Brown v DML Resources Pty Ltd

FACTS 7 IAG issued a prospectus dated 20 May 2003 ("the Prospectus") in respect of 2,000,000 Reset Preference Shares at a face value of $100 each to raise up to $200 million. IAG had previously issued such shares. I will call the Reset Preference Shares, the subject of the Prospectus, "RPS2". 8 The prospectus was lodged with the Australian Securities and Investments Commission ("ASIC") also on 20 May 2003. The Prospectus stated that it would be made generally available from its date until the closing date for applications, which was said to be 19 June 2003. The Prospectus said that the opening date for receipt of applications was 28 May 2003. That date was one day after the statutory seven-day period for the making of application to ASX for official quotation. 9 The Prospectus stated in various places that the RPS2 were intended to be quoted on the ASX, subject to the application for quotation being successful. On pages 7 and 15 of the Prospectus it was stated that the application for official quotation would be made to ASX within seven days after the date of the Prospectus. At page 7 it was added that if quotation was not granted, the RPS2 would not be issued and application money would be refunded without interest. 10 The Prospectus stated that it was expected that trading of the RPS2 on the ASX would commence on a deferred settlement basis on 23 June 2003 following announcement of allocations, and that trading would continue on that basis until 27 June 2003 when trading would be on a normal settlement basis. 11 On 20 May 2003 IAG made an announcement to ASX advising that it had lodged the Prospectus with ASIC. The announcement set out an indicative timetable for the offer, which included the RPS2 commencing trading on the ASX on the deferred settlement basis on 23 June 2003 and on a normal settlement basis on 27 June 2003. The indicative timetable had been agreed in discussions between IAG and ASX. On 21 May 2003 ASX released an announcement to the market setting out key details of the offer by IAG. That announcement by ASX also set out the indicative timetable. 12 On 23 May 2003 IAG made an announcement to ASX to the effect that the offer was expected to be fully subscribed. 13 The RPS2 are expected to be allotted on 20 June 2003, the day following the date of closure of the offer. 14 In order to understand why IAG failed to apply for admission of the RPS2 to quotation within seven days, it is necessary to know that the ASX Listing Rules also deal with the question of the time within which an application for quotation of securities must be made. Listing Rule 2.7 provides that in order to apply for quotation of securities, an entity must complete Appendix 3B to the Listing Rules and give it to ASX. A note to Listing Rule 2.7 explains that where, as here, the securities are not being issued under a bonus issue or pro rata issue, the "Appendix 3B is not given to ASX until the issue has been made" and that it is used to inform ASX under Listing Rule 3.10.5 that the issue has been made. Listing Rule 2.8.3 provides, relevantly, that an entity must apply for quotation of securities within ten business days after the date of the final allotment. In the present case, this period was one of ten business days after 20 June 2003. 15 The information required to complete Appendix 3B includes information which is known only after securities have been allotted. Shannon Leslie Meredith Finch, a solicitor employed by Mallesons Stephen Jaques ("Mallesons"), the solicitors for IAG, has given affidavit evidence that notwithstanding Listing Rule 2.8.3, in her experience an application for quotation of securities is usually made not later than several days before allotment, in order to allow quotation of them at the time of, or shortly after, allotment. 16 Listing Rule 3.10.3 provides that an entity must "immediately" tell ASX of a proposed issue of securities, and, where the issue is not a bonus issue or pro rata issue, give ASX the information specified in that Listing Rule when it announces the proposed issue. That information substantially reflects information that is later to be included in the Appendix 3B form. Listing Rule 3.10.5, referred to above, requires that where an issue of securities has been made, if the issue is not a bonus issue or pro rata issue, the entity must complete Appendix 3B and give it to ASX "at the same time". 17 According to Ms Finch's affidavit, on or about 22 May 2003, she asked a solicitor who was working for her on the matter to check when the Appendix 3B was required to be lodged with ASX and in response was told, on the same date, that it was not required to be lodged until around the time of allotment and that the information required to be given to ASX under Listing Rule 3.10.3 at the time of announcement of the proposed issue had in fact been given to it in accordance with that Rule. 18 In providing that answer, the solicitor had consulted the ASX Listing Rules but not the requirements of the Act. Ms Finch states that it did not occur to her that the Act might require an application for admission of securities to quotation to be made earlier than the time required by the ASX Listing Rules. As a result, she did not cause a draft Appendix 3B to be prepared and provided to IAG for completion and lodgement with ASX within seven days of the date of the Prospectus. She states that if she had been aware of the time limit stipulated in the Act, she would immediately have caused preparation of a draft Appendix 3B for provision to IAG and would have advised IAG of the seven day deadline. 19 It was not until the evening of Wednesday 4 June 2003 that Ms Finch came to appreciate that an Appendix 3B form was required to be, but inadvertently had not been, lodged with ASX within seven days of the date of the Prospectus. 20 On Thursday 5 June 2003 Ms Finch caused a draft Appendix 3B to be provided to ASX. Ms Finch is informed by Glenn Revell, the Company Secretary of IAG, and believes, that IAG will execute the draft application and promptly lodge it with ASX if the Court grants the relief sought in the originating process in this proceeding. 21 Also on Thursday 5 June 2003, Mallesons contacted my Associate and asked that the present application be heard as a matter of urgency on Friday 6 June 2003. I heard it commencing at 4.15 pm on that day. Clearly, there can be no suggestion of any delay since Ms Finch became aware of the problem on the evening of Wednesday 4 June 2003. 22 There is affidavit evidence of David Leslie Friedlander, a partner in Mallesons, that he is a member of the Due Diligence Committee formed by IAG in connection with the Prospectus and that "the other members of that committee include representatives of IAG, its auditors and the joint lead managers to the offer". Mr Friedlander states that he attended a Due Diligence Committee meeting at 2.30 pm on Friday 6 June 2003 at which each member of the Committee confirmed that he or she was not aware of any material adverse change affecting IAG's business or operations since the date of the Prospectus. 23 Finally, there are in evidence letters from ASX and ASIC indicating their attitudes to the present application. By letter dated 5 June 2003 ASX states that it received from IAG that day, and reviewed, a draft form of Appendix 3B. The letter states that ASX is not aware of any reason why, if the Court should extend the time for lodgement of the application for quotation of the RPS2, ASX would not grant admission of them to quotation in the ordinary course. By letter dated 6 June 2003 ASIC states that it has no objection to the making of the order sought by IAG.

