By a Second Amended Originating Process filed by leave on 16 February 2022, the Plaintiffs, Flight Centre Technology Pty Ltd ("FCT"), Australian OpCo Pty Ltd ("OpCo") and Flight Centre Travel Group Limited ("FCTGL") seek orders under s 1322(4) of the Corporations Act 2001 (Cth) so as to remedy and be excused from past non-compliance with certain requirements under ASIC Class Order: Wholly-owned Entities [CO 98/1418] ("Class Order") and its successor, ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 ("Instrument"). The Class Order and the Instrument set out the conditions that must be satisfied for an entity to be relieved of its financial reporting obligations under, inter alia, Pt 2M.3 of the Act. The Australian Securities & Investments Commission ("ASIC") has been given notice of the application and neither consents to nor opposes the relief sought and did not appear at the hearing.
I have drawn in this judgment on a helpful "roadmap" document prepared by the Plaintiffs' legal representatives, at my request, and on the submissions of Ms Mirzabegian, with whom Mr Farinha appears for the Plaintiffs. Ms Mirzabegian points out that the orders sought by the Plaintiffs, which I will set out in more detail below, are directed to four types of issues. The first type of issues concerns initial steps in applying for relief under the Class Order, which are sought to be addressed by orders extending the time to lodge Deeds of Cross Guarantee dated 28 June 2002 to which FCT is party ("FCT Deed") and to which OpCo is party ("OpCo Deed") (together, "2002 Deeds") with ASIC, and to provide ASIC with a prescribed statement and certain evidence by four days; abridging the time for FCTGL's directors to sign a directors' declaration by one day; extending the time for the directors of FCT to pass a prescribed resolution in respect of the financial year ending 30 June 2014 ("FY14"), to 21 days after the date of the orders; and relieving the Plaintiffs and their current and former directors and officers from any civil liability in respect of any failure to take such steps and to comply with financial reporting requirements by reason of any such failure. I address the relief sought in respect of these issue in paragraph 37 below.
The second type of issues concerns lodging opt in or "Form 389" notices with ASIC, which are sought to be addressed by orders (addressed in paragraphs 20f below) extending the time for such forms to be lodged by OpCo in respect of the financial year ending 30 June 2007 ("FY07"), and by FCT in respect of FY07 and FY14 to 21 days after the date of the orders. The Plaintiffs also seek an order (addressed in paragraphs 60-66 below) relieving them and their current and former directors and officers from any civil liability in respect of any failure to lodge Form 389 notices in respect of those financial years and the 2002 to 2006 financial years and to comply with financial reporting requirements by reason of any that failure and the non-compliance with a notice from ASIC in relation to the financial year ending 30 June 2019 ("FY19").
The third type of issues concerns failures to pass prescribed annual resolutions, which are sought to be addressed by orders extending the time to pass those resolutions in respect of the 2008 to 2019 financial years for FCT, and the 2008 to 2020 financial years for OpCo, to 21 days after the date of the orders, and relieving the Plaintiffs and their current and former directors and officers from any civil liability in respect of any failure to take such steps and to comply with financial reporting requirements by reason of any such failures. I address the relief sought in respect of these issues in paragraphs 43ff below.
The fourth type of issues concerns notes to FCTGL's consolidated financial statements and the accompanying directors' declarations. The Plaintiffs seek orders relieving them and their current and former directors and officers from any civil liability in respect of any failure to include one or more of the matters required by the Class Order or the Instrument in the notes to FCTGL's consolidated financial statements in respect of FY02 to FY20 and in that company's directors' declaration in respect of the financial year ended 30 June 2009 ("FY09") and to comply with financial reporting requirements by reason of any such failures. I address the relief sought in respect of these issues in paragraphs 61ff below.
[3]
Affidavits and background facts
The application is supported by numerous affidavits and the accompanying exhibits. The Plaintiffs rely on two affidavits of Mr Graham Turner dated 26 July 2021 ("Turner 1") and 2 March 2022 ("Turner 2"). Mr Turner was appointed as a director of FCT on 4 December 1981, shortly after its registration, and has been its sole director since 1 July 2005 (Turner 1, [8(c)-(d)]); he was appointed as a director of FCTGL on 17 November 1987, shortly after its registration (Turner 1, [10]); and he was appointed as a director of OpCo on 9 April 2002 and has been its sole director since 30 June 2005 (Turner 2, [15(c)-(d)]).
By his first affidavit, Mr Turner, refers to relevant documents and to FCTGL's annual reports from 2015 to 2016, and to correspondence received from the ASIC in October 2020 which noted that FCT had not lodged its 2019 financial statements. He also refers to further inquiries which indicated that issues had arisen in respect of FCT's lodgement of the notices necessary to take advantage of class order relief with ASIC in previous years.
By his second affidavit, Mr Turner refers to the scope of the relief that is now sought in the Second Amended Originating Process and to the inquiries which have been made by the solicitors acting in the proceedings to identify the additional issues which had arisen in them, refers to a schedule of those additional issues and to his understanding at the time that relevant documents were executed, and gives evidence of his belief that no substantial injustice has been caused to any person by reason of these matters, including by reason of the Plaintiffs' solvency and payment of their debts. He addresses the question of the utility of seeking to comply with additional financial reporting requirements, if relief is not granted, which he considers is limited, and refers to the replacement of the 2002 Deeds by a new Deed of Cross Guarantee between FTGHL as holding company and its subsidiaries from 8 June 2021, and to FCT and OpCo's reliance on that deed since that time in satisfaction of one of the preconditions to financial relief provided by the Instrument.
The Plaintiffs also read two affidavits of Ms Teeny Roberts dated 11 August 2021 ("Roberts 1") and 7 March 2022 ("Roberts 2"). Ms Roberts has, since 6 May 2003, been employed by FCTGL in the role of legal counsel (Roberts 1, [2]). In that role, within the legal team as part of a broader group compliance function, she is responsible for providing FCTGL and its related entities (including FCT), with general corporate and commercial legal advice (Roberts 1, [3]). By her first affidavit, Ms Roberts, exhibits relevant documents and refers to legal advice which FCTGL had received in 2013 relating to the revocation of the FCT Deed and FCT's acceding as a group entity to the OpCo Deed. Ms Roberts also refers to the entry into a document titled "FCT Assumption Deed" in late 2013 ("FCT Assumption Deed"), and to lodgement of notice of entry into that document with ASIC, while she was on parental leave, and to further legal advice which she had sought as to FCT's annual report in 2014. By her second affidavit, Ms Roberts further addresses her involvement with the 2002 Deeds prior to June 2013 and addresses the list of issues now identified in the proceedings.
The Plaintiffs also read an affidavit of dated 12 August 2021 of Mr Simon Seguna, who is legal counsel for the Flight Centre group, and commenced employment in May 2019. He also addresses matters relating to the FCT Assumption Deed, to correspondence with ASIC and to investigations undertaken in respect of the matters in issue in these proceedings.
