Rupert Company Limited v Imperial One Limited & 1 Ors

CATCHWORDS : TRADE PRACTICES - misleading and deceptive conduct - Corporations Act s995 - underwritten issue of new unlisted options offered under prospectus ("July 2003 options") - July 2003 options issued on very favourable terms - options offered to registered holders of options expiring 30 September 1999 ("September 1999 options") (and as far as the appellant was concerned after its September 1999 options expired) to those who 'lodged a valid transfer' - whether first respondent aware of appellant's beneficial ownership of September 1999 options - what necessary for assignment in equity of options - whether appellant was sent prospectus - whether first respondent acted in misleading and deceptive fashion when it failed to enable appellant to take up options when it assisted others in comparable position to do so - failure to provide a prospectus and/or failing to provide (as others in like situation were provided) a special personalised acceptance form enabling appellant to take up offer - appellant complains of loss at having missed out on offer - appellant was not a registered holder but claims to have been entitled to be - appellant at all times employed a stockbroker - Should claim for damages have been dismissed - misleading and deceptive conduct based on what first respondent failed to do rather than what it did - no contravention by either first or second respondent of either s52 Trade Practices Act were that applicable or s995 of the Corporations Act if it were applicable. Conveyancing Act 1919 (NSW) s12 Corporations Act s995 LEGISLATION CITED : Trade Practices Act 1974 s51AF; s52 Supreme Court Act s101(2)(r) Supreme Court Rules Pt 51 r8 Green v Crusader Oil NL & Anor (1986) 10 ACLR 120 CASES CITED : Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No. 1) (1988) 79 ALR 83 Semrani v Manoun [2001] NSWCA 337 Re Tempo Securities Ltd (1997) 25 ACSR 528 RUPERT COMPANY LIMITED (Appellant) PARTIES : IMPERIAL ONE LIMITED (First Respondent) David Laurence HUGHES (Second Respondent) FILE NUMBER(S) : CA 40342/03 COUNSEL : P GRAHAM, QC (Appellant) T D CASTLE/ N J OWENS (Respondents) SOLICITORS : Ian Burnham Mitchell (Appellant) Atanaskovic Hartnell (Respondents)

LOWER COURT Supreme Court - Common Law Division JURISDICTION : LOWER COURT SC 20098/01 FILE NUMBER(S) : LOWER COURT Harrison M JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40342/03 SC 20098/01

GILES JA SANTOW JA McCLELLAN J

30 JULY 2004 RUPERT COMPANY LIMITED -v- IMPERIAL ONE LIMITED & 1 Ors Judgment 1 GILES JA: This is an appeal from a decision of Master Harrison dismissing a claim for damages for contravention of s 52 of the Trade Practices Act 1974 and s 995 of the Corporations Act. Each proscribes engaging in misleading or deceptive conduct or conduct likely to mislead or deceive ("misleading conduct"), in the case of s 995 in connection with the issue of securities. "Conduct" includes refraining from doing an act otherwise than inadvertently. A person who suffers loss or damages by contravening conduct may recover the amount of the loss or damages from the contravenor or a person involved in the contravention. The appellant ("Rupert") contended that the first respondent ("Imperial") engaged in misleading conduct in connection with the issue of options in Imperial; that the second respondent, the secretary of Imperial, was involved in the contravention; and that it suffered loss or damage by the contravention measured by the difference between the subscription price for the options and their value. 2 The Master considered that s 52 was not available to Rupert because any contravening conduct fell within the exemption s 51AF of the Trade Practices Act of conduct in relation to financial services. It is unnecessary to decide whether the exemption applied, and I would wish to leave it open, because it was common ground that s 995 was available to Rupert and that it would not be in any better position under s 52. 3 The Master considered that there had not been misleading conduct, and that in any event Imperial's conduct had not caused any loss to Rupert. 4 The Master heard the proceedings on referral by a judge in accordance with the Supreme Court Rules. Appeal therefore lay to this Court. Before the Master the appellant claimed damages of $370,000 plus interest. Late in the appeal it conceded that its damages could not exceed $60,000 plus interest. This should have been recognised at an earlier time, particularly when it was necessary for the appellant to provide an affidavit pursuant to Pt 51 r 8 of the Rules showing that the appeal involved at least $100,000 (see Supreme Court Act s 101(2)(r)). An affidavit was filed asserting an entitlement to $587,500. It is difficult to see how this could properly have been done. The respondents did not take any point, and in the circumstances I do no more than note what occurred with disapproval. 5 The facts are set out in detail in the reasons of Santow JA, which I have had the advantage of reading in draft. 6 The central events may be distilled to the following.

(1) New Golden Trade and Investments Ltd ("NGTI") and Imperial Mining (Fiji) Ltd ("Imperial Fiji") were respectively registered as the holders of 14,000,000 and 3,900,000 unlisted options issued by Imperial expiring on 30 September 1999 ("1999 options").

(2) Under an agreement made in 1996 in settlement of some disputes - (a) NGTI agreed to transfer 2,200,000 1999 options to Rupert; and (b) Imperial Fiji agreed to transfer a total of 2,600,000 1999 options to Messrs Alfred Lai, Tony Hope, Clement Wong and Geoff Northcote ("the Lai parties") and 300,000 1999 options to Mr Robert McLennan, the effective controller of Rupert, or his nominee.

(3) At some time Rupert must have been nominated by Mr McLennan. As at July 1998 Rupert was in possession of transfers of the 2,500,000 1999 options and the option certificates. Imperial knew of the agreements to transfer 1999 options to Rupert and that it was in possession of the transfers and option certificates.

(4) In early August 1999 Rupert provided the transfers (by then duly stamped) and the option certificates to its broker, Mr John Wardman. Mr Wardman asked Imperial what the procedure was for transferring the 1999 options to Rupert. He was told that the transfers would be registered if they and the option certificates were sent to Imperial.

(5) The documents were not sent to Imperial. The Master found that Mr Wardman made "a conscious commercial decision on the basis of the apparent worthlessness of the options as of August and September 1999".

(6) On 24 August 1999 Imperial announced a proposal to offer to holders of 1999 options other options maturing on 31 July 2003 ("2003 options").

(7) On 30 September 1999, when the 1999 options expired, NGTI and Imperial Fiji were still the registered holders of the 2,500,000 1999 options to be transferred to Rupert and the other 1999 options to be transferred to the Lai parties.

(8) On 18 October 1999 Imperial announced that a general meeting would be held on 9 November 1999 to vote on the proposal to offer the 2003 options to holders of the 1999 options. The announcement included that the "record date to determine entitlement" was 30 September 1999. Mr Wardman knew of the general meeting.

(9) On 9 November 1999 the proposal was approved at the general meeting. (10) Also on 9 November 1999 Mr Wardman sent Rupert's stamped transfers and the option certificates to Imperial under cover of a letter asking that it "[k]indly process the above transfers and advise me on 93382843 when certificates are available for collection". Mr Wardman's evidence was that this was an attempt to rectify the register. He gave no evidence that it was with a view to taking up 2003 options.

(11) Imperial did not register the transfers. Mr Wardman did not follow up the request that the transfers be registered, or contact Imperial at all until 29 November 1999.

(12) After the general meeting the Lai parties told Mr Bruce McLeod, a director of both Imperial and Imperial Fiji, that they held 1999 options still in the name of Imperial Fiji and wanted to take up the offer of 2003 options, and asked how they could do so. Mr McLeod told them to send a cheque to him care of Imperial Fiji, and said that Imperial Fiji would complete the applications on their behalves and would request that the options be issued in their names.

(13) On 17 November 1999 Imperial issued a prospectus for the 2003 options. It included an application form expressed as acceptance of the offer of the options. The closing date for acceptance was 30 November 1999. The prospectus was not sent to Rupert. The Master found that Mr Wardman knew of the prospectus and its contents and told Mr McLennan of it, and "may well have obtained a copy of it".

(14) The prospectus offered 2003 options to holders of 1999 options as at 30 September 1999. The application form provided for acceptance by a person registered as at 30 September 1999 "or having lodged a valid transfer or otherwise being entitled as at that time to be registered as Option holder in the Company".

(15) The Lai parties sent their cheques to Mr McLeod. Mr McLeod decided to by-pass having Imperial Fiji complete application forms, and caused Imperial to prepare application forms for 2003 options in the names of the Lai parties. On 30 November 1999 2003 options were issued to the Lai parties.

(16) On 29 November and 1 December 1999 Mr Wardman telephoned Imperial and left messages asking that he be telephoned concerning registration of Rupert's options. He did not otherwise assert that Rupert was entitled to take up 2003 options.

