SANDFIRE RESOURCES LIMITED
[2024] WASC 261
•19 JULY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SANDFIRE RESOURCES LIMITED [2024] WASC 261
CORAM: STRK J
HEARD: 31 MAY 2024
DELIVERED : 31 MAY 2024
PUBLISHED : 19 JULY 2024
FILE NO/S: COR 87 of 2024
MATTER: IN THE MATTER OF SANDFIRE RESOURCES LIMITED
EX PARTE
SANDFIRE RESOURCES LIMITED
Plaintiff
Catchwords:
Corporations - Application for orders under s 1322 of Corporations Act 2001 (Cth) - Failure of company to ratify the appointment of auditor at annual general meeting - Where prompt action taken to rectify irregularity - Notice given to ASIC, the ASX and shareholders - Whether it is just and equitable to make the orders sought - Where no substantial injustice caused by proposed orders - Where no blatant or flagrant disregard of obligations - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 1322
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | AJ Papamatheos and KJ Travaglione |
Solicitors:
| Plaintiff | : | Allen Overy Shearman Sterling |
Cases referred to in decision:
Ex parte Bellevue Gold Ltd [2021] WASC 80
In the matter of Centuria Property Funds Ltd [2022] NSWSC 1056; (2022) 162 ACSR 699
In the matter of New Century Resources Ltd [2021] WASC 86
Re Bernsteen Pty Ltd (in liq) [2018] SASC 76
Re Caeneus Minerals Ltd [2018] FCA 560
Re Classic Minerals Ltd [2018] FCA 2039
Re Enova Mining Ltd; Ex parte Enova Mining Ltd [2023] WASC 492
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22
Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174
Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369
Re Kalamazoo Resources Ltd [2024] WASC 83
Re Matador Mining Ltd; Ex parte Matador Mining Ltd [2021] WASC 132
Re Memphasys Ltd; Ex parte Memphasys Ltd [2022] WASC 269
Re Omni Bridgeway Ltd; Ex parte Omni Bridgeway Ltd [2024] WASC 133
Re Order of AHEPA NSW Inc [2018] NSWSC 458
Re Spenda Ltd; Ex parte Spenda Ltd [2023] WASC 351
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
STRK J:
Introduction
Sandfire Resources Limited purported to appoint Deloitte Touche Tohmatsu as its auditor from 29 November 2023. It later came to appreciate that it had failed to comply with the relevant provisions of the Corporations Act 2001 (Cth) with respect to that appointment. Upon discovering its error, Sandfire applied to the court for a declaration pursuant to s 1322(4)(a) of the Corporations Act that:
(a)the appointment of Deloitte as its auditor from 29 November 2023 was not invalid by reason of Sandfire's:
(i) failure to comply with s 327B(1)(b) of the Corporations Act by not having the appointment of Deloitte approved at Sandfire's annual general meeting on 29 November 2023 (2023 AGM);
(ii) purported appointment of Deloitte in the absence of a member's prior nomination of Deloitte as auditor, being a failure to comply with s 328B of the Corporations Act;
(iii) failure to comply with s 327C of the Corporations Act within one month of the 2023 AGM; and
(iv) consequent failures to comply with s 302 or s 320 of the Corporations Act (that is, by not having a half‑year financial report by a properly appointed auditor for the financial half‑year ending 31 December 2023; and by not lodging a half‑year financial report by a properly appointed auditor for the financial half‑year ending 31 December 2023 with the Australian Securities and Investments Commission (ASIC) within 75 days of the end of the half-year); and
(b) Sandfire was deemed to have complied with each of the requirements described above.
The application was made on notice to ASIC, the Australian Stock Exchange (ASX), and to shareholders of Sandfire. The application was made in circumstances where Sandfire maintained that its failure to comply with the relevant provisions of ch 2M of the Corporations Act had not given rise to any concerns regarding the appointment of Deloitte as auditor, the validity of its financial reports, or the auditing or review of those reports. It maintained that that it was just and equitable for the order to be made in all of the circumstances, that the compliance failure had not caused any apparent or likely substantial injustice to any person, and that there was no discretionary reason to withhold relief.
Upon reading the materials filed, and after hearing counsel for Sandfire, I granted the relief sought and indicated that I would publish my reasons at a later date. These are my reasons.
Statutory context
Statutory regime - financial reports and auditor appointment
The statutory regime that governs the obligations to prepare financial reports and the appointment of auditors is set out in ch 2M of the Corporations Act.
Part 2M.3 of ch 2M concerns financial reporting, and div 2 of that part concerns the preparation of half‑year financial reports and directors' reports, whereas div 5 concerns lodging reports with ASIC.
Part 2M.4 of ch 2M concerns the appointment and removal of auditors, and div 6 of that part concerns the appointment, removal and fees of auditors for companies.
Set out below is an overview of those provisions which were relevant to Sandfire’s position from 29 November 2023 and to Sandfire's application. It is not intended to be a comprehensive summary of the statutory regime.
While s 327A of the Corporations Act concerns the initial appointment of an auditor of a public company, s 327B concerns the appointment of an auditor of a public company to fill a vacancy. Section 327B(1) provides that a public company must appoint an auditor of the company at its first annual general meeting, and appoint an auditor of the company to fill any vacancy in the office of auditor at each subsequent AGM. By operation of s 327B(3), a director of a company is obliged to take all reasonable steps to comply with, or to secure compliance with, s 327B(1).
A vacancy can occur in the office of auditor and where there is a casual vacancy in the office of auditor, s 327C of the Corporations Act obliges the directors of a public company to fill that vacancy. Section 327C(1) provides that if a vacancy occurs in the office of auditor of a public company; and the vacancy is not caused by the removal of an auditor from office; and there is no surviving or continuing auditor of the company, then the directors must, within one month of the vacancy occurring, appoint an auditor to fill the vacancy unless the company has already done so at a general meeting. An auditor appointed to fill a casual vacancy will hold the office of auditor until the company's next AGM: Corporations Act s 327C(2); and a director of a public company must take all reasonable steps to comply with, or to secure compliance with, subsection (1): Corporations Act s 327C(3).
