Re Barrick Middle East Pty Limited
[2023] WASC 122
•19 APRIL 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE BARRICK MIDDLE EAST PTY LIMITED [2023] WASC 122
CORAM: LUNDBERG J
HEARD: 12 APRIL 2023
DELIVERED : 12 APRIL 2023
PUBLISHED : 19 APRIL 2023
FILE NO/S: COR 50 of 2023
MATTER: IN THE MATTER OF BARRICK MIDDLE EAST PTY LIMITED
EX PARTE
BARRICK MIDDLE EAST PTY LIMITED
Plaintiff
Catchwords:
Corporations Law - Failure to comply with financial reporting obligations in Part 2M.3 of the Corporations Act 2001 (Cth) - Small proprietary company became a large proprietary company in financial year following receipt of dividend payment - Application for relief pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) for extensions of time to comply with ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 - Application pursuant to s 1322(4)(c) of the Corporations Act 2001 (Cth) for relief from civil liability
Legislation:
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785
Corporations Act 2001 (Cth), ss 181(1)(h), 292(1), 292(2), 301(1), 319(1), 344(1), 1274(11), 1322(4) and 1322(6)
Result:
Application for extensions of time and for relief from civil liability granted
Category: B
Representation:
Counsel:
| Plaintiff | : | A J Papamatheos and A Pieniazek |
Solicitors:
| Plaintiff | : | Warman & Goldblatt |
Case(s) referred to in decision(s):
Barrick (Australia Pacific Exploration) Pty Limited v Barrick (PD) Australia Pty Limited, in the matter of Barrick (Australia Pacific Exploration) Pty Limited (No 2) [2017] FCA 1076
Canon Australia Pty Ltd, in the matter of Cannon Australia Pty Ltd [2023] FCA 281
DAC Finance (NSW/Qld) Pty Ltd and other companies [2020] NSWSC 182
Dana Australia (Holdings) Ltd [2006] FCA 355; (2006) 57 ACSR 99
Diona Pty Ltd, in the matter of Diona Pty Ltd [2022] FCA 1215
Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960
Owen, in the matter of RiverCity Motorway Pty Limited [2014] FCA 1008
Re Affinity Health Ltd [2006] NSWSC 579; (2006) 58 ACSR 461
Re Bellavista Resources Limited [2023] WASC 40
Re Car Buyers Australia Pty Ltd [2020] FCA 599
Re Clinical Cell Culture Ltd [2004] FCA 1798; (2004) ACSR 362
Re Flight Centre Technology Pty Ltd [2022] NSWSC 367; (2022) 160 ACSR 651
Re Murray River Organics Ltd [2019] FCA 1432; (2019) 138 ACSR 365
Re Novonix Ltd [2019] FCA 2198; (2019) 141 ACSR 636
Re Ozito Industries Pty Ltd [2020] FCA 1432; (2020) 148 ACSR 585
Re Phosphate Resources Ltd [2005] FCA 1705; (2005) 56 ACSR 169
Re SMS Operations Pty Ltd; Ex parte SMS Operations Pty Ltd [2021] WASC 191
Re Sprintex Ltd [2022] WASC 188
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357
Re Yandal Resources Ltd [2022] WASC 338
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
Table of Contents
A. Introduction and Summary
B. Legislative Framework
C. Relevant Principles
D. Factual Background
Affidavit evidence
Corporate structure and details
Deed of Cross Guarantee
Events from October 2022
Historical non-compliance
The position of ASIC
E. Disposition
Preliminary matters
Extensions of time - should the jurisdiction be exercised?
Relief from civil liability - should the jurisdiction be exercised?
F. Conclusion
ATTACHMENT A
LUNDBERG J:
(This judgment was delivered ex temporaneously on 12 April 2023 and has been edited from the transcript to correct matters of grammar, add headings, and include complete references.)
A. Introduction and Summary
Barrick Gold Corporation is a large, global mining company which controls numerous entities around the world (Barrick Gold Group or the Group). One of the entities in the Barrick Gold Group is the plaintiff company (BME).
During 2021, and for the first time, another company in the Group paid dividends to BME. Unbeknownst to BME's officers at the time, this payment affected BME's proprietary status, changing its effective classification from a small proprietary company to a large proprietary company. As a small proprietary company within the Barrick Gold Group, BME was not, at least prior to that point in time, required to prepare or lodge a financial report and a directors' report as would otherwise be required by Part 2M.3 of the Corporations Act 2001 (Cth) (CA or the Act).
Specific action should have been taken by the company at the time (but was not) to enable BME to obtain relief from its financial reporting obligations under the Act for the financial year ended 31 December 2021. This was only subsequently discovered by the company once correspondence was received from the Australian Securities and Investments Commission (ASIC).
BME has now applied to this court for orders pursuant to ss 1322(4)(c) and 1322(4)(d) CA to cure the failures and seek relief from potential liability (Application). Specifically:
(a)pursuant to s 1322(4)(d) CA, BME seeks orders to cure the failures by BME and its directors and officers to lodge an ASIC Form 389 within a particular time period prescribed under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (ASIC Instrument 2016/785), and to resolve that BME should obtain the benefit of that ASIC Instrument; and
(b)pursuant to s 1322(4)(c) CA, BME seeks orders to relieve BME and its former and current directors and officers from certain civil liability in respect of the failures just mentioned.
ASIC has confirmed that it neither supports nor opposes the relief sought in the Application.
