Weinstock v Beck

Federal Court of Australia|2024-08-09|Before: Jackson J

Pursuant to s 203AA(2) of the Corporations Act 2001 (Cth), the day that Dr Joanne Kathleen Warner's resignation as a director of the plaintiff took effect is fixed as 31 March 2024.
Pursuant to s 1322(4)(c) of the Corporations Act, the plaintiff and its current and former directors, secretaries and other officers are relieved from any civil liability in respect of: (a) the plaintiff's failure to lodge a 'Form 484 - Change to Company Details' notifying ASIC of Dr Warner's resignation as a director of the plaintiff within 28 days of the date that Dr Warner stopped being a director of the plaintiff in compliance with s 205B(5) of the Corporations Act; (b) the plaintiff's failure to lodge a 'Form 484 - Change to Company Details' form notifying ASIC of the issue of 109,420 ordinary shares on 16 August 2023 within 28 days of the date of issue in compliance with s 254X(1) of the Corporations Act; and (c) any contravention of s 188(1)(f) and s 188(1)(g) of the Corporations Act in respect of the plaintiff's failures in (a) and (b) above.
Liberty to apply on 48 hours' written notice.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 The plaintiff, Deterra Royalties Limited, applies for orders under s 203AA(2) and s 1322(4)(c) of the Corporations Act 2001 (Cth) fixing the resignation date of a past director and relieving Deterra and its current and former directors and officers from any civil liability in respect of certain failures to comply with s 205B(5) and s 254X(1) of the Corporations Act. 2 The application was accepted for filing on 19 July 2024 and includes an originating process, an affidavit affirmed by Deterra's general counsel and company secretary, Bronwyn Kerr, on 17 July 2024, and written submissions. The Australian Securities and Investments Commission (ASIC) has confirmed that it does not oppose the application, so it is appropriate to deal with the matter on the papers. 3 For the reasons that follow, the application will be granted in the terms sought.

Statutory framework 4 Pursuant to s 205B(5) of the Corporations Act, if a person stops being a director of a company, the company must lodge notice of that fact, in a prescribed form, with ASIC within 28 days (unless the person has themself notified ASIC under s 205A). It is an offence of strict liability for a company not to do so: s 205B(7). 5 If notice of resignation as a director is lodged within the prescribed timeframe, the resignation takes effect on the day the person stopped being a director of the company: s 203AA(1)(a). In any other case, the resignation takes effect on the day that written notice is lodged with ASIC stating that the person has stopped being a director of the company: s 203AA(1)(b). 6 So if the company (or the director) are late in lodging the required notice, the resignation may take effect at a time after the person has, in fact, resigned. But s 203AA(2) of the Corporations Act empowers this Court or ASIC, on application by the relevant company, to fix the day the person's resignation took effect as the day that the person stopped being a director. The application can only be made to ASIC within 56 days of the day that the person stopped being a director of the company: s 203AA(5)(a)(i). Alternatively, the application may be made to the Court within 12 months after the day that the person stopped being a director, or such longer period as the Court allows: s 203AA(5)(b). 7 The applicant must satisfy the Court that the person stopped being a director on the day sought to be fixed: s 203AA(2)(d). The Court must also be satisfied that it is just and equitable to fix the date: s 203AA(3). In any case, there must be at least one director left for the resignation to take effect: s 203AA(8), s 203AB(1). 8 Also relevant to the present application is s 254X(1), which provides that within 28 days after issuing shares, a company must lodge with ASIC a notice in the prescribed form setting out the matters listed in s 254X(1)(a)-(f). An offence based on s 254X(1) is an offence of strict liability: s 254X(2A). 9 A secretary of a company contravenes s 188(1) of the Corporations Act, which is a civil penalty provision, if the company contravenes s 205B or s 254X: s 188(1)(f) and s 188(1)(g). If the person shows that they took reasonable steps to ensure that the company complied with the relevant provision, that is a defence to the contravention: s 188(3). 10 Deterra seeks relief under s 1322(4)(c) of the Corporations Act in relation to contraventions of s 205B(5) and s 254X(1) and any contravention of s 188(1)(f) and s 188(1)(g). Section 1322(4)(c) authorises the Court to make, on application by any interested person, an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure in relation to a provision of the Corporations Act, either unconditionally or subject to such conditions as it imposes. This provision has a remedial and practical purpose: see Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 at [42] (French CJ). The Court may make such consequential or ancillary orders as it thinks fit. Orders may be made under s 1322(4)(c) notwithstanding that the relevant contravention or failure resulted in the commission of an offence: s 1322(5). 11 However, s 1322(6) imposes limits on those broad powers. An order must not be made under s 1322(4)(c) unless the Court is 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)).