The Plaintiffs read an affidavit of Mr David Smith dated 16 August 2021 ("Smith 1") and two further affidavits of Mr Smith dated 2 March 2022 (44 paragraphs, "Smith 2") and 2 March 2022 (7 paragraphs, "Smith 3"). Mr Smith was appointed as company secretary of FCT on 31 January 2008 and remains in that role (Smith 1, [12(d)]) and was also appointed as company secretary of OpCo on 31 January 2008 and remains in that role (Smith 2, [14(c)]). Mr Kennedy was also a company secretary of both FCT and OpCo between 25 January 2008 and 15 June 2014 (Smith 1, [12(e)]; Smith 2, [14(e)]). During the period when both were appointed as company secretary of FCT and OpCo, Mr Kennedy acted as "assistant" company secretary and he reported to Mr Smith (Smith 1, [15]-[16]; Smith 2, [18]). Mr Kennedy is no longer employed by FCTGL (Smith 1, [17]).
By his first affidavit, Mr Smith addresses relevant documents, correspondence with ASIC, and the estimated costs of preparing audited financial statements for FY14-FY19, if it was possible to do so. By his second affidavit, Mr Smith addresses his knowledge as to the Deeds of Cross Guarantee in place within the Flight Centre companies and gives evidence that he does not recall turning his mind to the detail of the conditions for relief under the relevant ASIC instruments, until those issues were identified immediately prior to the commencement of these proceedings. He also gives evidence that he does not believe that any substantial injustice has been caused to any person as a result of the issues, and addresses the cost, uncertainty and lack of utility of seeking to comply with the financial reporting requirements if relief is not granted. By his third affidavit, Mr Smith annexes a further email which he has identified relevant to matters addressed in his second affidavit.
The Plaintiffs read two affidavits of their solicitor, Ms Jayme-Lyn Hendriks dated 18 August 2021 (Hendriks 1) and 7 March 2022 (Hendriks 2). By both affidavits, Ms Hendriks refers to correspondence with ASIC in respect of the matters in issue in the proceedings. By an affidavit dated 10 February 2022, of Mr Mark Chapple (Chapple), who is also a solicitor acting for FCT and others in the proceedings, sets out the chronology of events which have led to the commencement of the proceedings, and additional issues which have been identified as a result of investigations made by FCT and others in connection with the proceedings.
The Plaintiffs also rely on an affidavit dated 2 March 2022 ("Perkins") of Mr Keith Perkins, who is a chartered accountant who was first employed by the Flight Centre group in March 2008, initially as second-in-command of its global financial reporting team (Perkins, [4]-[5]) and, since early 2010, has been the leader of that team, which has responsibility for compliance by Flight Centre group entities with their financial reporting obligations as part of the broader global expert team (Perkins, [6]-[8]). Mr Perkins also addresses the list of issues in the proceedings and refers to his knowledge of the Deeds of Cross Guarantee existing within the Flight Centre group, but notes that he was not otherwise aware of steps to be taken for financial reporting relief, and has now become aware of the fact that relevant companies did not always correctly list all parties to the deeds of company guarantee in their consolidated financial statements. He also gives evidence as to his belief that no prejudice has arisen from these matters.
The Plaintiffs also read an affidavit dated 4 March 2022 ("Feros") of Mr Peter Feros, who is the group general counsel of the Flight Centre group. Mr Feros commenced employment with the Flight Centre group in May 2008, initially as a legal counsel and then as general counsel (Feros, [3]-[4]) and, as group general counsel, he leads the group's in-house legal function, which also forms part of the global expert team (Feros, [5]-[6]). Members of the legal team and, if necessary, external law firms assist the global financial reporting team if and as requested (Feros, [8]). Mr Feros also addresses the list of issues which have arisen in the proceedings. He notes that responsibility for obtaining and maintaining financial reporting relief rests with the global expert team within the Flight Centre group, which includes Flight Centre's global financial reporting team and corporate secretarial function, which are supported by members of the legal team and external law firms as requested. Mr Feros also addresses his knowledge of the terms of the 2002 Deeds and the relevant issues.
I now turn to the background facts and applicable requirements as to financial reporting under the Act. FCT was registered as an Australian proprietary company in Queensland on 28 September 1981 (Turner 1, [8(b)]; Exhibit "GFT-1", Tab 1) and FCTGL is the ultimate holding entity of FCT (Turner 1, [3], [8(e)]; Ex "GFT-1", Tabs 1 and 2). OpCo was registered as an Australian proprietary company in New South Wales on 24 April 1987 (Turner 2, [15(b)]) and FCTGL is also OpCo's ultimate holding company (Turner 2, [15(e)]). OpCo was a public company from about 6 September 1999 until about 30 April 2003, and then a proprietary company (Ex "GFT-2", Tab 1).
On or about 28 June 2002, FCTGL and FCT entered into the FCT Deed (Ex "GFT-2", Tab 5) and FCTGL, OpCo (then named ITG Limited ("ITG")) and other wholly-owned subsidiaries of FCTGL entered into the OpCo Deed (Ex "GFT-2", Tab 5). FCT remained a party to the FCT Deed until 28 December 2013, when that deed was revoked (Ex "TMR-1", Tab 18) and FCT became a party to the OpCo Deed by the FCT Assumption Deed (Ex "TMR-1", Tab 18). On 8 June 2021, the OpCo Deed was replaced by a new Deed of Cross Guarantee and FCT and OpCo are parties to that new deed (Turner 2, [38]). Condition (b) of the Class Order and later cl 6(1)(a) of the Instrument relevantly provide that a company seeking to be relieved of its reporting obligations must be a public company or a large proprietary company. FCT was a large proprietary company from FY02 to FY19 and OpCo was a public company in FY02 and part of FY03, and a large proprietary company thereafter (Ex "GFT-2" Tabs 1 and 2). The Class Order, and later the Instrument, imposed additional procedural conditions which FCT and OpCo were required to comply with in order to be relieved from their financial reporting obligations under Pt 2M.3 of the Act. The companies did not comply or did not adequately comply with a number of those conditions.
The issues that have now arisen relate to the Plaintiffs' compliance with Pt 2M.3 of the Corporations Act, resulting from the issues in respect of their compliance with requirements of the Class Order and the Instrument noted above. Part 2M.3 sets out the financial reporting requirements for certain entities. Ms Mirzabegian points out that, relevantly, large proprietary companies must prepare a financial report and a directors' report for each financial year under ss 292(1) and 298(1); have the financial report audited and obtain an auditor's report under s 301(1); report to members under s 314 within the time required by s 315; and lodge the above reports with ASIC under s 319(1). At all relevant times, a "large proprietary company" has been defined in s 45A(3) of the Act as a proprietary company satisfying at least two of three criteria, which have varied in some respects over time. Broadly, these have required that the consolidated revenue, consolidated gross assets and/or number of employees of the company and the entities that it controls exceed specified values. A "public company" is defined in s 9 as generally any company other than a proprietary company.