For the reasons explained below, I am satisfied that the failure to comply with the Act was inadvertent and not dishonest, and has not caused substantial injustice to any person. I am also satisfied that the relief sought would not cause substantial injustice. I therefore accept that the proposed orders sought by the plaintiff should be made on this Application and I will make orders in terms of the plaintiff's minute of orders dated 4 April 2023, as amended during the hearing.
I will first set out the relevant legislative framework and applicable principles, then summarise the factual background to the Application, before turning to my assessment of the relief sought in the Application.
B. Legislative Framework
Chapter 2M of the Act is headed 'Financial Reports and Audit'. As set out in Chapter 2M, all companies must keep financial records and some must prepare financial reports. Part 2M.3 of Chapter 2M sets out the provisions dealing with 'Financial Reporting', and Division 1 thereof deals with the subject of 'Annual financial report and directors' report' (and consists of ss 292 to 301 CA).
Pursuant to s 292(2) CA, small proprietary companies must prepare financial report and directors' reports only if directed to do so under ss 293 or 294 CA, or if they are controlled by a foreign company for all or part of the year and are not consolidated for that period in financial statements for that year lodged with ASIC, or they have one or more CSF (or crowd sourced funded) shareholders at any time during the financial year.
As BME was an entity controlled by a foreign company and which was consolidated within financial statements lodged with ASIC for the financial year ended on 31 December 2021, BME would otherwise have been freed of the obligation to prepare financial report and directors' reports: s 292(2)(b) CA.
The power of the court to make orders avoiding the effects of irregularities, extending time and relieving from civil liability is set out in s 1322 CA. The plaintiff relies on the power in s 1322(4)(c) and (4)(d) CA, in seeking its primary relief. The relevant parts of s 1322(4) and (6) CA are extracted below:
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a)an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
(b)an order directing the rectification of any register kept by ASIC under this Act;
(c)an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
...
(6)The Court must not make an order under this section unless it is satisfied:
(a)in the case of an order referred to in paragraph (4)(a):
(i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii)that it is just and equitable that the order be made; and
(b)in the case of an order referred to in paragraph (4)(c) - that the person subject to the civil liability concerned acted honestly; and
(c)in every case - that no substantial injustice has been or is likely to be caused to any person.
The terms of ASIC Instrument 2016/785 are relevant to this Application. That instrument is made pursuant to s 341(1) CA, which empowers ASIC to make orders in respect of a specified class of companies, registered schemes or disclosing entities, relieving them (and others) from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4) of the Act.
The purpose of Instrument 2016/785 is to enable a closed group of companies to prepare and lodge financial statements prepared on a consolidated basis where each such company is a party to a deed of cross guarantee: Re SMS Operations Pty Ltd; Ex parte SMS Operations Pty Ltd [2021] WASC 191 [43] (Hill J).
Section 5 of ASIC Instrument 2016/785 states as follows:
5 Financial reporting relief for wholly-owned entities
(1)A company that was party to a deed of cross guarantee at the end of a financial year (relevant financial year) does not have to comply with any of the following requirements of Part 2M.3 of the Act in relation to the financial year:
(a)the requirement to prepare a financial report and a directors' report under paragraphs 292(1)(b) and (c) and paragraph 292(2)(b);
(b)the requirement to have the financial report audited and to obtain an auditor's report under subsection 301(1);
(c)the requirement to report to its members under section 314 within the time required by section 315;
(d)the requirement to send reports to a member in accordance with a request under subsection 316(1) within the time required by subsection 316(2).
Note: The requirement for a company to lodge a report with ASIC under section 319 of the Act will not apply if the company does not have to prepare or obtain the report: subsection 319(1).
(2)The directors of a company referred to in subsection (1) do not have to comply with the requirement under section 317 to lay reports before the AGM of the company following the relevant financial year.
Section 6 of Instrument 2016/785 sets out numerous (and mandatory) conditions which must be satisfied before the relief in section 5 is available. Section 6 relevantly states as follows:
6Where financial reporting relief applies
(1)The relief in section 5 is available to a company and its directors in relation to a relevant financial year where all of the following are satisfied:
Nature of company
(a)the company was:
(i)a public company for the relevant financial year; or
(ii)a large proprietary company for the relevant financial year; or
(iii)a small proprietary company to which paragraph 292(2)(b) of the Act applies in relation to the relevant financial year at the relevant time;
(b)the company was not, at any time during the relevant financial year, any of the following:
(i)a disclosing entity;
(ii)a borrower in relation to debentures;
(iii)the guarantor of such a borrower;
(iv)a financial services licensee;
Holding entity
(c)there was a holding entity in relation to the company at the end of the relevant financial year;
Note:This requires that the holding entity was party to the deed of cross guarantee at the end of the relevant financial year: see definition of holding entity in section 4.
(d)the relevant financial year and the financial year (relevant holding entity financial year) of the holding entity ended on the same date;
(e)the holding entity was not a small proprietary company for the relevant holding entity financial year;
Opt-in notice
(f)if:
(i)the company did not rely on the relief available under this instrument or ASIC Class Order [CO 98/1418] in respect of the financial year before the relevant financial year; or
(ii) the holding entity of the company was not the same for the relevant financial year and the financial year before;
the company has lodged by the relevant time a notice signed by a director or secretary with ASIC using ASIC Form 389 as at the date of this instrument, containing a statement that the company has taken advantage of relief under this instrument together with the identity of the holding entity;
Initial procedures in applying for relief
(g) before the end of the first financial year (first reliance year) in respect of which the company took advantage of relief under this instrument or a previous order (being a financial year at the end of which the company was one of the wholly-owned entities of the holding entity):
(i) the directors of the company resolved that the company should obtain the benefit of this instrument or a previous order and the directors have not revoked that resolution or resolved to the contrary; and
(ii) in respect of every other entity (the other entity) which has become a party to the deed of cross guarantee after 13 August 1998 and before the end of the first reliance year (irrespective of whether the other entity has taken advantage of relief under this instrument or ASIC Class Order [CO 98/1418]) the directors of that other entity have made a statement:
Note: ASIC Class Order [CO 98/1418] was made on 13 August 1998.
(A)signed by at least one director, and made before the end of the financial year in which it became a party to the deed of cross guarantee; and
(B) stating that in the directors' opinion immediately before the execution of the deed of cross guarantee or assumption deed by the other entity there were reasonable grounds to believe that the other entity would be able to pay its debts as and when they become due and payable;
…
(2)In this section, relevant time means, in relation to a relevant financial year, 4 months after the end of the year.
C. Relevant Principles
The principles applicable to s 1322(4) CA are well known and need not be thoroughly restated for the purposes of this Application. I refer to and endorse the summary of those principles recently drawn together by Hill J in Re Sprintex Ltd [2022] WASC 188 [22], by Strk J in Re Yandal Resources Ltd [2022] WASC 338 [74] ‑ [75], in my recent decision in Re Bellavista Resources Limited [2023] WASC 40 [36] ‑ [47], and the very recent decision of Stewart J in Canon Australia Pty Ltd, in the matter of Cannon Australia Pty Ltd [2023] FCA 281 [3] (Stewart J). Those principles emerge from the leading authorities in this area including the decision of French J (as he then was) in Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29] ‑ [31] and the High Court's decision in Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43], [53] and [64].
Those principles, insofar as they relate to s 1322(4)(d) CA, may be summarised as follows:
(a)the prescriptive requirements of the wording in s 1322(4) CA and the preconditions in s 1322(6) CA need to be satisfied;
(b)the court retains a discretion under s 1322(4) CA as to whether it makes the orders sought;
(c)the broad powers reflect a legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law;
(d)limitations to the broad powers in s 1322 CA will not be readily implied. Section 1322 CA is remedial in character and should be applied broadly;
(e)the court can make orders under s 1322(4)(d) CA on conditions and also make such consequential and ancillary orders as it thinks fit; and
(f)an order can be made under s 1322(4)(d) CA notwithstanding that the contravention or failure concerned resulted in the commission of an offence.
A precondition to an order under s 1322(4)(c) is that the person to be relieved from civil liability acted honestly. In determining whether a person has acted honestly, the court looks to an absence of evidence of dishonesty. The submissions of the plaintiff note, and I accept, that the concept of acting honestly can embrace:
(a)an inadvertence or failure to turn one's mind to the relevant issue;
(b)an active, but incorrect, consideration of a legal issue as well as failure to consider the issue at all; and
(c)the failure to understand or appreciate the significance of noncompliance.[1]
[1] Diona Pty Ltd, in the matter of Diona Pty Ltd [2022] FCA 1215 [20] (Cheeseman J).
Prior to making an order under s 1322(4)(c) or (d) CA, the Court must be satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c) CA. I refer to the following exposition of this concept, by Anderson J in Re Murray River Organics Ltd[2019] FCA 1432; (2019) 138 ACSR 365 [35] ‑ [38]:
[35]The court must not make any order under s 1322 unless it is satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c) of the Act; Kimberley College Ltd v Davis, in the matter of Kimberley College Ltd [2018] FCA 1102 at [28]. There are two aspects to this requirement:
(a)the expression 'has been' invites an inquiry as to the effect of the irregularity sought to be cured; and
(b)the expression 'likely to be' draws attention to the effect of the proposed order: An v Joo [2019] NSWSC 39 at [34].
[36]A degree of prejudice to a person or persons may be outweighed if the overwhelming weight of justice is in favour of making the order: Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACSR 157 (Elderslie Finance) at 160; An v Joo [2019] NSWSC 39 at [35].
[37]The reference to 'substantial injustice' in s 1322(6)(c) is to a real and not insubstantial or theoretical prejudice: Elderslie Finance at 160. Whether there is real injustice requires a weighing of any prejudice if the order is made against the prejudice which would be suffered by the corporation and its directors and officers if an order was not made: Gangemi v Osborne [2009] VSCA 297 at [62], citing Re Compaction Systems Pty Ltd & The Companies Act [1976] 2 NSWLR 477 at 493; see also AHEPA NSW at [25].
[38]One mechanism by which the court may ensure that an order under s 1322(4) does not cause substantial injustice is to make an ancillary order permitting any interested person who may suffer substantial injustice to apply within a set period of time to vary or dissolve the s 1322(4) order: see Sprint Energy at [51]; Clancy Exploration Limited, in the matter of Clancy Exploration Limited [2018] FCA 569 at [36].
In essence, the question whether the making of the orders sought will cause any person substantial injustice directs attention to the interests of (at least) the creditors and shareholders of the company: DAC Finance (NSW/Qld) Pty Ltd and other companies [2020] NSWSC 182 [46] (Gleeson J).
The court of course retains a residual discretion even if the preconditions to s 1322(4) CA are satisfied: Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357 [35] (Vaughan J); and Re Murray River Organics Ltd [39]. Satisfaction of the conditions in s 1322(6)(b) CA and s 1322(6)(c) CA are therefore necessary but not sufficient to ensure a favourable exercise of the discretion in s 1322(4)(c) and (d) CA. As summarised in Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960, factors which have previously been considered as relevant to the exercise of the discretion in the context of applications involving a failure to comply with the conditions in ASIC Instrument 2016/785 (being the instrument which is central to the present application) include:
(a) the general objects and purposes of the relevant statutory provision within the Act;
(b) the public interest in ensuring compliance with the Act and the interests of all parties affected;
(c) the promptness of any action taken to remedy the error; and
(d) whether ASIC opposes the application.