Section 328B of the Corporations Act concerns the nomination of an auditor. Subsection (1) provides that subject to s 328B, a company may appoint an individual, firm, or company as auditor of the company at its AGM but only if a member of the company gives the company written notice of the nomination of the individual, firm, or company before the meeting was convened, or not less than 21 days before the meeting.[1] By operation of subsection (2), if a company purports to appoint an individual, firm, or company as auditor in contravention of subsection (1), the purported appointment is of no effect; and the company and any officer of the company who is in default are each guilty of an offence.
[1] Subsection (1) does not apply if an auditor is removed from office at the AGM.
By operation of s 302 of the Corporations Act, a disclosing entity is obliged to prepare a financial report and a directors' report for each half‑year; to have the financial report audited and reviewed in accordance with div 3 of pt 2M.3 of the Corporations Act, and obtain an auditor's report; and to lodge the financial report, the directors' report and the auditor's report on the financial report with ASIC.
By operation of s 320(1) of the Corporations Act, a disclosing entity that has to prepare or obtain a report for a half‑year under div 3 is obliged to lodge the report with ASIC within 75 days after the end of the half‑year. Subsection (2) provides that an offence based on subsection (1) is an offence of strict liability.
Power under s 1322 of the Corporations Act to grant the relief sought
Section 1322 of the Corporations Act confers remedial powers upon the court to cure procedural irregularities. For present purposes, s 1322 relevantly provides:
(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.
In the circumstances of this case, Sandfire submitted that it had standing as an interested person to seek relief; the prescriptive requirements of s 1322(4)(a) had been met; the court ought be satisfied that it was just and equitable to make the orders sought; there had been no dishonesty (its compliance failure having occurred as a result of honest and inadvertent oversight); and no substantial injustice had been or was likely to be caused to any person.
The principles to be applied when considering an application under s 1322 are well established. As Hill J recently observed in Re Kalamazoo Resources Ltd [2024] WASC 83 at [26], in considering an application under s 1322 of the Corporations Act, the essential principles can be summarised as follows:[2]
(a)the prescriptive requirements of the wording in s 1322(4) and the pre-conditions in s 1322(6) of the Corporations Act need to be satisfied;[3]
(b)the court retains a discretion under s 1322(4) of the Corporations Act as to whether it makes the orders sought;
(c)the broad powers that are granted to the court under s 1322 of the Corporations Act 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;[4]
(d)limitations to the broad powers in s 1322 of the Corporations Act will not be readily implied;[5]
(e)the court can make orders under s 1322(4)(a) of the Corporations Act on conditions and make such consequential and ancillary orders as it thinks fit; and
(f)an order can be made under s 1322(4)(a) of the Corporations Act notwithstanding that the contravention or failure concerned resulted in the commission of an offence.[6]
[2] Hill J citing Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174 [20].
[3] Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43], [53], [64].
[4] Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29].
[5] Weinstock v Beck [43], [55] - [56], [60], [64].
[6] Re Caeneus Minerals Ltd [2018] FCA 560 [38]; Re Classic Minerals Ltd [2018] FCA 2039 [34].
In the determination of this application, I adopted and applied the principles summarised above.
Evidence
Five affidavits were filed and read by counsel for Sandfire in support of the application. Set out below is an overview of the evidence that was before the court. Counsel also tendered an email communication to which was attached a letter from ASIC dated 31 May 2024,[7] which recorded that ASIC neither supported nor opposed the application and that it did not intend to appear at the hearing of the application.
Affidavit of Mark van Brakel
[7] Exhibit 1; ts 2 - 3 (31 May 2024).
Mark Simon van Brakel is a partner of the firm Allen Overy Shearman Sterling, which firm acted on behalf of Sandfire in this proceeding. Mr van Brakel swore an affidavit on 29 May 2024 in support of the application, to which he attached eight documents marked MVB‑1 to MVB‑8.
Mr van Brakel deposed that on 28 May 2024 he accessed the website of the ASX, and viewed copies of various announcements made by Sandfire, which included:
(a)an announcement authorised by Sandfire's then company secretary, Matthew Fitzgerald, dated 6 December 2022 which recorded that:
(i)Ernst & Young, Sandfire's then auditor, had applied for and received the consent of ASIC to resign as auditor of the Sandfire group;
(ii)the board of directors had resolved to appoint Deloitte as auditor of the Sandfire group; and
(iii)the decision to appoint Deloitte was subject to ratification by shareholders at the next AGM;[8]
(b) a further announcement dated 6 December 2022 by which Sandfire announced the appointment of Sophie Raven as Sandfire's company secretary;[9]
(c)an announcement dated 27 October 2023 by which Sandfire gave notice of the 2023 AGM, but which did not give notice of an intention to seek shareholder ratification of the appointment of Deloitte as auditor;[10]
(d) an announcement dated 29 November 2023 concerning the results of the 2023 AGM, which did not refer to a resolution put to shareholders to ratify the appointment of Deloitte as auditor;[11]
(e) a further announcement dated 29 November 2023 attaching a copy of a presentation given at the 2023 AGM. As was observed by Mr van Brakel, at page 20 the presentation recorded 'no resolution required to be moved' in respect of the shareholders' consideration of the financial report for the year ended 30 June 2023;[12] and
(f) an announcement dated 23 February 2024 attaching Sandfire's half‑year financial results for the six‑month period ending 31 December 2023, in which Deloitte was recorded as being the auditor of Sandfire,[13] and which included a copy of Deloitte's independent auditor's review report to members of Sandfire.[14]
[8] Affidavit of MS van Brakel sworn 29 May 2024, MVB-2 (page 179).
[9] Affidavit of MS van Brakel sworn 29 May 2024, MVB-3 (page 180).
[10] Affidavit of MS van Brakel sworn 29 May 2024, MVB-4 (pages 181 - 213).
