Re Bellavista Resources Limited
[2023] WASC 40
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE BELLAVISTA RESOURCES LIMITED; EX PARTE BELLAVISTA RESOURCES LIMITED [2023] WASC 40
CORAM: LUNDBERG J
HEARD: 13 FEBRUARY 2023
DELIVERED : 15 FEBRUARY 2023
FILE NO/S: COR 23 of 2023
MATTER: IN THE MATTER OF BELLAVISTA RESOURCES LIMITED
EX PARTE
BELLAVISTA RESOURCES LIMITED
Plaintiff
Catchwords:
Corporations - Application for orders under s 1322(4) of Corporations Act 2001 (Cth) - Failure to lodge half-yearly accounts as required by ss 302 and 320 of Corporations Act 2001 (Cth) - Unexplained delay - Orders made to extend time and deem compliance with ASIC Instrument 2016/190 such that the plaintiff is relieved of the obligation to lodge half-yearly accounts
Legislation:
ASIC Corporations (Disclosing Entities) Instrument 2016/190
Corporations Act 2001 (Cth), s 302, s 320, s 323D, s 1322
Result:
Application allowed
Representation:
Counsel:
| Plaintiff | : | Mr T O Coyle |
Solicitors:
| Plaintiff | : | Hamilton Locke |
Case(s) referred to in decision(s):
Dana Australia (Holdings) Ltd [2006] FCA 355; (2006) 57 ACSR 99
Ex parte Imdex Ltd [2020] WASC 298
Owen, in the matter of RiverCity Motorway Pty Limited [2014] FCA 1008
Re Affinity Health Ltd [2006] NSWSC 579; (2006) 58 ACSR 461
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 Micro-X Limited [2019] FCA 1154
Re Murray River Organics Ltd (2019) 138 ACSR 365; [2019] FCA 1432
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 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
B. Evidence
C. Notice to ASIC and the ASX
D. Relevant Facts
Uncontentious Facts
Unexplained Delay
E. Relevant Legislation
F. Relevant Principles
Overview
Analysis of authorities
Application of s 1322(4) to ASIC Class Orders and ASIC Instruments
G. Disposition
Standing and Power
Revised Form of Orders
Should the jurisdiction be exercised?
H. Conclusion
LUNDBERG J:
A. Introduction
On 6 February 2023, Bellavista Resources Limited (Bellavista Resources or the plaintiff) filed proceedings seeking relief pursuant to s 1322(4) of the Corporations Act 2001 (Cth) (CA or the Act) in respect of a failure by the company to lodge its first half-yearly reports as required by s 302 and s 320 CA (Application).
In particular, the plaintiff sought an order pursuant to s 1322(4)(d) CA extending the end of the company’s first half-yearly reporting period under s 302 CA. The extension of that reporting period which was sought by Bellavista Resources was from 31 May 2022 to 30 June 2022.[1]
[1] Originating Process dated 6 February 2023, Proposed Order 1.
In the alternative, relief was sought by Bellavista Resources pursuant to s 1322(4)(a) and s 1322(4)(d) CA to the effect that a newly prepared addendum be deemed to have been included in the directors’ report for the financial year ending 30 June 2022 (Proposed Addendum), together with associated service orders.[2] This alternative approach sought to bring Bellavista Resources within the relief from compliance which is permitted by the terms of s 6(2)(b) of ASIC Corporations (Disclosing Entities) Instrument 2016/190 (ASIC Instrument 2016/190).
[2] Originating Process dated 6 February 2023, Proposed Order 2(a) and (b). The terms of the Proposed Addendum explain the operation and effect of ASIC Instrument 2016/190. The plaintiff had taken steps to lodge the Proposed Addendum on the ASX platform prior to the hearing on 13 February 2023.
The Application was originally listed by the court for hearing before me on 20 February 2023. However, on 10 February 2023, the Australian Securities Exchange (ASX) suspended the securities of Bellavista Resources and indicated that it did not propose to lift the suspension until the defect the subject of this Application has been cured.[3] Accordingly, the plaintiff sought an urgent listing of the Application for Monday, 13 February 2023.[4] As the matter was of such an urgent nature that it was required to be heard immediately, the Civil Listings Coordinator made arrangements to list the matter for urgent hearing on the afternoon of 13 February 2023.
[3] The issue which arises in this regard is that it follows from a contravention of s 320 of the Corporations Act that there has been a failure to meet ASX Listing Rule 4.2A. A failure to meet ASX Listing Rule 4.2A triggers ASX Listing Rule 17.5, which leads to a suspension of the entity's securities from quotation: see the email from James Rowe (Head of Listings Compliance (Perth), ASX to Hamilton Locke sent on 9 February 2023 at Attachment MDN-9 to the Second Naylor Affidavit.