Historically, orders have been made under s 1322(4) CA to extend time for the lodgment of financial reports with ASIC and to relieve the company and its directors and officers from any civil liability in respect of those contraventions of the Act. I refer, by way of example, to Re Clinical Cell Culture Ltd [2004] FCA 1798; (2004) ACSR 362 (Lee J); Re Phosphate Resources Ltd [2005] FCA 1705; (2005) 56 ACSR 169 (French J); Re Affinity Health Ltd [2006] NSWSC 579; (2006) 58 ACSR 461 (Barrett J); and Owen, in the matter of RiverCity Motorway Pty Limited [2014] FCA 1008 (Greenwood J).
It has been accepted for some years that s 1322(4)(d) CA applies to time periods specified in ASIC Class Orders. I refer to Dana Australia (Holdings) Ltd [2006] FCA 355; (2006) 57 ACSR 99 (Finkelstein J) at [8] ‑ [11].Further, there is a body of authority which has held that s 1322(4) CA may apply to time periods specified in ASIC Instruments (such as ASIC Instrument 2016/785) where lodgment of a particular document is required to be lodged with ASIC as a condition of relief from compliance with financial reporting requirements. See, for example, Re Murray River Organics Ltd (Anderson J); Re Novonix Ltd [2019] FCA 2198; (2019) 141 ACSR 636 [26] (Jackson J); Re Car Buyers Australia Pty Ltd[2020] FCA 599 [30] (Gleeson J); and Re Flight Centre Technology Pty Ltd [2022] NSWSC 367; (2022) 160 ACSR 651 [29] (Black J).
D. Factual Background
Affidavit evidence
The relevant facts are primarily set out in two affidavits sworn by Mrs Teressa Estelle Trezise on 28 March 2023 and 6 April 2023 (First Trezise Affidavit and Second Trezise Affidavit). Among other roles within the Barrick Gold Group, Mrs Trezise serves as the company secretary of BME.
Further relevant material is detailed in the affidavit of Mr Luke Reginald Stephenson Fleming sworn on 28 March 2023 (Fleming Affidavit). Mr Fleming is a director of BME and has held tax manager roles within the Group over the years.
The court has also received an affidavit of Ms Lauren Kim Goldblatt sworn 11 April 2023 (Goldblatt Affidavit). Ms Goldblatt is a director of the law firm which acts for the plaintiff.
The uncontentious facts detailed in the affidavit material may conveniently be summarised as follows.
Corporate structure and details
Historically, the Barrick Gold Group had significant operations in Australia, but divested most of those projects between 2013 and 2019. Commencing in late 2021, the Group has begun to re-establish a presence in the Australia Pacific region. The plaintiff company, BME, has a long standing connection to this country having been incorporated in Queensland in March 1964.
The shares in BME are all held by Barrick Resources (Australia) Pty Limited (BRAPL). BME is itself a holding company which holds a 50% share in Ma'aden Barrick Copper Company Limited (Saudi Arabia) (MBCC). MBCC is a company incorporated in Saudi Arabia. It owns and operates the Jabal Sayid Copper Operation in the Kingdom of Saudi Arabia as a stand-alone mine (i.e. one that is not controlled by either of MBCC's shareholders). BME is also the 100% shareholder of Vertex Group Holdings WLL, a dormant entity domiciled in Bahrain.
BME's current directors are (a) Mr Luke Reginald Stephenson Fleming (he commenced on 20 October 2014); (b) Mr David Daniel Van de Vyver (he commenced on 30 November 2022); and (c) Mr Roelof Daniel Gey Von Pittius (he also commenced on 30 November 2022).
At the time of the relevant failures, the directors of BME were: (a) Mr Luke Reginald Stephenson Fleming; (b) Willem Jacobus Jacobs (who resigned on 30 June 2022); and (c) Johann Sebastiaan Bock (who resigned on 30 November 2022).
Deed of Cross Guarantee
On 18 November 2016, BME, BRAPL and other wholly-owned subsidiaries of BRAPL entered into a Deed of Cross Guarantee (Deed of Cross Guarantee) in the form required by ASIC Instrument 2016/785 to obtain relief (for those companies who would benefit from such relief) from the relevant requirements to prepare and lodge financial accounts. The Deed of Cross Guarantee was lodged with ASIC on 18 November 2016 and remains in force. This Deed of Cross Guarantee in effect replaced an earlier, similar deed, which had been entered into in December 2012.
Mrs Trezise has deposed that her understanding of the Group's reason for entry into the new Deed of Cross Guarantee was that it was for the key benefit of no longer being required to prepare standalone audited financial statements for its wholly owned subsidiary companies.
At the time, BRAPL and its subsidiaries obtained legal advice as to whether, given BME was a 'small proprietary company' under s 45A(2) CA, it needed relief under the ASIC Instrument if it did not wish to prepare standalone financial reports. BME was advised that it would need such relief if BME was not otherwise included in the consolidated financial statements lodged with ASIC (pursuant to s 292(2)(b) CA). Further, if consolidated accounts (which included BME) were prepared and lodged (as they were intended to be during the term of the Deed of Cross Guarantee so as to enliven the relief under the ASIC Instrument afforded to other wholly-owned subsidiaries of BRAPL), then BME would not require relief under the ASIC Instrument.
