Other acts of distribution
182 Nevertheless, the evidence indicates that Astra Resources did distribute application forms for the offer of shares in itself.
183 First, I refer to the emails sent by Ms Giustozzi on 7 May 2012 and 12 June 2012 referred to earlier. Ms Giustozzi said in each that she was attaching "revised" share application forms and gave instructions as to their use. There is no reason why Ms Giustozzi's conduct should not be attributed to Astra Resources: she sent the emails on Astra Resources' letterhead; used an Astra Resources email address from which to send the emails; and described herself in the emails as "Executive Manager - Corporate Services".
184 As noted earlier, Mr Barnett from Leisuretime confirmed in his s 19 examination that he had received application forms from Ms Giustozzi.
185 Next, ASIC relied upon Astra Resources' own records of the share transactions. As noted earlier, the spreadsheet maintained by Ms Giustozzi included the identity of the "Capital Raiser" being the broker who had procured the investment. In 19 cases, Ms Giustozzi included the entry "In-house" in the Capital Raiser column. In relation to these entries, Dr Biswas gave the following evidence:
Q: Now, does that mean that this was a pre-existing investor who received an application form direct from Astra Resources?
A: That could've been. I mean, I - I - I can't identify each one in turn.
Q: Yes?
A: And there's only two scenarios. That would be an investor who was a shareholder of Astra Mining prior to roll up who came back for more shares, and they contacted the company because they didn't have a relationship with a broker.
Q: Yes?
A: Or secondly, for some reason which is not normal - let's say, an investor contacted the company, and we had the forms, and despite the evidence that you pointed to, we had the tacit approval of Mr Meerkin of Astra Consolidated Nominees to hand out those forms if we were contacted.
This evidence was an acknowledgement by Dr Biswas that Astra Resources had issued share application forms directly to some investors.
186 Dr Biswas also said:
Astra Resources had permission from Michael Sing Lawyers from the share application forms that, if investors contacted our office, they could provide the forms, with the condition of the exception that there was no disclosure documents.
187 By this evidence, Dr Biswas appeared to be suggesting that Astra Resources and its employees had merely acted on behalf of Astra Nominees or MSL when it had distributed the forms. This view of the matter, even if accepted, would not avail Astra Nominees. As the decision in Axis International Management referred to earlier indicates, a person may distribute application forms for the purposes of s 727(1) even when the person is acting as an agent without knowledge that the offers to which the application forms relate require a disclosure under Pt 6D.2.
188 Generally, Dr Biswas was not willing to acknowledge in his cross-examination that Astra Resources had distributed share application forms. He attributed this to the fact that it had been done by MSL or by Astra Nominees and neither he nor Ms De Cianni had been directors of Astra Nominees.
189 However, Dr Biswas did make the following acknowledgements:
Q: Do you say you played no part at all in the production and distribution of those forms, you personally?
A: No. I - I - I am sure I emailed forms from Mr Meerkin to people who requested them.
...
Q: I want to clarify your answer to my question. Your answer to my question is yes, you personally did play a part in the distribution of those forms?
A: For Astra Consolidated Nominees, I ...
Q: But you weren't an officer or a director of Astra Nominees, were you?
A: We - no. I wasn't. But Mr Meerkin gave authority to pass those forms. And then the affidavits - if my - if the affidavits are allowed into evidence later, they described the process.
...
Q: You say ... Mr Meerkin authorised you to act on behalf of Astra Nominees?
A: Yes.
Q: Okay. When and how did he do that?
A: Well, from 8 September 2011, when they distributed and we received emails from the law firm saying, "These forms can be sent to investors". There - there's any number of emails from Lenice Lim and Barrie Meerkin to the company.
190 As can be seen, in these passages Dr Biswas admitted that he had emailed application forms provided by Mr Meerkin or Ms Lim to people who had requested them but said, that in doing so, he had been acting on behalf of Astra Nominees. He said that Astra Nominees had provided an authority for him to do so by the emails from Mr Meerkin and Ms Lim at MSL which had stated, in effect, that the forms could be sent to investors.
191 When challenged, Dr Biswas was not able to identify any email which, in terms, granted him an authority to act on behalf of Astra Nominees in distributing forms. Instead, the emails are more consistent with the retained legal advisors telling Dr Biswas and others at Astra Resources that the forms which they attached could be distributed in the sense that they were satisfactory. It was in that sense that Mr Meerkin and Ms Lim "authorised" their use.
192 In any event, as already noted, a finding that Astra Resources distributed the forms for and on behalf of Astra Nominees would not really avail it. I note again that a person may distribute forms for the purposes of s 727(1) of the Act even if the person does so as the agent of another.
193 Dr Biswas also acknowledged that he had known that application forms were being sent to brokers and that the brokers would then be forwarding the forms to investors.
194 Much of Dr Biswas' evidence that MSL was acting on behalf of Astra Nominees in the conduct said to comprise Astra Resources' distribution of share application forms, was based on the circumstance that Mr Meerkin and Ms Lim, both employed lawyers at MSL, were also the directors of Astra Nominees. This had the effect, his evidence and submissions supposed, that the conduct of Mr Meerkin and Ms Lim, instead of being conduct of MSL in the discharge of a solicitor-client retainer, was instead conduct of Astra Nominees. Whilst this characterisation of the circumstances may not be impossible, it does seem implausible. It would involve accepting that Mr Meerkin and Ms Lim, as employed lawyers, had engaged in a considerable amount of activity in work time, and had used MSL facilities and letterhead, in pursuit of their own interests as directors of Astra Nominees, rather than in work for which MSL had been retained.
