Cabcharge Australia Limited, in the matter of Cabcharge Australia Limited [2007] FCA 421

REASONS FOR JUDGMENT 1 In late 2006 the plaintiff Cabcharge Australia Limited (Cabcharge), announced an off-market takeover bid for shares in Newcastle Taxis Limited (Newcastle Taxis). After an original Bidder's Statement was lodged with the Australian Securities and Investments Commission (the Commission), on 28 November 2006, Cabcharge lodged a replacement Bidder's Statement with the Commission on 5 January 2007. The replacement Bidder's Statement was sent to Newcastle Taxis and Australian Securities Exchange Limited (ASX) on the same date. The Bidder's Statement and accompanying takeover offer to shareholders of Newcastle Taxis was dispatched to shareholders and lodged with ASX on 17 January 2007. The Offer was dated 17 January 2007. It was to remain open until 1 March 2007 unless extended or withdrawn. 2 Under the Offer, Cabcharge offered to acquire all A class and B class shares in Newcastle Taxis. The consideration for each share in Newcastle Taxis was one share in Cabcharge. Accordingly, s 625 of the Corporations Act 2001 (Cth) (the Act) was applicable. By s 625(3)(a), (b), (c) and (d), if the consideration offered is or includes securities, and the bidder's statement states that the securities are to be quoted on a financial market, then relevantly, two rules apply. They are: (1) the offer is subject to a condition that an application for admission to quotation will be made within seven days after the start of the bid period; and (2) the offer may not be made free from that condition. 3 The offers that were made under the replacement Bidder's Statement include conditions to give effect to s 625. Relevantly, clause 8.9(j) provided that the offer and the contract that results from acceptance of the offer was to be subject to fulfilment of a number of conditions including a condition that Cabcharge makes an application for admission to quotation of the Cabcharge Shares on ASX's exchange within a period of seven days after the start of the Offer Period and that permission for such admission be granted no later than seven days after the end of the Offer Period (the Statutory Offer Condition). By clause 9.1 the Offer Conditions were said to be conditions subsequent except for the Statutory Offer Condition. Clause 9.4 provided that Cabcharge must give written notice to Newcastle Taxis of any apparent or any apparent apprehended breach or non-fulfilment. 4 In the events that happened, the Statutory Offer Condition was not satisfied. In circumstances that I shall briefly recount, Cabcharge failed to make an application for admission to quotation of the Cabcharge Shares on the ASX exchange within a period of seven days after the start of the Offer Period. It should have been done by 24 January 2007. However, the secretary of Cabcharge, who had the carriage of the takeover offers, overlooked the requirement for the application to be made within seven days after the start of the offer period. The company secretary had in mind that the requirement was that the application be made within seven days of Cabcharge becoming entitled to over 90% of Newcastle Taxis shares. It was not until 19 February 2007 that the secretary of Cabcharge realised her omission and promptly applied to ASX for admission of the additional shares in Cabcharge to quotation on ASX. Permission for such admission was granted on 1 March 2007. Accordingly, the second limb of the Statutory Offer Condition has been satisfied. 5 Cabcharge has informed the Commission of the failure to comply with the Statutory Offer Condition, according to its literal terms. The Commission has indicated by letter dated 5 March 2007 that it has no objections to a making of the order that the time within which Cabcharge was to have made an application for admission to quotation by ASX be extended to 19 February 2007. 6 I have evidence before me that Newcastle Taxis supports the offers to its members by Cabcharge and is aware or has been made aware of the failure to comply with the Statutory Offer Condition. Newcastle Taxis is also aware of the application being made by Cabcharge for orders under the Corporations Act to overcome the possible consequences of the failure to satisfy the Statutory Offer Condition and has indicated it does not wish to be heard. I have been assured that 131 of 134 holders of A class shares in Newcastle Taxis have now accepted the offers. No more than 16 had accepted by 24 January 2007. 7 Cabcharge seeks whatever orders are appropriate to overcome the oversight of its secretary. There are three possible sources of power in the Corporations Act. (1) Under s 1322(4)(d) the Court may make an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under the Act or in relation to a corporation; however, under s 1322(6) the Court must not make an order under s 1322 unless relevantly satisfied that no substantial injustice has been or is likely to be caused to any person. (2) Section 1325D provides that the Court may declare that any act, document or matter is not invalid merely because a person has contravened a provision of Chapter 6 in which s 625 is to be found. (3) Section 1325A(2) provides that the Court may make any order or orders that it considers appropriate if, relevantly, an application for admission to quotation is not made within seven days after the start of the bid period. 8 I have some faint reservation as to the application of the first two provisions. My concern is that the effect of the Statutory Offer Condition is to make it a condition of each contract that came into existence by acceptance of the offers made by Cabcharge, that the application be made to ASX. Clause 9.1 provides that the Offer Conditions are conditions subsequent and does not prevent a contract for the acquisition of a Newcastle Taxis Share arising unless the Statutory Offer Condition is not fulfilled. Thus, in effect, the Statutory Offer Condition is a condition precedent. It is a term of the contracts that might or might not come into existence, as between holders of shares in Newcastle Taxis on the one hand, and Cabcharge on the other. 9 The terms of ss 1322 and 1325D are not entirely apt for remedying the difficulty that has arisen in the present case. To say that the contracts are invalid is not necessarily an apt use of language. To extend the time for doing something in relation to a corporation is not entirely appropriate. However, s 1325A(2) of the Act is directed specifically to the difficulty that has arisen in the present case. 10 While s 1325A is headed "Orders if contravention of Chapters 6, 6A, 6B, or 6C", the heading to the section is not part of the Act and the language of s 1325A is unlimited. It does refer to the orders that the Court can make as including a remedial order; a remedial order would not cover the present situation. However, it is clear from s 1325A(2) that the Court may make any order or orders that it considers appropriate. That, it seems to me, would include an order varying the terms of the contracts that might otherwise have come into existence by reason of acceptance of the offers, to overcome the oversight in question. 11 To the extent that it is relevant, I am satisfied that no substantial injustice has been or is likely to be caused to any person by the making of the orders that I propose. I have been referred to the decision of Lindgren J in Re Insurance Australia Group Limited [2003] FCA 581, concerning ss 723(3) and 724(1) of the Corporations Act and the possible application of s 1322(4)(d) to failure to comply with those provisions. I have no reservations at all concerning the correctness of his Honour's decision. However, there is a difference between s 625 on the one hand, and s 723 on the other. 12 Section 723 provides that, where there is failure to apply for admission of securities pursuant to a public offering, the issue or transferring of securities in response to an application made under a relevant disclosure document is void, and the person offering the securities must return the money. That is to say, the Act itself operates in the event of failure to make the relevant application to strike down and invalidate a transfer. In the present circumstances, there is a term of a contractual arrangement between private parties that is the source of difficulty. I am satisfied, however, that s 1325A confers an appropriate power on the Court, whether or not ss 1322 or 1325D does so. 13 In the circumstances I propose to make an order that the Statutory Offer Condition be varied by substituting the words "no later than 19 February 2007" for the words "within a period of seven days after the start of the offer period" and to order that the Statutory Offer Condition of each contract made by acceptance of the offers be deemed to have been satisfied on 19 February 2007. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.