- Car Buyers Australia Pty Ltd v Australian Securities and Investments Commission

Supreme Court of NSW|2024-10-24|Before: Black J

Solicitors: Ash St Partners (Plaintiff) File Number(s): 2024/317114

Background facts and affidavit evidence

By way of background, WSP Australia provides engineering and environmental consulting services to corporate and government clients. It is a wholly owned subsidiary of WSP Global Inc, an engineering consulting firm that is incorporated and headquartered in Canada and listed on the Toronto Stock Exchange. In 2015, WSP Australia and its immediate parent company WSP Australia Holding Pty Ltd ("Holdings"), took steps to obtain relief under the Class Order for a number of their wholly owned subsidiaries by entering into a Deed of Cross Guarantee dated 18 December 2015 ("Deed") with those subsidiaries in accordance with the requirements of the Class Order. WSP Australia and Holdings and several of their subsidiaries subsequently entered into Assumption Deeds that were intended to have the effect of joining other wholly owned subsidiaries to the Deed and Revocation Deeds that were intended to have the effect of releasing specified "Group Entities" from their obligations under the Deed. WSP Australia has now identified issues as to apparent non-compliance with the requirements of the Class Order and Instrument which have promoted this application.
WSP Australia reads the affidavit dated 26 August 2024 of its General Counsel, Mr Grant Smallhorn, who is also the Company Secretary for WSP Australia, Holdings and several subsidiaries. Mr Smallhorn outlines the structure of the WSP group and refers to the Class Order and the circumstances in which Holdings, "as trustee" under the Deed, WSP Australia and certain subsidiaries entered into the Deed for the purposes of the Class Order. He refers to subsequent events, including the deregistration of two subsidiaries which were not conducting business and had no creditors or outstanding liabilities, at a time that they were still parties to that Deed and WSP Australia's acquisition of another entity, Golder Associates, which became a party to the Deed under an Assumption Deed on 12 October 2022 and to the failure to lodge a requisite Form 389 by Golder Associates in respect of that matter. Mr Smallhorn also refers to WSP Australia's acquisition of two further subsidiaries, Greencap Holdings Pty Ltd ("Greencap") and Calibre Professional Services One Pty Ltd ("Calibre"), which became parties to the Deed by an Assumption Deed on 18 December 2023.
Mr Smallhorn notes that an officer of ASIC brought Golder Associates' failure to lodge a Form 389 to WSP Australia's attention on 15 May 2024 and Mr Smallhorn outlines the steps which WSP Australia then undertook to review its compliance with the Class Order and Instrument generally. As is common in matters of this kind, that review then disclosed several other failures to comply with the relatively complex requirements of the Class Order and the Instrument, which Mr Smallhorn addresses in his affidavit and which are now the subject of this application. Mr Smallhorn addresses the circumstances in which these matters arose, which I will address below. I am comfortably satisfied that they occurred by administrative oversight, where WSP Australia had not then prepared, but has since prepared, a checklist identifying the steps necessary to comply with the relevant requirements of the (now superseded) Class Order and the Instrument. Mr Smallhorn also refers to the financial position of WSP Australia over the relevant period to its and its subsidiaries' solvency and to the costs which would be incurred in preparing additional financial statements if WSP Australia and its subsidiaries cannot rely on the Instrument. This application is brought, inter alia, in order to seek to avoid the need for WSP Australia and its subsidiaries to incur those costs.
WSP Australia also reads the affidavit dated 15 August 2024 of Ms Mariana Mendes, who is, inter alia, the Assistant Company Secretary of Holdings, WSP Australia and several of its subsidiaries. She addresses her role in administrative work concerning the Deed and the circumstances in which Golder Associates had failed to lodge an opt-in notice in Form 389, after entering into an Assumption Deed in accordance with the Instrument on 13 October 2022. Her evidence, which I accept, is that the failure to lodge that Form 389 was inadvertent and unintentional, and she refers to procedures which have now been introduced by WSP Australia to avoid a recurrence of that failure in the future.
WSP Australia also reads the affidavit dated 15 August 2024 of its solicitor, Ms Janna Parfenova, who refers to steps taken to revoke the Deed in respect of one of the relevant group entities, Greencap, and to the fact that notice of that revocation was published shortly after the time in which it was required to be published under the Instrument. By a second affidavit dated 19 October 2024, Ms Parfenova refers to correspondence with ASIC in respect of this application, and also refers to a concern raised by ASIC on 1 October 2024, on a somewhat technical basis, that the Assumption Deeds entered into by the relevant companies were not effective. I address the nature of ASIC's concern and that issue further below.

Financial reporting requirements

I now address the applicable financial reporting requirements under the Act. The issues that have now arisen relate to WSP Australia's and related companies' compliance with Pt 2M.3 of the 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. 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. The Class Order provided 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 was amended several times since. On 29 September 2016, the Class Order was revoked and the Instrument commenced on that date. 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]. I have drawn on my judgment in Re Flight Centre Technology Pty Ltd [2022] NSWSC 367 ("Flight Centre") for this summary.

Failure to lodge Form 389

I first address the particular issues that are the subject of this application, before turning to the applicable principles and Mr Wheeldon's wider submissions
The first issue concerns the failure of Golder Associates, a wholly owned subsidiary of WSP Australia, to lodge "opt in" notices on Form 389 with ASIC following its execution of an Assumption Deed dated 12 October 2022 ("2022 Assumption Deed"). Mr Wheeldon points out that, in October 2022, WSP Australia sought to obtain relief from the reporting requirements under the Instrument for a newly acquired wholly owned subsidiary, Golder Associates, and, on 12 October 2022, Golder Associates entered into the 2022 Assumption Deed by which it agreed to be joined to and bound by the Deed. This matter is addressed in paragraphs 52 - 60 of Mr Smallhorn's affidavit, to which I referred above. Clause 6(1)(f) of the Instrument requires that a company that seeks relief from the financial reporting obligations in accordance with the Instrument and has not relied on the relief in a previous financial year must, as a condition to obtaining that relief, lodge with ASIC an "opt-in notice" on Form 389 entitled "Opt-in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations". Form 389 contains a statement that the company has taken advantage of the relief under the Instrument. Clause 6(1)(f) of the Instrument requires that the Form 389 be lodged by the "relevant time", which is defined (at cl 6(2)) as being within four months after the end of the relevant financial year.
The financial years of WSP Australia and its subsidiaries (including Golder Associates) end on 31 December and, in order to obtain the benefit of relief under the Instrument for FY 2022, Golder Associates was required to lodge a Form 389 with ASIC by no later than 30 April 2023. In May 2024, an ASIC officer sent an email to WSP Australia's financial controller which pointed out that Golder Associates had failed to lodge a Form 389 in respect of either FY 2022 or FY 2023 and was in default of its statutory financial reporting obligations in respect of both of those years. WSP Australia accepts that Golder Associates had failed to file a Form 389 within four months of the end of either FY 2022 or FY 2023 and, as matters stand, was not eligible for relief under the Instrument in respect of either of those years. On the assumption that it had complied with all of the requirements for relief, Golder Associates did not comply with the Pt 2M.3 reporting requirements for FY 2022 or FY 2023 and is in default of those obligations. The circumstances giving rise to the failure to lodge that Form 389 are addressed in Ms Mendes' affidavit, to which I referred above, and she confirms that she would not have intentionally caused any of the entities in the WSP group to be in default of its obligations and that she was "mortified" when she was informed that the notice had not been lodged with ASIC and that Golder Associates was in default of its reporting obligations. Mr Smallhorn, as Golder Associates' Company Secretary, accepts ultimate responsibility for the failure to lodge the Form 389s, but also gives evidence that he would not knowingly tolerate a situation in which an entity within the WSP group failed to comply with its statutory financial reporting obligations; and, until the non-compliance was brought to his attention following receipt of the email from ASIC in May 2024, he had a genuine belief that all of the parties to the Deed had done all things necessary to comply with the requirements of the ASIC instruments and to obtain the reporting relief.
WSP Australia seeks relief as to this issue in prayer 1 of the Amended Originating Process which seeks an order extending the time for Golder Associates to lodge Form 389s under the Instrument until the date that is 30 days after the making of the order. Prayers 7(a), 7(b) and 7(e) also seek relief from civil liability for WSP Australia, its subsidiaries (including Golder Associates), and their respective current and former officers and directors, for any liability arising from Golder Associates' failure to lodge the Form 389s or financial statements on Form 388 for FY 2022 and FY 2023, or their failure to comply with the financial reporting obligations to the extent that such compliance was required as a result of Golder Associates' failure to lodge the Form 389s. Mr Wheeldon notes that these prayers are in substantially similar form to, orders made in similar circumstances in Entertainment Publications of Australia Pty Ltd v Australian Securities and Investments Commission [2022] FCA 960 ("Entertainment Publications") and in Car Buyers. I am satisfied that I should order the relief sought in respect of this issue for the reasons set out below.