The circumstances of the non-compliance in this matter

Resignation of Dr Warner as a director of Deterra 12 Two incidences of non-compliance with the Corporations Act arise under this application. The first is Deterra's failure to lodge the prescribed 'Form 484 - Change to Company Details' with ASIC in relation to Dr Joanne Warner's resignation as a director within the time required under s 205B(5). 13 Dr Warner was appointed as a non-executive director of Deterra on 16 October 2020. In December 2023 she communicated to the board her intention to resign with effect from 31 March 2024. A resignation letter was signed by Dr Warner on 18 December 2023. An ASX announcement was prepared by Ms Kerr, and approved by Deterra's managing director and chief executive officer, Mr Julian Andrews. The announcement was released to the ASX on 18 December 2023 and stated Dr Warner's retirement as being effective from 31 March 2024. 14 On 3 April 2024, Deterra released an ASX announcement titled 'Appendix 3Z - Final Director's Interest Notice', which included information required for the purposes of listing rule 3.19A.3 of the ASX Listing Rules and s 205G of the Corporations Act. That announcement also stated Dr Warner's retirement as effective from 31 March 2024. 15 Deterra did not, however, lodge a Form notifying ASIC of Dr Warner's resignation within the 28 days required by s 205B(5) of the Corporations Act. Ms Kerr is responsible for overseeing such requirements and deposes that this failure was an 'inadvertent, administrative oversight' on her behalf. She says that she ordinarily sets calendar reminders for any compliance actions within the prescribed timeframes, and it appears that she either failed to set the reminder to lodge the Form for Dr Warner's resignation, or accidentally dismissed the relevant reminder. 16 On 20 December 2023, Ms Kerr did cause a Form to be lodged in relation to a change of joint company secretary that had been announced to the ASX on the same day as the announcement of Dr Warner's resignation. Ms Kerr says that between 31 March and 3 July 2024, she did not turn her mind to Deterra's obligation to notify ASIC of Dr Warner's resignation. 17 The non-compliance was discovered on 3 July 2024, when Ms Kerr logged into the ASIC Regulatory Portal to review Deterra's Annual Company Statement and noticed that Dr Warner remained listed as a current director of Deterra. Upon seeing this, Ms Kerr immediately prepared and lodged a Form 484 with ASIC in respect of Dr Warner's resignation. This was recorded as having been received by ASIC on 3 July 2024 at 11.21 am. Therefore the date that Dr Warner's resignation took effect under the Corporations Act is currently 3 July 2024: s 203AA(1)(b). 18 On 4 July 2024, Ms Kerr instructed Deterra's solicitors, King & Wood Mallesons, in respect of the contravention of s 205B(5). The 56-day window to apply to ASIC to fix the resignation date had passed when the non-compliance was discovered. After obtaining Dr Warner's consent to the making of this application, the application was filed. 19 Ms Kerr deposes to the best of her knowledge and based on her correspondence with Dr Warner in March and April 2024, that at all times from close of business on 31 March 2024, Dr Warner has proceeded on the belief and understanding that her resignation took effect from 31 March 2024. Ms Kerr further says that at all times from close of business on 31 March 2024, Deterra has conducted its affairs on the basis that Dr Warner is no longer a director of Deterra. Ms Kerr says that since 31 March 2024, she has attended all formal meetings of Deterra's board of directors, and Dr Warner has not been invited to, nor has she attended, any of those meetings. Nor has Dr Warner performed any duties or participated in the functions of the board since 31 March 2024. 20 Ms Kerr also says that to the best of her knowledge, the orders sought in respect of Dr Warner's resignation, if made, will not cause prejudice to any third party.

