Biron Capital Limited [2005] FCA 1228

REASONS FOR JUDGMENT 1 This is an application made under s 1322 of the Corporations Act 2001 (Cth) ('the Act'). Reliance is placed on s 1322(4)(d) which permits the Court to make an order extending the time for doing any act, matter or thing or instituting or taking any proceeding under the Act or in relation to a corporation (including an order extending a period where the period concerned before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such proceeding and to make consequential and ancillary orders. That power is conditioned by s 1322(6) which relevantly provides that the Court must not make an order in that respect unless it is satisfied '... that no substantial injustice has been or is likely to be caused to any person'. 2 The orders sought by the applicant are essentially that reflected and directed to proposed order 2, namely, 'that the period of seven days referred to in paragraph 723(3)(a) and in sub-paragraph 724(1)(b)(i) of the Corporations Act in respect of the prospectus dated 4 August 2005 ("the Prospectus") issued by the Applicant both be extended to …' the day contemplated in paragraph 4 of the proposed order. That would be a date no later than 7 days from the making of the order. 3 Section 723(3) of the Act provides that if a disclosure document for an offer of securities states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and: '(a) an application for the admission of the securities to quotation is not made within 7 days after the date of the disclosure document; … then (c) an issue or transfer of the securities in response to an application made under the disclosure document is void; and (d) the person offering the securities must return the money received by the person from the applicants as soon as practicable.' Section 724(1)(b)(i) similarly provides that if a person offers securities under a disclosure document and the disclosure document states that the securities are to be quoted on a financial market, the person must deal under subs 2 with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities. Section 724(2) provides for the consequences of non-compliance and include the possibility of repayment of the money and other remedial provisions. 4 The background circumstances appear from a number of affidavits. The principal affidavit, at least in terms of volume, is that of the company secretary of the applicant, Mr G. M. Chiappini, sworn on 21 August 2005. There is also a supplementary affidavit sworn by him on 22 August 2005. Additionally, there is an affidavit of Ms M. E. Cox sworn on 21 August 2005 and a supplementary affidavit sworn by her on 22 August 2005. Ms Cox is of the firm of solicitors acting for the applicant. The first of her affidavits is of no particular materiality other than to inform the Court. 5 From those affidavits it is apparent that the applicant as a company admitted to the official list of the Australian Stock Exchange Limited ('ASX'). On 4 August 2005 the applicant issued the Prospectus to which I have made reference to raise $9 million to enable the company to complete the acquisition of Physico Clothing Company Pty Ltd ('Physico') and Ed Harry business ('Ed Harry') operated by Suregroup Pty Ltd. The Board of the company delegated to Mr Chiappini the administration of the processing of the Prospectus with the ASX. 6 The affidavit of Mr Chiappini makes apparent that the key dates following the issue of the Prospectus were that on 11 August 2005 the offer opened and it is to close on 2 September 2005. A meeting in relation to the Prospectus and the share issue and other corporate matters is scheduled for 8 September 2005. The issue of shares is to follow on 12 September 2005 with an expected dispatch of shareholding statements on 13 September 2005. The shares are expected to commence trading on the ASX in the week commencing 12 September 2005. Compliance with the dates of this timetable is, therefore, of critical importance. 7 The Prospectus annexed to the affidavit of Mr Chiappini also makes apparent under the heading 'Key Offer Statistics' the commercial importance of the steps which I have just described. The total number of shares on issue post transaction is shown to be 35.9 million and the number of shares issued as consideration in connection with the proposed acquisitions to which I have referred would be 11.3 million. As I have said, the total proceeds from the offer are in the order of nine million. The market capitalisation, therefore, comprises 21.5 million. There is, in addition, a proposal for the issue of four million options. The pro forma forecast for the year ending 30 June 2005 is in the order of 3.237 million. 8 Mr Chiappini was informed by the company's solicitor who is also a director of the applicant that the application in the form of Appendix 3B was required to be made to the ASX no later than seven days after the date of the issue of the Prospectus. Accordingly, he prepared a draft Appendix 3B and circulated it to the members of the Board of Directors. He received comments on it and prepared a revised draft which in turn was circulated to the directors. Having not received any further comments, on 9 August 2005 at approximately 7.00 pm, through his computer, he logged into the ASX announcements website and attempted to electronically lodge Appendix 3B in the form of the revised draft. To the best of his understanding, having done that, Appendix 3B had been electronically lodged with the ASX and the quotation application to the ASX had been made, therefore, within the period of seven days. 9 However, on 18 August 2005, Mr Chiappini conducted a search of the applicant's announcements on the ASX. There was no record that Appendix 3B had been lodged on 9 August 2005, or at all. As a consequence, the company had failed to make the quotation application to the ASX within the permitted time of seven days. His belief is that the failure could only have been on account of a computer malfunction or failure. 10 His evidence is that no applications have been received for shares being offered under the Prospectus. Further, the applicant has not issued any securities pursuant to the Prospectus and of course, the issue date, as I have said, is 12 September 2005. 11 The company has appointed Tricom Equities Ltd ('the Underwriter') to be underwriter in respect of the Prospectus. If the applicant were to seek relief under provisions of s 724 of the Act which may entail the elapse of a period of one month prescribed in those provisions, the Underwriter would become entitled to terminate its underwriting obligations in accordance with subpar 16.1(a)(ii) of the Underwriting Agreements. The consequence is that the time periods in the key dates to which I previously referred would not be able to be met. This would place the company in breach of its obligations under agreements for the acquisitions which I have described, and, generally jeopardise the company's position. 