[11] Affidavit of MS van Brakel sworn 29 May 2024, MVB-5 (pages 214 - 215).
[12] Affidavit of MS van Brakel sworn 29 May 2024, MVB-6 (pages 216 - 250).
[13] Affidavit of MS van Brakel sworn 29 May 2024, MVB-7 (pages 251 - 294).
[14] Affidavit of MS van Brakel sworn 29 May 2024, MVB-7 (pages 293 - 294).
Mr van Brakel further deposed that on 25 May 2024 Sandfire engaged his firm in relation to its failure to seek shareholder approval ratifying the appointment of Deloitte as its auditor, and on 29 May 2024 Sandfire gave instructions to apply to the court to seek orders pursuant to s 1322 of the Corporations Act.
Mr van Brakel also deposed that on 29 May 2024 Sandfire issued an ASX announcement regarding its intention to apply for relief under s 1322 of the Corporations Act, a copy of which was also annexed to his affidavit.[15]
Affidavit of Brendan Harris
[15] Affidavit of MS van Brakel sworn 29 May 2024, MVB-8 (page 295).
Since 3 April 2023 Brendan Harris has been the managing director and chief executive officer of Sandfire. In support of the application, he affirmed an affidavit on 30 May 2024, in which he deposed that to the best of his knowledge, the contents of Mr van Brakel's affidavit was accurate as it concerned each of the announcements and events to which Mr van Brakel had deposed.
Mr Harris also deposed that:
(a)on 25 May 2024 he was informed by Megan Jansen, Sandfire's chief financial officer, that it appeared that Sandfire did not obtain shareholder approval ratifying the appointment of Deloitte at the 2023 AGM;
(b)until that time he had not been aware, nor had he suspected that Deloitte had not been duly appointed as Sandfire's auditor (that is, no issue relating to the failure of Sandfire to seek ratification of the appointment of its auditor had been brought to his attention, and to the best of his knowledge, no such issue was brought to the attention of any other director);
(c)on the same day that he became aware that Deloitte had not been validly appointed as auditor, he approved the engagement of lawyers to immediately investigate and provide advice on the issue and to take the necessary steps to rectify the issues. He then promptly instructed Sandfire's lawyers to apply to this court for the necessary curative orders under the Corporations Act;
(d)in his experience as managing director, Sandfire had been committed to good corporate governance, and it took compliance with the Corporations Act and the ASX Listing Rules seriously;
(e)undertaking technical and procedural steps to implement decisions made by Sandfire's board falls within the responsibility of the company secretary, which relevantly included the procedural steps necessary to implement a board decision to appoint a new auditor;
(f)on 4 September 2023 he had announced a fundamental restructure of line accountability at Sandfire and added the role of chief legal and compliance officer to Sandfire's senior leadership team;
(g)on 3 April 2024 Victoria Anne Twiss, the chief legal and compliance officer, assumed the role of company secretary, having herself appointed a new head of legal and compliance during this period; and
(h)this new team identified the defect associated with the auditor's appointment while they were completing assurance review activities that Mr Harris had requested be undertaken to confirm that Sandfire was meeting its various compliance obligations.
Affidavit of Victoria Twiss
Since September 2023 Ms Twiss has been the chief legal and compliance officer of Sandfire. In support of the application, Ms Twiss also affirmed an affidavit on 30 May 2024, to which she annexed 13 documents marked VAT‑1 to VAT‑13.
Like Mr Harris, Ms Twiss deposed that to the best of her knowledge, the contents of Mr van Brakel's affidavit was accurate as it concerned each of the announcements and events deposed to. Ms Twiss also deposed to her substantial professional experience, which included her employment with Sandfire. Among other things, Ms Twiss deposed that:
(a)she commenced working for Sandfire in August 2011;
(b)she was promoted to Sandfire's general counsel and head of legal in February 2020, and held that role until September 2023;
(c)she commenced her current role as Sandfire's chief legal and compliance officer in September 2023;
(d)she was also appointed Sandfire's company secretary on 27 February 2024;
(e)from 27 February 2024 to 3 April 2024 Ms Twiss shared the role as Sandfire's joint company secretary with Ms Raven; and
(f)Ms Raven's appointment as joint company secretary ended on 3 April 2024, and Ms Twiss had solely occupied that role since then.
As to the corporate details of Sandfire, Ms Twiss deposed that Sandfire is a copper and base metal producer explorer; that Sandfire was incorporated in Australia on 18 June 2003; on 4 March 2004, Sandfire was listed on the official list of the ASX trading under the security code 'SFR'; as of 28 May 2024 Sandfire had 457,258,594 shares on issue; based on Sandfire's share price listed on the ASX on 28 May 2024 (being $9.50), Sandfire's market capitalisation was approximately $4.34 billion; Sandfire's directors were Mr Harris, Sally Kirstin Langer, Jennifer Lyn Morris, John Richards, Robert Willem John Edwards, Sarah Jean Martin and Paul John Harvey; and that Sandfire's previous company secretaries included Matthew Fitzgerald (who held the held the role from 10 February 2010 to 6 December 2022) and Ms Raven (who held the role from 6 December 2022 to 3 April 2024).
In her affidavit Ms Twiss deposed that as the company secretary of Sandfire, she was responsible for ensuring Sandfire's compliance with the Corporations Act and the ASX Listing Rules, and for ensuring the implementation of corporate governance. She further deposed that this included overseeing the performance of tasks such as:
(a)the preparation of notices of meetings for shareholders;
(b)the lodgement of any notice and other documents that Sandfire was required to lodge with the ASX and ASIC;
(c)the preparation of proposed resolutions to be passed by shareholders and Sandfire's board of directors;
(d)the preparation of board papers and the keeping of minutes of board meetings; and
(e)ensuring that those documents comply with the requirements of the Corporations Act.
Ms Twiss further deposed that immediately prior to her appointment, Ms Raven was principally responsible for these matters as company secretary.
