(a) Exercise of the Court's discretion
115 If the issue of the Disputed Somerton Securities contravened LR7.1, BAS submits that the Court should not exercise its discretion in favour of OBL.
116 Section 793C(2) of the Corporations Act provides:
(1) If a person who is under an obligation to comply with or enforce any of a licensed market's operating rules fails to meet that obligation, an application to the Court may be made by:
…
(d) a person aggrieved by the failure.
(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:
(a) the person against whom the order is sought; or
(b) if that person is a body corporate-the directors of the body corporate;
about compliance with, or enforcement of, the operating rules.
(3) For the purposes of this section, a body corporate that is, with its acquiescence, included in the official list of a licensed market, or an associate of such a body corporate, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the body corporate or associate.
…
(5) For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure.
(6) There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section.
117 The other provision is s 1101B(1)(d). It provides:
(1) The Court may make such order, or orders, as it thinks fit if:
…
(d) on the application of a person aggrieved by an alleged contravention by another person of subsection 798H(1) (complying with market integrity rules) or a provision of the operating rules, or the compensation rules (if any), of a licensed market, it appears to the Court that:
(i) the other person did contravene the provision; and
(ii) the applicant is aggrieved by the contravention.
However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person.
(2) For the purposes of paragraph (1)(d), if a body corporate contravenes a provision of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the licensed market is taken to be a person aggrieved by the contravention.
…
(Emphasis added.)
Sub-section (4) sets out some examples of orders the Court may make under s 1101B(1) of the Corporations Act.
118 Each of these sections gives the Court a discretion as to whether, and in what form, it will make orders to address a contravention of the Listing Rules. In s 1101B(1), the discretion is expressly limited by the requirement that the Court must be satisfied that the order sought would not unfairly prejudice any person. Similarly, the Court's power to order declaratory and other relief under ss 21 and 23 of the Federal Court of Australia Act 1976 (Cth) and/or the common law is also a matter of discretion.
119 What then should the Court do?
120 OBL submits that the Court should make the orders it seeks on two grounds - dilution of its shareholding (and the associated consequences that accompany that dilution) and deterrence (specific and general). BAS disagrees. BAS submits that the Court should decline to make any of the orders sought by OBL on six principal grounds:
1. OBL led no evidence of any detriment other than the dilution of its 19.9% proportionate voting stake in BAS to 17.38% after the placement of the Disputed Somerton Securities;
2. OBL's submissions ignore the fact that all shareholders are always exposed to the potential for dilution through a share issue of up to 15% of BAS' capital annually. That is, OBL's proportionate shareholding at all relevant times was legitimately able to be diluted from 19.9% to 17.78% by a placement;
3. OBL's position is undermined by the fact that OBL makes no complaint about Cooper's underwriting of the 2012 BAS Rights Issue;
4. any potential prejudice to OBL has already been adequately addressed by an undertaking given by BAS to the ASX;
5. the GMP Options were issued on 17 October 2011 and, therefore, absent the undertaking given by BAS to the ASX, from 17 October 2012 the GMP Options will no longer be relevant in calculating the permitted number of securities that can be issued under LR7.1. That is, absent the undertaking given by BAS to the ASX, on 18 October 2012 BAS will be free to issue another 10 million shares;
6. the detriment to BAS and its shareholders (including OBL) by the making of the declarations and orders far outweighs any incremental benefit to OBL.
121 In addition to those six principal grounds relevant to OBL's application to set aside the whole of the issue of the Disputed Somerton Securities, as well as its alternative claim to the extent of 10 million shares, BAS seeks to rely on the following five additional considerations in respect of OBL's application to set aside the whole of the issue of the Disputed Somerton Securities:
1. the orders sought go beyond what is reasonably necessary to address OBL's alleged detriment;
2. the orders sought will unfairly prejudice Somerton and Cooper. This contention is based on the assertion that absent the availability of the disputed 10 million securities, Cooper could have, and most likely would have, secured a stake of between 18.06% and 19.09% and that the orders sought will effectively strip from Cooper and Somerton rights in respect of their BAS shares that they were always entitled to have;
3. the orders sought will cause substantial financial and other difficulties for BAS because, among other things, they will require all consideration paid by Cooper for the Disputed Somerton Securities to be returned and an unwinding of the 2012 BAS Rights Issue;
4. alternatively, the orders sought by OBL are pointless because, even on OBL's LR7.1 case, BAS will be entitled to immediately place 48,205,942 of the 56,205,942 Disputed Somerton Securities with Somerton and the remaining 10 million shares on 18 October 2012. That is, the effect of the orders sought by OBL will be simply to impose unnecessary costs of first unwinding the placement and 2012 BAS Rights Issue, and then re-issuing the Disputed Somerton Securities; and
5. the orders are ostensibly founded on the proposition that no decision of the Board has been valid since at least March 2011, throwing into doubt not just the Placement Resolution but a myriad of other Board decisions, including ones that have benefited OBL itself.
