In the matter of Tony Barlow Australia Limited [2005] FCA 363

Background 5 The Company at all material times has been subject to a Deed of Company Arrangement and its shares otherwise suspended from trading. 6 As part of a Recapitalisation Plan, it was sought to seek re-quotation on the ASX of the existing shares of the Company and to issue new shares under the Prospectus. 7 Under the Prospectus, the Company proposed to issue: (a) 200 000 000 shares at an issue price of $0.0075 per share to raise $1 500 000; and (b) 18 594 353 shares at an issue price of $0.0075 per share to Chatsworth or its nominee in lieu of a success fee for the successful implementation of a recapitalisation plan for the Company (together defined as 'the Shares'). 8 On 20 November 2003 the Prospectus was lodged by the Company. 9 By s 723(3)(a) and s 724(1)(b) of the Act, the Company was under an obligation to make the Quotation application by close of business on Thursday 27 November 2005 (that is, within 7 days of the lodgement of the Prospectus). 10 The applicant lodged the Quotation application with the ASX on Wednesday 17 December 2003 - 27 days after lodgement of the Prospectus. 11 The Shares were issued pursuant to the Prospectus on 17 December 2003. 12 The Shares were officially quoted on the ASX on 19 December 2003 and were capable of being traded.

The Statutory Framework 13 Section 254E provides: '(1) On application by a company, a shareholder, a creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if: (a) the issue is or may be invalid for any reason; or (b) the terms of the issue are inconsistent with or not authorised by: (i) this Act; or (ii) another law of a State or Territory; or (iii) the company's constitution (if any). (2) On lodgement of a copy of the order with ASIC, the order has effect from the time of the purported issue.'

14 Section 723(3) of the Act relevantly provides: '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.' 15 Section 724(1) relevantly provides that: 'If a person offers securities under a disclosure document and: …. (b) the disclosure document states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and: (i) an application for the admission to quotation is not made within 7 days after the date of the disclosure document; or (ii) the securities are not admitted to quotation within 3 months after the date of the disclosure document; or …. the person must deal under subsection (2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities. For the purpose of working out whether a condition referred to in paragraph (a) has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.' 16 Section 724(2) of the Act provides: 'The person must either: (a) repay the money received by the person from the applicants; or (b) give the applicants: (i) the documents required by subsection (3); and (ii) 1 month to withdraw their application and be repaid; or (c) issue or transfer the securities to the applicants and give them: (i) the documents required by subsection (3); and (ii) 1 month to withdraw their application and be repaid.' 17 It is submitted that s 724(2) has no application here and only s 723(3) is applicable in this case, because the Shares have in fact been issued to the subscribers under the Prospectus. In my view, that represents a plain reading of the provisions and, in the absence of a contradictor, I accept that as a proper basis upon which to proceed: cf Golden Gate Petroleum Ltd (2004) 50 ACSR 659 at [29]. 18 The Court has power to make orders avoiding the effects of irregularities under s 1322 of the Act (Pt 9.5). Section 1322(4)(d) relevantly 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: … (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceedings 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.' 19 Section 1322(6) must also be applied in relation to any order contemplated under s 1322(4)(d) and relevantly provides that: 'The Court must not make an order under this section unless it is satisfied: … (c) in every case - that no substantial injustice has been or is likely to be caused to any person.'

Application of section 254E to Validation of the Shares and section 1322 to Irregularities under sections 723 and 724 20 In ReWave Capital Limited (2003) 21 ACLC 1995 at [29], Justice French considered that s 1322: '…may be taken to reflect a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law. That broad policy does not authorise the court lightly to set aside the requirements of the Act where they have not been observed. Each application for the exercise of the court's relieving power will require consideration of all the circumstances of the case to ensure that the indulgence sought is appropriate and does not undermine the requirements of the Act. Like the discretion to validate invalid share issues under s 254E, the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue. It must also be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with the statute law and company constitutions. Evidence of a blatant disregard of the provisions of the Act or the constitution of the Company may lead to refusal of relief: Re Onslow Salt Pty Ltd (2003) 198 ALR 344; 45 ACSR 322 and cases there cited. The provision is, however, remedial in character and should be given a liberal construction: Re Insurance Australia Group Ltd (2003) 45 ACSR 702 at 707, at [27] per Lindgren J citing Re Australian Koyo Ltd(1984) 8 ACLR 928 at 930 and Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACSR 157 at 160.' Section 1322(4)(d) can readily accommodate the extension of the period for making an application for quotation under s 723(3)(a) and s 724(1)(b): Re Wave Capital Limitedat [30] per French J. 21 Justice Lindgren considered an extension of time under s 723(3)(a) and s 724(1)(b)(i) of the Act in relation to s 1322(4)(d) of the Act in Re Insurance Australia Group Ltd (2003) 128 FCR 581 (delivered on 6 June 2003). Insurance Australia Group Ltd('IAG') was also under an obligation to lodge an application in the form of an appendix 3B under the ASX Listing Rules. IAG lodged a prospectus on 20 May 2003. The appendix 3B was due to be filed on 27 May 2003. By reason of a solicitor's error, it was not prepared and provided to IAG for completion and lodgement with ASX within 7 days of the date of a Prospectus. The error was discovered on 4 June 2003 (some 7 days after the due date). In the exercise of his discretion, Lindgren J concluded that no substantial injustice was likely to be caused to any person if the extension of time sought to Tuesday, 10 June 2003 was granted. He considered (at [40] to [42]) that: '[40] …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 monies and subsequent redepositing of those moneys by subscribers favours the making of an order: cf Elderslie at ACSR 161. [42] I have no hesitation in exercising the Court's discretion in favour of making the order.'

