By Originating Process filed on 9 August 2019, the Plaintiff, Clime Capital Limited ("Clime"), applies under s 1322, s 1325A and s 1325D of the Corporations Act 2001 (Cth) for an extension of time for compliance by it with s 625(3)(c)(i) of the Act, to 5 August 2019. That application was ultimately pressed, consistent with the authorities, by reference to s 1325A(2) of the Act and no reliance was placed on the other sections to which I referred.
The background to the application emerges from an affidavit of Clime's solicitor, Mr Andersen, dated 8 August 2019. Clime is a public company which is listed on the Australian Securities Exchange ("ASX") and its shares are also quoted on the ASX. On 19 July 2019, Clime lodged a bidder's statement with the Australian Securities and Investments Commission ("ASIC") in respect of a bid for the shares in CGB Capital Limited ("CGB"), which is also a public company and is also listed on, and its shares are quoted on, the ASX. At the same time, and in accordance with the requirements of the Act, Clime sent a copy of that bidder's statement to CGB. Those steps commenced the "bid period" for the bid as defined in the Act. The bidder's statement records that the bid is an off-market bid and that CGB's independent directors recommend that bid for acceptance by its shareholders, in the absence of a superior proposal and subject to the receipt of any independent expert's report in a form acceptable to them.
Mr Andersen notes that on 1 August 2019, Clime announced to ASX that it had, on that day, completed the dispatch of the bidder's statement and offers in relation to it its off-market bid for its shares in CGB, commencing the "offer period" for the bid as defined in the Act. On 5 August 2019, Clime lodged an Appendix 3B New Issue Announcement with the ASX, and applied for quotation of additional securities in respect of the transaction.
These events give rise to a difficulty which has also arisen in several previous cases. Section 625(3)(c) of the Act provides that, if the consideration under an off-market bid is, or includes, securities, the offer is subject to a condition that an application for admission to quotation be made within seven days after the start of the bid period, as defined in the Act. Here, that bid period commenced on 19 July 2019, when the bidder's statement was lodged with ASIC and sent to the target, and also announced to ASX, whereas the "offer period" commenced later, on 1 August 2019, when the bidder's statement and offers were dispatched to shareholders. The application for admission of additional securities to quotation was made within seven days after the start of the offer period, but that did not comply with the requirement under s 625(3)(c) of the Act that it be made within seven days after the start of the bid period.
Mr Andersen, in turn, gives evidence on information and belief from the Company Secretary of Clime as to the circumstances in which this difficulty arose. He notes that a transaction timetable prepared prior to the preparation of the bidder's statement contained an error, because it specified the time for lodgement of the application for quotation of the additional securities as within seven days from the commencement of the offer period, rather than within seven days of commencement of the bid period, and that error occurred due to an inadvertent oversight as to the identification of the applicable period in which to calculate the time. It is not clear whether that error arose from a solicitor's error, but little turns on that for present purposes where it is plain enough that the error arose from an innocent mistake as to the concepts of "offer period" and "bid period", of a kind that has occurred in earlier cases. Mr Andersen, in turn, notes that Clime's Company Secretary lodged the application for quotation with the ASX in accordance with the transaction timetable and was subsequently advised by Clime's solicitor of the error that had occurred.
Mr Andersen's evidence is that he is not aware of any person who would be adversely affected if the Court granted the extension of time sought in the Originating Process. That evidence is persuasive, particularly in the case of a bid that has received at least a qualified recommendation by the independent directors of CGB. It would ordinarily be in the interests of the target company's shareholders that they have the opportunity to consider the bid.
By a further affidavit dated 9 August 2019, Mr Andersen notes that a copy of the Originating Process and supporting affidavit have been provided to ASIC and the solicitors acting for CGB. By letter dated 8 August 2019, ASIC indicated that it did not support or oppose the application and did not intend to appear. By letter dated 9 August 2019, the solicitors for CGB noted the relevant facts, and indicated that it also did not intend to appear and had no objection to the relief sought by Clime.
[3]
Whether the Court may hear this application in the bid period
Two legal issues arise in the application which have been addressed by Mr Tam, with whom Mr Rogan appears. The first is the question whether this application under s 1325A of the Act may be brought by Clime, while the bid period is on foot, having regard to s 659B of the Act. That section, relevantly, provides that only specified entities may commence Court proceedings in relation to a takeover bid, or proposed takeover bid, before the end of the bid period. That section was introduced when the Takeovers Panel was established, and is part of the regime which establishes the Takeovers Panel as the primary or exclusive venue for the determination of disputes in respect of takeovers.
The question of the application of that section, in respect of applications of this kind, was considered in a careful judgment of McKerracher J in Re Venturex Resources Ltd (2009) 72 ACSR 358 to which Mr Tam draws attention. His Honour there referred to earlier authorities which had treated analogous provisions to s 1325A of the Act as specific in character, by contrast with the general provision in s 659B of the Act. His Honour there noted that s 1325A was a very specific provision dealing with a specific deficiency and one that would almost inevitably arise only during a takeover bid. It seems to me that his Honour's reasoning is plainly correct. It would, with respect, be a wholly perverse result if a provision which specifically provides for an application to a Court to address issues in respect of a contravention of Ch 6 of the Act was not available during the bid period, by reason of s 659B of the Act.
For these reasons I am comfortably satisfied that I should follow the decision in Re Venturex Resources above, and that s 659B of the Act does not prevent the application under s 1325A to the Court in these circumstances, while the bid period continues.
[4]
Whether relief should be granted under s 1325A of the Act
The second legal issue which arises relates to the application of s 1325A(2) of the Corporations Act in the relevant circumstances. That section provides that the Court may make an order that it considers appropriate if, inter alia, a bidder's statement states that securities will be able to be traded on a financial market (whether in Australia or elsewhere) and an application for admission to quotation is not made within seven days after the start of the bid period, as occurred in this case. The Court has made orders under that section in several cases in which an application for admission to quotation has not been made within the time required within s 625(3) of the Act, including by reason of an error leading to that result: for example Re Graincorp Ltd [2008] FCA 996; FE Limited v Padbury Mining Ltd [2010] FCA 1207; Dourado Resources Ltd v Aurium Resources Ltd [2010] FCA 1208; Re Activistic Ltd [2016] FCA 1520 at [14].
Mr Tam draws attention to the decision in FE Limited v Padbury Mining Ltd above, where a solicitor had made a similar error to that which appears to have occurred here, and treated the seven days requirement for lodgement of an application for quotation as running from the commencement of the offer period rather than the commencement of the bid period. His Honour noted several relevant factors to the making of an order under s 1325A of the Act, including that the error was an honest one; that the plaintiff had acted with expedition to regularise the position; that third party interests would be prejudiced if the orders were not made, because the takeover process would miscarry; and that ASIC and the target were served with the documents and had indicated that they neither consented nor opposed the orders sought.
I am satisfied, on the evidence, that the error in the transaction timetable which occurred here was also an honest mistake; the application to rectify matters has been brought promptly, where the evidence indicates that the issue was identified on 7 August 2019, the application was brought on 8 August 2019 and has been heard on 9 August 2019; and, as I noted above, third parties including shareholders in the target would be prejudiced if the order sought was not made and difficulties arose in implementation of the bid process. For these reasons, I am satisfied that the orders sought by Clime are properly made.
[5]
Orders
I make orders in accordance with the short minutes of order, initialled by me and placed in the file. The exhibit may be returned.
[6]
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Decision last updated: 05 November 2019