Power 24 Upon analysis, s 1322(4)(d) of the Act can be seen to empower the Court to make: an order (1) extending the period for: (a) doing any act, matter or thing; or (b) instituting or taking any proceeding: either (i) under this Act; or (ii) 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 (2) abridging the period for: (a) doing any such act, matter or thing; or (b) instituting or taking such a proceeding. 25 What is meant by the expression "the period for doing ... or instituting or taking ..." (my emphasis)? 26 Subsections 723(3) and 724(1) do not, in terms, require the making of the application for the admission of the securities to quotation within the seven day period: rather, they prescribe the adverse consequences of a failure to apply within that period. Can it be said, in these circumstances, that the seven day period is a "period for doing any act, matter or thing under [the] Act or in relation to a corporation" for the purposes of par (d) of subs 1322(4)? In my opinion, it clearly can be. It is a natural use of language to say that subss 723(3) and 724(1) stipulate a period of seven days after the date of the disclosure document as "the period for" making application for the admission of the securities to quotation. Again, if one were to ask what is the period which the Act prescribes "for" applying for admission to quotation of securities which are the subject of a disclosure document, it would be a natural use language to say "seven days after the date of the disclosure document" and to cite subs 723(3) and 724(1) as authority for the answer. 27 Section 1322 is a remedial provision and should be given a liberal construction: Re Australian Koyo Ltd (1984) 8 ACLR 928 at 930; Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157 ("Elderslie") at 160. 28 Courts have had no difficulty in treating s 1322(4)(d) as being available even though the "period for doing any act, matter or thing or instituting or taking any proceeding under [the legislation] or in relation to a corporation" in question did not form part of a provision which in terms imposed an absolute positive obligation to do the act, matter or thing or to institute or take the proceeding: cf Elderslie (extension of time fixed in a condition of an exemption from ss 1021(5) and 1040 of the Corporations Law ("the Law") granted by Australian Securities Commission ("ASC") that a report be submitted to ASC within a certain time); Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398 (time limit for making of an application by a dissenting offeree under subs 701(6) of the Law); Pinnacle VRB Ltd v Reliable Power Inc (2001) 39 ACSR 8 (mandatory time for service of any notices varying offers under an off-market bid); Brown v DML Resources Pty Ltd (in liq) (No 6) (2002) 166 FLR 393 (extension of mandatory time limit for liquidator to apply under s 588FF(3)(b) of the Act for leave to bring proceedings to challenge certain transactions as unfair preferences). Indeed, it is perhaps only in a minority of cases that the provision in question will be found to impose an absolute positive obligation (an example is referred to in [34] below).

29 For the above reasons, I have no doubt that the Court has power to make the order sought.

30 Before coming to the question of discretion, I will address two cases to which IAG has referred in submissions. The first of these is Premier Pacific Pharmaceutical Industries Ltd v Australian Stock Exchange Ltd (1995) 129 ALR 661 ("Premier Pacific"). Premier Pacific concerned subs 1031(1) of the Law, which was the precursor of subs 723(3) of the Act, and provided as follows:

"1031(1) Subject to this section, where a prospectus in relation to securities of a corporation states that application has been or will be made to a securities exchange, whether in Australia or elsewhere, for permission for the securities to be listed for quotation on the stock market of that securities exchange and: (a) the permission is not applied for in the form for the time being required by that securities exchange on or before the third day on which that securities exchange is open after the date of issue of the prospectus; or (b) the permission is not granted before the end of 6 weeks after the date of issue of the prospectus or such longer period, not exceeding 12 weeks, after the date of issue as is, within those 6 weeks, notified to the applicant by or on behalf of the securities exchange; any allotment or issue, whenever made, on an application pursuant to the prospectus is void and the corporation shall repay, in accordance with the following provisions of this section, any money received by it pursuant to the prospectus." 31 Unlike IAG in the present case, Premier PacificPharmaceutical Industries Ltd ("Premier Pacific") applied for permission for the listing of securities for quotation within the time referred to in par (a) of subs 1031(1). What was in question was the need for a grant of permission within the time referred to in par (b) of that subsection. 32 ASX notified the solicitors of Premier Pacific that ASX had resolved to admit the company to its Official List, subject to "Notification and Compliance with the Conditions". This advice brought into play subs 1031(7) of the Law which stated: "1031(7) Where a securities exchange has, within the period applicable under paragraph (1)(b), granted permission subject to compliance with any requirements specified by the securities exchange, permission shall be deemed to have been granted by the securities exchange if the directors of the corporation have given to the securities exchange an undertaking in writing to comply with the requirements of the securities exchange." 33 One form of relief sought by Premier Pacificwas an order under s 1322(4)(d) of the Law extending the time for Premier Pacificto cause to come into existence an undertaking by the directors in writing to comply with the requirements of ASX. Subsection 1031(7) did not require that the directors to give a written undertaking to comply with the requirements of the ASX. Rather, like subss 723(3) and 724(1) of the Act in the present case, subs 1031(7) referred to the doing of an act (ss 723(3) and 724(1) refer to the failure to do an act) within a stipulated time as a condition, the existence of which gave rise to certain desired consequences. Gummow J did not question the availability of an order under subpar 1322(4)(d). On the other hand, the question of power did not arise for debate. This aspect of Premier Pacific lends, therefore, only the slightest support for my construction of s 1322(4)(d). 34 His Honour did make an interlocutory order under subpar 1322(4)(d) of the Law that the time permitted by subpar 1031(2)(b)(ii) in which Premier Pacific was obliged to repay money received by it pursuant to the prospectus "be extended to two days after the delivery of judgment in these proceedings", but since subpar 1031(2)(b)(ii) imposed an absolute positive obligation to repay, his having done so is irrelevant to the issue which I have raised. 35 In the result, I derive only slight assistance from Premier Pacific. 36 I accept IAG's submission that the circumstances of the present case are distinguishable from those of David Grant & Co Pty Ltd (receiver appointed) v Westpac Banking Corporation (1995) 184 CLR 265 ("David Grant"). As is well-known, that case was concerned with the time limited for the making of an application by a company under s 459G of the Law for an order setting aside a statutory demand served on the company. Under the section (which is repeated as s 459G of the Act), it was expressly stipulated that such an application "may only be made" within 21 days after the demand is served, and that an application was made in accordance with the section "only if, within those 21 days" an affidavit supporting the application was filed with the Court and a copy of the application and a copy of the supporting affidavit were served on the person who served the demand. 37 Gummow J, with whom the other Judges of the High Court agreed, held that the provisions just mentioned attached "a limitation or condition upon the authority of the court to set aside the demand" (at 277). His Honour said that the force of the term "may only" was "to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G" (also at 277). His Honour specifically stated that to treat s 1322 as authorising a court to extend the period to 21 days specified in s 459G would deprive the word "only" of effect. 38 David Grant does not stand in the way of a conclusion that I have power to make the order sought by IAG.

Discretion 39 As noted earlier, subs 1322(6) provides that the Court must not make an order under s 1322 unless it is satisfied, relevantly, "that no substantial injustice has been or is likely to be caused to any person" (par (c)). Even if so satisfied, the Court retains a discretion, to be exercised judicially, whether to make an order. 40 I accept IAG's submission that no substantial injustice has been or is likely to be caused to any person by its failure to apply within the seven-day period. No substantial injustice is likely to be caused to any person if the extension of time sought to Tuesday 10 June 2003 is granted and IAG makes its application to ASX on that date. (Tuesday 10 June is the next business day after the date of hearing, Friday 6 June 2003 - Monday 9 June 2003 is a public holiday.) 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 moneys and subsequent redepositing of those moneys by subscribers favours the making of an order: cf Elderslie at 161. 42 I have no hesitation in exercising the Court's discretion in favour of making the order.

CONCLUSION 43 There will be an order in the terms sought in the originating process. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 16 June 2003 Counsel for the Plaintiff: Mr T F Bathurst QC

Solicitor for the Plaintiff: Mallesons Stephen Jacques