As to the purported appointment of Deloitte as Sandfire's auditor, Ms Twiss deposed to the circumstances in which she came to be informed that Sandfire had not complied with its obligations under the Corporations Act in late May 2024. Ms Twiss deposed that:
(a)on 27 May 2024 she was informed by Mr Harris that it appeared that Sandfire did not obtain shareholder approval ratifying the appointment of Deloitte at the 2023 AGM;
(b)from her discussion with Mr Harris, and her later discussions with Gemma Tually (Sandfire's head of legal and compliance) and Phillippa Prior (assistant company secretary of Sandfire appointed on 24 January 2024), she understood that a potential issue with Deloitte's appointment was first identified on 14 May 2024 during a compliance review conducted by Sandfire's company secretariat team;
(c)on 24 May 2024 Ms Prior escalated the issue to Ms Tually who in turn escalated it to Ms Jansen (as noted above, Sandfire's chief financial officer); who in turn raised the issue with Mr Harris; and
(d)from that time onwards Sandfire's legal and compliance team (including Ms Twiss) worked closely with its external legal counsel to determine what steps needed to be taken to resolve the issue, including liaising urgently with ASIC and the ASX, informing shareholders and seeking curative orders from the court.
Ms Twiss deposed that prior to receiving notice of this issue from Mr Harris, she was not aware of and did not suspect that Deloitte had not been ratified as Sandfire's auditor; that the 2023 AGM and the appointment of Deloitte as auditor had both occurred prior to her appointment as company secretary; and that to the best of her knowledge she was not involved in the ASIC or ASX lodgements surrounding Deloitte's appointment, nor was she closely involved in the preparation of the notice of meeting for the 2023 AGM.
Ms Twiss also deposed that from her review of Sandfire's records and the registers maintained by ASIC and the ASX, she understood as follows.
In 2022 Sandfire undertook a tender process to change its then auditor, Ernst & Young; following a tender process which completed in October 2022, Deloitte was selected as Sandfire's new auditor; on 24 October 2022 Sandfire sent a letter to Ernst & Young informing the firm of its decision to appoint Deloitte as Sandfire's auditor; on the same day, Sandfire also sent a letter to ASIC regarding Ernst & Young's cessation as its auditor; on 26 October 2022 Deloitte provided its signed consent to act as Sandfire's auditor; on 27 October 2022 Sandfire's board of directors resolved to appoint Deloitte as its auditor; on 31 October 2022 Sandfire lodged a notice of meeting with the ASX in respect of its AGM to be held on 30 November 2022, which proceeded on that date; ASIC approved Ernst & Young's resignation on 17 November 2022; on 5 December 2022 Ernst & Young provided Sandfire with a formal notice resigning as auditor; on 6 December 2022 Sandfire made an announcement to the ASX that Ernst & Young had applied for and received ASIC's consent to resign as auditor for Sandfire and its controlled entities, the board of directors had resolved to appoint Deloitte as auditor of Sandfire and its controlled entities, and the decision to appoint Deloitte was subject to ratification by shareholders at the next AGM (being the 2023 AGM) (the auditor announcement).
Ms Twiss observed that the auditor announcement recorded that it had been authorised by Mr Fitzgerald (Sandfire's then company secretary). She further deposed that she did not recall being involved in the preparation of the auditor announcement.
Ms Twiss also deposed to her belief that on 6 December 2022 Sandfire made a further public announcement to the ASX appointing Ms Raven as company secretary; Mr Fitzgerald then resigned as company secretary but remained chief financial officer; Ms Raven had been performing company secretarial work alongside Mr Fitzgerald prior to her appointment as company secretary; Ms Raven subsequently prepared an ASIC form dated 10 December 2023 notifying ASIC of the resignation of Ernst & Young as auditor; on 31 August 2023 Sandfire made a public announcement to the ASX attaching a copy of its annual report for the year ended 30 June 2023; the annual report contained an independent auditor's report from Deloitte; Sandfire lodged the notice for the 2023 AGM with the ASX; notice of the meeting was prepared by Sandfire's solicitors, Gilbert + Tobin, in consultation with Ms Raven who was the company secretary at that time; and the notice of meeting did not seek shareholder ratification of the appointment of Deloitte as auditor.
Among other things, Ms Twiss deposed that she was not closely involved in preparing the notice of meeting for the 2023 AGM, and that Sandfire had undergone significant personnel changes that impacted its preparation for the 2023 AGM. She particularly noted that Mr Fitzgerald, Sandfire's chief financial officer and company secretary at the time of Ernst & Young's resignation as auditor, had stood down and left the business in September 2023.
Ms Twiss further deposed that on 29 November 2023 Sandfire held the 2023 AGM; in accordance with the agenda set out in the notice of meeting for the 2023 AGM, the financial report of Sandfire for the year ended 30 June 2023 (together with the directors' report and independent auditor's report from Deloitte as set out in the annual report) was tabled; the results of the 2023 AGM did not refer to a resolution put to shareholders to ratify the appointment of Deloitte as auditor; and Ms Raven did not raise the requirement to ratify Deloitte's appointment as auditor with Ms Twiss while they were jointly acting as company secretary of Sandfire, nor as part of her handover prior to 3 April 2024.
Ms Twiss deposed that on 29 May 2024 Ms Raven was contacted to obtain her account of the circumstances leading to the failure to ratify Deloitte's appointment at the 2023 AGM, but was unable to recall why a resolution regarding Deloitte's appointment had not been included in the notice of meeting for the 2023 AGM. Ms Raven had recalled however that Gilbert + Tobin had always dealt with the preparation for AGMs, including notices of meeting.
Ms Twiss also deposed to her conversation on 30 May 2024 with Sarah Turner, a partner at Gilbert + Tobin, regarding the preparation of the notice of meeting for the 2023 AGM; and that Ms Turner subsequently sent Ms Twiss an email confirming that a resolution regarding the change in auditor was not one of the resolutions requested by Ms Raven for the 2023 AGM.
