Law

Case study: Early mediation of complex disputes

By 3 February, 2020 February 6th, 2020 No Comments

Two of the biggest interests that clients have when engaging a law firm are time and expense.  They are both correlated as usually, the longer something takes the more expensive it shall be.  It therefore follows that the shorter a legal proceeding goes on the less expensive it shall be.

In November 2018, Pragma was engaged to commence proceedings to pursue voidable transactions against 24 parties.

As the infographic below displays we were able to, inside a period of 10 months, commence and resolve all 24 claims on favourable terms.

Under section 588FA of the Corporations Act 2001 (Cth) (Act) a voidable transaction by way of unfair preference may occur when:

  • the debtor company owes a creditor an unsecured debt; and
  • the debtor company and the creditors are then parties to a transaction; and
  • receipt of the payment results in the creditor receiving more than it would have received if the debtor company had been in liquidation, and the liquidator paid all unsecured creditors a dividend.

Below we have compared the procedures associated with our case and another well known voidable transaction proceeding, associated with the Forge Group of companies.  The infographic  shows that getting the cases to early mediation was in the best interests of our clients by reducing the time associated with the dispute.

Forge Proceeding

In 2017, the Liquidator of Forge Group Ltd (Receivers and Managers Appointed) (In Liquidation), Forge Group Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) and Forge Group Power Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (collectively, Forge) commenced three proceedings for various voidable transaction claims against 47 different parties.

The proceedings were initiated by way of an originating process in February 2017, seeking relief under ss 588FA, 588FC, 588FE and 588FF of the Act, which essentially was the liquidator seeking to void numerous payments made by the Forge Groups as unfair preferences, or payments subjected to other related relief.

The Liquidator sought leave from the Court pursuant to Order 18 Rule 4(1) of the Rules of the Supreme Court 1971 (WA) in relation to the joinder of multiple plaintiffs and defendants.

One of the defendants in COR 20 opposed the joinder application and filed a conditional appearance.  In COR 21, one defendant opposed the joinder application and filed lengthy submissions in opposition of the joinder application.

The hearing for the joinder application was heard in June 2017, and a decision handed down in July 2017, which granted leave to join multiple parties in the two actions, COR 20 and COR 21.

A Statement of Claim was filed in the proceeding in late August 2017.  Some of the defendants filed a Statement of Defence.  Mediations in the matter occurred in August 2018 and according to the eCourts portal records, the proceeding remains ongoing against three defendants.

Unfair Preference Claim – the Pragma Way

Pragma assisted the liquidators of a company to settle a 24 defendant proceeding.  Pragma was able to settle all claims within 10 months of commencing the claim.  One of the main reasons Pragma was able to settle this matter within this time frame was because it sought mediations at an early stage of the proceedings, and prior to the defendants having to exhaust substantive resources on preparing pleadings, discovery and responsive expert evidence.

The comparison of timeframes is depicted in the infographic below.

Key Takeaways

The use of the precedent created by the Forge Group proceedings in relation to joinder applications and the use of early mediation was a key factor in being able to resolve all 24 claims cost effectively within 10 months.

If you would like to have a chat with us about litigation strategy or voidable transactions more generally, please contact Aaron McDonald or Luke Davies on (08) 6188 3340, aaron@pragma.law or luke@pragma.law.

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