REASONING 22 The Company was in administration at the time of issue of the Prospectus and the Prospectus was a key part of the Recapitalisation Plan which was intended to enable the Company to seek re-quotation on the ASX. The Prospectus and the issue of the Shares was but one criterion which was required to be satisfied before the Company could seek re‑quotation of all its shares. 23 Notwithstanding the failure to lodge the Quotation application in the prescribed time frame, the Shares have been issued to applicants under the Prospectus and the Quotation application for the Shares was processed by the ASX so that the Shares are quoted and able to be traded on the ASX. 24 The particular circumstances of this case favour the grant of relief; broadly for the same reasons as set out in Re Wave Capital Limited and Re Insurance Australia Group Ltd, Re Golden Gate Petroleum Ltd at [35], and Re Onslow Salt Pty Ltd(2003) 198 ALR 344 at [25] - [28]. 25 In Re Golden Gate Petroleum Ltd at [35], Lee J said: '..s 1322 is to be given a liberal construction, allowing appropriate orders to be made that facilitate the conduct of commerce and serve the interests of the parties concerned where it is just and equitable that such orders be made.' 26 As outlined in the Blakiston affidavit, the Prospectus and the funds raised from the issue of the Shares were integrally linked to the Company complying with the deed of company arrangement and coming out of administration. The Prospectus also facilitated the reinstatement to quotation of the Company's shares, thus assisting the existing shareholders at the time of lodgement the Prospectus. 27 In the circumstances outlined in the Blakiston affidavit, no substantial injustice has been or is likely to be caused to any person. The reasons given in the Blakiston affidavit are: '(a) the issue of Shares by the Company was pursuant to the Prospectus the contents of which are regulated by the provisions of the Corporations Act; (b) the successful raising if equity funds under the Prospectus enabled the Company to comply with the conditions of the Deed of Company Arrangement and ultimately have the suspension of the Company's shares from trading lifted and for the shares to be requoted; (c) it is a condition of paragraph 723(3)(b) of the Corporations Act that not only must an application be made pursuant to paragraph 723(3)(a) of the Corporations Act within seven days of the date of the Prospectus but that the relevant securities must be admitted to quotation by ASX within three months of the date of the Prospectus. I am informed by the Company's solicitors that: (i) the real protection afforded by sub-section 723(3) of the Corporations Act is conferred by paragraph 723(3)(b); (ii) the late lodgement of the Quotation Application will not otherwise affect that protection; (iii) the three month period prescribed by paragraph 723(3)(b) of the Corporations Act would otherwise have expired three months after 20 November 2003 (i.e. 20 February 2004); (d) at the time of issue of the Prospectus the Company's shares were suspended from trading and suspension was not in fact lifted until 19 December 2003, after lodgement of the Quotation Application…; and (e) given that the ASX has already accepted the Quotation Application and the Shares have been quoted and able to be traded on the ASX since 19 December 2003.' Rather there is more likely to be a materially adverse impact on the Company, its shareholders and creditors, if the order is not granted. The Blakiston affidavit describes the relevant considerations. They are that the Company has entered into an acquisition agreement for the purchase of a 12.59% interest in a Texas gas field and has raised approximately $4.1 million to that end. Shareholder approval to change the Company to a pure oil and gas company will be sought at a general meeting scheduled for 4 April 2005. Additionally the Company has raised $2.75 million by the issue of 13 095 238 convertible notes which will be redeemable unless the shareholders approve the resolutions to arise at the general meeting. Further, the Company has a current obligation to fund its pro rata share of the costs of drilling further development wells, amounting to A$1.1 million. If the relief is not granted, these commercial activities of the Company will be impeded by its inability to raise capital. There may also be loss of investor confidence, the Shares having risen from 1.8 cents in November 2004 to 7.5 cents on 24 March 2005. 28 This application has been made promptly by the Company after the discovery of the error. 29 This is not a case of blatant nor deliberate non-compliance; nor failure to be aware of and appreciate the step required to be taken. Mr Kenny's affidavit establishes that he, as the person responsible, was aware that the Quotation application was required to be made to the ASX within 7 days following the date of the Prospectus. In the circumstances of the Company he thought that an Appendix 3B was not required until confirmatory approval of re-quotation of existing shares. It is clear from his evidence that he made every endeavour to respond to the requirements of the ASX. It was not until 16 March 2005, as the result of a due diligence search by the plaintiff's solicitors, that he became aware of the breach. 30 Accordingly, the orders sought should be made. 31 In the circumstances and because no 'special' costs order was made in the Re Insurance Australia Group Ltd decision, and because Re Wave Capital Limited is distinguishable, there should be no order as to costs. I certify that the preceding thirty-(31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.