Blaze Asset Pty Limited v Target Energy Ltd

NOTICE PROVISIONS - THE STATUTORY FRAMEWORK 7 Chapter 6 CA deals with takeovers. The purpose of the Chapter is to ensure that the acquisition of control of shares in the circumstances of takeovers, takes place in an efficient, competitive and informed market. The provisions aim to achieve reasonable and equal opportunities on the part of shareholders within a relevant class to participate in any benefits accruing to holders through any proposals for which a person would acquire a substantial interests in a company, body or scheme. Appropriate procedures are to be followed. 8 To the extent relevant to this application, the CA restricts the on-sale of shares issued without disclosure under Ch 6D unless the sale is exempt under s 708 or s 708A CA. The current sale was exempt but it was still necessary to give notice to investors (the Placees in this instance) of the matters prescribed in s 708A(6) within the time set out in subs (6). 9 The text of s 708A CA relevantly provides as follows: 708A Sale offers that do not need disclosure Sale offers to which this section applies (1) This section applies to an offer (the sale offer) of a body's securities (the relevant securities) for sale by a person if: (a) but for subsection (5), (11) or (12), disclosure to investors under this Part would be required by subsection 707(3) for the sale offer; and (b) the securities were not issued by the body with the purpose referred to in subparagraph 707(3)(b)(i); and (c) a determination under subsection (2) was not in force in relation to the body at the time when the relevant securities were issued. … Sale offer of quoted securities - case 1 (5) The sale offer does not need disclosure to investors under this Part if: (a) the relevant securities are in a class of securities that were quoted securities at all times in the 3 months before the day on which the relevant securities were issued; and (b) trading in that class of securities on a prescribed financial market on which they were quoted was not suspended for more than a total of 5 days during the shorter of the period during which the class of securities were quoted, and the period of 12 months before the day on which the relevant securities were issued; and (c) no exemption under section 111AS or 111AT covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and (d) no order under section 340 or 341 covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and (e) either: (i) if this section applies because of subsection (1) - the body gives the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made; or (ii) if this section applies because of subsection (1A) - both the body, and the controller, give the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made. (6) A notice complies with this subsection if the notice: (a) is given within 5 business days after the day on which the relevant securities were issued by the body; and (b) states that the body issued the relevant securities without disclosure to investors under this Part; and (c) states that the notice is being given under paragraph (5)(e); and (d) states that, as at the date of the notice, the body has complied with: (i) the provisions of Chapter 2M as they apply to the body; and (ii) section 674; and (e) sets out any information that is excluded information as at the date of the notice (see subsections (7) and (8)). …

INTEREST OF OTHERS 10 RCR has given notification by way of an announcement to the ASX of the nature of this order and has also notified the Australian Securities and Investments Commission (ASIC) in relation to the intention to apply for relief to issue a late but valid Notice under s 708(5)(e) CA. (Initially RCR sought relief directly from ASIC but ASIC indicated that it would not be in a position to grant relief in respect of the failure to issue the Notice, particularly to the extent that those shares had been on-sold as ASIC's power to modify the CA so as to grant relief can only apply to prospective breaches rather than retrospective breaches). 11 Subsequent to those events occurring, it has been confirmed on behalf of RCR that none of the parties notified in respect of the relief which RCR now seeks, intends to appear or opposes the granting of the relief. 12 The Company Secretary and Chief Financial Officer of RCR refers to the fact that as at the time of swearing his affidavit in support of the originating process, the Placees have on-sold over a million of the shares that were issued. On discovering that fact and notifying the Placees of the failure on the part of RCR to issue the Notice, he was informed by the representative of the Placees that the Placees would cease trading until further notice from RCR.

FAILURE TO ISSUE NOTICE WAS DUE TO INADVERTENCE 13 The Company Secretary and Chief Financial Officer of RCR has explained on oath that the failure on the part of RCR to issue the Notice was due to inadvertence and not through any act of dishonesty or wilful intention not to issue the Notice. He has given an explanation which I accept as to other activities at the time which gave rise to oversight on his behalf and presumably on behalf of others involved in and with the company. In addition, he has deposed to the fact that at all material times RCR has complied with the provisions of Ch 2M (financial reporting requirements) and s 674 CA (continuous disclosure requirements) as they applied to RCR; there was and is no excluded information as defined in s 708A(7) CA which would have been required to be disclosed or now requires disclosure and, accordingly it is submitted by RCR, that no injustice will have been caused to any person by reason of the Notice not having been lodged within five business days of the shares being issued. 14 Inadvertence has its normal meaning as suggested in the authorities, for example, Blaze Asset Pty Ltd v Target Energy Limited [2009] FCA 698 per Barker J (at [35]). 15 On the basis of the evidence and applying some common sense, it is plain that the oversight in failing to give the requisite Notice was caused by inadvertence.