Failure to pass required resolutions

As I noted above, when WSP Australia was notified by ASIC in May 2024 that Golder Associates had failed to lodge the required Form 389s, its internal counsel and external legal representatives undertook a review ("Compliance Review") of the companies' compliance with the Class Order and Instrument to determine if there were any other instances of non-compliance that should be remedied and, if necessary, brought to the Court's attention in this application. The conduct of that review is described in paragraphs 86 - 87 of Mr Smallhorn's affidavit to which I referred above. That review identified further instances of non-compliance, to which I now turn.
The second issue arising in this application concerns the failure of certain entities that were party to the Deed to pass certain resolutions required by the ASIC instruments, as to initial solvency statements of certain parties to the Deed prior to its execution and annual resolutions of certain parties to the effect that they have considered the benefits of the Deed and have resolved to remain parties. Mr Wheeldon points out that cl (o)(v) of the Class Order requires that, as a condition to an entity being relieved from the statutory financial reporting requirements, the directors of each other entity that is a party to the deed of cross-guarantee must have made a statement, signed by at least one director, and made before the end of the financial year in which the other entity became a party to the deed, stating that in the directors' opinion immediately prior to the execution of the deed, that there were reasonable grounds to believe that the other entity would be able to pay its debts as and when they become due and payable ("Initial Solvency Statement"). He recognises that, under that clause, each of WSP Australia and Holdings should have obtained an Initial Solvency Statement, signed by at least one director, in respect of the entity's solvency as at the time immediately prior to the execution of the Deed on 18 December 2015.
Mr Smallhorn's evidence is that, in the course of the Compliance Review, WSP Australia was unable to locate an Initial Solvency Statement signed by at least one director of either WSP Australia or Holdings immediately prior to 18 December 2015; he believes that the failure to prepare those Initial Solvency Statements was due to an unintentional oversight; all of the other entities that have been party to the Deed from time to time have executed the necessary Initial Solvency Statements, which are exhibited to his affidavit. His evidence is also that, until the matter was brought to his attention as part of the Compliance Review, he was not aware that WSP Australia and Holdings were also required to execute Initial Solvency Statements or that there had been any relevant non-compliance with the terms of the ASIC instruments. His evidence is also that he believes that there have always been reasonable grounds to believe that WSP Australia and Holdings could pay their debts as and when they fell due, given their financial positions, and there was no reason why directors of those entities could not have made the Initial Solvency Statements; and that each of WSP Australia and Holdings included solvency declarations of their directors in their respective annual reports for FY 2015.
WSP Australia addresses this issue in prayer 2 of the Amended Originating Process which seeks an order extending the time for WSP Australia and Holdings to make the Initial Solvency Statements as required by the ASIC instruments until the date that is 30 days after the making of the order. Prayers 7(b1) and 7(e) seek relief from civil liability for WSP Australia and its subsidiaries and their respective current and former officers and directors, for any liability arising from WSP Australia and Holdings' failure to pass the Initial Solvency Statement resolutions, or their failure to comply with the financial reporting obligations to the extent that such compliance was required as a result of WSP Australia's and Holdings' failure to pass those resolutions. Mr Wheeldon notes that this relief is also similar to that given in Entertainment Publications and Car Buyers. I am satisfied that I should order the relief sought in respect of these issues for the reasons set out below.
Mr Wheeldon also notes that cl (kb) of the Class Order requires that, as a condition to an entity being relieved from the statutory financial reporting requirements, at or about the time of the entity's balance date for each year in which it wishes to be relieved from those requirements, the directors of the entity must reassess 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 and resolve either that the entity should continue to remain a party to the deed, or seek to revoke the deed, as the case may be ("Annual Resolution"). Clause 6(1)(i) of the Instrument imposes a condition to relief in substantially identical terms.
Mr Smallhorn's evidence is that, in the course of the Compliance Review, WSP Australia had been unable to locate any record of "Annual Resolutions" having been passed by three of the "Group Entities" under the Deed (namely, WSP Asia Pacific Pty Ltd, WSP Engineering Pty Ltd and WSP Buildings Pty Ltd) for certain financial years as specified in paragraph 101 of his affidavit and as referred to in prayers 3 and 4 of the Amended Originating Process; he believes that the failure to pass these Annual Resolutions was due to unintentional oversights; until the matter was brought to his attention as part of the Compliance Review, he was not aware that those entities had failed to pass the required Annual Resolutions; and he does not recall specifically turning his mind each year to the question of whether those entities were required to pass those resolutions, but that if he had he would have caused the entities to pass the resolutions.
Prayers 3 and 4 of the Amended Originating Process seek orders extending the time for the three entities to pass the Annual Resolutions as required by the ASIC instruments until the date that is 30 days after the making of the order. Prayers 7(c) and 7(e) seek relief from civil liability for WSP Australia and its subsidiaries and their respective current and former officers and directors, for any liability arising from the failure of those three entities to pass the Annual Resolutions, or their failure to comply with the financial reporting obligations to the extent that such compliance was required as a result of those entities' failure to pass those resolutions. This relief is also similar to that ordered in Entertainment Publications. I am also satisfied that I should order the relief sought in respect of these issues for the reasons set out below.

