Blaze Asset Pty Ltd v Target Energy Ltd

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 313 of 2012

IN THE MATTER OF AZURE MINERALS LIMITED AZURE MINERALS LIMITED (ACN 106 346 918)

JUDGE: BARKER J DATE: 7 February 2013 PLACE: PERTH

REASONS FOR JUDGMENT 1 On 17 January 2013, I made orders pursuant to s 1322(4) of the Corporations Act 2001 (Cth) (Act) in terms of the applicant's minute of proposed orders (proposed orders). These are the reasons for so doing.

BACKGROUND 2 The applicant is a company listed on the Australian Stock Exchange (ASX). On or about 21 September 2012 the applicant entered into an agreement to raise new equity by way of a placement of 39,999,997 fully paid ordinary shares in the applicant to institutional and sophisticated investors (placees). The shares were issued and allotted to the placees on 27 September 2012 (placement). 3 On 2 November 2012, the chief financial officer and company secretary of the applicant became aware that the applicant had inadvertently failed to lodge a notice pursuant to s 708A(5)(e) of the Act. This notice is commonly referred to as a "cleansing notice". 4 The applicant sought curative orders under s 1322(4) of the Act to remedy the applicant's non-compliance with s 708A(5)(e) (application). 5 The application was supported by an affidavit of Mr Brett Douglas Dickson sworn 13 November 2012. 6 The Australian Securities and Investments Commission (ASIC) was served with the application and notified the applicant by letter dated 16 January 2013 that they neither supported nor opposed the application, and further advised that they did not intend to appear at the hearing.

RELIEF UNDER S 1322 OF THE ACT 7 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 s 708 or s 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). 8 Section 1322(4) of the Act provides that the Court may, on the application of any "interested person", grant all or any of the following orders: (a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; (b) an order directing the rectification of any register kept by ASIC under this Act; (c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended 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 a proceeding; as well as consequential or ancillary orders. 9 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: Strike Energy Limited, in the matter of Strike Energy Limited (ACN 078 012 745) [2012] FCA 725 (Strike Energy) at [8] and the authorities there cited. 10 The relief sought by the applicant under order 1 of the proposed orders 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: compare, for example, Strike Energy; In the Matter of Chameleon Mining NL [2009] NSWSC 660 (Chameleon Mining); Chalice Gold Mines Limited ACN 116 648 956, In the matter of Chalice Gold Mines Limited ACN 116 648 956 [2009] FCA 1236 (Chalice Gold Mines); Diversified, in the matter of Diversified United Investment Limited ACN 006 713 177 [2008] FCA 720 (Diversified United Investment). 11 The relief sought by the applicant under order 2 of the proposed orders, to the effect that a notice given under s 708A(5)(e) of the Act within the extended period be deemed to take effect as if it had been given within five business days of 27 September 2012, is also consistent with relief granted in previous cases pursuant to s 1322(4)(a): compare, for example, Strike Energy; Chalice Gold Mines; Diversified United Investment; Charter Hall Limited, in the matter of Charter Hall Limited [2007] FCA 1316 (Charter Hall). Furthermore, there is nothing in the wording of s 1322(4)(a) 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] NSWSC 1058; (2002) 43 ACSR 257 at [52].

DISCRETIONARY FACTORS 12 A relevant factor for the Court to take into account in exercising the discretion to grant relief under s 1322(4) is the promptness with which the applicant sought to remedy the irregularity: RCR Tomlinson Ltd (ACN 008 898 486); In the matter of RCR Tomlinson Ltd (ACN 008 898 486) [2009] FCA 1130 at [16]. Mr Dickson became aware of his inadvertent failure to issue a cleansing notice on 2 November 2012. I accept that upon realising his oversight Mr Dickson took immediate action to inquire into the matter and take steps to remedy the non-compliance with s 708A(5)(e). 13 It is also relevant to an application for relief under s 1322(4) to consider whether the applicant could have given the cleansing notice in compliance with s 708A(6): Strike Energy at [12]. Sub-paras 20(c) to (h) of Mr Dickson's affidavit set out the applicant's eligibility at the time to rely upon the disclosure exemption under s 708A. I accept that there was no "excluded information" (as defined in s 708A(7)) which would have required disclosure at the time that the cleansing notice ought to have been issued.

CONDITIONS FOR MAKING ORDERS UNDER S 1322(4)(A) 14 Pursuant to s 1322(6)(a), the Court must not make an order under s 1322(4)(a) unless the Court is satisfied: (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; … 15 As is evident from the wording of the paragraph, the Court need only be satisfied that one of the three alternative conditions in s 1322(6)(a) is met: see also Strike Energy at [14] and the authorities there cited. Nonetheless, I am satisfied that all three conditions have been met in this case. 16 First, the failure to lodge a cleansing notice was an irregularity of a procedural nature. The irregularity did not change the substance of what was done, as the offer of shares was still made and the placement shares still issued: Elemental Minerals Ltd, In the matter of Elemental Minerals Ltd [2010] FCA 687; (2010) 79 ACSR 277 (Elemental Minerals) at [36]-[39]. 17 Secondly, in my view the applicant and Mr Dickson have acted honestly at all times. While Mr Dickson prepared a cleansing notice in respect of the placement, he inadvertently omitted to give the prepared cleansing notice to the ASX after the placement on 27 September 2012. I accept that Mr Dickson's mistake was an inadvertent omission and was not made through any act of dishonesty or wilful intention. 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] FCA 698; (2009) 177 FCR 488 at [35] and the authorities there cited. In my view, since discovering the mistake the applicant and Mr Dickson have acted honestly, expeditiously and prudently to remedy the applicant's non-compliance with s 708A(5)(e). 18 Thirdly, in my view it is just and equitable that the proposed orders be made given that a number of the placees issued with shares on 27 September 2012 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, those placees who have on-sold their shares have done so in inadvertent breach of s 707(3) of the Act. As such, it is just and equitable that relief be granted so that the placees are relieved from actual or potential contravention of the Act: compare, for example, Strike Energy at [17]; Elemental Minerals at [46]; Golden Gate Petroleum Ltd (ABN 090 074 785), in the matter of Golden Gate Petroleum Ltd (ABN 090 074 785) [2010] FCA 40 at [55].

NO SUBSTANTIAL INJUSTICE 19 Finally, pursuant to s 1322(6)(c), the Court must not make an order under s 1322(4) unless the Court is satisfied that no substantial injustice has been or is likely to be caused to any person. 20 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 orders, and to 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] NSWSC 381; (2001) 161 FLR 243 at [27] and the authorities there cited. 21 In my view, 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: compare, for example, Strike Energy at [19]; Chalice Gold Mines at [30]; Charter Hall at [5]. In this respect, it is noted that a cleansing notice was lodged by the applicant with the ASX on 23 August 2012 for a share purchase plan which contained essentially the same information which would have been contained within the cleansing notice that was inadvertently not lodged by the applicant; in particular, as noted, there was no excluded information that was required to be disclosed: compare, for example, Chameleon Mining at [11]; Charter Hall at [5]. 22 Furthermore, in my view any potential for injustice is diminished by the proposed orders because the proposed orders: • require the applicant to give notice within two business days of the date of the orders to ASIC, the ASX and each placee named in annexure BDD3 to the affidavit of Mr Dickson; and • if made, will be placed on the applicant's website as soon as practicable and will remain there for at least 28 days. 23 Lastly, it is likely that placees who have on-sold their placement shares will suffer substantial injustice if the proposed orders are not made, as any purported on-sale of their shares are affected as a result of the applicant's non-compliance with s 708A(5)(e) of the Act and, as noted, those placees will be in inadvertent breach of the Act: compare, for example, Strike Energy at [21]; Silver Lake Resources Limited, in the matter of Silver Lake Resources Limited [2012] FCA 32; (2012) 87 ACSR 436 at [19]; Chameleon Mining at [13]. 24 For these reasons, the proposed orders should be made. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.