers appropriate’.
Voidable Transactions
- Liquidators of an insolvent company can pursue certain transactions to recover funds or assets for the benefit of creditors; these are known as voidable transactions. The types of transactions that are voidable include:
- unfair preferences
- uncommercial transactions
- insolvent transactions
- unfair loans
- unreasonable director-related transactions
- creditor-defeating dispositions
Liquidators must apply for a court order to recover amounts the subject of these transactions under section 588FF. Importantly, the provision imposes time limitation periods for liquidators to apply to the court. The application must be made:
- within 3 years after the insolvency process was commenced (the ‘relation-back day’); or
- 12 months after the first appointment of a liquidator (whichever is later); or
- a longer period ordered by the court.
The Primary Judge’s Decision
In the 2024 appeal, the applicants (including the Companies defending voidable transaction proceedings) pursuant to Order 4, asserted that:
- As there was no application under section 588FF(3)(b), there was no power to make Order 3; and
- Section 601AH(3)(d) does not empower the court to extend time for limitation purposes.
The intersection between the voidable transaction provision and the reinstatement provision was in issue. Section 601AH(3)(d) provides that in making an order to reinstate a company, a court may ‘make any other order it considers appropriate’. However, Markovic J found that this power could not be used to extend time for pursuing a voidable transaction, stating that 601AH(3)(d) is a provision of general application and cannot ‘override the explicit power in’ section 588FF(3).
Extensions of time for voidable transaction applications are provided for by section 588FF(3)(b), which provides that an application may be made ‘within such longer period as the court orders on an application’.
Markovic J concluded that there was no power to make Order 3 pursuant to section 601AH(3)(d) and it was discharged.
The Full Court of the Federal Court’s Affirmation
The Commissioner of Taxation and the Liquidators appealed to the Full Federal Court (Court).
The Court clarified that the power conferred by section 601AH(3)(d) is not ‘at large’, and that it can only be used to make orders related to the reinstatement of a company.
Section 588FF(3)(b) is the appropriate provision for a liquidator to use when bringing an application for an extension of time to pursue voidable transactions.
The judges gave credence to Parliament’s intent behind the provisions. Noting that the time limitation provides certainty in commercial dealings. Once the period provided for by section 588FF has expired, parties dealing with the company will know they are no longer at risk of facing voidable transaction proceedings. If the time limits provided for by section 588FF could be circumvented by section 601AH(3)(d), those dealing with a company remain at risk of litigation indefinitely.
The Court also underlined that creditors have other means of redress when there is a deficient or delinquent liquidator. Those steps include inspecting the liquidator’s books, appointing a committee of inspection and applying to the Court in relation to the conduct of the liquidator.
Outcome
While section 601AH(3)(d) states that the court ‘may make any other order it considers appropriate’, the Court has confirmed that the power is not so far reaching that it can impinge on the time provisions for voidable transactions provided for by section 588FF(3).
Further Information
for further information on insolvency disputes, voidable transaction claims, and regulatory compliance issues, contact the author of this article:
