Gangemi v Osborne

Federal Court of Australia|2022-03-03|Before: O'Bryan J

Pursuant to s 203AA(2) of the Corporations Act 2001 (Cth) (Corporations Act), the day that Marcia Ellen Hanrahan's resignation as director of the plaintiff took effect is fixed as 28 April 2021.
Pursuant to s 1322(4)(c), the plaintiff be relieved from any civil liability in respect of its failure to lodge notice of Ms Hanrahan's resignation with ASIC within 28 days of her ceasing to be a director in accordance with s 205B(5) of the Corporations Act.
There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 By originating process filed 7 December 2021, the plaintiff, Energy Resources of Australia Ltd (ERA) seeks the following relief from the Court: (a) pursuant to s 203AA of the Corporations Act 2001 (Cth) (the Corporations Act), an order fixing the date of Marcia Ellen Hanrahan's resignation as a director of ERA as 28 April 2021; and (b) pursuant to s 1322(4)(c) of the Corporations Act, an order relieving ERA of any civil liability in respect of its failure to lodge notice with ASIC within 28 days of the date that Ms Hanrahan stopped being a director. 2 The application was supported by an affidavit made by ERA's General Counsel and Company Secretary, Shanelle Elizabeth English, sworn 3 December 2021. 3 On 18 January 2022, ERA served ASIC with copies of the originating process and supporting affidavit. On 28 January 2022, ASIC informed ERA's solicitors that it neither supported nor opposed the application and did not intend to appear at the hearing of the matter. In the circumstances, ERA submitted and I agreed that it would be appropriate to consider the application on the papers, pursuant to s 20A(2)(c) of the Federal Court of Australia Act 1976 (Cth). 4 In support of its application, ERA filed written submissions dated 25 February 2022 and relied upon Ms English's affidavit. 5 For the reasons that follow, I am satisfied that it is appropriate to make the orders sought.

Resignation of a director 6 If a director of a company resigns, they may give ASIC written notice of their resignation: s 205A(1). If they do not do so, the company must do so within 28 days of the resignation: ss 205B(5) and 205B(6)(b). It is a strict liability offence for a company not to do so: 205B(7). 7 If ASIC is notified of the resignation by either the director or the company within 28 days, the resignation takes effect on the day that the person stopped being a director of the company: s 203AA(1)(a). In any other case, the resignation takes effect on the day notice is lodged with ASIC: s 203AA(1)(b). However, if the day of such notice is not the day that the person stopped being a director of the company, an application can be made to ASIC or the Court to fix a particular day as the day that the person's resignation took effect: s 203AA(2). The Court may make such an order if the Court is satisfied that: (a) the person stopped being a director on the day which the applicant seeks to fix as the day the person's resignation takes effect: s 203AA(2)(d); and (b) it is just and equitable to fix the resignation day as the day the person's resignation takes effect: s 203AA(3). 8 An application to the Court for an order under s 203AA(2) must be made within 12 months after the person stopped being a director or such longer period as the Court allows.

Relief from civil liability 9 Section 1322 of the Corporations Act provides for the statutory validation of certain irregularities. Relevantly for the present application, s 1322(4)(c) provides that the Court may, on application by any interested person, make an order relieving a person in whole or in part from any civil liability in respect of a contravention of a provision of the Corporations Act. The order may be made unconditionally or subject to such conditions as the Court imposes. 10 In Weinstock v Beck (2013) 251 CLR 39 (Weinstock), French CJ considered the purpose of s 1322(4) (at [39]): Section 1322(4) and related provisions reflect a long-standing legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which may be corrected without substantial injustice to third parties. 11 Section 1322, including subs (4), is remedial in nature and should be given a liberal construction: Weinstock at [39] per French CJ; Re Golden Gate Petroleum Ltd [2010] FCA 40; 77 ACSR 17 at [38] per McKerracher J; Re Insurance Australia Group Ltd (2003) 128 FCR 581 at [27] per Lindgren J. 12 An order may be made under s 1322(4)(c) notwithstanding that the contravention resulted in the commission of an offence: s 1322(5). However, the Court must not make an order under s 1322(4)(c) unless satisfied that the person subject to the civil liability concerned acted honestly (s 1322(6)(b)) and that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c). 13 Justice Banks-Smith summarised what it means to "act honestly" for the purpose of s 1322 in Re iCandy Interactive Ltd [2018] FCA 533; 125 ACSR 369 at [54]-[55]: [54] When determining whether someone has acted honestly for the purposes of s 1322 of Act the court looks to an absence of evidence of dishonesty: G8 Communications Ltd, Re G8 Communications Ltd [2016] FCA 297 [35]. It also takes into account whether the applicant has taken prompt action to remedy the error: Sprint Energy [44]; Golden Gate [48]. [55] The concept of acting honestly can embrace the following: (a) inadvertence or a failure to turn their mind to the relevant issue: Re QBiotics Ltd [2016] FCA 873 [38]; (b) an active, but incorrect, consideration of a legal issue as well as failure to consider the issue at all: Primelife Corporation Ltd v Aevum Ltd [2005] NSWSC 269; (2005) 53 ACSR 283 [8]; Golden Gate [47]; Sprint Energy [43]; (c) failure to understand or appreciate the significance of non-compliance: Sprint Energy [44]. 14 The concept of "injustice" in s 1322(6)(c) means real and not insubstantial or theoretical prejudice: Gangemi v Osborne [2009] VSCA 297 (Gangemi) at [62] per Nettle and Harper JJ. It requires the Court to weigh any prejudice associated with making the order against the prejudice which would be suffered if an order were not made: Gangemi at [62]. 15 Even if the criteria in s 1322(6) is satisfied, the Court has a residual discretion as to whether or not to make the order: Re Wesfarmers Ltd (No 2) [2018] WASC 357 at [35].

