Re ex parte; Navitas Bundoora Pty Ltd

Australia

16.03.2020

Company

Court has power to extend time where statutory pre-requisites are met but power must be exercised having regard to interests of all parties affected

The Plaintiffs seek relief under Section 1322(4)(d) of the Corporations Act, 2001 from compliance with financial reporting and lodgement obligations under pt 2M.3 of the Act for various financial years commencing with the financial year ending 30 June 2011. Specifically, the Plaintiffs seek relief in respect of two types of irregularities: (a) the failure by the first to fifth Plaintiffs to lodge a Form 389 'opt-in' notice with ASIC for the first financial year in which relief is sought from compliance with these obligations; and (b) the omission of certain details from consolidated financial statements prepared and lodged by the sixth Plaintiff for the 2013, 2015 and 2018 financial years.

Section 1322 of Act confers broad authority on the court to extend time where the statutory pre-requisites are met. The power must be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with the Act. It must also take account of the general objects and purposes of the relevant statutory provision of the Act imposing the time period; the court's order must not undermine the object of the relevant requirement. In respect of each of the irregularities for which the Plaintiffs seek relief, a time period is either expressly or impliedly imposed which is capable of extension.

Granting the extension of time was consistent with the purpose of the Class Order, the Instrument and the Act. The purpose of the Class Order and the Instrument is to enable closely held or 'closed group' companies to prepare and lodge a consolidated set of financial statements where each company is a party to a deed of cross guarantee. The relief sought by the Plaintiffs is consistent with this purpose. It also furthers the objects of the Class Order, Instrument and the Act by correcting the omission to lodge the requisite Forms and information in the notes to the consolidated financial statements.

Granting the relief will more accurately reflect the intention of the Plaintiffs that they be a 'closed group' as well as the contents of the consolidated financial statements that were lodged at the appropriate times in accordance with the Act. The non-compliance by the Plaintiffs was unintentional, honest and inadvertent.

The Plaintiffs have acted promptly in bringing this application once the issue was drawn to their attention. In addition, upon becoming aware of the issue, the plaintiffs identified other issues with the consolidated financial statements that had been filed and sought to address these. In the absence of an extension of time, there would be significant costs incurred by the Plaintiffs as they would be required to file audited financial statements for up to eight different financial years. There is no suggestion that any third party has acted or could have acted to its detriment as a result of the non-compliance or that any substantial injustice has been or is likely to be caused to any third party. ASIC did not oppose the application. In determining whether a person has acted honestly, the court looks to an absence of evidence of dishonesty and whether the party has taken prompt action to remedy the error.

The concept of acting honestly can embrace: (a) inadvertence or a failure to turn their mind to the relevant issue; (b) an active, but incorrect, consideration of a legal issue as well as failure to consider the issue at all; (c) the failure to understand or appreciate the significance of non-compliance. Relief from civil liability under Section 1322(4)(c) should be granted because all persons concerned in or party to the contravention acted honestly, and no substantial injustice has been or is likely to be caused to any person.

Present Court is satisfied that, the failure to lodge the notice was not dishonest. The evidence supports a conclusion that the failure by the plaintiffs to comply with the Class Order, the Instrument and the Act was a result of inadvertence, rather than a deliberate disregard of the plaintiffs' obligations. Each of these people held the bone fide belief that the company had been relieved from the requirement to report to members and to lodge financial statements with ASIC.

Tags : Financial reporting Time Extension

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