(17) Thereafter Rupert asserted that it had been entitled to have 2003 options issued to it, although only in February 2000 did it become insistent.

Misleading conduct 7 Rupert's pleaded case was that it was eligible to accept or cause to be accepted an offer of 2003 options; that Imperial was required to send the prospectus and application form to it; that Imperial's failure to send to it the prospectus and application form was misleading conduct within ss 52 and 995; that it relied on Imperial to send the prospectus and application form to it in order to apply for 2003 options; and that it thereby suffered loss and damage. 8 On appeal, and it seems also before the Master, Rupert accepted that Imperial was not required to send the prospectus and application form to it: indeed, at least on appeal its case included that it was not eligible to accept the offer of 2003 options. Before the Master Rupert submitted that there was nonetheless misleading conduct in Imperial's failure to send the prospectus and application form to it. Its case appears to have been that, being prepared to prepare and process application forms for the Lai parties notwithstanding that they were not holders of 1999 options, Imperial should have sent the documents to Rupert as an indication that it was prepared to issue options to it notwithstanding that it was not the holder of 1999 options. This was something of a departure from the pleaded case, over Imperial's protests. In the appeal failure to send the prospectus and application form all but disappeared. The argument was put in varying language, but was in essence that Imperial had given the Lai parties preferential treatment, because it had permitted the Lai parties to accept the offer of 2003 options when those parties were not eligible to accept the offer, but had not made known to Rupert that it would do the same for Rupert. 9 The respondents further protested on appeal that Rupert should not be permitted to depart from its pleaded case or the case it had put before the Master. Preferential treatment to the Lai parties was in play before the Master, and the pleaded case was never strictly adhered to; since in my opinion Rupert's claim fails in any event, I think it better to consider the claim on its merits rather than debate whether and where, as a matter of degree, the evolution of the way the claim was put took it past proper forensic bounds. 10 I have referred to Rupert's case including that it was not eligible to accept the offer of 2003 options. The respondents submitted that, although Rupert was not the holder of the 2,500,000 1999 options and thus not an offeree under the prospectus, it fell within the description in the application form of a person entitled to be registered as holder and was thus able to accept the offer. I do not think it matters whether those words in the application form extended to Rupert. Rupert and the Lai parties were in the same position so far as they could require the holder of the 1999 options, NGTI or Imperial Fiji as the case may have been, to take up 2003 options. Rupert had sent its transfers and option certificates to Imperial for registration, but it had done so after 30 September 1999 and as at 30 September 1999 was just as much or just as little a person entitled to be registered as holder as were the Lai parties. Rupert and the Lai parties were equally eligible or ineligible to accept the offer of 2003 options. 11 As was properly acknowledged, Imperial was obliged to send the prospectus and application form only to holders of 1999 options as at 30 September 1999. It was not for it to seek out persons who fell within the description of persons entitled to be registered as holders as at 30 September 1999, or persons who because of arrangements with holders could require the holders to take up 2003 options for their benefit. If Rupert, the Lai parties, or any other such person was eligible to accept the offer of 2003 options or could require a holder to accept the offer, it was for that person to act in its own interests. 12 The Lai parties did so. They made known to Imperial Fiji that they wanted to accept the offer, and steps were then taken whereby options were issued to them. The steps involved a short cut because of Mr McLeod's dual capacity, but that was machinery. 13 Rupert did not. It sent its transfers and option certificates to Imperial for registration of the transfers, but did no more. Sending the transfers and option certificates for registration of the transfers could in the circumstances have been seen as a preliminary to accepting the offer of 2003 options, although Mr Wardman did not suggest that it was. But it was not for Imperial to follow it up and invite Rupert to cause NGTI and Imperial Fiji to apply for 2003 options on its behalf, or invite Rupert to obtain an application form or send its money in and ask that Imperial prepare an application form on its behalf. Rupert was represented by an experienced broker, and could be expected to look after its own interests. 14 Where in Imperial's conduct was there misleading conduct? The Master's answer was encapsulated in the sentences, "Silence or non-disclosure will not, without more, amount to misleading or deceptive conduct. The plaintiff had notice of the necessary documentation and its contents to act decisively and the impugned conduct of the defendants was inconsequential". The answer was correct. On the evidence accepted by the Master there was not preferential treatment, because the Lai parties acted in their own interests but Rupert did not. It was not incumbent on Imperial to tell Rupert what the Lai parties had done or that it could do the same, and I do not think Imperial engaged in misleading conduct. 15 Two aspects of Rupert's submissions should be noted. 16 First, at times it seemed to be suggested that, despite being ineligible to accept the offer of 2003 options, the Lai parties were wrongly permitted by Imperial to do so by an illicit arrangement. Permitting 2003 options to be taken up by persons not entitled to accept the offer of the options would disadvantage the underwriter and sub-underwriters of the issue. The factual answer is that the Lai parties by the short cut were taking up the entitlement of Imperial Fiji; it is debateable whether that was an illicit arrangement. But if it was, the submission involved that Imperial should have told Rupert that Imperial would, if it asked, make an equally illicit arrangement with Rupert. The underwriters and sub-underwriters of the issue would be further disadvantaged. Failing to offer to subvert the position of the underwriter and sub-underwriters does not have a meritorious claim to be misleading conduct. 17 Secondly, there was in the submissions more than a flavour that Mr McLeod was concerned to favour the Lai parties so that they could make money out of the issue, because of underlying business alliances, but was averse to giving the same opportunity to Mr McLennan. If so, that would not improve Rupert's case. It would not provide a reason for Imperial making known to Rupert that it would, if desired, treat Rupert in the same way as the Lai parties, or for Mr McLennan expecting that Imperial would do so. If Mr McLennan was aware of underlying business alliances between Mr McLeod and the Lai parties, even less would he expect to have Imperial tell him what he might do in Rupert's interests.

