Re Skin Elements Limited - [2024] WASC 509

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE SKIN ELEMENTS LIMITED; EX PARTE SKIN ELEMENTS LIMITED [2024] WASC 509
CORAM:   HILL J
HEARD:   19 DECEMBER 2024
DELIVERED          :   19 DECEMBER 2024
PUBLISHED           :   6 JANUARY 2025
FILE NO/S:   COR 202 of 2024
MATTER:   IN THE MATTER OF SKIN ELEMENTS LIMITED; EX PARTE SKIN ELEMENTS LIMITED
EX PARTE

SKIN ELEMENTS LIMITED
Plaintiff

Catchwords:

Corporations - Application for orders under s 1322 of Corporations Act 2001 (Cth) - Failure of company to have shareholder nominate auditor prior to annual general meeting - Where immediate steps taken to rectify irregularity once identified - Where no substantial injustice caused by proposed orders - Where no blatant or flagrant disregard of obligations

Corporations - Application for orders under s 1322 of Corporations Act 2001 (Cth) - Application for declaratory relief to validate trading in shares issued without valid cleansing notices - Where immediate steps taken to rectify irregularity - Where no substantial injustice caused by proposed orders - Where no blatant or flagrant disregard of obligations

Legislation:

Corporations Act 2001 (Cth) s 245E, s 327B, s 327C, s 328B, s 707, s 708A, s 1322

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

M Holler

Solicitors:

Plaintiff

Steinepreis Paganin

Case(s) referred to in decision(s):

Re Bellevue Gold Ltd [2021] WASC 80
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22
Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174
Re Nanoveu Ltd; Ex Parte Nanoveu Ltd [2024] WASC 329
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 16 December 2024, the plaintiff, Skin Elements Ltd (Company), filed an originating process seeking orders under s 1322(4)(a) and s 254E of the Corporations Act 2001 (Cth) (Act) relating to contraventions in the appointment process of its auditor and, as a consequence, its compliance with pt 2M.4 of the Act. The contravention occurred as a result of the failure to have a shareholder nominate BDO Audit Pty Ltd (BDO) as auditor at its 2024 annual general meeting (AGM) or have BDO's appointment approved at the AGM.
These contraventions have had a secondary impact on the Company in raising a question as to whether a cleansing notice issued by the Company on 10 December 2024 is defective. This is because the cleansing notice states that as at the date of its issue, the Company was in compliance with the provisions of ch 2M of the Act.
After discovering this issue, an investigation was undertaken by the Company and a further issue discovered in relation to various cleansing notices issued by the Company between 26 June 2023 and 10 December 2024. This issue arose because these cleansing notices did not refer to the Company's compliance with…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Skin Elements Limited

Details

AGLC: Re Skin Elements Limited [2024] WASC 509
Case: [2024] WASC 509
Decision Date: 6 JANUARY 2025

CaseChat Overview and Summary

Skin Elements Limited, a company incorporated under the Corporations Act 2001, faced legal challenges concerning its compliance with statutory obligations regarding the nomination of an auditor and the issuance of valid cleansing notices for shares. The proceedings were before the Federal Court of Australia, where the company sought relief to validate actions that did not initially meet the requirements set forth by the Corporations Act. The core of the dispute centred on whether the court should grant orders to rectify procedural lapses and validate certain corporate actions, despite the company's prompt corrective measures.

The court was tasked with determining whether the company's actions warranted the granting of relief under section 1322 of the Corporations Act. Key issues included whether the failure to nominate an auditor before the annual general meeting and the issuance of shares without valid cleansing notices constituted a blatant or flagrant disregard of the statutory obligations. The court also needed to assess whether the immediate steps taken by the company to rectify these procedural irregularities could mitigate any potential prejudice to stakeholders and whether the granting of the requested orders would cause substantial injustice.

In its reasoning, the court emphasised the company's prompt rectification of the identified irregularities once they were brought to its attention. It was noted that the company had taken immediate steps to ensure compliance with the statutory requirements, which demonstrated a genuine effort to address the procedural shortcomings. The court held that the failure to comply with the relevant provisions did not amount to a blatant or flagrant disregard of the obligations, especially considering the absence of any substantial injustice to the company's stakeholders. Consequently, the court concluded that the granting of the orders would not prejudice any party and would serve the interests of justice by allowing the company to proceed with its business activities without the burden of invalidity attached to its actions.

The court ordered that the company's failure to nominate an auditor prior to the annual general meeting and the issuance of shares without valid cleansing notices be validated. This decision allowed Skin Elements Limited to continue its operations without the hindrance of these procedural deficiencies, provided that it maintained compliance with the statutory requirements in the future.

Orders