Late advertisement

The third issue concerns the late (by two days) publication of an advertisement as to the execution of a Revocation Deed by one of the parties to the Deed on 13 March 2024. Ms Parfenova's evidence is that, on 13 March 2024, the parties to the Deed entered into a Revocation Deed in the form of a pro forma deed published by ASIC with the intention that Greencap would be released from its obligations under, and would cease to be party to, the Deed. Clause 2.1(ii) of the Revocation Deed provides that the operation of the Revocation Deed is conditional upon each of the Group Entities giving notice to its creditors of the Revocation Deed by public advertisement in a national daily newspaper within one month after the date on which the original of the Deed is lodged with ASIC. The Revocation Deed was lodged with ASIC on 14 March 2024 and the advertisement needed to be published by 14 April 2024. However, Ms Parfenova made an error as to the practical timetable for publication of the advertisement, which was not published in The Australian newspaper until 16 April 2024, being two days after the date required by the Revocation Deed.
Prayer 5 of the Amended Originating Process seeks an order extending the time under the Deed and the Revocation Deed for publication of the advertisement of revocation until 16 April 2024. Alternative relief in the form of prayer 6 was not pressed. I am satisfied that this relief should also be granted.

Incorrect notations in financial statements

The fourth issue concerns the inclusion by Holdings, as holding entity under the Deed, of certain incorrect notations in its annual financial statements for certain years. Mr Wheeldon notes that cl (i) of the Class Order requires that, as a condition to an entity being relieved from the statutory financial reporting requirements, the "Holding Entity" under a deed of cross-guarantee, in this case Holdings, must include notes in its annual consolidated financial statements which provide specified information. Clause 6(1)(v) of the Instrument imposes a condition to relief in substantially identical terms.
Mr Smallhorn's evidence is that the Compliance Review identified deficiencies in the notes to Holdings' financial statements in several years, as set out in paragraphs 107 - 116 of his affidavit. His evidence is that, apart from those defects, he is not aware of any failure to provide correct and accurate financial reporting for the "Closed Group" under the Deed in the financial statements lodged and filed by Holdings; he believes, after consulting with WSP Australia's financial controller, Ms Ma, that the relevant consolidated financial information as set out in each of Holding's annual reports is true and correct and that none of the financial information that is presented in those annual reports requires correction or restatement; until the Compliance Review was undertaken, he was not aware of any of those deficiencies; he believes that any deficiencies in the notations as prepared by Holdings' financial team were the result of honest and inadvertent oversights; and PwC Australia, as Holdings' auditor, had provided an unqualified independent auditor's report for inclusion in each such annual report, which stated that PwC had audited the notes to the financial statements and that, in PwC's opinion, the financial report was in accordance with the Act.
Prayers 7(d) and 7(e) seek relief from civil liability for WSP Australia and its subsidiaries and their respective current and former officers and directors, for any liability arising from Holdings' failure to comply with the notation requirements under the ASIC instruments, or their failure to comply with the financial reporting obligations to the extent that such compliance was required as a result of Holdings' failure to comply with the notation requirements. These orders are also similar to those made in similar circumstances in Entertainment Publications. I am also satisfied that these orders should be made for the reasons set out below.