Mrs Trezise and BME therefore proceeded on the basis that BME did not require relief under the ASIC Instrument while it was a 'small proprietary company' and it was included in the consolidated financial statements lodged with ASIC in respect of the parties to the Deed of Cross Guarantee. In my view, this understanding is consistent with the relevant provisions of the Act.
On 19 January 2017, Mrs Trezise lodged ASIC Forms 389 for each party to the Deed of Cross Guarantee that was not a 'small proprietary company' under s 45A(2) CA for the financial year ended 31 December 2016, to enliven relief for those companies. Consolidated financial statements were subsequently lodged with ASIC in respect of each of the financial years which ended 31 December 2016 to 31 December 2021 (inclusive). I have also been informed that consolidated financial statements for the financial year ended 31 December 2022 are currently being prepared by BME for lodgement.
Events from October 2022
The failures in relation to BME, which form the central focus of this Application, first came to Mrs Trezise's attention when she received a letter from ASIC dated 10 October 2022. Mrs Trezise received that letter in mid-October 2022. The letter indicated that BME had failed to lodge its 2021 financial statements. Mrs Trezise then set about undertaking internal enquiries within the Group regarding this issue, as well as making external enquiries. These steps included discussions with Mr Fleming, reviewing electronic records held by the Group, searching ASIC registers, retrieving and reviewing boxes of archived corporate records, undertaking her own research to investigate the issue and its significance, and liaising with the Group's external accountants, among other steps.
Ultimately, Mrs Trezise, through these various endeavours, appreciated that the payment of dividends by MBCC to BME during the 2021 financial year had impacted BME's proprietary status. The dividends received were in the order of US$138 m. BME had, unknowingly from Mr Trezise's perspective, become a 'large proprietary company' as a matter of corporate classification through receipt of these dividends.
Mr Fleming has deposed that, as MBCC is a stand-alone operating mine and is not controlled by either of its joint venture shareholders, it is 'equity accounted' for accounting purposes. According to Mr Fleming, equity accounting is used to account for corporate investments where the investor holds significant influence over a subsidiary but does not exercise full control over it. BME's investment in its subsidiary (being MBCC) was initially recognized at cost and adjusted thereafter for post-acquisition change to the investor's (i.e. BME's) share of the subsidiary's assets. As explained by Mr Fleming, as MBCC is equity accounted for accounting purposes, the profits of MBCC (from which it paid the 2021 dividend to BME) did not themselves increase the consolidated revenue of BME. The status of BME from a 'small proprietary company' to a 'large proprietary company' changed once that dividend was actually paid, as a matter of law and fact. However, as BME's financial position is consolidated into the BRAPL Consolidated Financial Statements, Mr Fleming deposes that he did not realise that BME's proprietary status had changed. The issue simply went undetected at the time.
Mr Fleming deposes that he did not realise that BME needed to lodge an ASIC Form 389 to obtain relief from reporting requirements under the Act. At all times, Mr Fleming says he understood that BME had taken all necessary actions to obtain the relief from the relevant accounting, audit and reporting requirements under the Act.
Mrs Trezise informed ASIC by email on 3 November 2022 of the result of her enquiries and, following a decision by the BME directors to resolve to continue to remain a party to the Deed of Cross Guarantee, she lodged an ASIC Form 389 on behalf of BME in respect of the financial year ended 31 December 2021. Mrs Trezise was unaware at the time that merely lodging the form would not resolve the issue, a point to which she was alerted upon receipt of further correspondence from ASIC on 10 January 2023. In essence, ASIC indicated to BME that it was unable to grant an extension of time for BME to lodge its 2021 financial statements.
At this point, Mr Trezise sought external advice and provided a comprehensive update to ASIC by letter dated 21 February 2023. In that letter, Mrs Trezise informed ASIC that the Group was assessing its position in particular as to whether it would prepare, audit and lodge the financial statements and reports out of time, or in the alternative make an application under s 1322 CA for orders extending time to lodge the ASIC Form 389 and to relieve BME and its officers from civil liability.
As is now apparent, BME ultimately elected to pursue the alternative pathway. Mrs Trezise has deposed that she considered this a more efficient approach given that auditing BME's standalone financial statements would likely take several months to finalise. BME, as deposed by Mrs Trezise, wishes to ensure compliance at the earliest opportunity. There is evidence before me that the costs of preparing the standalone accounts would be in the order of US$30,000 to US$35,000, although this requires further consultation with the Saudi Arabian based audit team so I will treat this as something of an approximation only at this stage.
Mrs Trezise has further deposed that she, the Group, and BME all take compliance seriously. Mrs Trezise deposes that BME has acted swiftly to rectify the issue and to make this application to the court. Importantly, Mrs Trezise deposes that she does not wish for it to happen again and, accordingly, she will ensure that she has in place a procedure for periodic checks (at least at the end of each entity's financial year) as to the requirements for relief under ASIC Instrument 2016/785.
Mr Fleming deposes that the failure to comply with ASIC Instrument 2016/785 did not affect the content of the consolidated financial statements that were lodged with ASIC in respect to the financial year 2021. Mr Fleming says he has no reason to doubt the financial statements which have so far been prepared. Mr Fleming has also deposed that he is not aware of any person or entity that would be prejudiced or adversely affected, if the relief sought is granted (nor that any injustice is likely to be caused to any person).