12 Mr Chiappini's evidence is that the company, as the applicant, needs to issue the securities pursuant to the approvals to be obtained at the meeting and to raise the equity under the Prospectus before the meeting for a number of reasons. He considers that any delay would prejudice the underwriting for the Prospectus and the company's ability to raise the equity sought. In addition, it would prejudice the company's capacity to provide the consideration for the acquisition. Further, it would impact and effect on the reinstatement of the quotation by the ASX of the company's securities. 13 His evidence is that no person, including any shareholder or creditor of the applicant, will be prejudiced by the extension of time and he gives reasons for that. Conversely, he states that if the extension of time sought is not granted, there was a serious risk that the delays caused to the issue of securities pursuant to the Prospectus, will have a materially adverse impact on the company because of the reasons previously described. 14 I have already described the relevant statutory framework. In Re Wave Capital Limited (2003) 47 ACSR 418 at [29], French J described generally the effect of s 1322 as follows: 'As may be seen from the range of these powers there is no unifying theme which links the provisions of Part 9.5 beyond their common subject matter which is the powers of the courts. Sections 1318, 1322 and 1325D however may be taken to reflect a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the Court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law. That broad policy does not authorise the Court lightly to set aside the requirements of the Act where they have not been observed. Each application for the exercise of the Court's relieving power will require consideration of all the circumstances of the case to ensure that the indulgence sought is appropriate and does not undermine the requirements of the Act. Like the discretion to validate invalid share issues under s 254E, the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue. It must also be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with statute law and company constitutions. Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief - Re Onslow Salt Pty Ltd (2003) 198 ALR 344 and cases there cited. The provision is however remedial in character and should be given a liberal construction - In the Matter of Insurance Australia Group Ltd [2003] FCA 581 at [27] per Lindgren J citing Re Australian Koyo Ltd (1984) 8 ACLR 928 at 930 and Elderslie Finance Corporation Ltd v Australian Securities Commission (1999) 11 ACSR 157 at 160.' Further, he stated that s 1322(4)(d) to which I have previously referred, can readily accommodate the extension of the period for making an application for quotation under s 723(3)(a) and s 724(1)(b): Re Wave Capital Limited at [30]. 15 In Re Insurance Australia Group Ltd (2003) 128 FCR 581, Lindgren J, considered an extension of time under the two paragraphs to which I have referred. At [40] - [42] his Honour stated: '[40] The granting of the extension of time sought will simply ensure that subscribers will receive securities in accordance with their applications. The RPS2 are expected to be allotted on 20 June 2003 and are not due to commence being traded on ASX until 23 June 2003. Accordingly, all that has happened to date is that the period for the making of applications has commenced to run and some applications for the RPS2 pursuant to the Prospectus may have been received. [41] The additional costs and administrative inefficiencies which would result from a refund of subscription monies and subsequent redepositing of those moneys by subscribers favours the making of an order: cf Elderslie at ACSR 161. [42] I have no hesitation in exercising the Court's discretion in favour of making the order.' 16 I have previously considered and acted upon these authorities in the manner urged here by counsel for the applicant in the matter of Tony Barlow Australia Limited (2005) 53 ACSR 1. 17 The doorway to the power under s 1322(4)(d) is, as I have said, the pre condition and the meeting of it in s 1322(6)(c). It is relevant to the consideration of those concerns of justice to refer to additional evidence. The supplementary affidavit of Ms Cox attaches communications from ASIC and the ASX in which each of them state that they do not oppose the application and do not intend to appear at today's hearing. Further, the supplementary affidavit of Mr Chiappini provides evidence that the Underwriter supports the applicant seeking the extension of time in question. That is important evidence in favour of the absence of any substantial injustice or the likelihood of it. 18 There are other considerations which weigh the same way. The adherence to the timetable which itself secures the interests of the public is important. The interests of shareholders, intending shareholders and the public generally are, in my view, met by the progress of the matter in accordance with the key dates to which I have referred. Additionally, the edifice of financial and inter-related arrangements involving the acquisitions and the underwriting dictate that such a procedure be complied with rather than jeopardised. In my view, that is additional powerful evidence that no substantial injustice would be caused or be raised as a likelihood by the granting of the orders here sought. 19 It is also germane to that consideration and to the exercise of the discretions generally that the orders reflect that the evidence of Mr Chiappini provides an explanation for the non-compliance which is entirely devoid of any consideration of negligence or malpractice. It seems to be patently an electronic accident, one which may, in future, need constantly guarding against by receiving some form of electronic acknowledgment of lodgement or, indeed, resorting to what counsel has described as the old form of physical lodgement. However that may be dealt with, the fact is that the applicant does not come to the Court in any blame-worthy condition but, rather, in a condition which itself invokes considerations of justice in its favour. 20 Those considerations that I have just referred to are also relevant to the issue of costs. This is not a case such as Re Wave Capital in relation to costs. Rather, the circumstances of the inadvertence being as it were in the hands of a third force, namely, the electronic system, mean there is no proper basis for making any adverse costs order in respect of the applicant. I agree, therefore, with the submission on behalf of the applicant that there should be no order as to costs. 21 For those reasons I am prepared to make the orders in the minute before me on the basis that the liberty is confined only to variation of the orders 2, 3 and 4 as proposed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.