FEDERAL COURT OF AUSTRALIA

Revesby Workers’ Club Limited, in the matter of Revesby Workers’ Club Limited (No 2) [2008] FCA 2000

REVESBY WORKERS' CLUB LTD, IN THE MATTER OF REVESBY WORKERS’ CLUB LIMITED

NSD 1717 of 2008

EMMETT J

7 NOVEMBER 2008

SYDNEY

IN THE MATTER OF REVESBY WORKERS’ CLUB LIMITED

THE COURT ORDERS THAT:

1.                   That the time for the Plaintiff to lodge its annual report with the Australian Securities and Investments Commission be extended to 31 January 2009.

2.                   That the time for the Plaintiff to report to its members be extended to 31 January 2009.

3.                   That the time for the giving of notice of intention to move a resolution for removal of the Company’s auditors at the annual general meeting of the Company to be held on 30 November 2008 be abridged to 24 October 2008.

4.                   The proceeding be adjourned for mention at 9.30 am on 5 December 2008.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE MATTER OF REVESBY WORKERS’ CLUB LIMITED

REASONS FOR JUDGMENT

1                     On 31 October 2008, for the reasons that I then gave, I ordered that the period within which the plaintiff, Revesby Workers’ Club Limited (the Company), must comply with ss 315(1), 319(1) and 319(3) of the Corporations Act 2001 (Cth) (the Act) be extended to the period that terminates on 7 November 2008 or such later date as the Court may determine (see Revesby Workers’ Club Limited, in the matter of [2008] FCA 1999).  I adjourned the proceeding for further hearing today.  In the meantime, Australian Securities and Investments Commission (the Commission) was notified of the application.  The Commission indicated that it did not wish to appear at the further hearing of the proceeding today.  The Commission forwarded to my associate a copy of letter dated 6 November 2008 addressed to the Company’s solicitors.

2                     On the last occasion I briefly outlined the circumstances in which this application is made.  The Company finds itself in a difficult position by reason of the fact that the Commission has declined to consent to the resignation of its auditors.  While the auditors lodged an application with the Commission for consent to resign on 23 September 2008, it was not until 28 October 2008 that the Commission finally confirmed that it had decided to refuse to consent to the resignation.  I do not have information before me that enables me to form any view as to why the Commission did not indicate its position for more than four weeks.  The difficulty for the Company, however, is that it is now not able to comply with its obligations under ss 315 and 319 of the Act.

3                     In addition, as I said on the last occasion, the Company proposes to hold its annual general meeting on 30 November 2008, being the last day on which it can be held in compliance with the Act.  Because the Commission has declined to consent to the resignation of the auditors, a member has taken the steps contemplated by s 329 of the Act, by giving notice, on 24 October 2008, of intention to move a resolution at the next annual general meeting to consider and, if thought fit, pass a resolution that the auditors be removed and that other auditors be appointed for the purposes of auditing the Company’s accounts as at 30 June 2008.

4                     However, under s 329(1A), notice of intention to move a resolution for the removal of auditors must be given to the Company at least two months before the meeting is to be held.  It is not necessary that the resolution for the removal of the auditors be passed at the annual general meeting.  However, it would be highly inconvenient for the Company if a further general meeting were required to be held in order to ensure compliance with s 329(1A).  The Company has therefore applied for abridgement of the time within which notice of intention to move a resolution for the removal of the auditors might be given.

5                     On 24 October 2008, Mr Daryl Melham, a member of the Company, gave notice pursuant to s 329(1A) that the annual general meeting has been or is about to be convened and the business for that meeting will include the question of removal of the auditors.  The Commission has indicated that it does not wish to be heard in relation to the Company’s application for abridgement of time for the giving of notice of intention to move that resolution pursuant to s 329.  In the circumstances I am satisfied that there would be no substantial injustice caused to any person by abridging the time for giving notice pursuant to s 329.  The time should be abridged to 24 October 2008, the day on which Mr Melham delivered his notice of intention to the Company.  Whether the members will approve the resolution is a matter entirely for them and is not a matter presently before the Court.

6                     The Company’s other application, as I indicated on the last occasion, is for extension of time to comply with the Company’s obligations under ss 315 and 319.  Section 314(1) requires a company to report to members for a financial year either by sending members copies of the financial report, the directors’ report and the auditors’ report or by sending members a concise report for the year that complies with s 314(2).  Section 315(1) requires that a company must report to members under s 314 by the earlier of 21 days before the next annual general meeting after the end of the financial year or four months after the end of the financial year.  Accordingly, the latest time by which the Company must report to members under s 314 is 31 October 2008.

7                     Because of the doubt as to whether or not the existing auditors are to continue as auditors or are to be replaced, it is not possible to prepare an auditors’ report so that the Company can comply with s 314.  Section 319 requires the Company to lodge its report with the Commission within four months after the end of the financial year.  For the same reason the Company is unable to comply with that requirement. 

8                     While work had begun by the existing auditors for the purposes of producing and submitting their auditors’ report, that work stopped when the misappropriations to which I referred on the last occasion were discovered.  Those misappropriations, between August 2003 and May 2008, were uncovered by the Company rather than the existing auditors.  That fact led to the Company’s request that the present auditors resign. 

9                     However, at present, those auditors are still the auditors and they have obligations as such.  The proposed new auditors are not able to undertake the duties of conducting an audit unless and until they are appointed at the meeting to be held on 30 November 2008.  The proposed new auditors have indicated that they would be in a position to produce an auditors’ report within approximately two months after they are appointed.  The existing auditors have intimated to the Commission that they may only need a further two weeks to produce their report.  However, it is now not entirely clear how much time they would need, since they have written to the Company indicating further information that they now require.

10                  Whatever the position may be, the continuation of audit work cannot proceed until after the meeting on 30 November 2008.  In all the circumstances, it appears to me to be impracticable for the Company not to be granted some extension in order for the audit report to be prepared either by the existing auditors or the proposed new auditors.  As I have indicated, the proposed new auditors have intimated that they could complete an audit report within two months after being appointed.  I therefore propose to extend the time for the Company to comply with ss 315 and 319 to 31 January 2009.  I am satisfied that the extension of time for compliance with ss 315 and 319 will not cause any substantial injustice to any person.  I consider it would be appropriate, however, for the matter to be listed for further directions shortly after the annual general meeting, so that a report can be given to the Court as to the result of the proposed resolution.  It is conceivable that those orders should be varied if, for example, the members decide not to remove the existing auditors but to maintain their appointment.

Associate:

Dated:         21 January 2009