Historical non-compliance
The plaintiff has adduced evidence as to certain matters of historical non-compliance by companies in the Group. These matters were also disclosed to the Federal Court of Australia in the course of scheme of arrangements proceedings before that court in 2017: Barrick (Australia Pacific Exploration) Pty Limited v Barrick (PD) Australia Pty Limited, in the matter of Barrick (Australia Pacific Exploration) Pty Limited (No 2) [2017] FCA 1076. I will describe these historical matters briefly.
The affidavit evidence before me discloses that on 14 December 2006, Barrick (Australia Pacific Exploration) Pty Limited (BAPE), Barrick (GSM) Pty Limited (GSM), Delta Gold Pty Limited (Delta Gold), Barrick (Kalgoorlie) Pty Limited (BKal), AurionGold Pty Limited (AurionGold), Barrick (Granny Smith) Pty Limited (Granny Smith), Barrick (PD) Australia Pty Limited (BPDAL), and other wholly-owned subsidiaries of BPDAL entered into a Deed of Cross Guarantee (2006 Cross Guarantee) in the form required by the Class Order in order to seek relief under the Class Order in respect of requirements to prepare and lodge financial accounts. BPDAL was the 'Holding Entity' in respect of the 2006 Cross Guarantee.
The relevant failure was that BPDAL failed to prepare and lodge Consolidated Financial Statements in accordance with the conditions of the Class Order in respect of the financial years ended 31 December 2006, 31 December 2007, 31 December 2008, 31 December 2009, 31 December 2010 and 31 December 2011. Further, none of the entities seeking to rely on the relief provided by the Class Order (including BAPE, GSM, Delta Gold, BKal, AurionGold and Granny Smith) lodged the required annual notices or opt-in notices. Barrick Gold Group applied to ASIC for 'no-action' letters to be issued in respect of these contraventions, but that request was refused.
The affidavit evidence discloses that proceedings were commenced by ASIC in relation to certain of these contraventions, which resulted in a fine being imposed on at least one of the entities concerned. So, although the contraventions in question were not cured as such, they were dealt with in part, for the period of contravention from 2006 to 2009, by way of regulatory action.
Mrs Trezise has deposed that she is not aware of any failure to comply with Part 2M.3 of the Act by any of the entities in the Barrick Gold Group since 2012 (other than the matters the subject of this Application).
The position of ASIC
ASIC has been served with the papers filed in support of this Application. In the Goldblatt Affidavit, the history of the communications between the plaintiff's solicitors and ASIC has been outlined and copies of the written communications have been annexed. The course of the correspondence culminated in a letter from ASIC dated 11 April 2023 which states that:
ASIC neither supports nor opposes the application and does not intend to appear at the hearing of the matters in the Supreme Court of Western Australia…
E. Disposition
Preliminary matters
I accept the plaintiff is an interested person with sufficient standing to seek relief, as required by s 1322(4) CA. I also accept the court has power to grant the relief sought in the Application, to extend the time period in ASIC Instrument 2016/785 for the lodgment of ASIC Form 389, to extend time to allow the plaintiff's directors to resolve that it should obtain the benefit of the Instrument,[2] and to grant relief from civil liability.
[2] Which are express preconditions within ASIC Instrument 2016/785 – see condition 6(1)(f) and condition 6(1)(g)(i).
It remains to consider whether the court should grant the relief I have outlined above. In this regard, the remaining statutory requirements are, for the purposes of an order under s 1322(4)(c) CA, whether the persons in question acted honestly (s 1322(6)(b)) and whether the court is satisfied the contravention has not, and the making of the orders is not likely to, cause substantial injustice to any person (s 1322(6)(c) CA). In relation to an order under s 1322(4)(d) CA, the statutory requirement is whether the court is satisfied the contravention has not, and the making of the order is not likely to, cause substantial injustice to any person (s 1322(6)(c) CA). If these preconditions are met, I must also address the residual discretion.
Extensions of time - should the jurisdiction be exercised?
I turn first to deal with the orders sought to extend time for compliance with ASIC Instrument 2016/785. These orders are sought under s 1322(4)(d) CA, to extend the time for compliance with conditions 6(1)(f) and 6(1)(g)(i) of that instrument. In my view, the following matters weigh in favour of the extension which is sought.
First, there is a cogent reason for the delay in not having complied with the requirements of ASIC Instrument 2016 /785 and a good reason for the extension. The court has been provided with comprehensive affidavit evidence to detail the belief of the relevant officers within BME and the Group that BME did not require the relief by virtue of the lodgment of consolidated accounts and its status as a 'small proprietary company'. Mrs Trezise and Mr Fleming have deposed to the relevant circumstances which historically applied within the Group and the explicable reasons which meant the failure was not identified or detected at the time. I accept their belief was genuine.
It is entirely understandable in my view that the officers within a large international mining house, which is otherwise accustomed to group reporting, would overlook the consequences of a specific dividend payment in terms of the financial reporting obligations.
The error made in the present circumstances is not dissimilar to the error made by the plaintiff company in Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960 (Goodman J), an authority to which the plaintiff has drawn my attention. In that case, a change in the legislative definition of 'large proprietary company' in s 45A(3) CA went undetected by the company. The relevant entity ceased being a 'large proprietary company' during the relevant years, which impacted its financial reporting obligations. On the evidence before the court in that matter, extensions of time were granted and relief from civil liability orders were made.
Second, once BME became aware of the failure, it acted promptly to obtain further advice about the failures and how to comply with the relevant statutory requirements and conditions, including to bring this application. The affidavit evidence discloses a series of responsible steps and actions taken by the company from mid-October 2022 which demonstrate the company's concern as to the failure and the importance to the company of corrective action.