Section 341 of the Act allows ASIC to make an order in writing relieving a class of companies and other entities from, among other things, the reporting requirements under Pt 2M.3, including the obligations referred to above. Ms Mirzabegian points out that the Class Order provides a mechanism for relief "where a company within a group of companies had executed a deed of cross guarantee with other companies within the group" and the company and its directors had "met all of the conditions" in the order: Re ComfortDelGro Corporation Australia Pty Ltd [2020] FCA 378 ("ComfortDelGro") at [3], [5]. The Class Order was originally issued on 13 August 1998 and had effect for financial years ending on or after 1 July 1998, and has been amended several times since. On 29 September 2016, the Class Order was revoked and the Instrument commenced on that date. As Ms Mirzabegian also points out, the "principal requirement" of the Class Order and the Instrument is "that the company seeking to be relieved of the reporting obligations in Pt 2M.3 must be a party to a deed of cross-guarantee, the rationale being that such a deed protects creditors and other stakeholders from any disadvantage that may arise from an inability to access a company's financial reports": Car Buyers Australia Pty Limited v Australian Securities and Investments Commission [2020] FCA 599 ("Car Buyers") at [24], referring to the Instrument.
[4]
Extension of time to lodge Form 389s for OpCo for 2007 and FCT for 2007 and 2014
First, as noted above, the Plaintiffs seek order under s 1322(4)(d) of the Act extending the time specified by condition (k) of the Class Order for a "Form 389 - Opt in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations" ("Form 389") to be lodged by OpCo in respect of FY07. The contravention or omission addressed by this order is that the Form 389 lodged by OpCo in FY07 appears to omit some of the required information and includes minor typographical errors. The Plaintiffs also seek a corresponding order in respect of Form 389s to be lodged by FCT in respect of FY07 and FY14. The contraventions or omissions addressed by this order are that the Form 389 lodged by FCT in FY07 also appears to omit some of the required information and has typographical errors and that it appears that FCT failed to file a Form 389 for FY14, or at least it cannot locate any evidence that it did so.
Ms Mirzabegian points out that, at all relevant times, condition (k) of the Class Order required an entity who sought to take advantage of the financial reporting relief in the Class Order to "opt in" by lodging a specified notice with ASIC. Until the end of FY07, that condition required that a notice be lodged with ASIC in Form 389 containing prescribed information within 4 months after the end of the relevant financial year. During FY08, ASIC announced changes to the Class Order which included "replacing the requirement to lodge an annual notice concerning use of the class order with a requirement to lodge a notice when the relief is first applied or the group holding entity changes, and another notice when the company ceases to apply the relief": "ASIC, IR 08-08 Changes to Class Order 98/1418 relief and new class order relief for disclosing entities" (ASIC media release, 31 March 2008, Ex P1) . From FY08, condition (k) of the Class Order therefore required that a notice using Form 389 be lodged with ASIC unless the entity had taken advantage of the relief available under the order in respect of the immediately preceding financial year and the holding entity of the entity was the same for the two years.
The Plaintiffs recognise that the Form 389s lodged for FCT and OpCo in FY07 appear not to have included all of the information required by the form and include typographical errors (Chapple, [16(a)(i)]; Ex "GFT-2", Tab 3). They note that, with effect until the end of FY07, condition (k) required that such a form be lodged annually. Ms Mirzabegian points to Mr Turner's evidence that he does not know who prepared the forms but, to the best of his limited recollection, believes it likely that they were provided to him for signature by a member of the Flight Centre group compliance team (Turner 2, [28(a)-(b)]). Unsurprisingly, he does not specifically recall signing those forms but accepts that he signed some and considers it unlikely that he identified what he now sees to be typographical errors and omissions having regard to his usual practice in dealing with such matters (Turner 2, [28(c)-(d)]). His evidence is that he has "no reason to believe that those errors and omissions were not honest errors inadvertently made" (Turner 2, [28(e)]) and there is no reason not to accept that evidence.
Mr Smith's evidence is that he does not recall being aware that a Form 389 needed to be lodged with ASIC or having seen the Form 389s (Smith 1, [37]; Smith 2, [28(b)-(c)]). He has no recollection of any of the additional issues identified with Form 389's having been raised with him until after the further enquiries in the course of this proceeding (Smith 2 at [28(d)]). His evidence is that he also has "no reason to believe that the errors and omissions in those Form 389's were not honest errors inadvertently made" (Smith 2 at [28(e)]) and there is also no reason not to accept that evidence. Ms Roberts' evidence is that she could not recall having been involved in the preparation or lodgement of an "ASIC Form 389" at the time of her first affidavit but subsequently became aware, in preparing her second affidavit, that she was involved in correspondence about them in 2020 (Roberts 2, [22]). She also does not "recall ever having seen the Form 389's" or "being involved in any annual process of filing" them, and she has "no recollection of any of these additional issues identified with [them] having been raised" with her before the enquiries in this proceeding (Roberts 2, [23]).
Turning to the position in respect of FY14, Ms Mirzabegian refers to the evidence concerning this matter, which I need not address in detail. Broadly, on 3 June 2013, a law firm advised Ms Roberts advised that FCTGL had identified an issue in relation to the FCT Deed relating to the status of the trustee or alternative trustee under that deed and identified a course of action to rectify that issue, which, involved the FCT Deed being revoked in its entirety and FCT acceding as a group entity to the OpCo Deed (Roberts 1 [16]; Ex "TMR-1", Tab 5). On 17 June 2013, that law firm advised Ms Roberts that "various documents" could "now be executed" including, under "step three", that "[i]f reporting relief is required, ASIC Form 389 must also be signed and lodged with ASIC within 4 months of the end of the financial year", although that email did not attach the form of that notice (Roberts 1, [17]; Ex "TMR-1", Tab 6). Ms Roberts seeks to attribute the failure to lodge that form to the fact that law firm did not provide a copy of it to her, without recognising that she could equally have accessed that form for herself. In any event, that form was not then executed and not provided to the firm to lodge with ASIC, and that firm did not identify that omission.
Mr Turner executed the FCT Assumption Deed on behalf of FCTGL and FCT on or about December 2013 (Turner 1, [15(b)(i)]; Ex "GFT-1", Tab 4) which recited that FCT wished to be joined as a party to the OpCo Deed and stated that the latter deed had been entered into "pursuant to the Class Orders" (which includes the Class Order). Mr Turner's evidence is that, at the time he signed the FCT Assumption Deed, Mr Turner understood that it "was being entered into in order to enable FCT to become a party to the [OpCo Deed] so as to enable FCT to obtain relief from future financial reporting obligations" (Turner 1, [17]) and that he was not aware whether any further steps were required to be taken in order for FCT to obtain that relief; he "expected and assumed" that the Flight Centre group compliance team would take "whatever other steps were required in order to achieve that result" (Turner 1, [18]).
On 10 July 2014, Ms Roberts sent a further email to the law firm, attaching a draft statement, which she understood at the time was being prepared for the FCTGL Annual Report for FY14 (Roberts 1 [42], Tab 17). She asked that firm to check the details in the statement, which included that:
"Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and directors' report.
