Re Emerald Resources Nl
[2025] WASC 94
•21 MARCH 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE EMERALD RESOURCES NL; EX PARTE EMERALD RESOURCES NL [2025] WASC 94
CORAM: HILL J
HEARD: 28 FEBRUARY 2025
DELIVERED : 28 FEBRUARY 2025
PUBLISHED : 21 MARCH 2025
FILE NO/S: COR 28 of 2025
MATTER: IN THE MATTER OF EMERALD RESOURCES NL
BETWEEN: EMERALD RESOURCES NL
Plaintiff
Catchwords:
Corporations - Application for orders under s 1322 of Corporations Act 2001 (Cth) - Failure of company to synchronise financial year with overseas subsidiary - Where immediate steps taken once irregularity identified - Where no substantial injustice caused by proposed orders - Where no blatant or flagrant disregard of obligations
Legislation:
Corporations Act 2001 (Cth) s 245E, s 323D, s 707, s 708A, s 1322
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | M Holler |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Cases referred to in decision:
Blaze Asset Pty Ltd v Target Energy Ltd [2009] FCA 698; (2009) 177 FCR 488
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22
Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174
Re Jaxsta Ltd; Ex parte Jaxsta Ltd [2018] WASC 390
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
On 27 February 2025, Emerald Resources NL (Company) filed an originating process seeking orders under s 1322(4)(a) and s 254E of the Corporations Act 2001 (Cth) (Act). The application originates from the failure to cause the financial year of the Company's Cambodian subsidiary to synchronise with its own financial year, as required by s 323D(3) of the Act.
This issue, in turn, has raised a question as to the validity of cleansing notices that have been issued by the Company after 16 September 2017, which verified its compliance with its obligations under pt 2M.3 of the Act. In reviewing the cleansing notices for the purposes of this application, the plaintiffs' solicitors identified a further issue, being that those notices that were issued between 7 December 2021 and 14 November 2023 did not state that the plaintiff was in compliance with its obligations under s 674A of the Act, as required by s 708A(6) of the Act.
In total, 46 cleansing notices are the subject of this application.[1]
[1] Affidavit of Mark Andrew Clements filed 26 February 2025 [32].
In support of its application, the plaintiff has read five affidavits: an affidavit of Mark Andrew Clements, the company secretary and former non-executive director of the plaintiff, filed 26 February 2025; an affidavit of Brett Ashley Dunnachie, the chief corporate officer of the plaintiff, filed 26 February 2025; an affidavit of Morgan Cain Hart, the managing director of the plaintiff, filed 26 February 2025; and two affidavits of Dominic John Hird, a solicitor employed by the plaintiff's solicitors, filed 26 and 28 February 2025.
I have also had the very significant benefit of an outline of submissions filed by the plaintiff and oral submissions today from counsel who appeared on behalf of the plaintiff.
Factual background
The plaintiff is an international gold mining and exploration company with projects in Cambodia and Western Australia. Its securities are listed on the Australian Securities Exchange (ASX). As at 27 February 2025, the Company had a market capitalisation of approximately $2.65 billion and approximately 4,815 shareholders.[2]
[2] Plaintiff's submissions filed 26 February 2025 [20(a)].
On 14 November 2016, following a successful off-market takeover offer by the plaintiff, Renaissance Minerals Limited (Renaissance), a Cambodian company that operates the Okvau gold mine, became a subsidiary of the plaintiff.
Since completion of the acquisition, the plaintiff and Renaissance have maintained different financial years.[3] Renaissance maintained a financial year end date of 31 December, while the plaintiff and its other subsidiaries have a financial year end date of 30 June.[4] Notwithstanding this difference, since the financial year ending 30 June 2017, the plaintiff's consolidated financial accounts have included the financial information of Renaissance and have been audited on that basis.
[3] Affidavit of Mark Andrew Clements filed 26 February 2025 [8(a)].
[4] Affidavit of Mark Andrew Clements filed 26 February 2025 [19].
Section 323D of the Act relevantly requires that a company that has to prepare consolidated financial statements:
[M]ust do whatever is necessary to ensure that the financial years of the consolidated entities are synchronised with its own financial years. It must achieve this synchronisation by the end of 12 months after the situation that calls for consolidation arises.
Pursuant to s 323D(3A) of the Act, a failure to comply with s 323D(3) is a strict liability offence.
The irregularity concerning the plaintiff's accounts was first raised at a meeting of its audit and risk committee on 22 August 2024. At this meeting, the committee discussed the potential synchronisation of financial years and resolved to investigate the matter further.[5] During a subsequent meeting on 23 October 2024, the requirements of the requirements of s 323D(3) of the Act were brought to the attention of the committee.[6]
[5] Plaintiff's submissions filed 26 February 2025 [20(d)]; Affidavit of Mark Andrew Clements filed 26 February 2025 [20] - [21], 'MC-05'.