It was Ms Twiss' evidence that it was her belief that Sandfire's failure to seek ratification of Deloitte's appointment as auditor was an inadvertent and honest mistake, and was a result of a combination of the passage of time between the making of the auditor announcement and the 2023 AGM; Mr Fitzgerald's departure in September 2023 (as he had been principally involved in preparing the auditor announcement); and Ms Raven and Gilbert + Tobin's focus on other items of business to be considered at the 2023 AGM.
Ms Twiss deposed to the release of Sandfire's half‑year financial results for the six‑month period ending 31 December 2023 and its March 2024 quarterly report. She deposed that on 23 February 2024 Sandfire made a public announcement to the ASX attaching its half‑year financial results for the six‑month period ending 31 December 2023; the half‑year financial results contained the independent auditor's review report from Deloitte and the auditor's independence declaration from Deloitte; on 30 April 2024 Sandfire made a public announcement to the ASX attaching its March 2024 quarterly report; and that a disclaimer was included at page 12 of the March 2024 quarterly report, that the report 'includes unaudited financial information …'.[16]
[16] Affidavit of VA Twiss affirmed 30 May 2024, par 42, VAT-12 (page 155).
As to whether there would be any substantial injustice or prejudice if the relief sought by the application was granted, Ms Twiss deposed that at the date of her affidavit she was not aware of and had not been informed by any shareholder or other person of any complaint or objection about the failure to obtain shareholder nomination and approval of the auditor at the 2023 AGM; any concerns with the half‑year financial statements for the half‑year ending 31 December 2023 as audited by Deloitte; any notice foreshadowing an intention to appear at any court hearing to oppose the orders sought in this proceeding; or any shareholder having issued a notice s 328B(l) of the Corporations Act nominating an auditor after Sandfire announced on 6 December 2022 that it would be seeking the ratification of the appointment of Deloitte as its auditor.
As to the position of Deloitte, Ms Twiss deposed that she was aware that Mr David Newman, audit partner at Deloitte, had reviewed the ASX announcement made by Sandfire on 29 May 2024 regarding its intention to apply for relief under s 1322 of the Corporations Act,[17] and that Mr Newman had confirmed (as set out in the announcement), that:
the failure of the Company to seek ratification of Deloitte's appointment at the Company's 2023 AGM does not impact the independent auditor's review report issued by Deloitte in the half-yearly reports on 22 February 2024.
[17] Which announcement was annexed to the affidavit of MS van Brakel sworn 29 May 2024, MVB‑8 (page 295).
As to the potential consequences to Sandfire and its shareholders if this application to the court was refused, Ms Twiss deposed that Sandfire has a US$200 million corporate rollover facility under a syndicated facility agreement with a number of financial institutions; under the terms of the facility, Sandfire is required to provide audited financial statements on an annual basis and it would be an event of default if Sandfire failed to do this and had not remedied the default within the cure period; and Sandfire may be prevented from giving valid cleansing notices in the future, which may impact its ability to issue shares and raise capital.
Finally, Ms Twiss deposed to the circumstances which revealed that Sandfire took its corporate governance obligations seriously. Further, she deposed that going forward, Sandfire intended to ensure that items that require ratification at future meetings are duly recorded by Sandfire's company secretariat team, and that there is ongoing monitoring and assurance of regulatory and compliance obligations.
First affidavit of Meredith Campion
Meredith Nancy Campion is also a partner of the firm Allen Overy Shearman Sterling, and on 30 May 2024 affirmed an affidavit in support of the application to which she annexed three documents marked MNC‑1 to MNC‑3.
Ms Campion's affidavit concerned service of the application on ASIC and the ASX, and I was satisfied that ASIC and the ASX had been served with the application and the three affidavits referred to above before the hearing of the application.
Ms Campion also attached to her affidavit a true copy of a graph obtained on 30 May 2024 by Amelia Ikin of Allen Overy Shearman Sterling from Sandfire's listing on the ASX website, showing the movement in Sandfire's share price from December 2022 to May 2024.[18]
Second affidavit of Meredith Campion
[18] First affidavit of MN Campion affirmed 30 May 2024, MNC-3 (page 11).
In support of the application, Ms Campion affirmed a second affidavit on 31 May 2024 to which she attached two documents marked MNC‑4 and MNC‑5. Ms Campion's second affidavit concerned further communications with ASIC and the ASX, and to communications from shareholders.
I was satisfied that as at the date of her second affidavit, Ms Campion had not received confirmation from ASIC as to whether it sought to be heard or intended to appear at the hearing of the application, whereas confirmation had been received from the ASX that it was not in a position to comment on the issues raised by the application, and that it did not intend to appear at the hearing of the application.[19]
[19] Second affidavit of MN Campion affirmed 31 May 2024, MNC-5 (pages 12 - 19).
Having reviewed the matters deposed to by Ms Campion in her second affidavit, I also understood that Sandfire had not received any communications from shareholders or third parties in response to Sandfire's ASX announcement made on 29 May 2024 in relation to the appointment of the auditor; foreshadowing an intention to appear to oppose the orders sought in this proceeding; or raising any complaint or objection as to the relief sought by this proceeding.
Disposition
I had regard to and was satisfied of the following matters.
Findings - the failures and the cause of them
Before the 2023 AGM, Deloitte was validly appointed as Sandfire's auditor pursuant to s 327C(1) of the Corporations Act, having been appointed to fill a casual vacancy in that office. By operation of s 327C(2), Deloitte's appointment under subsection (1) ceased at the 2023 AGM.
As was acknowledged, Sandfire did not receive a shareholder nomination of Deloitte as auditor and did not formally appoint Deloitte at the 2023 AGM, as required by s 327B(1)(b) and s 328B(1) of the Corporations Act. Due to its failure to appoint Deloitte within one month following the 2023 AGM, Sandfire also failed to comply with s 327C of the Corporations Act.
