Section 1322 of the Corporations Act 2001 (Cth) (Corporations Act) is an extremely useful remedial provision which empowers the Court to make a broad range of orders with respect to various procedural requirements of the Act, including the ability to modify statutory time periods.
Section 1322(4)(a) in particular, is commonly relied upon to cure inadvertent corporate governance failings, allowing the Court to declare that any act, matter or thing purporting to have been done is not invalid by reason of a contravention of a provision of the Corporations Act or a provision of the Company’s constitution. This provision reflects the policy underpinning section 1322, which, said Chief Justice French, is "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".
However, the section can also be used in anticipation of what would otherwise be a breach of the Corporations Act, as illustrated in a recent decision of the Supreme Court of Western Australia.
On 19 November 2024, Justice Hill issued orders under section 1322(4)(d) of the Corporations Act extending the time for ASX- listed Global Lithium Resources Limited (Global Lithium) to hold its 2024 annual general meeting (AGM) (and a related extraordinary general meeting (EGM) to be convened at the same time in response to a section 249D notice).
The proceedings stem from a long-running dispute over attempts by major Global Lithium shareholder, Serenity Developments, to seize control of the company’s board. On 14 October 2024, Global Lithium submitted a letter to the Commonwealth Treasury concerning potential breaches of the Foreign Acquisitions and Takeovers Act 1975 (Cth) resulting from those attempts. Subsequently, on 8 November 2024, Global Lithium applied to the Court to defer its AGM, which the Corporations Act required to be held on or before 30 November 2024, and its EGM to allow the Commonwealth Treasury time to consider the reported matters.
At a contested matter, Global Lithium Resources Limited v Sincerity Development Pty Ltd (No 2) [2024] WASC 443, where the parties bringing the section 249D notice appeared as defendants, Justice Hill noted that the Commonwealth Treasurer could take steps affecting certain shareholders’ ability to vote at any general meeting of the company (that is the AGM or the EGM) (see [45](e)). Her Honour reasoned that if those shares were voted before the investigation by the Treasury was concluded, it was possible that the result of the vote could be impugned, and any decisions made could be difficult to unwind (see [45](f)–(g)). Justice Hill ultimately held that an extension of time for Global Lithium to hold its AGM and EGM until 14 February 2025 adequately balanced addressing Global Lithium’s concerns and the rights of its members.
Critically, for any application under section 1322(4) to pass muster, the Court must (among other things) be of the opinion that, in making the order, no substantial injustice has been or is likely to be caused to any person. This usually requires that there be a deprivation of, or interference with, the legal rights of a member or creditor rather than mere detriment (see NRMA Insurance Group Ltd v Spragg (2001) 161 FLR 243, [27]). Justice Hill, for example, rejected the defendant's argument that granting the extension would deprive the defendant or its shareholders of the opportunity to vote on Global Lithium’s directors. Her Honour concluded that the opportunity was only delayed, which did not cause substantial injustice.
The Global Lithium case underscores the broad remit of the Court under section 1322. The Supreme Court of Western Australia has reminded us that, provided it can be said there is no substantial injustice (and mere delay would not appear to be sufficient), the Court can pragmatically remedy past and future innocent actions that breach the Corporations Act.