There is one deed in effect. The subsidiaries to the deed are …[FCTGL]… (Holding Entity), Australian OpCo Pty Ltd, P4 Finance Pty Ltd, Travel Services Corporation Pty Ltd and …[FCT]…."
The …[FCTGL]… and …[FCT]… deed was revoked on the 28th December 2013.
…[FCT]…became a party to the deed above by virtue of a Deed of Assumption on the 28th December 2013…."
The firm responded that the statement should be amended to indicate that FCT became a party to the deed on 2 December 2013, not 28 December 2013 (Roberts 1, [43]; Ex "TMR-1", Tab 18). Neither Ms Roberts nor the firm further addressed the question of a Form 389 and her evidence is that she assumed that FCT was entitled to relief from the requirements under the Act for preparation, audit and lodgement of financial reports and directors' report and, in particular, she "assumed that whatever were the requirements to obtain that relief, those requirements had been met" (Roberts 1, [46]). It appears that FCT only identified that it had not complied with the Form 389 notice requirement in the Class Order in FY14 as a result of inquiries made after ASIC raised a question about the non-lodgement of financial statements and reports for FY19.
I will address the applicable legal principles in respect of this issue and the Plaintiffs' wider submissions here and then not repeat these matters in dealing with other issues below. As I noted above, the Plaintiffs seek relief under s 1322(4) of the Act, which allows the Court to make orders, relevantly, extending the time in which any act in relation to a corporation may be done. That section provides, relevantly to this aspect of the application:
(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: …
(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".
Section 1322 is a remedial provision and should be given a broad construction: Re Wave Capital Limited (2003) 47 ACSR 418; [2003] FCA 969; Weinstock v Beck (2013) 251 CLR 396; (2013) 93 ACSR 231; [2013] HCA 14. Orders have previously been made under this section to extend the time in which a form is required to be lodged with ASIC, where lodgement within a specified time is a condition of relief from compliance with financial reporting requirements under the Act: Re Murray River Organics Ltd (2019) 138 ACSR 365; [2019] FCA 1432; Ozito Industries Pty Ltd v Australian Securities and Investments Commission (2020) 148 ACSR 585; Car Buyers Australia Pty Ltd v Australian Securities and Investments Commission [2020] FCA 599 ("Car Buyers"); ComfortDelGro; Re Navitas Bundoora Pty Ltd [2020] WASC 87 ("Navitas"); Re Bremick Pty Ltd [2021] NSWSC 533 ("Bremick"). Relevant factors in determining whether to extend the time in which a form is to be lodged with ASIC, in order to obtain relief from financial reporting requirements under the Act and to provide relief from civil liability in respect of any past failure to comply with those requirements, include whether the non-compliance arose as a result of imprudence, carelessness, or wilful ignorance of the law; whether the steps taken by the plaintiff were likely sufficient, in substance, for the relevant relief instrument to achieve its object, whether public policy would be undermined by the making of such orders; whether the plaintiff acted reasonably promptly in commencing an appropriate inquiry once it became aware of the error; and whether ASIC opposed the relief sought. The cases, including ComfortDelGro, Navitas and Bremick indicate that the lapse of a significant time does not prevent the making of orders under s 1322(4)(d) of the Act in an appropriate case.
The Court must not make an order under s 1322(4)(d) unless it is satisfied that no substantial injustice has been or is likely to be caused to any person. Ms Mirzabegian refers to Bowen CJ in Eq's explanation of this requirement in Re Compaction Systems Pty Ltd and the Companies Act [1976] 2 NSWLR 477 with reference to the former s 366(3) of the Companies Act 1961 (NSW) as follows:
"[T]he word "injustice" in this provision requires the Court to consider any real, and not merely insubstantial or theoretical, prejudice which will be suffered by, for example, a member by the making of an order, and to weigh this in the scales against the prejudice to the company, other members and creditors, if an order be not made. In other words, it is insufficient to show that there may be some prejudice to a member if, on a consideration of the whole matter, the overwhelming weight of justice, as it were, is in favour of making the order." [citations omitted]
Ms Mirzabegian also points out that the Court may be satisfied that no substantial injustice has been or is likely to be caused to any person by the making of the order, where the order would simply preserve the position to which [the company] would have been entitled, had it provided information as required, and this may be so where there is no evidence that suggests that any third party could have acted to its detriment as a result of [the company's] non-compliance: ComfortDelGro at [50]; Bremick at [21].
Ms Mirzabegian submits and I also accept that no substantial injustice has been caused by this issue (and other matters in issue in this application), where the FCT Deed and the OpCo Deed were operational throughout the relevant period, their existence was disclosed in the annual reports prepared for FCTGL in the relevant financial years and the compliance issues did not affect the enforceability of the 2002 Deeds. She also points out that the annual reports contained audited consolidated financial statements which reflected the profit and loss, and assets and liabilities of, relevantly, FCT and OpCo, and that information was publicly available (Turner 2, [34(d)]). She also refers to Mr Turner's evidence of his belief there are reasonable grounds to believe that FCT, OpCo and FCTGL have paid their debts as and when they fell due during each of the relevant financial years and that the companies remain solvent (Turner 2, [32]-[33]) and he is not aware of any shareholder or creditor being misled by any of the compliance issues, nor is he aware of any complaints having been made by any shareholder or creditor with respect to any of those matters (Turner 2, [34(a)-(b)]). I also have regard to the other evidence to similar effect (Smith 2, [33]-[35]; Perkins, [22]-[24]; Feros, [25]). Ms Mirzabegian submits and I accept that, in these circumstances, it is very unlikely that any third party creditor or shareholder has been prejudiced by the compliance issues or will be prejudiced by the grant of the relief.
Ms Mirzabegian also submits that, if the relief sought is not granted, the companies will be required to incur significant costs to prepare audited statutory accounts for FCT and OpCo with limited benefit to shareholders and creditors. She refers to Mr Smith's estimate that the cost of preparing such accounts for FCT for 18 years (FY02 to FY19) and for OpCo for 19 years (FY02 to FY20) would be at least approximately $1.2 million (Smith 2, [37]) and to his evidence that at the preparation of those accounts may be impossible for the period FY02 to FY13 as the information required for the preparation of the accounts is not currently available and would need to be extracted from archived databases, which may not be possible (Smith 2, [38]). Mr Smith's evidence is also that, even if historical accounts could be prepared, this is likely to be of limited utility to creditors and shareholders because of the continuous turnover of creditors and debts throughout the relevant period, as well as turnover in FCTGL's individual shareholders (FCTGL has been a listed company since December 1995 (Turner 2, [36])). I addressed similar issues in Bremick above.
Ms Mirzabegian also points out that the relief sought is directed to remedying and/or excusing historical non-compliance which occurred during the period in which FCT and OpCo were parties to the 2002 Deeds and those issues are unlikely to arise again. As I noted above, on 8 June 2021, the OpCo Deed was replaced by a new Deed of Cross Guarantee between FCTGL (as holding entity) and its subsidiaries including FCT and OpCo (Turner 2, [38]) and, since that time, FCT and OpCo have relied upon that new deed to obtain financial reporting relief under the Instrument. Mr Turner's evidence is that he does not believe there are any compliance issues with the entitlement of FCT, OpCo and the other relevant FCTGL subsidiaries to obtain that relief from and since 8 June 2021 (Turner 2, [39]-[40]).