Evidence 16 Ms English gave evidence that Ms Hanrahan was a non-executive director of ERA between 29 May 2020 and 28 April 2021. On 23 April 2021, Ms Hanrahan advised Ms English that she was resigning as a director effective from the conclusion of ERA's AGM on 28 April 2021. Ms English sent Ms Hanrahan an email on 23 April 2021 in which she acknowledged Ms Hanrahan's notification of resignation, and informed Ms Hanrahan that she would arrange the appropriate ASX announcement approval via ERA's Disclosure Committee and then release the announcement on the ASX. Correspondence ensued between Ms English and ERA's Disclosure Committee regarding Ms Hanrahan's resignation and an announcement of the resignation was made via the ASX on Monday 26 April 2021. A copy of the ASX announcement was annexed to Ms English's affidavit. 17 Neither Ms Hanrahan nor ERA gave notice to ASIC of Ms Hanrahan's resignation as a director, within 28 days or at all. Ms English gave evidence that she did not, at the time of Ms Hanrahan's resignation as a director, turn her mind to the need to lodge with ASIC notice of Ms Hanrahan's resignation. She said that this was an oversight on her part. 18 When Ms English became aware of this oversight on or about 21 October 2021, the 56 day time period in which an application may be made to ASIC under s 203AA had expired. She therefore instructed Ashurst to make an application to the Court on behalf of ERA pursuant to s 203AA(2) of the Corporations Act. Ms English annexed to her affidavit a copy of an email chain with Ms Hanrahan, in which Ms Hanrahan confirms that she consents to ERA making an application to the Federal Court to fix her resignation date as 28 April 2021. 19 Separately, on 11 November 2021, Ms English instructed Karen McIntyre, an executive assistant employed by Rio Tinto Group Finance who has access to the ASIC Regulatory Portal, to lodge a Form 484 with ASIC in relation to Ms Hanrahan's resignation as director effective 28 April 2021. Acknowledgement of lodgement was received from ASIC on the same date. 20 Ms English said that to her knowledge, Ms Hanrahan has proceeded on the premise that her resignation took effect from 28 April 2021. Further, ERA has since 28 April 2021 conducted its affairs on the basis that Ms Hanrahan is no longer a director of the company. ERA has at all times since 28 April 2021 had at least five directors.

Consideration 21 Pursuant to s 203AA(1)(b), Ms Hanrahan's resignation took effect on the day written notice of her resignation was lodged with ASIC (being 11 November 2021) unless I make orders under s 203AA(2) fixing 28 April 2021 as the date of resignation. On the basis of the evidence before me, summarised above, I am satisfied that Ms Hanrahan stopped being a director of ERA on 28 April 2021. I am further satisfied that it is just and equitable to fix Ms Hanrahan's resignation date as 28 April 2021. ERA's only failure in this case consisted of the non-lodgement with ASIC of notice of a director's resignation within the required time. Neither Ms Hanrahan nor ASIC oppose the application, and there is no evidence that the orders sought will prejudice any third-party. ERA, Ms Hanrahan and the share market all appear to have proceeded on the basis that Ms Hanrahan resigned as a director effective 28 April 2021. For these reasons, I am satisfied that it is appropriate to fix 28 April 2021 as the date that Ms Hanrahan's resignation took effect. 22 As to relief under s 1322(4)(c), I am satisfied that ERA acted honestly. In this respect it is sufficient to observe that there is no evidence that ERA or Ms English (on ERA's behalf) acted dishonestly. Indeed, the evidence shows that the non-compliance was entirely inadvertent. For the reasons set out above in respect of s 203AA(3), I am further satisfied that no substantial injustice has been or is likely to be caused to any person. I am therefore satisfied that it is appropriate to make an order under s 1322(4)(c) relieving ERA from any civil liability in respect of its contravention of s 205B(5).

Conclusion 23 I will grant the relief sought in the plaintiff's originating process. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.

Corporations Act 2001(Cth)ss 203AA, 205A, 205B, 1322(4)(c), 1322(5), 1322(6)

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