[4] Certificate of Urgency filed by Hamilton Locke, directed to the Principal Registrar of the Supreme Court dated 10 February 2023.
At the hearing on 13 February 2023, the plaintiff was represented by Mr T O Coyle. There was no appearance on behalf of any other party and the matter thus proceeded ex parte. I heard oral submissions from counsel in support of the Application at the hearing. Those oral submissions amplified some of the more salient matters set out in the plaintiff’s outline of submissions dated 12 February 2023.
As further explained in these reasons, I had two preliminary concerns with the relief sought by the plaintiff. On the morning of 13 February 2023, I had my associate raise these issues with the plaintiff’s solicitors by email. The two issues were as follows:
(a)The first issue was whether there was any judicial authority which supported s 1322(4) being engaged to extend the reporting period in s 302 (and s 323D(5)), as distinct from extending the time period in which a half-yearly report or annual report may be filed. As explained below, I was ultimately not satisfied the primary order sought by the plaintiff to this effect was within power.
(b)The second issue was whether there was any explanation for the delay between 21 September 2022 (when the plaintiff first became aware of the contravention) and 6 February 2023 (when the Application was filed with the court). No explanation was forthcoming.[5]
[5] ts 4 - 6 (13 February 2023).
During the course of the hearing, and after an exchange with counsel, I proposed an alternative set of orders which modified the orders proposed by the plaintiff. I considered those orders would be within the power granted by s 1322(4) CA, and I was satisfied those orders should be made on the material available.[6] I made those orders at the conclusion of the hearing and indicated I would publish my reasons in due course.
[6] ts 14 - 18 (13 February 2023).
B. Evidence
The Application was supported by a number of affidavits. Counsel relied on each of these affidavits at the hearing on 13 February 2023. The primary affidavit was that of Michael David Naylor which was affirmed on 3 February 2023 (First Naylor Affidavit). Mr Naylor affirmed a supplementary affidavit on 12 February 2023 (Second Naylor Affidavit). Mr Naylor is one of two company secretaries of Bellavista Resources. He has held that position since the incorporation of the company on 30 November 2021.
A short affidavit was affirmed on 12 February 2023 by Maddison Joy Cramer who is Mr Naylor’s co-company secretary (Cramer Affidavit).
Finally, two affidavits were affirmed on 13 February 2023 by of one of the plaintiff’s solicitors, Mr Christopher Paul Hood (First Hood Affidavit and Second Hood Affidavit). Those affidavits largely explained and verified the communications between the plaintiff and with both the ASX and the Australian Securities and Investments Commission (ASIC).
C. Notice to ASIC and the ASX
As already noted, there was no appearance at the hearing on behalf of ASIC or the ASX.
The First Hood Affidavit and the Second Hood Affidavit attached the latest communications between the plaintiff’s solicitors and both ASIC and ASX.
The First Hood Affidavit included a letter from the ASX dated 13 February 2023 indicating that it was not aware of any fact or circumstance that would cause it to oppose the application and that it did not intend to appear at the hearing. The Second Hood Affidavit included a letter from ASIC dated 13 February 2023 indicating that ASIC neither supported not opposed the relief sought and did not intend to appear at the hearing of matter.
I was satisfied on the affidavit material that both ASIC and the ASX were given proper notice of the Application.
D. Relevant Facts
Uncontentious Facts
The essential (and uncontentious) matters of fact which emerged from the affidavit material are set out below.
Bellavista Resources is an early-stage Australian mineral exploration company with a focus on exploration in the upper-Gascoyne region of Western Australia.[7] Bellavista Resources was only relatively recently incorporated and admitted to quotation on the ASX. It was incorporated on 30 November 2021 and listed on 25 May 2022.[8]
[7] First Naylor Affidavit [7].
[8] First Naylor Affidavit [8].
Bellavista Resources engages a third party company, Blue Leaf Corporate Pty Ltd, to provide it with company secretarial and financial management services. Mr Naylor is a director of that company.[9]
[9] First Naylor Affidavit [9] - [11].
Mr Naylor and one of his associates prepared the financial statements for Bellavista Resources for the 7 month period comprising the balance of the 2021/2022 financial year. This period commenced on the date of incorporation of Bellavista Resources (namely, 30 November 2021) and ran through until 30 June 2022.[10] The financial statements for the balance of the 2021/22 financial year were lodged with the ASX on 30 September 2022.[11]
[10] First Naylor Affidavit [12].
[11] First Naylor Affidavit Attachment MDN-3.