Ms Mirzabegian also recognises that, if the preconditions to an order under s 1322(4) of the Act are satisfied, the Court has "a residual discretion as to whether or not to make the order": Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357 at [35] per Vaughan J. She refers to relevant matters to be considered in the exercise of that discretion as identified in Bremick at [16]:
"[R]elevant factors in determining whether to extend the time in which a form is to be lodged with ASIC, in order to obtain relief from financial reporting requirements under the Corporations Act and to provide relief from civil liability in respect of any past failure to comply with those requirements include whether the non-compliance arose as a result of imprudence, carelessness, or wilful ignorance of the law; whether the steps taken by the plaintiff were likely sufficient, in substance, for the relevant relief instrument to achieve its object, whether public policy would be undermined by the making of such orders; whether the plaintiff acted reasonably promptly in commencing an appropriate inquiry once it became aware of the error; and whether ASIC opposed the relief sought."
No discretionary reason not to make the orders sought to extend the time to lodge Form 389s for OpCo for FY07 and FCT for FY07 and FY14 arises from the matters that I have addressed above.
[5]
Extension of time for FCT and OpCo to comply with requirements in relation to the 2002 Deeds
Second, the Plaintiffs seek an order under s 1322(4)(d) of the Act that the time specified by condition (l) of the Class Order for FCT and OpCo to lodge originals of the 2002 Deeds with ASIC be extended to 4 July 2002. Ms Mirzabegian points out that conditions (l), (m) and (o) of the Class Order in force for FY02 prescribed initial steps that had to be satisfied for an entity to be relieved from financial reporting requirements. Condition (l) required that an original of the 2002 Deeds be lodged with ASIC before the end of the financial year in respect of which an entity sought to take advantage of relief from the financial reporting requirements. The contraventions or omissions addressed by this relief are FCT's and OpCo's failure to lodge originals of the 2002 Deeds with ASIC before the end of FY02.
The Plaintiffs also seek an order under s 1322(4)(d) of the Act that the time specified, by condition (o)(i) and (iii) of the Class Order for the FCT and OpCo to provide ASIC with the prescribed statement be extended to 4 July 2002. Ms Mirzabegian points out that condition (o) of the Class Order in force for FY02 prescribed one of the initial steps that had to be satisfied for an entity to be relieved from financial reporting requirements, and relevantly required that, before the end of that financial year, the entity provide ASIC with a solvency statement signed by at least two directors (sub-paragraph (i)) and the entity provide ASIC with evidence that it is entitled to the benefit of the order (sub-paragraph (iii)). The contraventions or omissions addressed by this order are respectively FCT's and OpCo's failure to provide ASIC with the prescribed solvency statement before the end of FY02 and their failure to provide ASIC with evidence that they were entitled to the benefit of the Class Order before the end of FY02.
A copy of the FCT Deed was stamped by ASIC as received on 1 July 2002 and appears to have been lodged on that date (Roberts 1, [15]; Ex "GFT-2", Tab 5), and a statutory declaration by Mr Turner and two solvency statements (one by Mr Turner and a secretary and one by another director) also appear to have been provided to ASIC on 1 and 4 July 2002 (Ex "GFT-2", Tab 5). The Plaintiffs recognise that, as these steps appear to have taken place after the end of the first financial year in respect of which FCT sought to take advantage of relief from the financial reporting requirements, conditions (l) and (o) of the Class Order seem not to have been satisfied for the FCT Deed.
A copy of the OpCo Deed and solvency statements, including one for OpCo (then named ITG) by Mr Turner and another director, was also stamped by ASIC as received on 1 July 2002 and appear to have been lodged on that date and a statutory declaration by Mr Turner and another director appears to have been provided to ASIC on 1 July 2002 (Ex "GFT-2", Tab 5). The Plaintiffs recognise that, as these steps also appear to have taken place after the end of the first financial year for OpCo, conditions (l) and (o) of the Class Order seem not to have been satisfied for the OpCo Deed.
Mr Turner's evidence is that, when he executed the 2002 Deeds, he understood that their purpose was to enable the wholly-owned subsidiaries of FCTGL who were party to each deed to obtain relief from future financial reporting obligations (Turner 2, [20(a)], [21]). His evidence is that he was "not aware whether any further steps were required to be taken in order for a subsidiary to obtain that relief from financial reporting obligations" (Turner 2, [20(b)]) and he expected and assumed the Flight Centre group compliance team would take the steps necessary to achieve that result (Turner 2, [20(b)], [31(a)]). His evidence is also that he relied on the group compliance team for those matters given his personal inexperience with those issues and also because he "was aware, and believed that, and took comfort from the fact that, each individual area of [the group compliance team] … was staffed by personnel who I understood were specialists experienced in their respective fields and led by very senior and experienced specialists" (Turner 2, [24]). His evidence is that that belief "influenced [his] usual practice when it came to executing documents prepared for [him] by members of the [g]roup [c]ompliance [t]eam or by external advisers which they had retained" (Turner 2, [25]) and he was "not aware of what other steps, or the timing of any other steps, which were required in order for FCT and OpCo to be entitled to [f]inancial [r]eporting [r]elief" and had "no reason to believe that [the] failures [above] with respect to the timing of those steps were not honest errors inadvertently made" (Turner 2, [31]).
Both the 2002 Deeds were in place for some time before Mr Smith became company secretary in 2008 (Smith 2, [22], [27]) and his evidence is that he does not recall reviewing the Class Order or Instrument himself or instructed anyone to do so, and his understanding of their effect was "limited to what was explained in the pages of the FCTGL Annual Reports" and does not "recall ever turning [his] mind to the detail of the specific conditions" in the Class Order or Instrument which he now understands needed to be satisfied for FCT and OpCo to be entitled to financial reporting relief and he operated on the assumption that both companies were, and remained, so entitled where required (Smith 2, [23]). His evidence is that he does not recall anything coming to his attention, prior to becoming aware of the issues in this proceeding, which caused him "to think that FCT or OpCo were not, or may not be, entitled" to financial reporting relief (Smith 2, [24]). His evidence is that he thinks it unlikely that this occurred, given his usual practice when problems were identified to him (Smith 2, [25]).
The 2002 Deeds were also in place before Ms Roberts commenced employment with FCTGL on 6 May 2003 (Roberts 2, [12], [24]) and she does not have any unaided recollection of being involved with either of the 2002 Deeds prior to June 2013, and is not aware of having any other involvement in issues relating to either deed during that time (Roberts 2, [14(a)], [15]). Her evidence is that she does not recall knowing of any of the problems that have now been identified or of anything else which caused her to think, or be concerned, that FCT and OpCo were not entitled to financial reporting relief (Roberts 2, [19]-[20]) and her evidence is also that she thinks it unlikely that she was aware of those matters given her usual practice when an issue arose (Roberts 2, [21]).