Issue as to terms of Assumption Deeds

A further issue was identified by ASIC following commencement of these proceedings, which ASIC considers raises a question as to the validity of the two Assumption Deeds entered into by subsidiaries of WSP Australia that were intended to cause those subsidiaries to be joined to the Deed. ASIC there identified the possibility that WSP Australia could seek appropriate relief from the Court as part of these proceedings. Parts of the relief contained in the Amended Originating Process dealing with this issue were not pressed by WSP Australia but it seeks relief from liability as to this issue.
These issues are addressed in paragraphs 4 - 12 of Ms Parfenova's second affidavit, to which I referred above. The issue raised by ASIC concerning the validity and effectiveness of the two Assumption Deeds arises in respect of the Assumption Deed dated 12 October 2022, by which Golder Associates sought to be joined to the Deed as a "Group Entity", and the Assumption Deed dated 18 December 2023, by which Greencap and Calibre sought to be joined to the Deed as a "Group Entity". This issue arises because the Deed had not been varied to conform to the latest iteration of the relevant ASIC pro forma deed of cross-guarantee contemplated by the Instrument.
Ms Parfenova describes how this issue arises in paragraph 11 of her second affidavit. As I noted above, by her second affidavit dated 19 October 2024, Ms Parfenova refers to a concern raised by ASIC on 1 October 2024, on a somewhat technical basis, that the Assumption Deeds entered into by the relevant companies were not effective. It appears that issue arises because the Assumption Deeds were based on a pro forma document issued under the Class Order which referred, in cl 5.1, to the execution of an assumption deed "to which the Trustee and any further controlled entity or controlled entities of the Holding Entity eligible for the benefit of the Class Order are party", in order to join a further group entity or group entities to the relevant deed of cross-guarantee. The term "Class Order" was there defined to mean the Class Order, which was replaced by the Instrument. At the time the Instrument was issued on 29 September 2016, ASIC also issued a new pro forma deed of cross-guarantee, which replaced the words "Class Order" in the corresponding cl 5.1 by a reference to the term "ASIC Instrument", which was defined to include both the Class Order and the Instrument. However, WSP Australia and its subsidiaries did not then vary the Deed (which had previously been executed on 18 December 2015) to reflect the amended cl 5.1 of that new proforma document.
ASIC has expressed a concern that: "Because the unamended Deed continued to use a definition of "Class Order" that did not embrace the … Instrument, the Assumption Deeds entered into by Golder Associates, Calibre and Greencap are arguably not "Assumption Deeds" of the kind contemplated by cl 5.1 of the Deed."
By a further extension of an already somewhat technical argument, ASIC then indicates a concern that the Instrument only affords relief to a company that was party to a deed of cross-guarantee at the end of a financial year and that if the Assumption Deeds are invalid or ineffective by this matter, then Golder Associates, Calibre and Greencap never became parties to the Deed and would not be entitled to relief under the Instrument. ASIC then invited WSP Australia to seek relief from the Court in respect of this "technicality", including orders to the effect that the Assumption Deeds are not invalid by reason of the incorrect reference in cl 5.1 of the Deed.
WSP Australia initially sought remedial orders under s 1322 of the Act, although Mr Wheeldon now accepts that no order that could be made under that section would assist. Alternatively, by prayers 6A and 6B of the Amended Originating Process, it sought orders in the nature of declarations that the Assumption Deeds were valid and effective for the purposes of the Instrument. In the course of his submissions, Mr Wheeldon submitted that: "… arguments can perhaps be made that despite the incongruity between the terms of the Deed and the terms of the new pro forma deed of cross-guarantee issued by ASIC, the two Assumption Deeds are valid and fully effective, including for the purpose of reliance on the ASIC relief instruments. However, there does not appear to have been any judicial consideration of this issue."
Mr Wheeldon ultimately did not press a submission that this issue could be resolved as a matter of construction of the Deed, and it seems to me he was correct in not doing so. The Court must take an objective approach to contractual construction and, in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; 306 ALR 25; [2014] HCA 7 at [35] the plurality observed that (citations omitted): "[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'."
The case law has also emphasised that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances; an objective approach is applied in determining the rights and liabilities of a party to a commercial contract, by reference to its text, context and purpose; and "[t]he meaning to be given to its terms is determined by reference to what a reasonable business person would have understood those terms to mean": Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; 325 ALR 188; [2015] HCA 37 at [46]-[52], [59]; Price (dec'd)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20 at [27], [42]; Re Border Express Pty Ltd [2023] VSC 769 at [69]ff; Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd [2024] NSWCA 211 at [87].
Here, it seems to me that cl 5.1 of the Deed, on an objective construction, identified which entities were entitled to execute a deed of cross-guarantee by reference to the eligibility criteria set out in the Class Order. While there is a substantial degree of overlap between the eligibility criteria set out in the Class Order and those set out in Instrument, those documents are expressed in different terms and it does not seem to me that a reasonable business person could read the reference to the criteria in the Class Order as extending to the differently expressed Instrument. The position might have been different had ASIC had published a replacement class order or instrument in the same or materially identical terms to the previous Class Order.
By prayers 7(f) and 7(g) of the Amended Originating Process, WSP also seeks orders relieving Golder Associates, Calibre and Greencap from any liability for their historical failure to comply with the statutory reporting requirements to the extent that such compliance was required as a consequence of the ineffectiveness of the Assumption Deeds. I am satisfied that those orders should be made for the reasons set out below.

