JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE SMS OPERATIONS PTY LTD; EX PARTE SMS OPERATIONS PTY LTD [2021] WASC 191
CORAM: HILL J
HEARD: 17 MARCH 2021
DELIVERED : 17 MARCH 2021
PUBLISHED : 11 JUNE 2021
FILE NO/S: COR 43 of 2021
MATTER: SMS Operations Pty Ltd
EX PARTE
SMS OPERATIONS PTY LTD
Plaintiff
Catchwords:
Corporations - Group of companies - Financial reporting - Relief from reporting obligations - Opt-in notice not lodged as required by Class Order - Application for relief under s 1322 of the Corporations Act - Extension of time sought - Whether procedural irregularity - Whether substantial injustice - Application granted
Legislation:
Corporations Act 2001 (Cth), s 1322(4), s 1322(6)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr A J Papamatheos & Ms A Pieniazek |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Case(s) referred to in decision(s):
Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NSWSC 293; (2002) 41 ACSR 587
Blaze Asset Pty Ltd v Target Energy Ltd [2009] FCA 698; (2009) 177 FCR 488
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265
Re iCandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369
Re Jaxsta Ltd [2018] WASC 390
Re Murray River Organics Ltd [2019] FCA 931; (2019) 138 ACSR 365
Re Navitas Bundoora Pty Ltd [2020] WASC 87
Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450; [2003] QSC 329
HILL J:
On 10 March 2021, the plaintiff, SMS Operations Pty Ltd (SMS Operations), filed an originating process seeking orders under s 1322 of the Corporations Act 2001 (Cth) (Act) in relation to the plaintiff's non-compliance with its financial reporting obligations under pt 2M.3 of the Act for various financial years. Specifically, the plaintiff seeks relief in respect of its failure to lodge a Form 389 'Opt-in Notice' (Opt-in Notice) with ASIC for the first financial year in which relief is sought. Relief is also sought in relation to the plaintiff's failure to comply with the reporting obligations for subsequent financial years. The plaintiff's non-compliance occurred as a result of its reliance on the incorrect advice of its solicitors.
The plaintiff has provided a frank and detailed explanation as to the circumstances surrounding its non-compliance with the Act. I was and am satisfied that the failures were caused by inadvertence rather than any deliberate disregard of the plaintiff's financial reporting obligations.
At the conclusion of the hearing on 17 March 2021, I made orders granting the relief sought and stated that I would subsequently publish written reasons for my decision. These are those reasons. In publishing my reasons, I have drawn on the helpful submissions of the plaintiff's counsel in these proceedings, Mr Papamatheos and Ms Pieniazek.
Reporting requirements under the Act
Part 2M.3 of the Act imposes financial reporting requirements on certain entities including 'large proprietary companies' and 'public companies'.[1] I accept that the plaintiff…
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- Re SMS Operations Pty Ltd [2021] WASC 191
- Case
- [2021] WASC 191
- Decision Date
CaseChat Overview and Summary
The court had to determine whether the statutory requirements of section 1322(4)(d) and section 1322(6) of the Corporations Act were satisfied. These provisions allow for the extension of time for fulfilling reporting obligations in certain circumstances. The applicant argued that the extension was necessary to avoid substantial injustice, given the significant cost of preparing and auditing financial statements and reports. The court had to consider whether the applicant had standing as an 'interested person' and whether the extension of time would be consistent with the purpose and objects of the relevant statutory provisions.
The court granted the application for relief, finding that the statutory requirements for an extension of time were met. The court accepted that the applicant had standing as an 'interested person' and that the extension would not undermine the purpose of the Old Class Order, the New Instrument, or the Act. The court concluded that granting the extension would more accurately reflect the intention of the applicant and the subsidiary companies to be a 'closed group' and correct the omission in the consolidated financial statements. The court found that extending the time until 15 March 2021 would not cause substantial injustice and was consistent with the broader interests of all parties and the public interest in compliance with the Act.
The court ordered that the time limits for filing the Form 389 Opt-in Notice and the lodgement of consolidated financial statements be extended until 15 March 2021. This decision highlighted the broad authority of the court under section 1322 to extend time where the statutory pre-requisites are met, and the importance of considering the interests of all parties and the public interest in ensuring compliance with the Act.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Section 1322 confers broad authority on the court to extend time where the statutory pre-requisites are met.[53] The power must be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with the Act. It must also take account of the general objects and purposes of the relevant statutory provision of the Act imposing the time period; the court's order must not undermine the object of the relevant requirement.[54] [53] David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, 275 ‑ 276.[54] Re Jaxsta Ltd [43]. Counsel for the plaintiff submitted that if they were unable to rely on the Class Order or the New Instrument to obtain relief from the requirements of pt 2M.3 of the Act, the financial interests of plaintiff are likely to be adversely affected. This is because of the significant cost involved in the consequential requirement by the plaintiff to prepare and have audited financial statements and reports. Courts have previously accepted that a real financial interest in the result is sufficient to confer standing as an 'interested person'.[55] [55] Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450; [2003] QSC 329 [16]; Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NSWSC 293; (2002) 41 ACSR 587 [21]. On the basis of the evidence before me, I accept that the plaintiff is an interested person for the purpose of s 1322(4)(d). The plaintiff sought orders extending the time for fulfilling the requirements in:(a)conditions (k), (j), (i), (kb), (o) and (v) of the Old Class Order to 15 March 2021; and (b)conditions (g), (i), (w), and (x) of the New Instrument to 15 March 2021. In applying for this extension of time, counsel for the plaintiff submitted that the statutory requirements of s 1322(4)(d) and s 1322(6) of the Act were satisfied. I am satisfied that in respect of each of the irregularities for which the plaintiff seeks relief, a time period is either expressly or impliedly imposed which is capable of extension. On this basis, I accept that the time limit for filing the Form 389 Opt-in Notice and the lodgement of consolidated financial statements can be extended under s 1322(4)(d) of the Act.[56] [56] Re Murray River Organics Ltd [2019] FCA 931; (2019) 138 ACSR 365; Re Navitas Bundoora Pty Ltd [2020] WASC 87. In the circumstances of this matter, I considered it was appropriate to extend the time limits until 15 March 2021 for the following reasons. First, granting the extension of time is consistent with the purpose of the Old Class Order, the New Instrument and the Act. The purpose of the Old Class Order and the New Instrument is to enable closely held or 'closed group' companies to prepare and lodge a consolidated set of financial statements where each company is a party to a deed of cross guarantee. The relief sought by the plaintiff is consistent with this purpose. It also furthers the objects of the Old Class Order, the New Instrument and the Act by correcting the omission to lodge the requisite Forms and information in the notes to the consolidated financial statements. Granting the relief will more accurately reflect the intention of the plaintiff and the subsidiary companies of Swick that they be a 'closed group' as well as the contents of the consolidated financial statements that were lodged at the appropriate times in accordance with the Act.