Mr Perkins' evidence is that he only became aware of the existence of the 2002 Deeds shortly after he joined the Flight Centre group in March 2008 and that the global financial reporting team "needed to know which subsidiaries (if any) were eligible for [relief] to prepare stand-alone statutory accounts and consolidated financial statements", and he understood that entry into a deed of cross guarantee was necessary for such relief to apply (Perkins, [18]). His evidence is that he does not "now recall being aware of any other particular steps which were required to be undertaken, either initially or on an ongoing basis, for [the relief] to apply with respect to a particular financial year" and he "operated on the basis that, and … believed that, FCT and OpCo continued to be entitled" to relief in the absence of advice to the contrary (Perkins, [19]-[20]). Mr Feros' evidence is similarly that the 2002 Deeds were already in place by the time that he joined the Flight Centre group in 2008 and he cannot now recall precisely when, or in what circumstances, he first became aware of the two deeds but thinks it likely within a year or so after joining (Feros, [18]-[19]). His evidence is that cannot now specifically recall reading either deed and, within the legal team, he was "aware that members of the [l]egal [t]eam undertook certain work in relation to deeds of cross guarantees" and "also worked with external law firms from time-to-time in relation to those matters" but had "very limited, and occasional, exposure to, or involvement in, such matters" (Feros, [15], [20]).
I accept, for the reasons noted above, that relief is properly granted in respect of this issue, no substantial injustice has been caused by this issue and there are no discretionary reasons not to grant this relief.
[6]
Abridging the time for FCTGL's directors' declaration for FY02
Third, the Plaintiffs seek an order under s 1322(4)(d) of the Act that the time specified by condition (m) of the Class Order for the signing of FCTGL's directors' declaration for FY02 be abridged to 29 August 2002, being 59 days after the 2002 Deeds had been lodged with ASIC. Ms Mirzabegian points out that condition (m) of the Class Order in force for FY02 prescribed one of the initial steps that had to be satisfied for an entity to be relieved from financial reporting requirements, and required that the deed of cross guarantee to which the entity was party had been lodged with ASIC at least 60 days before the signing of the holding entity's directors' declaration referred to in condition (j)(iii).
The Plaintiffs recognise that the FCTGL director's declaration with respect to FY02 appears to have been made 59 days, rather than at least 60 days, after lodgement of the 2002 Deeds (Ex "GFT-2", Tab 6) and condition (m) of the Class Order seems not to have been satisfied for the 2002 Deeds. I have referred to the evidence as to the lodgements made with ASIC in this year above. I also accept, for the reasons noted above, that relief is properly granted in respect of this issue, no substantial injustice has been caused by this issue and there are no discretionary reasons not to grant this relief.
[7]
Extension of time for FCT and OpCo to pass prescribed annual resolutions for FY 2008-FY 2019 for FCT and FY 2008-FY 2020 for OpCo
Fourth, the Plaintiffs seek an order under s 1322(4)(d) of the Act that the time specified by condition (kb) of the Class Order and/or cl 6(1)(i) of the Instrument, for the directors of FCT to pass the prescribed annual resolutions in respect of FY08 to FY19 to be extended to a date that is 21 days after the date of the orders, and the time for the directors of OpCo to pass the prescribed annual resolutions in respect of FY08 to FY20 be extended to the same date. These orders address the fact that, despite searches and investigations, FCT and OpCo have been unable to locate evidence of the passage of annual resolutions to the effect that they should respectively continue to remain a party to the FCT Deed from FY08 to FY19 and the OpCo Deed from FY08 to FY20. FCT did not require relief in respect of FY20 as it was not a large proprietary company in that year.
Ms Mirzabegian points out that, in FY08 to FY20, condition (kb) of the Class Order and later cl 6(1)(i) of the Instrument required an entity's directors to reassess or consider the advantages and disadvantages associated with the entity remaining a party to the Deed of Cross Guarantee and taking advantage of the relief afforded by the Class Order or the Instrument (as the case may be), and resolve annually that the entity should continue to remain a party to the Deed of Cross Guarantee. Ms Mirzabegian also points to Mr Chapple's evidence that, despite searches and investigations, FCT and OpCo have been unable to locate evidence of the passing of annual resolutions that each company should continue to remain a party to the relevant Deed of Cross Guarantee with respect to FY08 to FY20 in the case of OpCo, and FY08 to FY19 in the case of FCT (where FCT did not require relief in respect of FY20 as it was not a large proprietary company in that year) (Chapple, [16(c)(ii)]). Mr Smith deposes that he has "no recollection of the required Annual Resolutions being made at any time since [he] began in the role of [c]ompany [s]ecretary in 2008": Smith 2 at [32(a)]. The Plaintiffs recognise that condition (kb) of the Class Order and later cl 6(1)(i) of the Instrument appear not to have been satisfied for FCT and OpCo. Mr Smith notes that he does not "think it likely that [he] ever identified that Annual Resolutions were required" given his usual practice when he became aware of a problem (Smith 2, [32(e)]) and he has "no reason to believe that the failure to pass the required Annual Resolutions were not honest errors inadvertently made" (Smith 2, [32(f)]).
I accept, for the reasons noted above, that relief is properly granted in respect of this issue, no substantial injustice has been caused by this issue and there are no discretionary reasons not to grant this relief.
[8]
Extension of time for FCT to pass prescribed resolutions for FY 2014
Fifth, the Plaintiffs seek an order under s 1322(4)(d) of the Act that the time specified by condition (o)(ii) of the Class Order for the directors of FCT to pass the prescribed resolution in respect of FY14 be extended to a date that is 21 days after the date of the orders. This order addresses the difficulty that FCT has been unable to locate evidence that FCT's director resolved, at the time FCT entered into the OpCo Deed or at all in FY14 (being the first financial year that FCT relied upon its accession to the OpCo Deed as the basis for its entitlement to relief), that FCT should obtain the benefit of the Class Order.
Ms Mirzabegian points out that, under condition (o) of the Class Order in force for FY14, the directors of an entity seeking to take advantage of the relief afforded by the Class Order were required to, inter alia, resolve that the entity should obtain the benefit of the order (sub-paragraph (ii)). As noted above, FCT became a party to the OpCo Deed on 28 December 2013 and, from that time until FY19 (after which it ceased being a large proprietary company), it relied on its accession to the OpCo Deed in order to be relieved from its financial reporting obligations under the Class Order (Chapple at [10]). FCT has been unable to locate evidence that FCT's director resolved, at the time FCT entered into the OpCo Deed or at all, that FCT should obtain the benefit of the Class Order (Chapple, [16(b)(v)]). It appears that the requirement in sub-paragraph (ii) of condition (o) was not satisfied for the first financial year FCT relied upon its accession to the OpCo Deed as the basis for its entitlement to financial reporting relief.