Applicable principles and Mr Wheeldon's wider submissions

I now turn to the applicable principles and Mr Wheeldon's wider submissions. Mr Wheeldon submits and I accept that WSP Australia has standing to seek orders on behalf of its wholly owned subsidiaries, and its and their respective current and former officers and directors, in its capacity as an "interested person" for the purposes of s 1322(4) of the Act. Relevantly, I accept that WSP Australia has an interest, by virtue of its shareholdings in the subsidiaries and its employment and engagement of those officers and directors, in causing those subsidiaries and those officers and directors to be relieved from any liability for past non-compliance; WSP Australia has an interest in the application and proper implementation of the ASIC instruments and the Deed and the related ancillary agreements to which WSP Australia is a party; and WSP Australia has an interest in restoring the position under the Deed and the ancillary agreements to what it would have been thereunder if there had not been any non-compliance with the terms of the ASIC instruments. I note that Beach J adopted a similar approach in ComfortDelGro at [53] and there made orders as sought by a holding company extending to its subsidiaries. Mr Wheeldon notes that relief is here also sought on behalf of two subsidiaries of WSP Australia (WSP Asia Pacific Pty Ltd and WSP Engineering Pty Ltd) that have been deregistered. I accept that relief can be sought by WSP Australia although it could not be sought by those companies without reinstating them.
As I noted above, WSP Australia seeks 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".
Mr Wheeldon submits that s 1322 of the Act is a remedial provision and should be given a broad construction and he refers to my decision in Flight Centre at [29] and the cases cited there in that regard. Mr Wheeldon points out that s 1322(4)(d) of the Act provides that the Court may, on application by any interested person, make an order, either unconditionally or subject to conditions, extending the period for doing any act, matter or thing in relation to a corporation. He notes that this power may be exercised beyond circumstances where the relevant provision of the Act does not in terms impose an obligation to take a step within a particular time frame, including where the relevant provision of the Act makes compliance with that timeframe a condition for the validity of some other matter: Re Order of AHEPA NSW Inc [2018] NSWSC 458 at [31]. He points out that orders have previously been made under s 1322 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 and again refers to Flight Centre at [29] and the cases cited there. Mr Wheeldon rightly also recognises that the Court must not make any order under s 1322 unless it is satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c). He submits, and I accept below that, the Court can be comfortably satisfied that the several instances of non-compliance in issue in this case are attributable to inadvertence and honest mistakes in the nature of oversights and failures to turn WSP Australia's or its officers' minds to the relevant issue.
I accept that s 1322 of the Act 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; 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.
As Mr Wheeldon recognised, 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. 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), Bowen CJ in Eq observed that: "[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]
I accept 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 a 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].
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. Relevant matters to be considered in the exercise of that discretion were 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." I have again drawn on my judgment in Flight Centre for this summary of these principles.
Mr Wheeldon submits that, in respect of the failure of Golder Associates to lodge the Form 389s, Ms Mendes gives a candid explanation of the oversight on her part that led to the non-lodgement and this is a case of simple human error, devoid of any dishonest intent. It does not rise to the level of imprudence or wilful disregard of the law. Mr Wheeldon submits, in respect of this and other issues, that the evidence establishes that any failures to comply with the requirements of the ASIC instruments were inadvertent and the result of honest mistakes and oversights; any such failures have not caused any loss, detriment or substantial injustice (or material risk thereof) to be imposed on any person; WSP Australia, in collaboration with its external lawyers, has implemented a rigorous procedure to minimise the risk of future non-compliance with the ASIC instruments; and it would be just and equitable having regard to the purposes of s 1322, and it would not cause substantial injustice to any person, to grant the requested relief.