On or around 21 September 2022, it appears that Mr Naylor’s attention was drawn to the issue concerning the failure by Bellavista Resources to lodge its 6 monthly accounts with ASIC for the period ending 31 May 2022. The plaintiff’s auditors, Ernst & Young, raised this issue with Mr Naylor.[12] Specifically, Ernst & Young enquired whether the plaintiff had lodged a notice under the ASIC Instrument within the 75 day specified period. Shortly after being informed by Ernst & Young of the company’s failure, Mr Naylor also took legal advice.
[12] First Naylor Affidavit [14].
I accept that it was open to Bellavista Resources to avoid the requirement to lodge the 6 monthly accounts in question if it had given appropriate notice to the ASX within the 75 day period which expired on 14 August 2022 and also included an explanation within the directors’ report lodged for the 2022 financial year.[13] This can be achieved by giving notice to the ASX under ASIC Instrument 2016/190 and including an explanation in a directors’ report for the relevant financial year.[14]
[13] First Naylor Affidavit [16].
[14] The terms of ASIC Instrument 2016/190 are set out in these reasons at [34].
Unfortunately, Mr Naylor missed the window of opportunity to follow this course. He affirms in his affidavit that he would have followed that course of action had he been aware of these obligations before the expiration of the 75 day period. I accept it is highly likely that Mr Naylor would have followed that course had he appreciated he had the ability to do so. Had he done so, as I have noted, Bellavista would have been excused from the requirements under the Act in respect of the preparation and lodging of the 6 monthly accounts.
Mr Naylor deposes that the breach of the requirement in the Act is a matter of concern for him. He deposes that:[15]
First, it has always been my position as company secretary (and CFO) that Bellavista should comply with its ongoing obligations under the Corporations Act in relation to the lodging of accounts and similar such requirements. Secondly, as matters stand Bellavista may not be able to proceed with securities issues by means of issuing cleansing notices under section 708A(6) of the Corporations Act because it will not be able to state in such notices that it has complied with Chapter 2M of the Corporations Act, which is a requirement under section 708A(6)(d)(i).
As to the second matter outlined above, I have had recent discussions with directors of Bellavista about the need to raise funds over coming months. In the normal course I would cause Bellavista to proceed with such securities issues via the issue of cleansing notices rather than with the more complicated and expensive process involved in proceeding by way of disclosure by prospectus. Apart from the issue outlined above as to Bellavista having failed to issue 6 monthly accounts, I am not presently aware of any reason why future fundraising could not proceed by way of cleansing notices.
[15] Naylor Affidavit [21] - [22].
Mr Naylor further deposes that, in early December 2022, he took further legal advice and was advised by the plaintiff’s solicitors that the company should seek to deal with the non-compliance referred to above by commencing proceedings in the Supreme Court for orders extending the 75-day period for lodging such a notice and related orders. If such orders were made, Bellavista Resources would then be in a position to certify its compliance with Chapter 2M of the Act. In turn, Mr Naylor deposes, this would enable Bellavista to issue valid cleansing notices for future securities issues.
Mr Naylor states in his affidavit that the plaintiff’s failure to lodge 6 monthly accounts was a 'one-off default'. He explains that this is because the requirement to lodge 6 monthly accounts arose by operation of s 302 and s 323D(5) CA as a result of the incorporation of Bellavista Resources on 30 November 2021.
Finally, Mr Naylor deposes that the plaintiff’s future financial statements will be lodged on an annual basis in accordance with s 292 CA (with the company’s financial year ending on 30 June of each year). Mr Naylor assures the court that these statements will be properly prepared and audited, as required under the Act.
Unexplained Delay
One aspect of the chronology was not clear to me from the affidavit material. It was evident that Mr Naylor (and therefore the plaintiff) appreciated by on or about 21 September 2022 that a contravention of the Act had occurred. This was too late to seek the exemption from the ASX, as explained above. Mr Naylor then took legal advice in December 2022 specifically in relation to the bringing of an application to this court seeking relief. Mr Naylor was advised by the plaintiff’s solicitors that the company should seek to deal with the non-compliance by commencing proceedings in this court. That was sound advice which he ought to have followed.
What remained unclear from the affidavits which were filed is why the plaintiff did not follow this advice and instead waited until 6 February 2023 to file the Application seeking relief from this court under s 1322(4) CA.
As noted at the outset of these reasons (see [6] above), I raised the issue of delay with the solicitors for the plaintiffs prior to the hearing and during the course of the hearing with counsel. In essence, the delay remains unexplained. It appears that the appropriate degree of urgency was only felt by the plaintiff once it appreciated that a consequence of the contravention was a suspension of its shares by the ASX. That was quite late in the piece. In my opinion, the delay of over four months between knowledge of the contravention and instituting proceedings for relief ought to have been properly explained on affidavit.