[6] Plaintiff's submissions filed 26 February 2025 [20(d)]; Affidavit of Mark Andrew Clements filed 26 February 2025 [23], 'MC-07'.
Since then, the plaintiff has sought legal advice from its external solicitors, Steinepreis Paganin, who have engaged with the Australian Securities and Investments Commission (ASIC) regarding the application of s 323D(3).[7] It is important to note that, at this stage, ASIC has not positively asserted that the plaintiff is, in fact, in breach of its obligations under s 323D(3).[8]
[7] Plaintiff's submissions filed 26 February 2025 [20(e)]; Affidavit of Mark Andrew Clements filed 26 February 2025 [24] - [25].
[8] Affidavit of Dominic John Hird filed 26 February 2025 [8].
The cleansing notices that have been issued by the Company between 16 September 2017 and 4 November 2024 all state that the Company has met all its requirements under ch 2M of the Act. At the time each of these notices were issued, Mr Clements, the company secretary, believed this was accurate.[9] It is possible, given the matters that have been raised on the application today, that the Company was not, in fact, in compliance with this obligation because of the issue concerning the synchronisation of its accounts.
[9] Affidavit of Mark Andrew Clements filed 26 February 2025 [8(b)].
On 20 February 2025, Steinepreis Paganin drew another issue to Mr Clements' attention concerning the cleansing notices issued between 7 December 2021 and 14 November 2023. These did not refer to the Company's compliance or belief that it is in compliance with its obligations under s 674A of the Act. Mr Clements' evidence is that in preparing these notices, he was unaware of the legislative change that had occurred requiring this reference, and only became aware of this in November 2023.[10]
[10] Affidavit of Mark Andrew Clements filed 26 February 2025 [8(c)].
On 27 February 2025, the plaintiff requested that its shares be placed in a trading halt, where they remained at the time of the hearing on the afternoon of 28 February 2025.
Relief sought under s 1322 and s 254E of the Act
The plaintiff seeks orders under s 1322(4)(a) of the Act declaring that the cleansing notices are not invalid by reason of any contravention of s 323D(3) and s 708A(6) of the Act.
In considering an application under this section, the essential principles are well known and can be summarised as follows.[11]
(a)The prescriptive requirements of the wording in s 1322(4) and the pre‑conditions in s 1322(6) of the Act must be satisfied.[12]
(b)Even where this is the case, the court retains a discretion under s 1322(4) of the Act as to whether it will make the orders sought.
(c)The broad powers that have been granted to the court under s 1322 of the Act reflect the 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 the public interest.[13]
(d)Limitations to these broad powers granted by s 1322 of the Act shall not readily be implied.[14] This is because the section is remedial in character and should be applied broadly.
[11] Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174 [20].
[12] Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43], [53], [64].
[13] Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29].
[14] Weinstock v Beck [43], [55] - [56], [60], [64].
Should the relief sought by the plaintiff be made?
In this case, I accept that the plaintiff has standing as an interested person to bring the application for the relief that it seeks.[15] Notice of the application has been provided to both the ASX and ASIC, neither of whom have sought to appear at the hearing today to oppose the orders that are sought, and both have given the standard correspondence to the plaintiff.[16]
Should the cleansing notices be validated?
[15] Corporations Act2001 (Cth) s 1322(5); Re Wave Capital Ltd [29].
[16] Affidavit of Dominic John Hird filed 26 February 2025 [9] - [15], 'DH-1', 'DH-02', 'DH-03', 'DH-04'.
In relation to the first orders sought by the plaintiff in order 1 of its minute, the proposed orders are:
(a)framed in a declaratory form;
(b)identify the act, matter or thing, namely the issue of cleansing notices and issues of shares; and
(c)clearly identify the contraventions or possible contraventions that are sought to be validated by the orders.
In this case, I am satisfied that the precondition in s 1322(6)(a)(ii) of the Act has been satisfied. That is, I am satisfied that the person or persons concerned in the contravention or failure have acted honestly.
The plaintiff's evidence is that until August 2024, it was not aware of the possible impact of s 323D(3) or that there was any question as to its compliance with its obligations under pt 2M.3 of the Act and the knock-on effect of this on the validity of its cleansing notices. In relation to the second issue that has been identified with the cleansing notices, I accept Mr Clements' evidence that he re-used a previous cleansing notice and was unaware or did not turn his mind to the requirements of s 708A(6) of the Act until November 2023.[17]
[17] Affidavit of Mark Andrew Clements filed 26 February 2025 [37] - [39], [48].
In considering whether there would be any substantial injustice if the orders sought are made, I have considered the classes of persons who may be impacted by the making of these orders. For the following reasons, I do not consider that any substantial injustice would be caused by the making of these orders and consider the reverse to be the case.
First, there would be prejudice to the people who have been issued these shares if the orders sought are not made, as any future sales of these shares may be void or voidable.