Further, Sandfire's December 2023 half‑year financial report was released to the ASX on 24 February 2024. This report contained the independent auditor's review report from Deloitte; and the auditor's independence declaration from Deloitte, but had not been audited or reviewed by a properly appointed auditor. Sandfire also did not lodge a half‑year financial report by a properly appointed auditor for the financial half‑year ending 31 December 2023 with ASIC within 75 days of the end of the half‑year. Thus, Sandfire failed to comply with s 302 or s 320 of the Corporations Act.
Having given careful consideration to the affidavits read, I was satisfied that the objective facts and circumstances before the court were such as to support the finding of an oversight on the part of Sandfire. As was noted in the submissions filed on behalf of Sandfire:[20]
(a)Ernst & Young ceased to be Sandfire's auditor on 5 December 2022 when the firm provided Sandfire with a formal notice, resigning as auditor after receiving consent from ASIC to resign as auditor of the Sandfire group;
(b)Deloitte provided its signed consent to act as Sandfire's auditor on 26 October 2022, and Sandfire's board of directors resolved to appoint Deloitte as its auditor on 27 October 2022;[21]
(c)the auditor announcement made on 6 December 2022 specifically recorded Sandfire's stated intention to seek shareholder approval of Deloitte as auditor at the 2023 AGM;
(d)the lodgement of the notice of the 2023 AGM on 27 October 2023 occurred some 10 months after the 6 December 2022 announcement, which was attended to by a then different company secretary (Ms Raven) as Mr Fitzgerald had ceased working in that role on 6 December 2022 (and had also ceased working with Sandfire in the role of chief financial officer on 30 September 2023, two months prior to lodgement);
(e) the notice of the 2023 AGM was not limited in subject matter or simple - it was not only passing the accounts and re‑appointing a director - the number of resolutions in the 2023 notice of AGM (seven in total) and substance of business covering comprehensive remuneration related issues were likely to have had a bearing on the preparation of that document;
(f) Mr Harris specifically deposed that he was not aware of the oversight, nor has it been brought to the attention of any other director; and
(g) Ms Twiss affirmed that she has reviewed company records and considered it an oversight.
[20] Outline of submissions par 25.
[21] Affidavit of VA Twiss affirmed 30 May 2024, par 25, VAT-4 (pages 17 - 18).
I accepted that it was not until May 2024 that Sandfire became aware that it had failed to seek shareholder approval ratifying the appointment of Deloitte as auditor at the 2023 AGM. The failure was detected by the assurance review requested by the managing director of Sandfire. Until May 2024, Mr Harris, Sandfire's chief executive officer and managing director, and Ms Twiss, Sandfire's current company secretary, were not aware, nor did they suspect, that Deloitte had not been properly appointed as Sandfire's auditor. Ms Twiss was appointed as joint company secretary of Sandfire in February 2024, and became sole company secretary in April 2024. Mr Harris commenced as chief executive officer and managing director of Sandfire on 3 April 2023.
Upon becoming aware of the oversight, significant efforts were made to bring this application promptly, on notice to ASIC, the ASX and to shareholders.
Jurisdiction
I was satisfied that the court had jurisdiction and power to make the orders sought by operation of s 1337B(2) of the Corporations Act (by which original jurisdiction was conferred on this court with respect to such civil matters arising under corporations legislation); and s 1322 of the Corporations Act (which conferred the necessary jurisdiction and powers upon this court to grant the relief sought by Sandfire).
As to Sandfire's request that an order be made declaring that Sandfire be deemed to have complied with each of the requirements of the Corporations Act described at [1(a)(i) to (iv)] above, I was satisfied that such an order was within power. As was submitted on behalf of Sandfire, the basis for such an order was the chasseau of s 1322(4), which confers a power on the court to make any consequential or ancillary order that it sees fit.[22]
[22] Outline of submissions par 58, referring to Re Order of AHEPA NSW Inc [2018] NSWSC 458 [32] and In the matter of Centuria Property Funds Ltd [2022] NSWSC 1056; (2022) 162 ACSR 699 [44].
The court's jurisdiction to grant such orders under s 1322(4) has been confirmed in previous decisions,[23] and the same ancillary deeming order has been made in recent applications to this court concerning the validity of auditor appointments.[24]
Standing - application by an 'interested person'
[23] Outline of submissions par 58, referring to Re Memphasys Ltd; Ex parte Memphasys Ltd [2022] WASC 269 [96] ‑ [99].
[24] Outline of submissions par 58, referring to Ex parte Bellevue Gold Ltd [2021] WASC 80; Re Matador Mining Ltd; Ex parte Matador Mining Ltd [2021] WASC 132; Re Spenda Ltd; Ex parte Spenda Ltd [2023] WASC 351; Re Enova Mining Ltd; Ex parteEnova Mining Ltd [2023] WASC 492; Re Omni Bridgeway Ltd; Ex parte Omni Bridgeway Ltd [2024] WASC 133.
An application may be made under s 1322 of the Corporations Act by an interested person. As the section is a remedial one, the concept of an 'interested person' for the purposes of s 1322(4) should not be narrowly interpreted.[25]
[25] In the matter of Bernsteen Pty Ltd (in liq) [2018] SASC 76 [26].
In all of the circumstances, I accepted that Sandfire was an interested person, with requisite standing to seek relief under s 1322 of the Corporations Act.
Notice of the application to ASIC and the ASX
I was satisfied that both ASIC and the ASX had received prior notice of the application. Neither sought to be heard.
Prescriptive requirements - s 1322(4)(a) of the Corporations Act
Upon discovering its error, Sandfire applied to the court for a declaration pursuant to s 1322(4)(a) of the Corporations Act that the appointment of Deloitte as its auditor from 29 November 2023 (that is, from the date of the 2023 AGM), was not invalid by reasons of the failures described at [1(a)(i) to (iv)] above. In addition, a declaration was sought that Sandfire be deemed to have complied with each of the requirements of the Corporations Act described at [1(a)(i) to (iv)].
In granting relief, I was satisfied that the prescriptive requirements of s 1322(4)(a) had been met in that the proposed order was framed in a declaratory form; the act, matter or thing was the appointment of an auditor; and the alleged contraventions were clearly identified.