The share issue 21 The other incidence of non-compliance with the Corporations Act is Deterra's failure to lodge a Form 484 with ASIC in relation to the issue of 109,420 ordinary shares on 16 August 2023 in the time required under s 254X(1) of the Corporations Act (28 days). 22 In light of her discovery of the failure to notify ASIC of Dr Warner's resignation, on 10 July 2024 Ms Kerr reviewed Deterra's Annual Company Statement in detail to conduct an audit of Deterra's historical compliance with its obligations to notify ASIC under the Corporations Act. 23 On 16 August 2023, Ms Kerr had caused Deterra to release an ASX announcement titled 'Application for Quotation of Securities' regarding the share issue. However her review of the Company Statement on 10 July 2024 caused her to identify the omission described at [21] above. Upon identifying this, she prepared and lodged a Form 484 with ASIC to notify ASIC of the share issue. That Form 484 is recorded as having been received by ASIC on 10 July 2024 at 11.49 am. 24 Ms Kerr deposes that in the period between the issue of shares on 16 August 2023 and her review of Deterra's Annual Company Statement on 10 July 2024, she did not turn her mind to Deterra's obligation under s 254X(1) of the Corporations Act to notify ASIC of the issue within 28 days. Again, she says that it appears that due to an inadvertent, administrative oversight, she either failed to set the reminder to lodge the Form 484 for the share issue, or accidentally dismissed the relevant reminder. 25 Ms Kerr says that she did not identify any other non-compliance in her audit of Deterra's historical compliance with its obligations to notify ASIC under the Corporations Act. She deposes to having changed her practice to avoid such non-compliance in the future, which includes setting a calendar reminder to lodge the relevant forms with ASIC on the date of the relevant event (for example, the resignation of a director) and a further calendar reminder for the end of the relevant period for compliance to confirm that the relevant changes have been processed and are accurately reflected in ASIC's records.

Fixing the date of resignation 26 For the purposes of s 203AA(5)(b), this application was made within 12 months of the day that Dr Warner stopped being a director of Deterra. I also note that Deterra has had at least four directors at all times since close of business on 31 March 2024: s 203AA(8), s 203AB(1). 27 Deterra submits that this matter is analogous to that addressed in the decision of O'Bryan J in Re Energy Resources of Australia Ltd [2022] FCA 176. There is no need to describe the facts of that case in detail, it is enough to say that they are indeed closely analogous to the facts of this case. In the circumstances of the case before him, O'Bryan J was satisfied that the relevant director stopped being a director of the company on 28 April 2021 (which was more than 28 days before the Form 484 was lodged) and that it was just and equitable to fix the date of resignation to that date, on the basis that (at [21]): (a) Energy Resources' only failure was the non-lodgement with ASIC of notice of a director's resignation within the required time; (b) neither that director nor ASIC opposed the application, and there was no evidence that the orders sought would prejudice any third party; and (c) Energy Resources, the relevant director and the share market all appeared to have proceeded on the basis that the director had resigned effective from 28 April 2021. 28 Section 203AA of the Corporations Act was introduced to ensure that directors are held accountable for misconduct by preventing the improper backdating of their resignations, and relatedly, to reduce illegal phoenix activity and its effect on employees, creditors and government revenue: Explanatory Memorandum, Treasure Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) paras 3.1, 3.10, 3.14. The facts of this matter as outlined above are far removed from the mischief the provisions were intended to remedy. As with s 1322(4), s 203AA(2) has a remedial and practical purpose: cf. Weinstock, above. 29 I accept all the evidence described above. I therefore accept the essential facts that, first, Dr Warner's resignation was intended by her and by Deterra to take effect on 31 March 2024 and, second, that the omission to lodge the necessary form with ASIC within 28 days of when Dr Warner stopped being a director was a result of inadvertence. Further, I accept that Dr Warner's resignation effective 31 March 2024 was announced to the share market, and that she, Deterra and other market participants conducted themselves accordingly. 30 In the circumstances, it is just and equitable to fix the date that Dr Warner's resignation as a director of Deterra took effect as 31 March 2024 pursuant to s 203AA(2) of the Corporations Act. Other points supporting that conclusion are that Deterra has acted swiftly to seek to remedy the omission, Dr Warner has consented to the order, ASIC does not oppose it, and there is nothing to suggest that it will cause prejudice to any third party.

