CONSIDERATION
21 Section 723(3) provides:
"(3) If a disclosure document for an offer of securities states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and:
(a) an application for the admission of the securities to quotation is not made within 7 days after the date of the disclosure document; or
(b) the securities are not admitted to quotation within 3 months after the date of the disclosure document;
then:
(c) an issue or transfer of securities in response to an application made under the disclosure document is void; and
(d) the person offering the securities must return the money received by the person from the applicants as soon as practicable."
22 Section 723(3) is enlivened where a disclosure document (such as a prospectus) for an offer of securities (such as the offer of the present shares and options to acquire shares by way of issue) "states or implies that the securities are to be quoted on a financial market [such as the ASX]".
23 Does the prospectus in the present case state or imply that the shares and options "are to be quoted" on the ASX?
24 In cl 2.3 of the prospectus, NuSep states that it "will apply to ASX within 7 days after the date of this Prospectus, for official quotation of all of the Shares and Options issued by [NuSep]". There was a statement in the letter from the chairman dated 14 December 2006 that accompanied the prospectus, to the effect that the shares and the options would be "traded separately" (my emphasis).
25 Section 711(5) provides that if a prospectus for an offer of securities states or implies that they will be able to be traded on a financial market, the prospectus must state one of three things, and one of those is that an application for admission of the securities to quotation on that financial market will be made to the operator of that market within seven days after the date of the prospectus (s 711(5)(c)). It may be that cl 2.3 was included in the prospectus because of this provision.
26 While cl 2.3 goes no further than to state that NuSep will make application to ASX for quotation, I think that the statement signifies, in terms of s 723(3), "that the securities are to be quoted on a financial market" (my emphasis). Clearly, s 723(3) is referring to something less than 100 percent certainty that the securities will be quoted. The appropriate shade of meaning is conveyed by the idea that the disclosure document reveals to those reading it that it is intended, contemplated or expected that the securities will be quoted. In my view, NuSep's promise in cl 2.3 to apply for quotation and the statement in the chairman's letter that the shares and options will be "traded separately" clearly imply that the securities "are to be" quoted in this sense.
27 Section 1322(4)(d) of the Act provides:
"Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) …
(b) …
(c) …
(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;
and may make such consequential or ancillary orders as the Court thinks fit."
(my emphasis)
28 Section 723(3) does not, in terms, require the application for quotation to be made within the seven day period, and, of course, does not require that the securities be admitted to quotation within the three month period - a matter for ASX. In Re Insurance Australia Group Ltd (2003) 128 FCR 581 ("IAG") I held that s 1322(4)(d) was nonetheless applicable to s 723(3)(a) (and to s 724(1)(b)(i)). For the reasons I gave in IAG, I again hold that I have power to make an order under s 1322(4)(d) to extend the seven day period referred to in 723(3)(a).
29 The position in relation to the three month period referred to in s 723(3)(b) may be thought to be less clear, but I reach the same conclusion as in relation to s 723(3)(a). It is true that it is a third party, ASX, not NuSep, that can choose to do or not to do the act referred to in s 723(3)(b) (admit the securities to quotation). Otherwise, however, the considerations that led me to conclude in IAG that s 1322(4)(d) was available in relation to s 723(3)(a) apply. In my opinion, the period of three months for the admission of the securities to quotation is as much as "a period for doing any act, matter or thing" within s 1322(4)(d) as is the period of seven days for the making of an application for the admission of the securities to quotation.
30 I turn now to the question of discretion.
31 I accept that the failure to apply for the admission of the securities to quotation within seven days after 14 December 2006, that is to say, by 21 December 2006, was due to the misapprehension on the part of Mr Smith and, through him, Mr Patel, as to the status of NuSep's application of 16 October 2006 to ASX for the indicative ruling. If the application for quotation had been made by 21 December 2006, I have little doubt that the securities would have been admitted to quotation within three months after the date of the prospectus, that is to say, by 14 March 2007.
32 The best estimate that can be given by Nusep is that the securities will be admitted to quotation within approximately the next four weeks. If they are admitted to quotation by 16 May, that will be some one and a half months following the application made on 1 March 2007, well within three months.
33 No shareholder or optionholder will be disadvantaged by the making of an order extending the times referred to in paras (a) and (b) of s 723(3). Indeed, it would fulfil the expectations of shareholders and optionholders that their shares and options be admitted to quotation.
34 In Cabcharge,Emmett J dealt with an off-market takeover bid. Section 625 of the Act had the effect that if the consideration offered was or included securities and the bidder's statement stated or implied that the securities were to be "quoted on a financial market", then the offer was "subject to a condition" that an application for admission of the securities to quotation would be made within seven days after the start of the bid period, and the offer could not be made free from that condition.
35 His Honour expressed "some faint reservation" as to the availability of s 1322(4)(d), because the Act had the effect of making it a condition of the contracts that came into existence by acceptance of the takeover offers that the application for admission to quotation would be made within seven days after the start of the bid period. Clause 9.1 of the bidder's statement provided that the Offer Conditions were conditions subsequent and did not prevent a contract for the acquisition of a share arising, unless the statutory offer condition to which I referred was not fulfilled. Thus, in effect, his Honour said, the statutory offer condition was made a condition precedent: "[i]t 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" (at [8]). His Honour considered that in these circumstances s 1322 may not be entirely apt to remedy the difficulty that had arisen.
36 It was in the light of Cabcharge that NuSep advised all of its shareholders who had taken up the rights issue of the making of the present application and invited them to give notice of any objections they might have.
37 In the present case, the prospectus does not make the making of an application for quotation within seven days (or the admission of the securities to quotation within three months), a condition precedent. NuSep promised in cl 2.3 of the prospectus to apply to ASX within seven days after the date of the prospectus, for official quotation of all the shares and options. This promise became a term of the contracts between NuSep and those of its shareholders who took up the rights issue.
38 The orders that I am asked to make are to be made only "for the purposes of" s 723(3)(a) and (b) of the Act. The orders will therefore only overcome the adverse consequences provided for in s 723(3)(c) and (d), namely, that an issue of securities in response to an application made under the prospectus is void and that NuSep must return the money received by it from the applicants as soon as practicable. Importantly, the orders will not interfere with the contractual relationship between NuSep and its members who took up the rights issue, and, in particular, with the legal consequences of NuSep's failure to perform its contractual promise expressed in cl 2.3 of the prospectus. If any of those members have suffered loss or damage by reason of their shares or options not having been quoted on the ASX as early as they would have been if the application had been made within seven days after 14 December 2006, they will retain their right of action unaffected by the orders made.
39 I am satisfied that no substantial injustice has been or is likely to be caused to any person by the making of an order under s 1322: see s 1322(6)(c) of the Act.
40 Relief should be made available under s 1322(4)(d).