The promptness of the plaintiff's conduct was directly addressed by counsel for the plaintiff, Ms Pieniazek. Counsel drew a distinction in her submissions between failures on the part of public listed entities and failures on the part of privately held entities.[3] In the former circumstances, counsel submitted there may well be trading or market‑related concerns and a need for urgent corrective action to be taken. In the latter cases, although delay is not encouraged, there are typically no trading or market-related concerns and so there tend not to be the broader implications for third party interests beyond those of the creditors and shareholders to the instant group. I accept this is a valid distinction and in any event, as counsel observed, third party stakeholders of the plaintiff had the protection of the Deed of Cross Guarantee which remained in place.
[3] ts 30.
Third, it is consistent with the policy and purpose of the Act that extensions such as the present be granted. Extensions such as this are facilitative of commerce generally, as a beneficial end in itself.
Fourth, the conduct of BME and its officers, viewed in totality, is not otherwise disentitling of relief. I find that the failures were a result of inadvertence and oversight on the part of Mrs Trezise, the plaintiff's company secretary. I find that the non-compliance was unintentional and not dishonest. Further, while I note the existence of historical instances of non-compliance by other entities within the Barrick Gold Group, which remain uncured, they are not such as to disentitle the plaintiff from the relief which is presently sought. As I have indicated, these historical non-compliances concern companies other than the present plaintiff, did not concern the present management team, and were dealt with by way of regulatory proceedings at least in so far as a substantial proportion of the contraventions are concerned.
Fifth, if no extension is granted there are adverse consequences for the plaintiff. Most significantly, these are the costs and time associated with the preparation and lodgment of financial reports for the plaintiff. While the costs are not material from the perspective of this Group, the need for the plaintiff to incur these costs, and the additional time of personnel to attend to the tasks required, is not consistent with the rationale of ASIC Instrument 2016/785 (particularly where I am told the Deed of Cross Guarantee remains in place and the holding company has already lodged consolidated financial statements).
Sixth, and allied to the preceding reason, the substantive protection and information needs of creditors of the Group (as well as other stakeholders) are already sufficiently met given the Deed of Cross Guarantee remains in place and the holding company has already lodged consolidated financial statements for the relevant year).
Seventh, an officer of the plaintiff has deposed that steps will be taken to prevent this oversight occurring in the future.
Eighth, ASIC has indicated it does not oppose the Application.
In the circumstances, I am persuaded that the failure was unintentional and inadvertent, and was not the result of any deliberate disregard of the Act. I find that no substantial injustice has been or is likely to be caused to any person by reason of the failure or by making of the order which is sought. As submitted by the plaintiff, the orders do not alter any rights but rather seek to formalise what should have occurred and what was assumed to have occurred.
As I have observed, the consolidated financial statements of the Group were lodged in respect of the financial year in question and, at all relevant times, the Group enjoyed the support of its parent entity, which is Barrick Gold Corporation, the ultimate parent company within the Group. There is evidence before me that the directors have obtained a letter of support from that parent company, which indicates that its present intention is to provide financial support to the plaintiff in order to enable the plaintiff to meet its liabilities as they fall due and to carry on its own business, for at least the 12 months after the audit report signing date. The audit report signing date is 31 May 2022, which indicates a continuing period of support beyond today for some months.
Specifically, there is evidence before me, contained within the Second Trezise Affidavit, of a solvency declaration which was made by the directors of the plaintiff on 4 April 2023. The directors noted that the plaintiff, which is ultimately controlled by Barrick Gold Corporation, has provided a letter of support to BRAPL. According to the declaration, that letter of support undertakes to ensure that BRAPL and its subsidiaries have access to adequate financial resources to enable them to fulfill all of its financial obligations.
Relief from civil liability - should the jurisdiction be exercised?
I next turn to deal with the orders sought to relieve the plaintiff and its officers from civil liability. These orders are sought under s 1322(4)(c) CA. The relevant failures identified in the orders are:
(a)a failure to lodge an ASIC Form 389 with ASIC within 4 months of the end of the 2021 financial year (which is the opt in/change of holding entity notice);
(b)a failure to comply with s 188(1)(h), s 292(1), s 301(1), s 319(1) and s 344(1) CA in respect of the financial year ended 31 December 2021;
(c)a failure to lodge an ASIC Form 388 with ASIC for the financial year ended 31 December 2021 (which is a copy of its financial statements and reports); and
(d)a failure to comply with any notice issued by ASIC under s 1274(11) CA.
As to the last of these matters, the plaintiff notes that it has not as yet received any notice from ASIC pursuant to s 1274(11) CA, but ASIC has foreshadowed that it might issue one. I refer to the email which was received by the plaintiff from ASIC on 10 January 2023 in which an ASIC representative indicated that a second compliance letter with a notice under s 1274(11) CA notice 'may be issued to the company if it remains non-compliant'.
Following Ms Trezise's comprehensive response to ASIC on 21 February 2023, a further email was received from a representative of ASIC on 22 February 2023. That email gave some further indication that a notice under s 1274(11) CA may indeed already have been issued. At the moment, there is no evidence before the court to indicate that such a notice has, in fact, been issued. There is, however, a distinct possibility that one might be forthcoming. It is therefore appropriate in my view to include in the relief to be granted the failure which is described at [69(d)] above concerning any notice issued by ASIC under s 1274(11) CA.