Ms Mirzabegian draws attention to the evidence led in respect of the execution of the OpCo Deed and FCT Deed and FCT's failure to lodge a Form 389 for FY 14 [submissions 34-40, 51-58]. She also refers to Mr Turner's evidence that he was not aware whether any further steps were required at the time of signing the FCT Assumption Deed and his expectation and assumption was that the compliance team would take any such steps (Turner 1, [18]). Mr Smith's evidence is that he has no recollection as to whether or not the required resolution was made (Smith 2, [31(b)]). Ms Roberts, who was on parental leave from about mid-July 2013 until about mid-May 2014, also does not recall that matter (Roberts 2, [25(b)-(c)]). Mr Smith and Ms Roberts note that correspondence from a firm of solicitors, who were advising FCT regarding its accession to the OpCo Deed, appears not to have referred to the need for the resolution (Smith 2, [31(g)]; Roberts 2, [25(f)]) and Ms Roberts' evidence is that, had the need for the resolution been raised, Ms Roberts would have asked that firm to prepare the resolution but she has no recollection of any of that occurring and instead assumed that FCT was entitled to financial reporting relief (Roberts 2, [25(g)-(h)]). It should be recognised that, at best, those solicitors did not alert the Flight Centre companies to the companies' own omissions in this regard.
I am also satisfied, for the reasons noted above, that relief is properly granted in respect of this issue, no substantial injustice has been caused by this issue and there are no discretionary reasons not to grant this relief.
[9]
Relief of Plaintiffs and directors and officers from liability
Sixth, the Plaintiffs also seek relief from liability under s 1322(4) of the Act, which relevantly provides that:
"(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 …
(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) …"
Before making an order under s 1322(4)(c) providing relief from civil liability, the Court must also be satisfied that the person subject to the civil liability concerned acted honestly: s 1322(6). Ms Mirzabegian points out that the word "honest" here carries its "ordinary meaning" of "without deceit or conscious impropriety, without intent to gain improper benefit or advantage for himself, herself or for another, and without careless or imprudence to such a degree as to demonstrate that no genuine attempt at all has been [made] to carry out the duties and obligations of his or her office", and includes "inadvertence or a failure to turn [one's] mind to the relevant issue": Re iCandy Interactive Ltd (2018) 125 ACSR 369 at [55(a)], [56] ("iCandy"). In determining whether the precondition is satisfied and whether relief should be granted, the Court "takes into account whether the applicant has taken prompt action to remedy the error" and this includes whether the company "acted reasonably promptly in commencing an appropriate inquiry once it became aware of the error", although "relief may still be granted even where there has been a large effluxion of time between the contravention or failure and the application for relief": iCandy at [54]; ComfortDelGro at [45], [52].
Mr Mirzabegian submits and I accept that the evidence to which I have referred above indicates that the Plaintiffs and their relevant directors and officers acted honestly within the meaning of s 1322(6) and the evidence establishes that the irregularities resulted from honest errors inadvertently made. Ms Mirzabegian submits and I accept that the non-compliance appears to be the result of "administrative error", as FCT admitted to ASIC in relation to its failure to lodge a Form 389 in respect of FY14. She also submits and I also accept that the evidence establishes that the Plaintiffs were operating under a mistaken assumption and genuine belief that the necessary steps to obtain financial reporting relief had been taken. As Ms Mirzabegian points out, this conclusion is consistent with the fact that FCTGL's annual reports from FY02 to FY16 referred to: the Class Order; the requirement for a deed of cross guarantee for the Class Order to apply; the OpCo Deed, to which FCT had become a party; and to FCTGL subsidiaries (including OpCo and FCT) that were relieved from financial reporting obligations under the Class Order (Turner 1, [20]; Ex GFT-2, Tab 7, 110-125). FCTGL's annual reports for FY17 to FY20 also referred to: the Instrument; the requirement for a deed of cross guarantee for the Instrument to apply; the OpCo Deed, to which FCT had become a party; and the FCTGL subsidiaries (including OpCo and FCT) that were relieved from financial reporting obligations under the Instrument (Turner 1, [24]; Ext GFT-2, Tab 7, 126-129. The annual reports also contained audited consolidated financial statements for FCTGL and the entities it controlled during the relevant year (Ex "TMR-1", Tabs 19-24) and Mr Turner's evidence is that he signed the annual report for FCTGL for each of FY14 to FY20 under the genuine belief that the statements in those reports about FCT's entitlement to relief from financial reporting obligations were true because FCT was a party to the OpCo Deed, and he expected and assumed that the group compliance team had undertaken any other step required to be taken in order for FCT and the other named subsidiaries to be entitled to that relief (Turner 1, [25]). I have also had regard to Mr Smith's evidence as to these matters. Ms Mirzabegian also submits and I accept that, since FCT became aware of the Form 389 issue for FY14, the Plaintiffs have engaged with ASIC about the compliance issues the subject of the application. As I noted above, ASIC advised that, having considered that evidence, those submissions and subject to any orders being in the same form as the orders set out in the Second Amended Originating Process, ASIC neither supports nor opposes the plaintiffs' application, and does not intend to appear at the hearing.
First, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any civil liability, including under s 344 of the Act, in respect of any failure to take the steps referred to in orders 1 to 5 within, or after, the time specified by the Class Order and/or the Instrument, as the case may be. I have addressed these matters above and I am satisfied, for the reasons set out above, that this order should be made.
Second, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any civil liability, including under s 344 of the Act, in respect of any failure to lodge a Form 389 in respect of FY02 to FY06, and this application is not otherwise addressed by any other application for an extension of time. This application is directed to the fact that, in those years, it appears that FCT and OpCo either purported to lodge a Form 389 notice but failed to include all of the information required by the form, or else failed to lodge such a notice at all or within the time required (Chapple, [16(a)(ii)]; Ex "GFT-2", Tab 4). I am satisfied that this issue is appropriately relieved by such an order and that this issue caused no relevant injustice and the Plaintiffs acted honestly in respect of it to permit such relief. I accept that there would be no utility in an extension of time to address these matters given their age.
Third, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any civil liability, including under s 344 of the Act, in respect of any failure to include one or more of the matters required by condition (i) of the Class Order or cl 6(1)(v) of the Instrument in the notes to FCTGL's consolidated financial statements in FY02 to FY20. This relief is addressed to the fact that the notes to the consolidated financial statements did not always correctly list all parties to the 2002 Deeds, including details of accessions to the OpCo Deed within the relevant financial year.
Ms Mirzabegian points out that, from FY02 to FY20, condition (i) of the Class Order and later cl 6(1)(v) of the Instrument relevantly required that the notes to the holding entity's consolidated financial statements include a list of all parties to the Deed of Cross Guarantee which was relied upon to obtain relief from the financial reporting requirements, separately identifying all members of the closed group and extended group (if any) under that deed (sub-paragraph (ii)); and give details of parties added to that Deed of Cross Guarantee by an assumption deed, or removed by a revocation deed, or which were the subject of a notice of disposal, during or since the relevant financial year (sub-paragraph (iii)). The Plaintiffs have identified that the notes to FCTGL's consolidated financial statements prepared and lodged with ASIC for FY02 to FY20 did not always correctly list all parties to the OpCo Deed and FCT Deed, including details of accessions to the OpCo Deed within the relevant financial year (Chapple, [16(d)(ii)]; Ex "GFT-2", Tab 7) and condition (i) of the Class Order and later cl 6(1)(v) of the Instrument appear not to have been satisfied for FY02 to FY20.