Pre-conditions to the making of orders pursuant to s 1322
Only one of the three pre-conditions in s 1322(6)(a) needed to be satisfied.
Sandfire did not contend that the auditor appointment was of a procedural nature, and did not suggest that it had satisfied s 1322(6)(a)(i) (that the act, matter or thing is essentially of a procedural nature).[26]
[26] Outline of submissions par 50, footnote 47, referring to Ex parteBellevue Gold Ltd [2021] WASC 80 [60]; In the matter ofNew Century Resources Ltd [2021] WASC 86 [48]; Re Matador Mining Ltd [2021] WASC 132 [75]; Re Spenda Ltd [2023] WASC 351 [40]; ts 12 (31 May 2024).
As to s 1322(6)(a)(ii), counsel submitted, and I accepted, that there was no evidence before the court that Sandfire or its directors or officers had acted dishonestly, nor did the circumstances considered objectively suggest there was dishonesty. That said, it was acknowledged on behalf of Sandfire that there was no direct evidence before the court from the relevant former officer of Sandfire (Ms Raven) or Gilbert + Tobin.
In all of the circumstances, the focus of Sandfire's application was s 1322(6)(a)(iii) (that it was just and equitable that the order be made).[27]
Section 1322(6)(a)(iii) - just and equitable
[27] ts 17 (31 May 2024).
In circumstances where the pre‑condition in s 1322(6)(a)(iii) has been relied upon, the court has generally focused on the interests of the shareholders to assess whether it is just and equitable that orders be made.[28]
[28] Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369 [10].
Counsel for Sandfire submitted that it was just and equitable for the order to be made in all of the circumstances, not at least because:[29]
(a)Sandfire (and the directors, officers, auditors and shareholders of Sandfire) had assumed Deloitte's valid appointment and conducted themselves accordingly;
(b)no issue had been raised as to the accounts or conduct of Deloitte's audits;
(c)if left unremedied, doubt with respect to Sandfire's financial reporting compliance obligations with respect to the audit of Sandfire's 2023 annual report would be unwarranted and, may impact upon future operations (including raising capital or finance) and, without the validated appointment there may be a default of the US$200 million facility; and
(d)the issue arose by an honest and inadvertent oversight in circumstances where Sandfire, when it initially announced Deloitte's appointment to fill the casual vacancy left by Ernst & Young, intended to seek shareholder approval at the 2023 AGM.
[29] Outline of submissions par 52.
Counsel further noted that Sandfire had acted promptly in making this application, and submitted that prompt action to remedy an error may be regarded as an indicia of whether an applicant has acted honestly for the purposes of s 1322 of the Corporations Act.[30] I had regard to the evidence that Sandfire, since becoming aware of the issue regarding Deloitte's appointment as auditor in May 2024, had taken timely action by liaising with ASIC and the ASX, informing its shareholders, and commencing proceedings in this court seeking curative orders on 29 May 2024.
[30] Outline of submissions par 53, referring to Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369 [54].
I also took comfort that by the application, Sandfire had sought to reserve to any person who might claim to suffer substantial injustice or may be likely to suffer substantial injustice by the making of any or all of the orders pressed, liberty to apply to vary or to discharge them within 28 days.[31]
[31] See ts 14 (31 May 2024); see also order 5 of the orders reproduced at sch A to these reasons.
These were all matters which supported a finding that it was just and equitable for the order to be made.
Finally, I did not consider that Sandfire's conduct had otherwise been so poor as to have been disentitling of relief. Sandfire's failure to comply with the provisions of ch 2M of the Corporations Act was one of oversight, discovered by its own internal review processes. I accepted Ms Twiss' evidence that Sandfire takes its corporate governance obligations seriously, as was supported by:
(a)the manner in which the oversight in the appointment of the auditor was identified, which was discovered in the course of Sandfire completing an assurance review activity that had been requested by Mr Harris to confirm Sandfire was meeting its compliance obligations;
(b) Sandfire promptly taking steps to seek legal advice and correct the irregularity shortly after becoming aware of the issue; and
(c) Sandfire taking steps to build a company secretariat team, to ensure it has the necessary leadership, skills and expertise to respond to corporate governance issues.[32]
[32] Affidavit of VA Twiss affirmed 30 May 2024, par 49.
I accepted that in this case it was just and equitable for the order to be made, and for these reasons, I found that the pre‑condition to the making of orders prescribed in s 1322(6)(a) to have been satisfied.
Section 1322(6)(c) - no substantial injustice
Section 1322(6)(c) of the Corporations Act was enlivened, as it is enlivened in every case where relief is sought pursuant to s 1322 of the Corporations Act. Section 1322(6)(c) provides that the court cannot make an order unless it is satisfied that no substantial injustice has been or is likely to be caused to any person.
The classes of persons who may be impacted by the making of the orders sought on behalf of Sandfire were Deloitte, Sandfire and Sandfire's shareholders.
As to Sandfire, counsel submitted that if no validating order was made, Deloitte's appointment as auditor, and Sandfire's December 2023 half‑year report reviewed by Deloitte on 22 February 2024, may remain in a state of uncertainty, with implications for Sandfire's historic compliance with its financial reporting and audit obligations under ch 2M of the Corporations Act. It was also submitted that Sandfire may also be in default under its corporate rollover facility if it failed to provide audited financial statements on an annual basis, and it may be prevented from giving future cleansing notices with confirmations of compliance for the purpose of s 708A(6)(d)(i) (when issuing of shares to raise capital).[33]
[33] Outline of submissions par 56(a).
Further, it was noted that:[34]
(a)Deloitte, as an established auditor, had audited the 2023 annual report and half-year reports;
(b)in respect of the December 2023 half-year report, Sandfire had confirmed that it had been reviewed by Deloitte in accordance with applicable accounting standards, and that Deloitte had confirmed that the failure to seek ratification of the auditor appointment did not impact Deloitte's independent auditor's review report; and
(d)no shareholder had raised any issue regarding the substance of either of the reports audited or reviewed by Deloitte, or the conduct of the audit or review undertaken by Deloitte at the 2023 AGM or since.
