Ozito Industries Pty Ltd v Australian Securities and Investments Commission, in the matter of Ozito Industries Pty Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 02 October 2020
• Neutral Citation: [2020] FCA 1432
• Court: Federal Court
• Date: 02 October 2020

Federal Court of Australia

Ozito Industries Pty Ltd v Australian Securities and Investments Commission, in the matter of Ozito Industries Pty Ltd [2020] FCA 1432

File number:	VID 283 of 2020
Judgment of:	O'BRYAN J
Date of judgment:	2 October 2020
Catchwords:	CORPORATIONS – financial reporting and lodging requirements under Part 2M.3 of the Corporations Act 2001 (Cth) – inadvertent failure to comply with conditions of exemption under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 – relief from non-compliance under s 1322 – requirements of ss 1322(4) and (6) – appropriate form of orders – relief to be limited to a contravention arising by reason of identified acts or omissions
Legislation:	Corporations Act 2001 (Cth) ss 292, 301, 314, 315, 319, 1274(11) and 1322 ASIC Corporations (Wholly-owned Companies) Instrument 2016/785
Cases cited:	Re Australian Dairy Farms Ltd [2018] FCA 2056 Re ComfortDelGro Corporation Australia Pty Ltd [2020] FCA 378 Car Buyers Australia Pty Limited v Australian Securities and Investments Commission Ltd [2020] FCA 599 Re EHR Resources Ltd [2018] FCA 997 Re Murray River Organics Ltd [2019] FCA 931; (2019) 138 ACSR 365 Re Navitas Bundoora Pty Ltd [2020] WASC 87
Division:	General Division
Registry:	Victoria
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Number of paragraphs:	34
Date of last submission:	6 August 2020
Date of hearing:	21 May 2020
Counsel for the Plaintiff:	Ms C van Proctor
Solicitor for the Plaintiff:	Hall & Wilcox

ORDERS

		VID 283 of 2020
IN THE MATTER OF OZITO INDUSTRIES PTY LTD
BETWEEN:	OZITO INDUSTRIES PTY LTD Plaintiff
AND:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Defendant

order made by:	O'BRYAN J
DATE OF ORDER:	2 OCTOBER 2020

THE COURT ORDERS THAT:

1. Pursuant to s 1322(4)(d) of the Corporations Act 2010 (Cth) (Act), the time specified by ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (Instrument) for the plaintiff to lodge a ‘Form 389 - Opt in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations’ (Form 389) be extended from a date within four months of the plaintiff’s financial year ending 30 June 2016 to a date 30 days after the date of these orders.

2. Pursuant to s 1322(4)(c) of the Act, the plaintiff and its current and former directors and officers are relieved from any civil liability in respect of any failure to comply with the following requirements of Part 2M.3 of the Act in respect of the plaintiff’s financial years ending 30 June 2016, 30 June 2017, 31 December 2017, 31 December 2018 and 31 December 2019:

   1. the requirement to prepare a financial report and a directors’ report under s 292;

   2. the requirement to have the financial report audited and to obtain an auditor’s report under s 301(1);

   3. the requirement to report to its members under s 314 within the time required by s 315; and

   4. the requirement to lodge the foregoing reports with the Australian Securities and Investments Commission (ASIC) under s 319(1),

arising by reason of the plaintiff’s failure to comply with the requirements specified in paragraphs (f) to (i) of section 6 of the Instrument.

3. Pursuant to s 1322(4)(c) of the Act, the plaintiff and its current and former directors and officers are relieved from any civil liability in respect of the failure to comply with the notice issued by ASIC under s 1274(11) of the Act dated 4 December 2019.

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

REASONS FOR JUDGMENT

O’BRYAN J

Introduction

1. By originating process filed on 28 April 2020, the plaintiff, Ozito Industries Pty Ltd (Ozito), applied under ss 1322(4)(c) and (d) of the Corporations Act 2001 (Cth) (Act) for relief from non-compliance with the financial reporting and lodging requirements of Part 2M.3 of the Act.

2. In May 2016, Ozito’s parent company, Einhell Holding Australia Pty Ltd (Einhell Holding Australia), lodged an application with the Australian Securities and Investments Commission (ASIC) under the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (Instrument) seeking relief from the financial reporting requirements under Part 2M.3 of the Act. The Instrument provides a mechanism for relief from compliance with certain financial reporting requirements under the Act in circumstances where a company within a group of companies has executed a deed of cross guarantee with other companies within the group. Specifically, section 5 of the Instrument provides as follows:

5 Financial reporting relief for wholly-owned entities

(1) A company that was party to a deed of cross guarantee at the end of a financial year (relevant financial year) does not have to comply with any of the following requirements of Part 2M.3 of the Act in relation to the financial year:

(a) the requirement to prepare a financial report and a directors’ report under paragraphs 292(1)(b) and (c) and paragraph 292(2)(b);

(b) the requirement to have the financial report audited and to obtain an auditor’s report under subsection 301(1);

(c) the requirement to report to its members under section 314 within the time required by section 315;

(d) the requirement to send reports to a member in accordance with a request under subsection 316(1) within the time required by subsection 316(2).

Note: The requirement for a company to lodge a report with ASIC under section 319 of the Act will not apply if the company does not have to prepare or obtain the report: subsection 319(1).

(2) The directors of a company referred to in subsection (1) do not have to comply with the requirement under section 317 to lay reports before the AGM of the company following the relevant financial year.

3. Ozito believed that it benefitted from financial reporting relief under the Instrument and has not prepared or lodged financial statements or reports for the 2016 financial year and subsequent reporting periods. However, it inadvertently failed to comply with a condition of relief under the Instrument, which was to lodge with ASIC a ‘Form 389 - Opt in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations’ (Form 389) within four months of its financial year ending 30 June 2016.

4. On 3 October 2019, ASIC notified Ozito that it had failed to lodge its financial statements and reports in accordance with s 319 of the Act. On 4 December 2019, ASIC issued a notice under s 1274(11) of the Act requiring Ozito to lodge its financial statements and reports.

5. ASIC has been given notice of this application but has elected not to appear at the hearing of the application. It has issued a letter to Ozito stating that it neither consents to nor opposes the relief sought by Ozito from the Court.

6. For the reasons set out below, I will grant relief largely in the form sought by Ozito.

Procedural history and evidence

7. The application filed by Ozito on 28 April 2020 was supported by unsworn affidavits of its Director, Kai Schmid, and...