Barondene Pty Ltd v Breakfree Ltd [2006] NSWSC 579 | Case summary

3006/06 RE AFFINITY HEALTH LIMITED & 38 ORS JUDGMENT 1 The plaintiff companies, of which there are thirty nine, are all subsidiaries of Ramsay Health Care Limited, a company the securities of which are listed for quotation on the stock market of Australian Stock Exchange Limited. 2 The plaintiffs fall into two groups. Each company in the first group seeks an order under s.1322(4)(d) of the Corporations Act 2001 (Cth) extending until a specified date (being, in each case, a date now past), the time for lodging with Australian Securities and Investments Commission ("ASIC") audited financial statements and directors' reports under s.319 of the Act. Each company in the second group seeks an order under s.1322(4) extending until a specified date (being again, in each case, a date now past), the time for lodging with ASIC notice under paragraph (k) of ASIC Class Order 98/1418. Within each group of plaintiffs there are sub-groups, in that some companies are concerned with lodgment in respect of one financial year, while others are concerned with lodgment for different years (sometimes more than one). 3 As this brief description of the relief sought implies, each relevant company defaulted in meeting a lodgment requirement (in that it did not lodge within the required time) but afterwards remedied the situation by lodging the document or documents in question. 4 One might wonder why, as a practical matter, the retrospective applications for extension of time have been made; and why the companies wish to have orders the effect of which is to cause what was, at the time, a default dealt with in such a way that the due date for compliance is extended so that it becomes a date after that on which the act directed towards compliance occurred. The answer comes from a desire of the Ramsay Group to make itself fit within ASIC's Class Order 98/1418 so that the numerous subsidiaries are not required to produce and lodge separate financial reports and related documents in circumstances where to do so would be onerous in light of the large number of companies in the group. 5 It is necessary to say something about Class Order 98/1418. Parts 2M.2 and 2M.3 of the Corporations Act impose requirements with respect to financial reporting by companies. The requirements extend to matters which include preparation, dissemination and lodgment of financial statements and related reports. Part 2M.6 confers upon ASIC power to grant certain exemptions and modifications in relation to such matters. By s.340, ASIC is empowered to grant a specific application relieving a company or its directors or both (or the auditor) from all or specified provisions of Parts 2M.2 and 2M.3. By s.341, ASIC is empowered to make "an order in writing in respect of a specified class of companies … relieving" the companies and their directors (or auditors) from all or specified provisions of Part 2M.2 and 2M.3. In exercise of the latter power, that is, the power conferred by s.341, ASIC has made an order in writing designated "Class Order 98/1418" relieving a company which is one of several "Wholly-owned Entities" of a "Holding Entity" from, broadly speaking, the requirements to prepare and disseminate a financial report and director's report, to have financial reports audited, to lay the reports before an annual general meeting and to lodge the reports with ASIC. The relief is, however, made available by the class order only if certain conditions are fulfilled. Among the conditions is a condition that the company taking advantage of the dispensation and its auditor have, in relation to the last three financial years before that in relation to which the relief is used, "satisfied all their obligations under Chapters 2M and 2N of the Act …". 6 Because of the matters of late compliance to which the present application relates, the companies in question take the view that they do not at present fulfil this condition. They are further of the view, it seems, that they will be taken to fulfil the condition if the orders now sought are made. 7 Under s.341, ASIC's power to make an order relieving relevant entities and persons from all or specified requirements of Parts 2M.2 and 2M.3 is cast in such a way as to make it clear that the order may be expressed to be subject to conditions (s.341(2)(a)). It follows that, where the order is expressed in that way (with the result that availability of the relief is dependent on satisfaction of a condition), a company within the relevant class which wishes to take advantage of the relief may not do so unless the condition is satisfied. Neither the class order now in question nor the statutory provision under which it was made creates any mechanism by which ASIC itself may grant dispensation from such a condition. If the condition is satisfied, the relief is available; if the condition is not satisfied, the relief is not available. And, in the latter event, ASIC cannot act to make the class order relief available despite the non-satisfaction of the condition. That is not to say that ASIC could not act under s.340 to grant specific relief in the particular case having the same effect, with respect to a particular financial year, as that made available under the class order. The plaintiffs have not pursued that course, preferring to seek to bring themselves within the class order by means of retrospective repair work to be carried out by orders of the court in the way I have described. 8 I turn then to the central issue, namely, whether orders should be made under s.1322(4)(d) extending nunc pro tunc the latest time for certain lodgments so that it becomes a date (now past) by which the lodgments were in fact made. 9 I have no doubt that s.1322(4)(d) is available to be applied in the manner sought in relation to the several late lodgments under s.319. That section requires that the financial report and director's report for a financial year be lodged with ASIC, depending upon precise circumstances, within either three months or four months after the end of that financial year. The time limit is set by s.319(3). That section obviously fixes what s.1322(4)(d) refers to as a "period for doing an act, matter or thing … under this Act". There is, however, a question whether an extension of time for a filing required by paragraph (k) of Class Order 98/1418 can be granted under s.1322(4)(d). 10 It is necessary to explain, in this context, that certain of the companies now within the Ramsay Group have previously operated in circumstances considered to attract the relief created by Class Order 98/1418. The proposal that has prompted the present application is, in effect, the enlargement of the participating group by the addition of further subsidiaries and a desire to rely on the class order in respect of the enlarged group. 11 As it applied to relevant Ramsay Group companies in respect of each of the relevant past financial years, Class Order 98/1418 operated subject to a condition that each relevant company lodge a certain type of document with ASIC within four months or five months (depending on circumstances) after the end of the financial year in question. Viewed in the context of the statutory provision giving it efficacy, the class order relieved each relevant company from certain requirements of the Act in relation to a particular financial year "on condition that" the company lodged the document in question within the stipulated period after the end of the financial year. As I have said if the document was not so lodged, the relief did not operate and the statutory provision applied in the way that would have been avoided had the relief operated. The question posed by s.1322(4)(d) is whether, in those circumstances, the lodgment contemplated by the class order condition was something to be done "under this Act or in relation to a corporation". It is not the first kind. That leaves the question whether it is of the second kind. 12 In Re Dana Australia (Holdings) Pty Ltd (2006) 57 ACSR 99, Finkelstein J held that a period specified in the ASIC class order issued under s.341 for the doing of an act specified in the class order was one that came within the words "the period for doing any act, matter or thing … in relation to a corporation". He reasoned, in effect, that if ASIC has, in exercise of a statutory power, created an alternative regime of regulation applicable to corporations and imposed time limits as part of that regime, the s.1322(4)(d) power is attracted because the alternative regime not only applies to corporations but is sufficiently akin to a statutory regime to warrant treatment in the same way. Finkelstein J distinguished a regime created by class order of general application from one arising from a specific decision of ASIC in relation to a particular case, such as a decision under s.340. 13 I respectfully agree with the approach taken by his Honour. It gives due weight to the words "or in relation to a corporation" which, clearly enough, are intended to refer to an act, matter or thing not directly referable to the Act itself ("under this Act"). It also keeps the extension effected by the words "or in relation to a corporation" within bounds appropriately derived from analogy with statutory situations. Whether those bounds may, in some later case, be found to be even broader is a question for the future. 14 I conclude therefore that the court has jurisdiction to make all the orders now sought under s.1322(4)(d). It remains to consider whether, in the exercise of discretion, it should do so. The statutory directive relevant is that found in s.1322(6)(c), namely, that the court be satisfied that the making of the orders is not likely to cause substantial injustice to any person. 15 It is relevant, in that connection, to re-emphasise that all the lodgments that were not made on time were subsequently made, so that the objective of disclosure and availability upon search of relevant information has been, in each case, satisfied. In a number of instances, the relevant delay involved a period of between one and fifteen days. Those may be classified as relatively trivial cases and no more need be said about them. In a number of other cases, the delay was a little more than six months and was the product of confusion between Sydney and Melbourne offices as to required procedures in the period following Ramsay's acquisition of the Affinity group of companies. The failure to lodge occurred in the context of steps taken to integrate the Affinity systems into the Ramsay systems. Again the objective of disclosure and availability upon search has been satisfied. 16 In the five remaining cases, the delay was between seven months and thirty one months. The cause, in those instances, was simple oversight which was rectified promptly when discovered. Those cases did, however, occur within the Ramsay Group's own administrative structure. All that need be said about that, I think, is that oversight is one of the kinds of human failure that s.1322(4) is intended to cover (see Barondene Pty Ltd v Breakfree Ltd (2004) 22 ACLC 910 at pp.912-3) and that the fact that the officer with ultimate responsibility has had to swear an affidavit testifying to the internal oversights which have been disclosed to the court may be expected to impress on him the need for greater diligence in the future. 17 ASIC was given notice of these applications and indicated that it did not wish to be heard. There is no suggestion that the Ramsay Group is anything but solvent and healthy. There is no perceived basis on which any member or creditor would be prejudiced by the making of the orders. Indeed, nothing that has been put before the court suggests that it would be productive of any kind of injustice - substantial or otherwise - for the orders extending time to be made. That being so, I will make the orders under s.1322(4)(d) sought in the originating process. 18 I have not so far mentioned that each plaintiff also seeks declaratory relief in the form of a declaration that it "has not failed to comply with its obligations" under s.319 with respect to a certain financial year or certain financial years and that it "has not failed to substantially satisfy its obligations" under Chapters 2M and 2N for that year or those years by lodging a notice or notices under paragraph (k) of the class order. As I presently see matters, I am not persuaded that such declaratory relief is appropriate or of utility. The s.1322(4)(d) orders and their legal effect will be clear without elaboration. The applications were made ex parte and there was accordingly no contradictor. There is no lis inter partes. The jurisdiction under s.75 of the Supreme Court Act 1970 to make "binding declarations of right" does not seem to me, as presently advised, to be engaged in these circumstances. I am not disposed to make the declarations but will reserve liberty to the plaintiffs to have the matter restored to the list within seven days should they wish to make further submissions on that aspect. **********

Barondene Pty Ltd v Breakfree Ltd

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