[34] Outline of submissions par 56(b).
As to Deloitte, it was noted that if no validating order was made, the status of its appointment and its compliance with the relevant statutory provisions under ch 2M of the Corporations Act may be uncertain, with potentially adverse effects on that auditing firm, including potentially as to professional indemnity insurance.[35]
[35] Outline of submissions par 56(c).
There was considerable weight in counsel's submission that neither Sandfire, its shareholders or Deloitte would suffer substantial injustice if the relief pressed was granted, but rather, would be aided by such grant.
In the course of the hearing counsel also referred to the graph attached to Ms Campion's first affidavit showing the movement in Sandfire's share price from December 2022 to May 2024.[36] Counsel observed that the graph revealed that the general trajectory of Sandfire's share price had been upwards, with some volatility.[37] In circumstances where the general trajectory had been upwards, it was submitted that it was difficult to imagine a shareholder would have a claim grounded on the invalidity of Deloitte's appointment as auditor in this period, so that it might be said that the grant of relief would cause substantial injustice.[38] I took comfort in the same.
[36] First affidavit of MN Campion affirmed 30 May 2024, MNC-3 (page 11).
[37] ts 20 (31 May 2024).
[38] ts 20 (31 May 2024).
It is usual in cases such as this to provide an opportunity for shareholders or other parties to raise a complaint about the proposed orders. I also took comfort by the express inclusion of order 5 of the proposed orders (liberty to apply).[39]
[39] See order 5 of the orders reproduced at sch A to these reasons.
With the comfort afforded by proposed order 5, for the reasons set out above I found s 1322(6)(c) to have been satisfied. I was satisfied that no substantial injustice had been or was likely to be caused to any person.
No other discretionary reason to withhold relief
In addition to the prescriptive requirements and pre‑conditions that must be satisfied, the court has a residual discretion to grant or refuse relief.
In the disposition of the application I also considered whether there was evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or Sandfire's constitution so as to warrant refusal of the relief sought.[40]
[40] Re Wave Capital Ltd [29].
I was satisfied that the non-compliance had been inadvertent. There was no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or the company's constitution so as to warrant refusal of the relief sought.
Further, I was and am satisfied that there was nothing in the evidence before me to suggest that any minority shareholder interest might be oppressed or any other interest might be affected by the grant of the relief sought. I was and am satisfied that all shareholders impacted by the contravention as well as the ASX and ASIC had been given notice of this hearing. No shareholder or regulator sought to intervene or gave notice that they wished to be heard on the application.
In exercising the discretion to grant relief under s 1322(4), a relevant factor is the promptness with which the applicant has sought to remedy the irregularity once it has been identified.[41] In this case, the failure was detected by the assurance review requested by the managing director of Sandfire and was acted upon without delay.
[41] Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22 [60].
I was satisfied that there was no other discretionary reason to withhold relief. I did not consider that public policy would be undermined by the making of the orders. I was satisfied that the court had been provided with a frank and detailed explanation of the circumstances surrounding the failure by Sandfire to formally appoint its auditor at the 2023 AGM, and that on the evidence, Sandfire's conduct did not involve a failure to act honestly or a blatant disregard of the provisions of the Corporations Act, but rather, was caused by inadvertence.
Conclusion
In the circumstances of this case, I was and am satisfied that the relief sought on behalf of Sandfire should be granted. At the conclusion of the hearing on 31 May 2024 I made orders substantially in the form sought in the originating process. The final form of the orders made are reproduced at sch A to these reasons.
I proceeded on the basis that orders under s 1322(4)(a) of the Corporations Act might be made on conditions, or with consequential and ancillary orders. Sandfire suggested that the inclusion of orders 2 to 5 was appropriate so as to allow fair notice and permit any affected parties to be heard. I considered that such orders were appropriate in all of the circumstances.
Finally, I accepted Sandfire's submission that there to be no order as to costs, reflected in order 7 of my extracted orders, having accepted that there was nothing in the evidence to warrant looking behind Sandfire's decision not to pursue costs.
Sch A - Orders made on 31 May 2024
Pursuant to s 1322(4)(a) of the Corporations Act 2001 (Cth), it is declared that the appointment of Deloitte Touche Tohmatsu as auditor of the plaintiff from 29 November 2023 is not invalid by reason of:
(a)the failure of the plaintiff and/or its directors to comply with s 327B(1)(b) of the Corporations Act by not having such appointment approved at the 2023 Annual General Meeting of the plaintiff;
(b)the failure of the plaintiff and/or its directors to comply with s 327C of the Corporations Act within one month following the 2023 Annual General Meeting of the plaintiff;
(c)the failure of the plaintiff and/or its directors and officers to comply with s 328B of the Corporations Act;
(d)any failure by the plaintiff to comply with s 302 of the Corporations Act by not having a half-year financial report by a properly appointed auditor for the financial half‑year ending 31 December 2023; and
(e)any failure by the plaintiff to comply with s 320 of the Corporations Act by not lodging a half-year financial report by a properly appointed auditor for the financial half-year ending 31 December 2023 with the Australian Securities and Investments Commission (ASIC) within 75 days of the end of the half-year,
and, pursuant to s 1322(4) the plaintiff and its directors and officers (as the case may be) are deemed to have complied with those requirements.
A sealed copy of these orders is to be served on ASIC as soon as reasonably practicable and upon service of these orders, ASIC is to include these orders on its database.
A sealed copy of these orders is to be given to the plaintiff's former auditor, Ernst & Young, and the plaintiff's current auditor, Deloitte Touche Tohmatsu.
As soon as is reasonably practicable, the plaintiff is to publish an announcement to the Australian Securities Exchange annexing a copy of these orders.
For a period of 28 days from the date of these orders, 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 to discharge them within that period.
The plaintiff have liberty to apply for further orders.
There be no order as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KO
Associate to the Honourable Justice Strk
19 JULY 2024
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