195 There is a considerable amount of evidence indicating that MSL had a retainer at relevant times for Astra Resources. It may also have had a retainer with Astra Nominees as a letter from MSL to Dr Biswas on 27 September 2011 indicates that MSL sought a signed costs agreement with Astra Nominees. The evidence does not include the response, if any, of Dr Biswas to MSL's letter so that it is unclear whether Dr Biswas was making relevant decisions for Astra Nominees.
196 The evidence of an underlying retainer of MSL by Astra Mining and Astra Resources includes the following. Mr Meerkin was introduced at the extraordinary general meeting of Astra Mining Ltd on 15 June 2011 as a solicitor. He cannot then have been engaged at that time by Astra Nominees as it had not yet been incorporated.
197 Next, there is Mr Meerkin's correspondence of 23 December 2011 to the Morgan Stanley Financial Advisor and his correspondence of 21 March 2012 to Mr Konjevic to which I referred earlier. As noted, Mr Meerkin described himself in each letter as "Legal Counsel for Astra Resources Plc". There are other examples of this description in the evidence.
198 Dr Biswas tendered a letter from MSL signed by Mr Meerkin and dated 12 October 2012 which was addressed to Ms De Cianni and himself. In that letter, Mr Meerkin identified the matters on which MSL was presently acting, or on which it had acted in the 2012 financial year, for members of the Astra Group of Companies. MSL's work for Astra Nominees was described as comprising only "General Corporate Advice", whereas Mr Meerkin recorded an extensive range of work for Astra Resources. This included "General corporate advice in the day to day operations of the company".
199 This letter suggested MSL may have been retained contemporaneously by both Astra Resources and Astra Nominees. It also suggests that there would be some artificiality in concluding that, in preparing and distributing the application forms, MSL was acting solely for Astra Nominees.
200 The objective circumstances all point to MSL acting at least principally on behalf of Astra Resources when preparing and distributing the application forms directly to brokers. Those objective circumstances include:
(a) It was Astra Resources which was seeking to raise working capital from investors by having them purchase shares. It was the entity which stood to benefit from the arrangements;
(b) Astra Nominees did not stand to benefit in any way from the sale of the shares. It was a bare trustee having only a legal interest in the Astra Resources shares it held, and was obliged to act in accordance with Astra Resources' instructions. None of the share subscription agreements provided for Astra Nominees to be remunerated for its activities as trustee. From Astra Nominees' perspective, it was a matter of no moment whether any of the Astra Resources shares it held were sold;
(c) It was Astra Resources and not Astra Nominees which was party to several of the contracts with the brokers. That made it natural for Astra Resources to have a significant interest in the brokers being provided with application forms for their use and to have retained MSL for that purpose;
(d) Astra Nominees had no participation in the appointment of the brokers and some (Aurillia, Kea Funds and Oxcorp in its first appointment) were appointed even before its incorporation;
(e) Astra Resources involved itself in the interactions with brokers as is evidenced by the response of Dr Biswas and Ms Adelde De Cianni to Mr Critchley's query of 5 October 2011 and by Ms Giustozzi's communications of 7 May 2012 and 12 June 2012;
(f) MSL provided copies of the respective application forms to Astra Resources. It is theoretically possible that it did this only so that Astra Resources could exercise some general oversight or so that it could be aware of what was happening but, in context, this seems unlikely. It is much more consistent with Astra Resources having engaged MSL to prepare and revise the application forms;
(g) It was Dr Biswas who, on 20 December 2011, sought advice from Mr Meerkin as to matters bearing upon the lawfulness of the share offers. It was very evident that he was doing so on behalf of Astra Resources, and not Astra Nominees.
201 Having regard to all these matters, I am satisfied that MSL was acting at least partly on behalf of Astra Resources when it provided the share application forms to the brokers. It was acting in that respect as agent of Astra Resources. Alternatively, in the language of s 52 of the Act, Astra Resources had caused or authorised its conduct so that the distributions by MSL were distributions by Astra Resources.
202 ASIC submitted that the Court should draw the inference that each of the investors recorded in Astra's own records as having invested through an identified "Capital Raiser" had received an share application form from the identified broker and that, in turn, the broker had received the share application forms directly from Astra Resources or from MSL on its behalf. Although the evidence did not disclose the precise source of the information for the record made by Astra Resources of the pertinent Capital Raiser in each case, I consider it appropriate to infer that the investors did receive the application form they used from the identified broker. That is consistent with normal practice. The evidence of the individual investors adduced by ASIC confirms that that is what occurred in their respective cases.
203 I also accept ASIC's submission with respect to the means by which the brokers obtained the application forms. I find that the application forms were provided to the brokers either directly by Astra Resources or by MSL on its behalf.
204 Although the evidence does not establish an express authorisation of MSL by Astra Resources to provide application forms on behalf of Astra Resources, I consider, for the reasons given earlier, that such an authority can be inferred. As already noted, MSL did issue application forms to brokers and did so with the knowledge of Dr Biswas, Ms De Cianni and others in Astra Resources. There is no suggestion in the evidence that any action was taken to preclude it from doing so. On the contrary, by communications to which I have already referred, Astra Resources seems to have implicitly ratified the conduct of MSL.
205 In these circumstances, I think it likely that most of the investors who applied for shares through the medium of a broker, did so on forms which Astra Resources had itself distributed or which it had authorised to be distributed to the brokers.
206 ASIC submitted a different basis on which this conclusion could be reached. It contended that the evidence disclosed that there was an accepted practice between Astra Resources and MSL with respect to the distribution of application forms from which an inference as to conduct in a particular case could be drawn. He referred in this respect to Palios Meegan & Nicholson Holdings Pty Ltd v Shore [2010] SASCFC 21; (2010) 108 SASR 31 at [81]-[84] and the authorities therein reviewed. I am not prepared to act on that submission. I consider that it would be necessary to have much more detailed evidence about the "practice" before drawing this inference.