Analysis
39 Sub-sections 1322(4) to (6) provide as follows:
Irregularities
…
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
(b) an order directing the rectification of any register kept by ASIC under this Act;
(c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
(5) An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.
(6) The Court must not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is just and equitable that the order be made; and
(b) in the case of an order referred to in paragraph (4)(c) - that the person subject to the civil liability concerned acted honestly; and
(c) in every case - that no substantial injustice has been or is likely to be caused to any person.
40 Section 1322(4) is "cast in very broad terms" and "is not to be hedged about by any implied limitation" (Weinstock v Beck (2013) 251 CLR 396 at [53] and [55] per the plurality). And as explained by French J in Re Wave Capital Ltd (2003) 47 ACSR 418 at [29] with his customary commerciality, the powers under s 1322(4) reflect:
a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non‐compliance with its requirements where such non‐compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law.
41 But the power is not to be exercised lightly and is to be exercised having regard to the general purposes of the Act, including the provision in respect of which relief is sought, the interests of all parties affected and the public interest in ensuring compliance with the Act. Clearly, the power may be used to grant relief in respect of the failure to lodge an opt in notice (see Re Murray River Organics Ltd (2019) 138 ACSR 365 at [41] to [47] per Anderson J and In the matter of DAC Finance (NSW/Qld) Pty Ltd [2020] NSWSC 182 at [21], [36] to [39] and [44] to [50] per Gleeson JA).
42 The relevant exercise of power can be described as involving a two step process. First, is it appropriate to make one or other of the orders in 1322(4)? Second, are the conditions in s 1322(6) satisfied?
43 Section 1322(6)(c) provides that I must not make any order under s 1322(4) unless I am satisfied "that no substantial injustice has been or is likely to be caused to any person". The first part of the disjunction "has been" invites an inquiry as to the consequences of the non-compliance sought to be cured. The second part of the disjunction "likely to be" focuses on the effect of the proposed order.
44 Further, s 1322(6)(b) provides that an order under s 1322(4)(c) may not be made relieving a person of civil liability unless I am satisfied that the person acted honestly. The concept of acting honestly can embrace an active but incorrect consideration of an issue, a failure to turn one's mind to the relevant issue or a failure to appreciate the true significance of non-compliance (DAC Finance at [32] and [33] per Gleeson JA).
45 But even if the pre-conditions or criteria in ss 1322(4) and (6) are satisfied, I still retain a discretion whether to make the orders sought. So, it is necessary to take into account whether the relevant applicant has taken prompt action to remedy the error. But 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. Further, the public interest is a relevant consideration in the exercise of my discretion.
46 Now as I have said, CDC Australia seeks an order under s 1322(4)(d) extending the time specified by the Old Class Order and/or the New Class Order for itself and for the original subsidiaries and additional subsidiaries, save for the deregistered entities, to lodge an opt in notice as a condition of obtaining relief under the Class Orders.
47 It also seeks an order under s 1322(4)(c) for itself, the original subsidiaries, the additional subsidiaries and each of their respective current and former officers and directors relieving them from any civil liability in respect of any failure, in respect of the financial years ending 31 December 2007 to 31 December 2018, to lodge an opt in notice by the time specified in the Old Class Order and/or the New Class Order and to comply with ss 292(1), 301(1), 314(1) and 319(1) of the Act, and also to comply with the notice issued by ASIC under s 1274(11) of the Act dated 4 December 2019.
48 Ms Simona Gory, counsel for CDC Australia, has submitted that the relief under s 1322(4) should be granted because all persons concerned acted honestly and at all relevant times believed that all steps required to obtain relief under the Class Orders had been undertaken. Further, CDC Australia and the original and additional subsidiaries had properly entered into the deeds of cross guarantee, and the persons concerned believed that all necessary forms had been lodged with ASIC and that the original and additional subsidiaries were accordingly exempt from the requirements of the Act to lodge separate audited financial reports. I accept her careful and clear submissions on these aspects.
49 Clearly the evidence before me supports a conclusion that the failure was the result of inadvertence, rather than any deliberate disregard of CDC Australia's and its subsidiaries' obligations.
50 Further, no substantial injustice has been or is likely to be caused to any person by reason of the contraventions or by the making of the proposed form of order. There is no evidence that suggests that any third party could have acted to its detriment as a result of CDC Australia's or its subsidiaries' non-compliance. CDC Australia prepared and lodged consolidated financial statements which incorporated the operations of the original and additional subsidiaries. Those statements were audited by Deloitte. Moreover, the deeds of cross guarantee were operational during the entire period and creditors would have been able to rely on those guarantees. Further, at all relevant times the group on a consolidated basis had substantial net assets, for example, $595 million as at 31 December 2018. Accordingly, no creditor of the relevant entities could have been significantly prejudiced by the prior non-compliance or could be prejudiced by my orders. The deed(s) of cross guarantee together with a healthy consolidated balance sheet so demonstrate.
51 Further, I am also satisfied that public policy will not be undermined by the making of the orders.
52 Further, CDC Australia acted reasonably promptly in commencing an appropriate inquiry once it became aware of the error.
53 Finally, I raised with counsel whether the relevant subsidiaries needed to be joined as co-plaintiffs and also whether the relevant deregistered subsidiaries should be re-registered for this limited purpose. But on balance I am satisfied that the orders with their breadth can be made notwithstanding that such steps have not been taken. It is at the least reasonably arguable that the intermediate holding company, namely, CDC Australia, has standing to seek the orders, inter-alia, on their behalf given the scope of "interested person" as referred to in s 1322(4), and further that the orders would have the necessary breadth of efficacy. The concept of "interested" would be established both by CDC Australia's direct or indirect shareholding in the subsidiaries but also by its interest in the application and proper implementation of the Class Orders and the deed(s) of cross guarantee arrangements, and its interest in essence in restoring the position to what it would have been thereunder if all opt-in notices had been given.
54 I will make orders in the terms sought.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.