Blaze Asset Pty Ltd v Target Energy Ltd

Federal Court of Australia|2012-07-06|Before: Gilmour J

REASONS FOR JUDGMENT 1 The applicant is a company listed on the Australian Stock Exchange (ASX). On 19 December 2011 it entered into an agreement to raise new equity in the company by way of a placement of 25 million fully paid ordinary shares in the applicant to institutional and sophisticated investors (Placees). The shares were issued and allotted to the Placees on 23 December 2011 (Placement). 2 On 26 March 2012, the applicant became aware that it had inadvertently failed to lodge a notice pursuant to s 708A(5)(e) of the Corporations Act 2001 (Cth) (the Act) in respect of the Placement. Such a notice is commonly referred to as a "cleansing notice". 3 The applicant seeks curative orders under s 1322(4) of the Act to remedy the applicant's non-compliance with s 708A(5)(e) of the Act. 4 The application is supported by an affidavit of Andrew Minh Hooper-Nguyen sworn 18 April 2012. 5 I am satisfied, for reasons which follow, that relief should be granted and that the orders proposed in the applicant's minute of proposed orders (the Minute) should be made.

Discretionary factors 11 A relevant factor to take into account in exercising the discretion to grant relief under s 1322 is the promptness with which the applicant seeks to remedy the irregularity: RCR Tomlinson Ltd; In the matter of RCR Tomlinson Ltd [2009] FCA 1130 at [16]. Mr Hooper-Nguyen was alerted to his inadvertent failure to issue a cleansing notice on 26 March 2012. I am satisfied that Mr Hooper-Nguyen took immediate action to inquire into the matter and take steps to remedy the non-compliance with s 708A(5)(e). 12 It is also relevant to consider whether the applicant could have given the cleansing notice in compliance with s 708A(6). Sub-paras 18(c) to (i) of Mr Hooper-Nguyen's affidavit set out the applicant's eligibility at the time to rely upon the disclosure exemption under s 708A of the Act. There is no evidence that any "excluded information" which would have required disclosure at the time that the cleansing notice ought to have been issued.

Conditions for making orders under section 1322(4)(a) 13 Section 1322(4) requires the Court to be satisfied that at least one of the three conditions prescribed by s 1322(6)(a) has been satisfied, namely: (i) that the act, matter or thing, or the proceeding [referred to in s 1322(4)(a)], 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; . . . and, pursuant to s 1322(6)(c), that no substantial injustice has been or is likely to be caused to any person. 14 The Court need only be satisfied of one of the three alternative conditions in s 1322(6)(a): Re Charter Hall at [7]; Re Westpac Banking Corporation (2004) 53 ACSR 288 at [27]. Nonetheless, all three conditions have been satisfied in this case. 15 Failure to lodge a cleansing notice is of a procedural nature. The irregularity relates to the offer of shares, which was accompanied by a procedure that required a cleansing notice to be filed under s 708A(5)(e). The irregularity does not change the substance of what was done, as the offer of shares was still made and the Placement shares issued, it is therefore procedural in nature: Re Elemental Minerals Ltd at [36]-[39]. 16 The applicant and Mr Hooper-Nguyen have acted honestly at all material times. Mr Hooper-Nguyen's mistake was an inadvertent omission and was not made through any act of dishonesty or wilful intention. Mr Hooper-Nguyen inadvertently omitted to give the prepared cleansing notice to the ASX during the closure of the applicant's office during the Christmas to New Year period. Inadvertence in this context is given its ordinary meaning, which includes "not being properly attentive or not directing one's mind to the doing of an act …": Blaze Asset Pty Ltd v Target Energy Ltd (2009) 177 FCR 488 at [35]. Since discovering the mistake, the applicant and Mr Hooper-Nguyen have acted honestly, expeditiously and prudently to remedy the applicant's non-compliance. 17 Further, it is just and equitable that the proposed orders be made given that a number of the Placees issued with shares on 23 December 2011 have since sold their Placement shares, presumably in good faith and in reliance on assumed compliance by the applicant with the Act. Without the relief sought pursuant to s 1322, those Placees who have on-sold their shares will have done so in inadvertent breach of s 707(3) of the Act. Accordingly, it is just and equitable that relief be granted so that the Placees are relieved from contravention of the Act: Re Golden Gate Petroleum Ltd at [45] and [55]; Re Elemental Minerals at [46].

No substantial injustice 18 The expression "substantial injustice" requires the Court to assess whether any real, and not merely insubstantial or theoretical, prejudice will be suffered by any person by the making of the order, and consider whether this outweighs the prejudice to the company, other members and creditors, as the case may be, if the orders are not made: NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174 at [27]. 19 It is unlikely that substantial injustice would have been caused to any person since compliance with the Act would not have improved the position of the Placees or the market generally: Chalice Gold Mines Limited, In the matter of Chalice Gold Mines Limited at [30]; Charter Hall Limited, in the matter of Charter Hall Limited [2007] FCA 1316 at [5]. In this respect, a cleansing notice was lodged by the applicant with the ASX on 21 December 2011 for a separate pro-rata rights issues which contained essentially the same information which would have been contained within the required cleansing notice which was inadvertently not lodged by the applicant. In particular, there was no excluded information that was required to be disclosed: In the Matter of Chameleon Mining NL at [11]; Charter Hall Limited, in the matter of Charter Hall Limited at [5]. 20 Any potential for injustice is diminished by the proposed orders, because the proposed orders: (a) require the applicant to give notice within two business days of the date of the orders to each Placee named in annexure AHN3 to the affidavit of Andrew Minh Hooper-Nguyen; and (b) if made, will be placed on the applicant's website as soon as practicable and will remain there for at least 28 days. 21 It is, by contrast, likely that Placees who have on-sold their Placement shares will suffer substantial injustice if the orders are not made, as any purported on-sales of their shares are affected as a result of the applicant's non-compliance with s 708A(5)(e) of the Act, and those Placees will be in inadvertent breach of the Act: Silver Lake Resources Limited, in the matter of Silver Lake Resources Limited [2012] FCA 32 at [19]; In the Matter of Chameleon Mining NL at [13]. 22 ASIC has been served with the papers and has notified the applicant by letter dated 8 June 2012, that they neither supported nor opposed the applicant's application, and further advised that they did not intend to appear at the hearing. 23 There will be orders accordingly in terms of the Minute. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Corporations Act 2001(Cth)ss 707(3), 708, 708A, 708A(5)(e), 1322, 1322(4)

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