It goes without saying, I hope, that this degree of delay in seeking relief under s 1322(4) CA is unacceptable and far from consistent with good corporate governance. A listed entity which becomes aware of a contravention, including of its reporting obligations under Chapter 2M, should seek relief from a court in a prompt fashion.
E. Relevant Legislation
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 2 thereof deals with the subject of ‘Half-year financial report and directors’ report’ (and consists of ss 302 to 306 CA).
Section 302 CA is headed ‘Disclosing entity must prepare half-year financial report and directors' report’. In terms, it provides as follows (excluding the notes to the provision):
A disclosing entity must:
(a)prepare a financial report and directors' report for each half-year; and
(b)have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor's report; and
(c)lodge the financial report, the directors' report and the auditor's report on the financial report with ASIC;
unless the entity is not a disclosing entity when lodgment is due.
Pursuant to s 320 CA, a disclosing entity that has to prepare or obtain a report for a half-year must lodge the report with ASIC within 75 days after the end of the half-year. By virtue of ss 302 and 320 CA, Bellavista Resources was required to lodge its half-yearly accounts with ASIC by 14 August 2022, for the period ending 31 May 2022. As already noted, it failed to do so.
The power of the court to make orders avoiding the effects of irregularities and extending time is set out in s 1322 CA. The plaintiff relies in this Application on the power in s 1322(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 2016/190 should also be noted. 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. Sections 6(1) and 6(2) of ASIC Instrument 2016/190 state as follows:
6Disclosing entities with short first financial years
Relief
(1) A disclosing entity does not have to comply with sections 302 or 306 of the Act for a half-year within the entity’s first financial year (the relevant financial year) where that year lasts for 8 months or less.
Where relief applies
(2) The relief in subsection (1) is available where:
(a) either:
(i)the entity:
(A) is a listed disclosing entity; and
(B) gives to the operator of each prescribed financial market of which the entity is included on the official list a notice which explains the effect of this section and states that the entity intends to rely on it; or
(ii)the entity:
(A) is an unlisted disclosing entity; and
(B)gives to ASIC a notice which states that the entity intends to rely on this section; and
(b)the directors’ report for the relevant financial year of the entity explains the effect of this section and states that the entity relied on it.
The notice referred to in sub-subparagraph (a)(i)(B) or (a)(ii)(B) must be given to the operator or ASIC (as relevant) on or before the deadline for lodging the reports which would have been required to be prepared by section 302 of the Act but for this section.
In the context of the present case, the plaintiff would have obtained relief from the reporting requirement if it had (1) given to the ASX a notice within 75 days of 31 May 2022 which explained the effect of s 6 and stated that the plaintiff intended to rely on it (s 6(2)(a)(i)(B)) and (2) included within the directors’ report for the 2021/2022 financial year of the plaintiff an explanation of the effect of section 6 and stated that the plaintiff relied on it (s 6(2)(b)).
F. Relevant Principles
Overview
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] and by Strk J in Re Yandal Resources Ltd [2022] WASC 338 [74] - [75]. 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 (omitting the footnotes):
(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.
Historically, orders have been made under s 1322(4) CA to extend time for the lodgment of annual reports and half yearly reports with ASIC and, indeed, to relieve the company and its directors and officers from any civil liability in respect of those contraventions of the Corporations 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).[16] I will briefly refer to three of these authorities.
Analysis of authorities
[16] In Owen, in the matter of RiverCity Motorway Pty Limited, Greenwood J applied s 1322(4)(d) CA to extend the time period for a company in liquidation to comply with its reporting obligations under ss 292, 298, 302, 206, 314, 319 and 320 CA (see [80] - [86] and Order 6).
In Re Clinical Cell Culture Ltd, the plaintiff entity mistakenly believed that a valid resolution had been passed at an AGM which permitted the company to change its financial year-end date. In truth, an exemption was required from the regulator to achieve this outcome. Accordingly, the company contravened the Act in failing, within time, to hold an AGM, to lodge the annual and half-yearly report and in failing to properly issue a prospectus (and thereby comply with disclosure requirements for a share purchaser plan). During the period in which the company operated under this mistaken belief, it continued to otherwise comply with its reporting obligations.[17]
[17] Re Clinical Cell Culture Ltd [5]
Lee J granted the relief sought. His Honour found the contraventions were inadvertent and innocent, and it was just and equitable and in the interest of all parties that remedial orders be made under s 254E and s 1322 CA, relieving the company, its directors and officers from any civil liability in respect of the contraventions ([7]). His Honour’s orders included a specific order which extended the time period under s 320(1) CA for the lodgment of the company’s report for two half-year periods, extending the time period to a future date to allow compliance.[18]
[18] Re Clinical Cell Culture Ltd [8] (see Order 8)
Re Phosphate Resources Ltd is a relatively well-known decision of French J (as his Honour then was). It is one of a very few, select cases in Australian jurisprudence in which approval for a scheme of arrangement has been declined ([132] - [133]). The unexpected failure of the scheme created a consequential timing difficulty for the applicant in a number of respects, including an inability to prepare and lodge its annual financial report by 30 September, as required by s 319(1) CA.