Second, in relation to the plaintiff's shareholders more broadly, the plaintiff's failure or alleged failure to comply with the relevant provisions of the Act has caused the plaintiff to enter into a trading halt. If orders are not made by the court, these security holders will not have the benefit of an active market for their shares.
Third, if the orders sought are not made, there may be substantial ongoing prejudice to the plaintiff as any offer and subsequent sale of shares which are the subject of the many cleansing notices may be void or voidable. This may give rise not only to commercial uncertainty, but also potential expense for the plaintiff if it is required to remain involved in the issue or make any further applications to the court.
In this case, I accept and find that there is no evidence of any substantial misconduct, serious wrongdoing, or flagrant disregard of the Act or the plaintiff's constitution which would warrant the court refusing the relief sought.[18]
[18] Re Wave Capital Ltd [29].
There is nothing in the evidence before me that suggests that any minority interest might be oppressed or that anyone's interest, including those of creditors, could be affected by the orders sought.
In exercising the court's discretion to grant relief, a relevant factor is the promptness with which the plaintiff has sought to remedy the irregularity once it has been identified.[19] In this case, the issue in relation to the financial accounts was first properly identified in October 2024, having been first raised in August 2024. Since then, the plaintiff has taken significant steps to determine what action it is required to take, including seeking legal advice, engaging with ASIC, and deciding the extent to which its cleansing notices were impacted before commencing these proceedings and seeking an urgent hearing.
[19] Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22 [60].
Finally, in my view, I do not consider that there is any public policy reason that would be undermined by granting the relief sought.
For these reasons, I consider it is appropriate to grant the relief broadly in terms sought in order 1 of the plaintiff's minute.
It is usual in cases such as this provide an opportunity for shareholders and any persons with a sufficient interest in the matter to raise a complaint or concern about the orders. The usual period is that there be liberty to apply within 28 days, which is the time frame sought by the plaintiff in its minute.
Extension of time under s 1322(4)(d) of the Act
The evidence of the plaintiff is that its commercial preference would be for it and Renaissance to retain their current financial years, and only if this is not possible to amend the financial year for itself and its subsidiaries.
The plaintiff's present intention is to apply to ASIC pursuant to s 340 of the Act to seek relief from future compliance with s 323D(3) of the Act. The plaintiff is seeking an extension of the period referred to s 323D(3) of the Act to 31 December 2025, which will allow the plaintiff the necessary time to make the application to ASIC and, if required, to take the necessary steps required for synchronisation.[20]
[20] Affidavit of Mark Andrew Clements filed 26 February 2025 [29].
In considering whether to grant an extension of time under s 1322(4)(d), as was set out by Vaughan J in Re Jaxsta Ltd, the court undertakes a two stage process:[21]
First, the Court needs to determine whether, having regard to the circumstances of the case and the general objects of the [Corporations Act 2001 (Cth)], it is appropriate to make an order extending a relevant period, or abridging a relevant period. Secondly, if those circumstances are made out, then the Court must address the question whether any substantial prejudice has been or is likely to be caused to any person by the making of such an order.
[21] Re Jaxsta Ltd [2018] WASC 390 [41] ‑ [43].
In the somewhat unusual circumstances of this case, and for the following reasons, I consider it is appropriate to grant the extension sought of the period referred to in s 323D(3) of the Act, to 31 December 2025.
First, I accept that until recently, the plaintiff was unaware of its specific obligation s 323D(3) of the Act and only recently turned its mind to the meaning and potential impact of this section on its operations.
Second, and importantly, the plaintiff has substantively complied with its obligations under the Act by including the financial information of its Cambodian subsidiary in its own consolidated accounts. It is only the failure to synchronise the financial years that is the subject of any query.
Third, the Act contemplates a period of time following completion of an acquisition for a company to take steps to synchronise its financial years. In granting the extension sought, this will facilitate the transaction as originally contemplated and in accordance with the obligations of the Act. I consider that the making of these orders is consistent with the conduct of commerce generally.[22] As has been noted before in other cases, s 1322(4)(d) of the Act should be exercised in a way which does not unnecessarily stifle corporate and financial activity on technical grounds.[23]
[22] Re Jaxsta Ltd [50].
[23] Blaze Asset Pty Ltd v Target Energy Ltd [2009] FCA 698; (2009) 177 FCR 488 [33].
Fourth, the additional orders sought by the plaintiff provide a notice to be given to all persons potentially affected by the making of this order and for them to have an ability to raise any matter with the court.
Finally, and importantly, neither the ASX nor ASIC oppose the application.
For these reasons, I am satisfied it is appropriate to make orders in terms of order 2 of the plaintiff's minute.[24]
[24] At the conclusion of the hearing, I made orders in terms of Annexure 'A'.
Annexure 'A'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Honourable Justice Hill
21 MARCH 2025
0
6
1