DISCRETIONARY FACTORS 16 A relevant factor to take into account in exercising discretion to give relief as is sought in this proceeding is the promptness with which the applying corporation seeks to regularise the position. There is no doubt in the present case that RCR has taken steps within a reasonable time once the failure to lodge the Notice was identified. Specifically, RCR first became aware of the failure to issue the Notice on 9 September 2009. Given the need to take some advice in respect of that matter, taken with an intervening weekend, the notification to the Placees, the announcement to the ASX and the communication with ASIC had all been achieved by 14 September 2009 which is effectively within some three working days. There has been no undue delay. 17 Also central to the relief sought by this application is the fact that RCR would have been exempt in respect of the requirements under s 708A(5) CA in respect of the on-sale of the shares had it given a notice for the purpose of s 708A(5)(e) CA within five business days of the issue of the shares. 18 RCR was then and has at all material times been able to issue a notice under that paragraph as: (a) the shares concerned are in a class of securities that were quoted securities at all times in the three months before the day on which the shares were issued; and (b) trading in that class of securities on a prescribed financial market on which they were quoted was not suspended for more than a total of five days during the shorter of the period during which the class of securities were quoted and the period of 12 months before the day on which the shares were issued; and (c) no exemption under s 111AS or s 111AT CA related to RCR or any person as director or the auditor of RCR at any time during the relevant period referred to in (b) above; and (d) no order under s 340 or s 341 CA related to RCR or any person as director or auditor of RCR at any time during the relevant period referred to in (b) above. 19 The declaratory relief sought by RCR under s 1322(4)(a) CA to the effect that a notice given under s 708A(5)(e) CA within the extended period be deemed to take effect as if it had been given on 13 July 2009, that is, within the required five business day period, is consistent with relief granted in the matters of Charter Hall Limited, in the matter of Charter Hall Limited [2007] FCA 1316, Diversified, in the matter of Diversified United Investment Limited ACN 006 713 177 [2008] FCA 720 and In the Matter of Chameleon Mining NL [2009] NSWSC 660. It also gives clarity for those affected shareholders (the Placees) who on-sold the relevant securities prior to the lodgement of a notice which complies with the section and thereby to any purchaser from them. 20 Section 1322(6)(a) CA provides that the Court must not make an order under s 1322(4)(a) unless it is satisfied: (i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature; (ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or (iii) that it is just and equitable that the order be made. 21 Even though these elements are expressed disjunctively, for the reasons discussed above, I am satisfied as to each of the elements of s 1322(6)(a) CA. 22 Further, s 1322(6)(c) CA provides that the Court must not make an order under s 1322(4)(a) unless it is satisfied that no substantial injustice has been or is likely to be caused to any person. 23 I am satisfied that no substantial injustice has been or is likely to be caused to any person. It is not evident that any injustice at all will be occasioned by granting the relief sought. Indeed, the contrary may be the case if relief is refused. It seems there was no excluded information which should have been but was not disclosed that could have altered the information base of those concerned if the time limits had been met. If that is wrong, a purchaser who is able to prove that there was excluded information which should have been disclosed would presumably have an independent cause of action available and certainly by the granting of liberty to apply, will have additional relief in respect of the orders to be made in this proceeding. There is no reason to think that compliance in the circumstances would have improved the position of a purchaser (Charter Hall Ltd at [5]). 24 Given the requirements for notice and advertising of the proposed orders, the granting of liberty to apply to vary or discharge the orders within a limited time would appear to accommodate any presently unforeseen potential for injustice (Chameleon Mining NL (at [12])). 25 The following orders will be made: 1. In respect of the 4,270,644 shares in the Plaintiff issued on 10 July 2009 (the relevant securities), the period of 5 business days referred to in s 708A(6)(a) of the Corporations Act 2001 be extended to the second business day after the day on which these orders are entered. 2. The notice under s 708A(5)(e) of the Corporations Act 2001 given to ASX Limited in respect of the relevant securities within the period provided for in order 1 be deemed to take effect as if it had been given to ASX Limited on 13 July 2009. 3. These orders be entered forthwith. 4. A sealed copy of these orders be served on ASIC, ASX, and each person named in paragraph 6 of the Affidavit of Phillip Crighton sworn 15 September 2009 within 2 business days of the date of these orders. A copy of these orders also be placed on the website of the Plaintiff as soon as practicable and remain there for at least 28 days. 5. Any interested party have liberty to apply within 28 days of the entry of these orders to revoke or vary the orders. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate: Dated: 6 October 2009 Appearance for the Plaintiff: L Randall