Relief under s 1322 31 As the company that has contravened the Corporations Law, Deterra is plainly an 'interested person' with standing to apply for relief under s 1322(4) in respect of the contraventions. 32 In order to make an order relieving a person from civil liability under s 1322(4)(c), the Court must be satisfied that that the person subject to the liability acted honestly: s 1322(6)(b). In Re ICandy Interactive Ltd [2018] FCA 533, Banks-Smith J described the concept of honesty in this context at [54]-[55]: When determining whether someone has acted honestly for the purposes of s 1322 of the Act the court looks to an absence of evidence of dishonesty: G8 Communications Ltd, in the matter of G8 Communications Ltd [2016] FCA 297 [35]. It also takes into account whether the applicant has taken prompt action to remedy the error: [Re] Sprint Energy [Limited [2012] FCA 1354] [44]; [Re] Golden Gate [Petroleum Ltd (2010) 77 ACSR 17] [48]. The concept of acting honestly can embrace the following: (a) inadvertence or a failure to turn their mind to the relevant issue: Re QBiotics Limited [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]. 33 The Court must also be satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c). In Energy Resources O'Bryan J said, at [14]-[15]: 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]. 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]. 34 Once again, I accept the evidence described above and, on the basis of it, I am satisfied that Deterra and its secretary, Ms Kerr, acted honestly for the purposes of s 1322(6)(b). There is no evidence that they acted dishonestly. To the contrary, the evidence shows that the non-compliance in respect of both s 205B(5) and s 254X(1) of the Corporations Act was inadvertent. 35 I am also satisfied that no substantial injustice has been or is likely to be caused to any person by the grant of relief sought. Again, it appears that each of Dr Warner, Deterra and the market treated Dr Warner's resignation as effective on 31 March 2024, noting that the market was informed of the resignation being effective on this date both prior to and after 31 March 2024. 36 Further, ASIC is not opposed to the orders sought. It is also relevant that Ms Kerr, on behalf of Deterra, acted promptly to rectify the non-compliance with s 205B(5) and s 254X(1), and that she has adopted a new practice to avoid further administrative errors or oversights. The fact that Ms Kerr investigated Deterra's historical compliance with its obligations to notify ASIC after discovering the non-compliance with s 205B(5), leading to the discovery of the non-compliance with s 254X(1), weighs in favour of granting relief in the circumstances. It is appropriate to exercise the residual discretion in Deterra's favour. 37 I am therefore satisfied that it is appropriate to make an order under s 1322(4)(c) relieving Deterra and its current and former directors and officers from any civil liability in respect of its contraventions of s 205B(5) and s 254X(1) and any contravention of s 188(1)(f) and s 188(1)(g), in relation to the circumstances described above. 38 Given that there could conceivably be third parties affected by these orders who have not had notice of this application, it is appropriate, as Deterra has proposed, also to make an order providing for liberty to apply on 48 hours' notice. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.

Corporations Act 2001(Cth)ss 188, 203AA, 203AB, 205A, 205B, 205G, 254X, 1322

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