Blaze Asset Pty Ltd v Target Energy Ltd

Relief under section 1322 6 Section 707(3) of the Act restricts the on-sale of shares issued without disclosure under Chapter 6D of the Act, unless the sale offer is exempt under ss 708 or 708A. Where a sale offer is exempt under s 708A, as is the case with the Placement, s 708A(5)(e) requires a company to lodge a cleansing notice which complies with s 708A(6). 7 Pursuant to s 1322 of the Act, any interested person may apply to the Court for orders, including orders to declare that any act, matter or thing purporting to have been done under the Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Act (s 1322(4)(a)), orders to extend the period for doing any act, matter or thing under the Act or in relation to a corporation (s 1322(4)(d)), and consequential or ancillary orders. 8 The applicant is an interested person as its material legal rights or pecuniary or other economic interests are or may be substantially affected by the matter in issue: Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17 at [44]; Re Elemental Minerals Ltd (2010) 79 ACSR 277 at [34]. 9 The relief sought by the applicant under Order 1 of the Minute is consistent with previous cases where s 1322(4)(d) has been used to extend the period for giving a cleansing notice to the market, in circumstances where a person has inadvertently failed to give the notice and, in the Court's view, no substantial injustice would be caused by the notice having effect as though it had been given within the relevant time: for example, In the Matter of Chameleon Mining NL [2009] NSWSC 660; Chalice Gold Mines Limited, In the matter of Chalice Gold Mines Limited [2009] FCA 1236; Diversified, in the matter of Diversified United Investment Limited [2008] FCA 720. The relief under Order 2 of the Minute sought by the applicant under s 1322(4)(a) of the Act, to the effect that a notice given under s 708(5)(e) of the Act within the extended period be deemed to take effect as if it had been given within 5 business days of 23 December 2011, is also consistent with relief granted in these cases. Moreover, "there is nothing in the wording of [s 1322(4)] to limit the court's general power, where it has jurisdiction to make an order, to make that order nunc pro tunc": Re Wood Parsons Pty Ltd (in liq) (2002) 43 ACSR 257 at [52]. 10 The grant of the relief is appropriate in the circumstances, as it will provide clarity and certainty for the Placees who have sold Placement shares prior to the lodgement of a cleansing notice, and the purchasers of those shares: In the Matter of Chameleon Mining NL at [14].

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.