French J was ultimately prepared to make the orders sought, allowing an extension of time under s 1322(4)(d) CA for the period set out in s 319(3)(a) CA for the plaintiff to lodge its annual report through to 31 December 2005. This represented an extension of around 3 months. His Honour concluded:
[138]In so far as the late preparation of financial reports may have impacted upon the Scheme approval process, no substantial injustice has been or is likely to be caused having regard to the Court’s refusal to approve the Scheme for unrelated reasons. It is said that a refusal to grant an extension would inflict unnecessary liability or inconvenience. PRL’s primary focus has been on ensuring that shareholders are provided with all relevant information, both financial and non-financial. The time and resources directed to the Scheme approval process meant that the time for preparation and lodgment of audited annual reports proceeded on the basis of an assumption that was not realised. It is submitted for PRL that this honest inadvertence in circumstances where PRL was doing its best to give all relevant information to shareholders for the Scheme meetings is not one which warrants punishment.
[139]There is no reason to doubt the honesty of those who were responsible for the preparation of the financial report and failed to act in relation to its preparation in a timely fashion. The assumption upon which they acted was, however, a risky one. It depended upon the absence of any opposition at the meeting and moreover assumed that the Court would give its approval to the Scheme. It was, of course, open to PRL to apply to the Court for an extension before the period had ended. The failure to do so speaks of a rather casual approach to the obligations imposed by the Act.
[140]In my opinion, however, the circumstances which have given rise to the failure to comply with the requirements of the Act were unique in the history of PRL. They reflect distraction, carelessness and wrong assumptions, rather than any dishonesty or reckless disregard of statutory requirements. In the circumstances, I am prepared to make the orders sought.
In Re Affinity Health Ltd, a number of companies in a corporate group defaulted in meeting a lodgment requirement for their audited financial statements and directors’ reports under s 319 CA (and under a Class Order). Subsequently, the failures were remedied by lodging the documents in questions, albeit out of time. Barrett J was asked to make orders under s 1332(4)(d) CA extending the time for lodging the documents so that it became the date (which had by then past) by which the lodgments were in fact made. In effect, an order nunc pro tunc was sought.
Barrett J concluded that s 1322(4)(d) CA was available to be applied in the manner sought by the plaintiff companies to extend the time period required by s 319 (at [8] - [9]). Additionally, his Honour concluded that s 1322(4)(d) could be engaged to extend time for the filing required under paragraph (k) of Class Order 98/1418.[19]
[19] Re Affinity Health Ltd [10] - [13]
That being so, Barrett J turned his mind to whether the discretion under s 1322(4)(d) CA should be exercised, having regard to the statutory requirement in s 1322(6)(c) CA that the orders are not likely to cause substantial injustice to any person. His Honour was ultimately satisfied the orders should be made in the circumstances of that case.[20] His Honour noted there were extensive delays in some of the circumstances before him, although even in those cases the matter was one of simple oversight which was rectified promptly when discovered.
Application of s 1322(4) to ASIC Class Orders and ASIC Instruments
[20] Re Affinity Health Ltd [15] [17]
It has been accepted for some years that s 1322(4)(d) CA applies to time periods specified in ASIC Class Orders, as some of the authorities to which I have already referred demonstrate. I refer also to Dana Australia (Holdings) Ltd [2006] FCA 355; (2006) 57 ACSR 99 (Finkelstein J) at [8] - [11].[21]
[21] In Dana Australia (Holdings) Ltd, Finkelstein J concluded at [8] that ‘[n]o longer is there a reference [in the section] to the period that may be extended or abridged as being a period that is fixed by the Act or by the rules or regulations made under the Act…On this basis it is easy to conclude that s 1322(4)(d) allows the court to extend or abridge periods prescribed not only be the Corporations Act and any rules or regulations made under the Act, but also periods prescribed by some other instrument or authority.'