The precondition to the making of orders pursuant to s 1322(4)(c) CA is that the persons have acted honestly. In assessing whether this precondition has been satisfied on this Application, in the absence of any contradictor, I am left to examine the affidavit material and make findings and draw appropriate inferences where possible from that material. The quality of the affidavit material in applications such as the present is undoubtedly critical to the ability of the court to undertake this task. Where affidavits are drawn in too general a manner, or leave questions unanswered, or perhaps fail to explain material aspects of the chronology of events, the court may be left in a position where it has insoluble concerns as to whether the preconditions to the granting of the relief sought have been established, or the residual discretion to decline to grant the relief sought may be engaged.
The court is naturally assisted in its task by the process of external lawyers and counsel working with prospective plaintiffs to ensure the affidavit material which is adduced is sufficiently comprehensive as to the circumstances which led to the relevant failure or failures and any consequences flowing therefrom, as well as candidly exposing any material matters which may negatively bear upon the relief which is sought. One such example is the identification of instances of historical non-compliance with the Act, as has been done in the present case.
The affidavit material adduced on this Application is comprehensive and candid, and leaves me comfortably satisfied that the precondition in s 1322(6)(b) CA has been satisfied here. There is no evidence before me that BME or its directors and officers have acted dishonestly in any way, and I find that, on the totality of the affidavit material, the persons concerned have acted honestly. The primary factual findings which can be made from the affidavit material (and which I so find) are:
(a)The plaintiff entered into the Deed of Cross Guarantee in order to have the ability to obtain relief from the obligation to prepare and lodge standalone financial statements for its many wholly owned subsidiaries. External legal advice was sought. The plaintiff understood, correctly in my view, that if the 'holding company' under the Deed of Cross Guarantee lodged consolidated accounts which included the plaintiff then it was unnecessary for the plaintiff to obtain relief under ASIC Instrument 2016/785 provided it remained a 'small proprietary company'.
(b)In the financial year which ended on 31 December 2021, the 'holding company' under the Deed of Cross Guarantee lodged consolidated accounts for the Group (which included BME).
(c)An inadvertent error occurred in 2021. Mrs Trezise failed to appreciate that BME ceased to be a 'small proprietary company' and was unaware of the implications of that happening, namely that the plaintiff was no longer entitled to rely on the exemption from the obligation to prepare standalone accounts afforded by s 292(2)(b) CA.
(d)Mr Fleming (and the other directors of the plaintiff) relied on Mrs Trezise on matters such as this. Although there is not in evidence any affidavit material sworn directly by the other directors of the company (other than Mr Fleming), I am able to draw the inference, and I do draw the inference, that each of the directors and officers of the company had a practice of relying upon Mrs Trezise as the company secretary in order to comply with the company's financial reporting obligations in the relevant period. Mr Fleming himself had around 11 years of experience in working together with Mrs Trezise and formed positive views as to her strong work ethic, her high attention to detail, her knowledge of the corporate structure of the Group, and her understanding of the regulatory regime. It was reasonable for Mr Fleming and the other directors to have relied upon her as they did.
(e)The plaintiff (and Mrs Trezise) sought legal advice from an external law firm as to the establishment of the Deed of Cross Guarantee in the first place. That legal advice was correct. Once the failure to comply with the Act came to the plaintiff's attention in mid-October 2022, the plaintiff (and Mrs Trezise) again took legal advice and acted on, and followed, that advice.
(f)Prompt action was taken by the parties to remedy the failure and to pursue this Application before the court.
As to the pre-condition and requirement in s 1322(6)(c) CA that no substantial injustice has been or is likely to be caused to any person, that matter is satisfied in the present circumstances. I reach that conclusion primarily because the Deed of Cross Guarantee has been and is in place, and because the plaintiff is solvent and operates within a large corporate group for which group accounts have been prepared. It is therefore most unlikely that any creditor or potential creditor has been prejudiced by the contraventions. In addition, I refer to the letter of support which exists within the Group itself.
Counsel for the plaintiff, Mr Papamatheos, has also directed my attention to paragraph 4 of the minute of proposed orders, which provides another measure of comfort as to satisfaction of the precondition in 1322(6)(c) CA.[4] That paragraph allows parties to make an application within 28 days should they wish to address the court on the question of substantial injustice.
[4] ts 22.
As to whether there are discretionary reasons to withhold relief, I am satisfied there is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or constitution so as to warrant refusal of the relief sought. Additionally, the Application has been brought promptly.
This is one final matter to address. The form of the relief sought was initially directed to 'any failure' to comply with the relevant statutory and other requirements. There is authority to the effect that the grant of the court's relief should be based on, and limited to, the 'confessed acts of contravention', rather than be drafted in an overly broad manner. See, for example, Re Ozito Industries Pty Ltd [2020] FCA 1432; (2020) 148 ACSR 585 [30] (O'Bryan J) but there are other authorities. The fundamental proposition that is made in those authorities is that the form of the order for relief should not operate as a blank cheque to the plaintiff and the other parties involved. This is a matter I raised with counsel during the course of the hearing. I am satisfied that, with a minor change to the chapeau to paragraph 2 of the minute to refer to 'the failures', the order is sufficiently directed to the confessed acts of contravention. With this amendment, the form of paragraphs 2(a), 2(b) and 2(c) will all be directed to particular acts or omissions which have been identified in the affidavit evidence before the court as being the relevant acts of contravention in this particular case.
F. Conclusion
For the reasons set out above, I will make the orders sought in the plaintiff's minute of proposed orders dated 4 April 2023, as amended during the hearing. The final orders made are set out in Attachment A to these reasons.
ATTACHMENT A
ORDERS MADE BY THE COURT ON 12 APRIL 2023
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Lundberg
19 APRIL 2023
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