Mr Wheeldon also points out that the WSP Australia rightly initiated the Compliance Review which has identified the further matters that have been brought to ASIC's and the Court's attention. He submits and I accept that there is no indication of any dishonesty in respect of these matters. He points out that WSP Australia has taken steps to seek to minimise the risk of similar instances of non-compliance occurring again, and WSP Australia has now developed and adopted a comprehensive "Deed of Cross Guarantee Checklist" that is to be followed by the company secretarial and finance groups within the WSP Australia group of companies, as set out in paragraphs 27 to 31 of Ms Mendes affidavit.
Mr Wheeldon also submits and I accept that: "… the Court can be satisfied that the instances of non-compliance: a did not undermine any of the practical objectives of the ASIC relief instruments; and b did not cause any injustice or detriment to be suffered by any person. First, the Deed of Cross Guarantee, and the Assumption Deeds, were operational throughout the relevant periods and treated as fully effective and binding by their parties. Second, the existence of the Deed was publicly disclosed, including in WSP Australia's annual reports, and those reports contained audited financial statements which accurately disclosed the profit and loss and asset position of the "Closed Group" of parties to the Deed . WSP Australia has been audited by PricewaterhouseCoopers since 2016. Third, WSP Australia is profitable and well capitalised business. … Fourth, WSP Australia has acted reasonably promptly to address the matters that were first raised by ASIC in May 2024, including by undertaking the compliance review and commencing these proceedings. WSP Australia would be subjected to significant financial and administrative costs if the prayed for section 1322 relief were not granted, including substantial costs for preparing audited financial reports of the subsidiaries that would not be entitled to relief under the ASIC instruments."
Mr Wheeldon also submits and I accept that the Court can be satisfied that no prejudice to any person is likely to arise if the prayed for relief were to be granted; there is no public policy reason not to grant the prayed for relief; and it is just and equitable in the premises to grant the relief. I have had regard to these matters in finding that I should grant the relief sought in respect of each of the issues that I have addressed above.
As I noted above, WSP Australia also seeks relief from liability under s 1322(4)(c) of the Act as to these matters. That section 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) …"
Mr Wheeldon points out that s 1322(4)(c) permits the Court to make an order relieving a person from civil liability for a broad range of contraventions or failures, subject to the conditions in s 1322(6) that the person concerned acted honestly and that no substantial injustice has been or is likely to be caused to any person, and I address the scope of that section further below. He notes that no order may be made under s 1322(4)(c) unless the relevant person "acted honestly": s 1322(6). Mr Wheeldon also submits and I accept that the concept of "acting honestly" can embrace active but incorrect consideration of an issue, inadvertence and oversight and a failure to turn one's mind to the relevant issue or to give any consideration to the issue, and I address the case law in that regard below. 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 carelessness 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]; [2018] FCA 533 ("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]. I have again drawn on my judgment in Flight Centre for this summary.
The evidence to which I have referred above indicates that WSP Australia and its related companies 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. I am satisfied that the order sought by WSP Australia in this respect should also be made.

Orders

For these reasons, I made the orders sought by WSP Australia at the conclusion of the hearing.

Amendments 30 October 2024 - Correcting typographical error on page 1. 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: 30 October 2024

Companies Act 1961(NSW)

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Cases Cited (23)