There is also 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 2016/190) 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(2019) 138 ACSR 365; [2019] FCA 1432 (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). Black J commented as follows:
[29]Section 1322 is a remedial provision and should be given a broad construction: Re Wave Capital Limited (2003) 47 ACSR 418; [2003] FCA 969; Weinstock v Beck(2013) 251 CLR 396; (2013) 93 ACSR 231; [2013] HCA 14. Orders have previously been made under this section to extend the time in which a form is required to be lodged with ASIC, where lodgement within a specified time is a condition of relief from compliance with financial reporting requirements under the Act: Re Murray River Organics Ltd (2019) 138 ACSR 365; [2019] FCA 1432; Ozito Industries Pty Ltd v Australian Securities and Investments Commission[2020] FCA 1432; (2020) 148 ACSR 585; Car Buyers Australia Pty Ltd v Australian Securities and Investments Commission[2020] FCA 599 (“Car Buyers”); ComfortDelGro; Re Navitas Bundoora Pty Ltd [2020] WASC 87 ('Navitas'); Re Bremick Pty Ltd[2021] NSWSC 533 ('Bremick'). Relevant factors in determining whether to extend the time in which a form is to be lodged with ASIC, in order to obtain relief from financial reporting requirements under the Act and to provide relief from civil liability in respect of any past failure to comply with those requirements, include whether the non-compliance arose as a result of imprudence, carelessness, or wilful ignorance of the law; whether the steps taken by the plaintiff were likely sufficient, in substance, for the relevant relief instrument to achieve its object, whether public policy would be undermined by the making of such orders; whether the plaintiff acted reasonably promptly in commencing an appropriate inquiry once it became aware of the error; and whether ASIC opposed the relief sought. The cases, including ComfortDelGro, Navitas and Bremick indicate that the lapse of a significant time does not prevent the making of orders under s 1322(4)(d) of the Act in an appropriate case (emphasis added).
G. Disposition
Standing and Power
I accepted that the plaintiff is an interested person with sufficient standing to seek relief, as required by s 1322(4) CA. However, as already noted, I had significant doubts the primary relief sought by the plaintiff was within the scope of the provision. The primary order sought by the plaintiff in its Originating Process was as follows:
Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth), the plaintiff’s half-yearly reporting period under s 302 of the Corporations Act be extended from 31 May 2022 to 30 June 2022.
This is plainly not the form of relief sought in cases such as Re Clinical Cell Culture Ltd, Re Phosphate Resources Ltd, and Re Affinity Health Ltd. The plaintiff does not seek an extension of time to lodge its half-yearly accounts after the requisite time period. In fact, the plaintiff does not propose to lodge half-yearly accounts at all. Rather, the plaintiff seeks to deploy s 1322(4)(d) CA to modify the obligation imposed by ss 302 and 320 CA such that, instead of an obligation to lodge accounts for the period from 30 November 2021 to 31 May 2022, the obligation would be to lodge accounts for the period from 30 November 2021 to 30 June 2022.[22]
[22] ts 6 (13 February 2023).
With the obligation modified in this manner, the plaintiff asserts it had in effect already complied with the obligation, in that it prepared and lodged an annual financial report and directors’ report for that particular period (which it did pursuant to its obligation in s 292(1) CA).[23]
[23] ts 7 (13 February 2023).
Prior to the hearing, I enquired of the solicitors for the plaintiff whether they were aware of any authority which endorsed this approach in the context of s 1322(4) CA. They were not able to draw my attention to any authority in this regard. Nor could I identify any.
In my view, the relief sought by the plaintiff was simply a bridge too far in the use of s 1322(4)(d) CA.
The provision contemplates that the interested person requires an order to extend the period for ‘doing any act, matter or thing or instituting or taking any proceedings under’ the Act or in relation to a corporation. I could not discern how that language was broad enough to encompass the plaintiff’s proposed order. The provision is, of course, said to be a remedial measure which should be given a liberal construction. Further, the power to extend time properly applies to provisions even though they impose an absolute positive obligation, subject only to a plain contrary intention. All of that may be accepted. However, in my view, the provision is not open to be used to exempt an entity from an obligation imposed by the Act in the manner sought in this case.