122 There was a contravention of LR7.1 and BAS' Constitution in respect of 10 million of the Disputed Somerton Securities, namely the GMP Options. This proceeding was not commenced by the Australian Securities Commission: cf Australian Securities and Investments Commission v McDougall (2006) 57 ACSR 175 at [55]. However, it is a proceeding where there is a dispute between the parties about the proper operation of LR7.1 and the exceptions in LR7.2. A declaration, properly framed, is necessary to determine the parties' respective positions in relation to that disputed issue. Moreover, given the nature of the issue and the identity of the parties, it is in the public interest for the Court to make a declaration of contravention in a specified respect: Plaintiff M61/2010E v The Commonwealth (2010) 243 CLR 319 at [102]-[104] and AWB Ltd v Cole (No 6) (2006) 235 ALR 308 at [5] and [6]. The form of the declaration should identify with precision the nature and extent of the contravention: AWB at [5]. Accordingly, I would make a declaration in the following terms:
The First Defendant breached ASX Listing Rule 7.1 by issuing 10,000,000 more ordinary securities than it was entitled to issue on 13 August 2012 without the approval of its ordinary security holders.
123 The next issue is what further relief, if any, should be granted. OBL is an aggrieved person. It was entitled to commence these proceedings. It has succeeded in part. However, I would decline to grant OBL any further substantive relief. OBL's detriment was the dilution of its 19.9% proportionate voting stake in BAS to 17.38% after the placement of the Disputed Somerton Shares. However, as BAS submitted, having regard to the fact that 10 million more securities were issued than should in fact have been issued, it resulted in an illegitimate dilution of OBL's shareholding from 17.8% to 17.38%, less than half of one per cent.
124 Moreover, any potential prejudice to OBL has already been adequately addressed by an undertaking given by BAS to the ASX. The form of the undertaking was not in evidence. The only evidence before the Court was the ASX release: see [29]-[30] above.
125 Notwithstanding this gap in the evidence, it appears that BAS' undertaking to the ASX has the effect that for the period until 13 August 2013 it will reduce by 10 million the number of securities it is able to issue under LR7.1, other than an issue available as an exception under LR7.2. That undertaking is substantively and practically significant. It is substantively significant because it identifies the securities (both number and identity of security holder, namely the GMP Options) which were the subject of the contravention. It is practically significant because it effectively protects the further dilution of OBL's shareholding for a period beyond the expiry of the period specified in LR7.1. The GMP Options were issued on 17 October 2011 and, therefore, absent the undertaking given by BAS to the ASX, from 17 October 2012 the GMP Options would no longer be relevant in calculating the permitted number of securities that can be issued under LR7.1. That is, absent the undertaking given by BAS to the ASX, on 18 October 2012 BAS would be free to issue another 10 million shares. For those reasons, I would not exercise the discretion under ss 793C(2) and/or 1101B(1)(d) in favour of OBL to grant OBL any further of the relief that it seeks. OBL's two grounds have been addressed - its dilution and, to the extent relevant, deterrence. In the circumstances of this case, BAS' undertaking to the ASX addresses the question of OBL's dilution in a manner which is pragmatic, effective and equitable. The declaration addresses the need for the contravention to be recorded and, to the extent relevant, the question of deterrence.
126 I have not addressed the other grounds raised by BAS. In the circumstances, it is unnecessary. However, there is one aspect of BAS' submissions concerning the involvement of the ASX that should be addressed.
127 BAS relied on Re Delta Gold Ltd (2001) 40 ACSR 347 as authority for three propositions: (1) the Listing Rules are not a statute, (2) a breach of the Listing Rules is not an unlawful act, and (3) following from those two propositions, in a case where there is no doubt that the ASX knows about all of the facts and is not itself making any complaint or seeking to be heard, that is in itself a reason why the Court should stay its hand. I accept the first two propositions. I reject the third proposition. First, Delta Gold is not authority for the third proposition. Delta Gold considered LR10.8, which enabled an entity to seek the ASX's opinion on whether it needed approval to acquire or dispose of an asset. In such a case, Allsop J said at [58]:
I think the view of the ASX which has been taken would be a powerful consideration why a court would not exercise its discretion.
128 LR7.1 is in very different terms. It does not provide for an entity to seek the ASX's opinion. Second, the evidence does not support the proposition that the ASX knows about all of the facts and is not itself making any complaint or seeking to be heard. BAS has given the ASX an undertaking. As noted, the circumstances in which the BAS gave that undertaking and its precise terms were not in evidence.