Car Buyers Australia Pty Limited v Australian Securities and Investments Commission, in the matter of Car Buyers Australia Pty Limited

COLVIN J: 1 Wooboard Technologies Limited is a public company whose shares are listed for trading in the markets that form part of the Australian Securities Exchange conducted by ASX Limited. Mr Joshua Quinn is a director and the company secretary of Wooboard. Company secretarial services are provided to Wooboard by Boardroom Pty Ltd. The terms of its engagement include advising the board of Wooboard with respect to matters concerning the ASX Listing Rules and compliance with the Corporations Act 2001 (Cth). Pursuant to those agreed arrangements, Ms Rebecca Weir has assisted Wooboard as to company secretarial matters. She commenced providing those services on or around 9 February 2021. 2 On 11 February 2011, Wooboard announced that it would undertake a capital raising of $4,000,000 from sophisticated and professional investors in two tranches. 3 As to such capital raisings, Part 6D.2 of the Corporations Act imposes disclosure requirements in respect of the issue of securities. The legislative scheme was described by McKerracher J in Sprint Energy Limited, in the matter of Sprint Energy Limited [2012] FCA 1354 at [17]-[21]. In some circumstances, those requirements may be met by the issue of a notice that complies with s 708A(6) (generally known as a cleansing notice): s 708A(5). More generally, if a prospectus has been lodged in accordance with s 708A(11) then no further disclosure is required under Part 6D.2. Some provisions allow securities the subject of the regulation in Part 6D.2 to be issued without disclosure. However, if that is done then the party to whom the securities are issued may not be able to on-sell the shares within 12 months without that party itself providing disclosure. 4 So, if the issuer does not issue a valid cleansing notice or a prospectus at the time of issue then there is a prospect that the party to whom the securities are issued must itself cause such disclosure if it wishes to on-sell those securities within 12 months. 5 On 17 February 2021, Wooboard issued 605,540,680 shares as the first tranche of capital raising. A cleansing notice in respect of that issue was issued on 18 February 2021. 6 On 1 April 2021, Wooboard issued a further 727,792,666 shares as the second tranche of capital raising. Although the second tranche was announced in a similar manner to the first, no cleansing notice was issued. There has since been trading in shares issued as part of the second tranche. 7 Mr Quinn says that at the time he was generally aware that there are disclosure requirements that must be met by public companies when they seek to raise subscription funds. In particular, he was generally aware that the requirements may be met by the issue of a cleansing notice in some circumstances. However, he does not have a detailed understanding of those particular requirements and relied upon Boardroom and Ms Weir in that regard. Indeed, it was for that reason that when he accepted the appointment as company secretary he did so on the basis that Boardroom would be engaged to provided company secretarial assistance as to such matters. 8 On 13 April 2021, Ms Weir became aware that arrangements should have been made for a cleansing notice for the second tranche. She became aware as a result of a conversation with her manager at Boardroom. Until then she had been under the mistaken belief that because the second tranche occurred after approval by an extraordinary meeting of shareholders (which had not been the case with the first tranche), a cleansing notice was not required. 9 Thereafter, prompt steps were taken to inform ASX Limited, for there to be a halt in trading in shares issued by Wooboard and for an application to be made to this Court to seek orders to validate past and future trading in the shares. 10 A disclosure document, described as a cleansing prospectus in the affidavit materials, was lodged on 15 April 2021. On that basis it is said that the required disclosure has now been given. 11 None of the recipients of the shares as part of the second tranche were directors or officers of Wooboard. The only director known to hold shares in Wooboard, whether directly or indirectly, has not traded those shares since the issue of shares as part of the second tranche. 12 In the circumstances, I am satisfied that the failure to comply with the disclosure requirements was not dishonest in any way. The concept of acting honestly can include an active but incorrect consideration of the legal position: ICandy Interactive Limited, in the matter of ICandy Interactive Limited [2018] FCA 533 at [54]-[106]. As was noted by Siopis J in TV2U International Limited, in the matter of TV2U International Limited [2016] FCA 1556 at [40] in similar circumstances to the present case, it is reasonable to expect that those involved in the transfer of shares did so without being aware of the failure to comply with the disclosure requirements. Therefore, there has been no dishonesty on the part of those persons who have participated in trading in the shares the subject of the second tranche prior to the trading halt. 13 Wooboard seeks remedial orders pursuant to s 1322(4)(a) and s 1322(4)(c) of the Corporations Act. It has standing to do so: Sprint Energy Limited at [40]. I explained the requirements of those provisions in Poseidon Nickel Ltd, in the matter of Poseidon Nickel Ltd [2018] FCA 1063 at [37]-[43]. 14 Notice of the application has been given to the Australian Securities and Investments Commission and ASX Limited and neither party raises any concern or seeks intervene. ASX Limited maintains that issues of compliance with the Corporations Act are solely matters for the Australian Securities and Investments Commission. 15 An ASX announcement was made on 20 April 2021 informing the market about the making of an application to this Court seeking validating orders in relation to on-sales of shares issued as part of the second tranche that may have infringed the secondary trading provisions of Part 6D.2 of the Corporations Act. 16 There being no dishonesty, it being demonstrated to be just and equitable that the orders should be made and there being no substantial injustice, I am satisfied that the order should be made. I do so recognising the three aspects that I described in Poseidon Nickel Ltd at [62]-[65] each of which is apposite in the present case. There is no indication of any real or substantial prejudice to others that would need to be weighed in the consideration and there is no basis disclosed upon which the Court might exercise its residual discretion to refuse relief: as to which see Car Buyers Australia Pty Limited v Australian Securities and Investments Commission, in the matter of Car Buyers Australia Pty Limited [2020] FCA 599 at [31]-[32] (Gleeson J). 17 The usual approach is to require the orders to be published in an appropriate way and to provide a period of time for any party who claims to have suffered substantial injustice to make application to vary or discharge the orders. This enables the substantial injustice of not granting relief to be avoided, while preserving the position for those parties who may claim substantial injustice (even though none is apparent on the application) to make application for different relief. As a balance between providing the certainty for future trading, a relatively short period of 28 days is usually expressed: see, for example, Golden Gate Petroleum Ltd, in the matter of Golden Gate Petroleum Ltd [2010] FCA 40 at [54]-[55]. For that reason, the period proposed in that regard is appropriate. 18 Having regard to the explanation provided by those involved, I am satisfied that there should be no order as to costs. 19 For the above reasons, I made the orders sought by Wooboard. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.