The decision of O’Bryan J in Re Ozito Industries Pty Ltd [2020] FCA 1432; (2020) 148 ACSR 585 provides a relatively recent reminder that there are occasions in which the outer boundaries of s 1322(4) CA are reached. In that case, O’Bryan J declined to grant a declaration under s 1322(4)(a) to the effect that the applicant was not ineligible for the reporting relief referred to in ASIC Instrument 2016/785 by reason of any failure to comply with any condition or requirement specified in that Instrument. Such a declaration concerned the applicant’s eligibility for the financial reporting relied under the Instrument. That eligibility to qualify for an exemption was a different subject matter to the validity of ‘any act, matter or thing’ for the purpose of s 1322(4) CA.[24]
[24] Re Ozito Industries Pty Ltd [24]
I therefore considered the primary relief sought by the plaintiff was not supported by s 1322(4)(d) CA. That being so, it appeared to me to be doubtful that the alternative relief sought, in Order 2(a) and 2(b) of the Originating Process could be made in the form sought. The doubt arises from the fact that declaratory deeming orders of the type sought are typically regarded as ancillary relief, or orders granted as a corollary to primary relief under s 1322(4) CA.[25] I therefore formed the view that a more solid primary foundation was required for the relief sought by the plaintiff.
Revised Form of Orders
[25] Re Micro-X Limited [2019] FCA 1154 [13] (Moshinsky J); Ex parte Imdex Ltd [2020] WASC 298 [57] - [59] (Hill J).
In my view, the more orthodox manner in which to deal with the plaintiff’s concerns is to permit the plaintiff to secure the relief under ASIC Instrument 2016/190 upon which it would otherwise have sought to rely. Section 1322(4)(d) CA authorizes the making of an order that the time period within which an entity was required to give notice to the ASX for the purposes of an ASIC Instrument be extended.[26]
[26] Re Murray River Organics Ltd; Re Novonix Ltd; and Re Flight Centre Technology Pty Ltd.
In the present case, it was apparent that proper notice was given to the ASX by the plaintiff on 10 February 2023 when it served on the ASX copies of the court documents initiating this proceeding.[27] An extension of time was therefore needed by the plaintiff for the purposes of s 6(2)(a)(i)(B) of ASIC Instrument 2016/190 until 10 February 2023.
[27] Second Hood Affidavit, [12].
Allied to this, and for the avoidance of doubt, I considered I had power to make an order to the effect that the giving of notice to the ASX on 10 February 2023, which included a copy of the Proposed Addendum,[28] be deemed to be sufficient compliance with the requirement under s 6(2)(a)(i)(B) of ASIC Instrument 2016/190 to give notice to the ASX.
[28] Being the notice prepared by the plaintiff which was annexure MDN-7 to the First Naylor Affidavit.
A further order was also required to meet the requirements of s 6(2)(b) of ASIC Instrument 2016/190, namely an order that the Proposed Addendum be deemed to have been included in the plaintiff’s directors’ report for the financial year ending 30 June 2022 and to take effect as sufficient compliance with the requirement under s 6(2)(b) of that ASIC Instrument.
In my view, the court had, and has, jurisdiction to make orders of the kind I have set out in the [57] to [59] above under s 1322(4)(a) and s 1322(4)(d) CA.
Should the jurisdiction be exercised?
It remains to consider whether the court should grant the relief I have outlined above. In this regard, the remaining statutory requirements are whether, for the purposes of s 1322(4)(a) CA, the persons in question acted honestly (s 1322(6)(a)(ii)) or whether it is just and equitable the orders be made (s 1322(6)(a)(iii) CA), and relevantly for the purposes of s 1322(4)(a) and (d) CA, whether the court is satisfied the making of the orders is not likely to cause substantial injustice to any person (s 1322(6)(c) CA).
There has been a significant delay between the contravention coming to the attention of the plaintiff and the filing of this Application. The present urgency of the relief sought arises not from the original contravention itself, but from the recently emerging consequence of the suspension of the plaintiff’s securities by the ASX.[29]
[29] The manner in which the plaintiff's securities were suspended by the ASX is explained in the Second Naylor Affidavit at [6] - [14].
Prior to that, it seems the plaintiff had been adopting something of a leisurely approach to dealing with the failure to comply with ss 302 and 320 of CA. Indeed, over four months elapsed between the contravention being made known to Mr Naylor by the plaintiff’s auditors and the filing of the present Application. The company’s solicitors appear to have advised the company in December 2022 that it should initiate proceedings seeking relief, but it did not do so.
Against this delay, I weigh in the balance a number of other important considerations.
First, the omission in question was a matter of oversight and not caused by a deliberate decision on the part of the company. I have no doubt the company officers concerned acted in an honest manner. I have no reason to doubt Mr Naylor’s statements and assurances in this regard, as set out in his affidavit. I find that Bellavista Resources attended to its annual reporting requirements in Division 1 Part 2M.3 but overlooked its obligations in Division 2 Part 2M.3. This oversight is understandable given the entity had only been incorporated as of 30 November 2021, it was listed on the ASX from 25 May 2022, and the half-yearly reporting obligation may quite naturally have been subsumed by the annual reporting obligations and the listing process.