Mr Turner's evidence is that he does not know who prepared those notes but, to the best of his limited recollection, he believes it likely that they were prepared by the global reporting team and he "cannot now specifically recall reading those notes" but does not think it likely that he was aware at the time of the requirement to list every party and all accessions and does not believe he identified the omissions given his usual practice (Turner 2 [29(a)-(e)]. Mr Smith's evidence is that he does not know who prepared the notes although it was not him; he cannot recall whether he reviewed the annual report each year before it was approved when he was in the legal team but believes it likely that he read the notes at least after he became company secretary; and he does not think it likely that he was aware of the requirement for the notes to list every party to the deeds and all accessions to the OpCo Deed and, in any event, does not believe that he identified, at the time, that the notes contained errors or omissions; and he has no reason to believe that those errors and omissions were anything but "honest errors inadvertently made" (Smith 2, [29(a), (d) (k)(i)-(iv)]). Ms Roberts' evidence is that she does not recall being aware of the requirement for the notes or identifying the errors or omissions (Roberts 2, [27(b), (h)]). Mr Perkins' evidence is that he considers it likely that he read the notes each year and believes he has known of the requirement for at least some years, but he did not identify that the notes contained any errors or omissions (Perkins, [21(c)-(e)]) and Mr Feros' evidence is that he does not recall having any personal involvement in this matter and was not aware of the problems in this respect (Feros, [23]). I am again satisfied that this issue is appropriately relieved by such an order and that this issue caused no relevant injustice and the Plaintiffs acted honestly in respect of it to permit such relief.
Fourth, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any civil liability, including under s 344 of the Act, in respect of any failure to include one or more of the matters required by condition (j) of the Class Order in the directors' declaration of FCTGL in respect of FY09. This relief is addressed to the fact that the declaration of FCTGL's directors for FY09 omitted a solvency statement as to the members of the extended closed group (Chapple, [16(d)(ii), (iv)]; Ex "GFT-2", Tab 8), and condition (j) of the Class Order seems not to have been satisfied for FY09. Mr Turner's evidence is that he believes the director's declaration for FY09 was likely prepared by the global reporting team; that he cannot recall reading or signing it but accepts that he did so; that he does not think it likely that he recalled that other director's declarations included a solvency statement in relation to the extended closed group when he came to sign it; and that he has "no reason to believe that the failure to include [the statement] was not an honest error inadvertently made" (Turner 2, [30(f)]). I am satisfied that this breach is also appropriately relieved by such an order.
Fifth, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any failure to comply with ss 292(1), 298(1), 301(1), 314(1), 315 or 319(1) of the Act, by reason of any failure to take or properly take the steps required by the Class Order or the Instrument (as the case may be) as to one or more of the financial years ended 30 June 2002 to 30 June 2019 inclusive in the case of FCT.
Sixth, the Plaintiffs also seek corresponding relief in respect of any failure to take, or properly take, the steps required by the Class Order or the Instrument (as the case may be) as to and one or more of the financial years ended 30 June 2002 to 30 June 2020 (inclusive) in the case of OpCo. An issue arises as to the scope of this relief. Ms Mirzabegian refers to ComfortDelGro, where the Court relieved the Plaintiff, certain subsidiaries and current and former directors and officers, of a failure to comply with specified sections of the Act, in a case involving a failure to lodge opt-in notices. Ms Mirzabegian also addressed the decision in Car Buyers and recognised that the Court did not make the wider form of orders which was there sought by Car Buyers, but a more limited form of order which relieved the company and its directors and officers from civil liability in respect of the particular failures that were the subject of that application. Ms Mirzabegian submits that there was no detailed discussion why the more limited order was preferred, although it seems to me that little explanation is required for the proposition that a Court should generally limit its orders to the matters it has addressed. Ms Mirzabegian also refers to my judgment in Bremick, where I made an order relieving a plaintiff and its current and former directors and officers from civil liability in respect of a failure to lodge financial accounts in the years ended 30 June 1996 to 30 June 2020, but that case turned on a single failure to lodge a prescribed notice with ASIC in order to rely on a grandfathered exemption, rather than the several errors and omissions arising in this case. Ms Mirzabegian refers to the extensive investigations undertaken by the Plaintiffs in order to identify non-compliance with the Class Order, the Instrument and accounting requirements over a 19 year period. I have regard to that matter, but it seems to me that the relief of the Plaintiffs and their current and former directors and officers should extend no more widely than the matters in issue in these proceedings. The Plaintiffs will need to prepare a revised form of order to give effect to that position.
Seventh, the Plaintiffs seek an order that they and their current and former directors and officers be relieved from any failure to comply with the notice dated 26 March 2021 issued by ASIC under s 1274(11) of the Act. This issue arises because FCT has not lodged financial statements and reports for FY19, which it would not have been required to do had the errors and omissions addressed in this judgment not occurred. Ms Mirzabegian draws attention to the evidence that, on 26 March 2021, ASIC wrote to FCT enclosing a notice issued under s 1274(11) of the Act, which required FCT to lodge those financial statements and reports in accordance with s 319 of the Act (Turner 1, [30]; Ex "GFT-1", Tab 13). On 4 June 2021, FCT replied to ASIC, advising that this failure was the result of an "administrative error" and that FCT had not lodged its own financial statements and reports because it was proceeding under a "genuine (but mistaken) belief" that it was entitled to relief from those financial reporting obligations because it was a party to the OpCo Deed (Turner 1, [32]; Ex "GFT-1", Tab 14). Mr Turner signed that letter and his evidence is that it reflected his understanding of the outcome of the investigations by the group compliance team and his belief based on statements in previous annual reports to the effect that FCT was relieved from financial reporting obligations as it was a party to the OpCo Deed (Turner 1, [33]-[34]). The evidence to which I have referred above supports the view that these matters arose by inadvertence. On 10 June 2021, ASIC advised FCT that it did not have power to relieve a company retrospectively for failure to lodge financial statements and reports and outlined options for FCT to consider (Turner 1, [36]; Ex "GFT-1", Tab 15). On 22 June 2021, FCT's solicitors informed ASIC that FCT would make an application under s 1322 of the Act for orders extending the time for lodgement of the Form 389, and relieving it and its current and any former officers from any civil liability in respect of the failure to lodge the Form 389 and, as a consequence, FCT's financial statements (Turner 1, [37(a)]; Ex "GFT-1", Tab 16). The progress of that application was delayed by the additional matters identified by FCT and its advisers in the course of the application. This failure was consequential on the matters which I have addressed above and relief should be granted on that basis.
[10]
Orders
For these reasons, I will make orders in substantially the form sought by the Plaintiffs, but narrowing the relief from liability to the matters addressed in the proceedings. I direct the Plaintiffs to bring in short minutes of order to give effect to this judgment within 7 days.
[11]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 05 April 2022