Second, there is no evidence of any injustice caused by the contravention, particularly as the company filed its annual reports and audited financial statements in accordance with its obligations under the Act. Those reports and statements cover the period from 30 November 2021 to 30 June 2022, which includes the period for which the half-yearly accounts would otherwise have been required. I therefore accept that it is very unlikely that any third party creditor or shareholder of the plaintiff will have been prejudiced by the compliance issue or will be prejudiced by granting the relief sought.
Third, if the relief is not granted, adverse consequences will continue for the plaintiff and its shareholders. Unless the orders are made by the Court, the plaintiff’s shares will continue to be suspended from trading which will deny the shareholders of the plaintiff the opportunity to trade their shares.[30]
[30] Ex parte Imdex Ltd [32] (Hill J)
Fourth, it appears that, had the plaintiff given notice to ASIC for the purposes of ASIC Instrument 2016/190 within the requisite time period, there is little doubt that the plaintiff would have been granted the exemption which is afforded by that Instrument. The orders therefore permit the plaintiff to enjoy the benefit of the relief which it would otherwise have been permitted to rely upon, had it acted in a timely manner.
Fifth, and importantly, the plaintiff does not seek relief from civil liability either for itself or for its officers as part of this Application.
Sixth, the plaintiff seeks orders which provide for notice to be given to all persons affected by the orders and affords them the ability to apply to the court to raise any matters appropriate. A period of 28 days is to be given, which I consider suitable.
In my view, although I remain concerned about the lengthy delay in bringing the Application for relief, I am satisfied the orders should be made. There is no evidence before me of any substantial misconduct, serious wrongdoing, or flagrant disregard of the corporate law so as to warrant refusal of the relief sought: Re Wave Capital Ltd [29]. In the circumstances, I considered the persons from Bellavista Resources who were involved had acted honestly and, in any event, it was just and equitable to make the orders sought. I also formed the view that no substantial injustice has been or is likely to be caused to any person by the contravention. I was therefore satisfied that the criteria in s 1322(6) CA were satisfied. I recognize the court retains a residual discretion nevertheless: Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357 [35] (Vaughan J). There were no circumstances present in this case which would justify this court exercising that residual discretion so as not to grant the required relief, in my view.
H. Conclusion
While I was not prepared to grant the entirety of the relief in the form set out in plaintiff’s Originating Process, the overall merits of the plaintiff’s position and the ongoing prejudice suffered by its shareholders through the suspension of the company’s securities, warranted alternative orders being made under s 1322(4) CA which would in effect allow the plaintiff the benefit of the relief afforded by ASIC Instrument 2016/190.
I therefore made the following orders at the conclusion of the hearing on 13 February 2023:
1.Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth), the time period within which the plaintiff was required to give notice to the ASX for the purposes of section 6(2)(a)(i)(B) of the ASIC Instrument be extended to 10 February 2023.
2.Pursuant to s 1322(4) of the Corporations Act 2001 (Cth), the giving of notice of these proceedings by the plaintiff to the ASX on 10 February 2023, which included a copy of the Addendum, be deemed to be sufficient compliance with the requirement under section 6(2)(a)(i)(B) of the ASIC Instrument to give notice to the ASX.
3.Pursuant to s 1322(4) of the Corporations Act 2001 (Cth), the Addendum be deemed to have been included in the plaintiff’s directors’ report for the financial year ending 30 June 2022 and to take effect as sufficient compliance with the requirement under section 6(2)(b) of the ASIC Instrument for the directors’ report to explain and state the matters specified in that section.
4.As soon as reasonably practicable, the plaintiff is to publish an announcement to the ASX in which a copy of these orders is included and place a copy of these orders on its own website to remain there for at least 28 days.
5.For a period of 28 days from the date of publication of these orders on the ASX website, any person who claims to have suffered substantial injustice or is likely to suffer substantial injustice by the making of any or all of these orders has liberty to apply to vary or discharge them within that period.
6.A sealed copy of these orders is to be served on ASIC as soon as reasonably practicable and upon service of these orders on ASIC, ASIC is to include these orders on its database.
7.There be no order as to costs.
Definitions:
For the purposes of these orders, the following terms have the corresponding meanings:
Addendum means the document which is Annexure MDN-7 to the affidavit of Michael Dylan Naylor affirmed on 3 February 2023, which is intended to be an addendum to the plaintiff’s directors’ report for the financial year ended 30 June 2022.
ASIC means the Australian Securities and Investments Commission.
ASIC Instrument means the ASIC Corporations (Disclosing Entities) Instrument 2016/190.
ASX means the Australian Securities Exchange.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IHN
Associate to the Honourable Justice Lundberg
16 FEBRUARY 2023
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