Causation of loss or damage 18 Let it be assumed that in mid-November 1999 Imperial told Rupert that, if it wished to take up 2003 options, it should send in its money and Imperial would arrange for application forms to be completed in its name and for the options to be issued. Would Rupert have acted upon that invitation? 19 The Master found - "In cross-examination, McLennan gave the impression that he was almost disinterested in the affairs of Imperial (t 37-42) but this was not the case. Wardman, acting at McLennan's behest, conducted significant trade in Imperial through August of 1999 to February 2000. McLennan must have watched Imperial's stock prices closely. For example, the purchase of 80,000 shares at 8.8 cents each on 19 November 1999 by McLennan on behalf of Rupert was the first time he actually bought Imperial stock (t 41.33-36). Prior to that date, McLennan had only sold Imperial stock. It is significant that this occurred soon after the Imperial general meeting on 9 November 1999 and the issue of the prospectus on 17 November 1999. On 1 December 2000, McLennan sold the parcel of 80,000 shares for 9.5 cents each (Ex A p 336). By buying shares at the time of the Imperial general meeting and the issue of the prospectus, and then selling immediately after the close of the prospectus on November 30 1999, McLennan was able to make a small but tidy profit (t 42.50-52). This activity is consistent with him being aware of the options offer." 20 She later said - "83 As previously stated, it is my view that Wardman and McLennan paid close attention to Imperial's affairs at this time and that on the balance of probabilities Wardman had seen Imperial's prospectus, and was aware of its contents. McLennan knew of the offer either by means of his regular contact with Wardman or by his own research. McLennan's trading in Imperial is consistent with his being appraised of the options offer. Given this information, either Wardman or McLennan could have taken steps to obtain the prospectus with attached entitlement form and press ahead with efforts to ensure their interests were protected. Instead, between 17 November 1999 and the expiration of the offer on 30 November 1999 they did nothing. At the same time, Messrs Lai, Hope, Wong and Northcote, took active steps to transfer and register their options, albeit that they were ably assisted in this endeavour by McLeod." 21 Not until the end of February 2000, after the traded prices of Imperial shares and options had markedly increased, did Rupert seriously press an entitlement to 2003 options. The Master said - "It is my view that it was only when the value of options recognisably increased as of February 2000 that Wardman and McLennan focused their attention on securing the registration of the options by threatening legal action. There is no causal connection between the plaintiff's failure to obtain the 2003 options and the conduct of the defendants. The possibility that the plaintiff might have been misled by the defendants' conduct is remote." 22 The Master's conclusion as to causation was well open to her. Mr Wardman and Mr McLennan knew of the proposal to issue the options and of the prospectus. It was not suggested they were deterred from applying for 2003 options by doubt over eligibility to accept the offer. They were watching closely the affairs of Imperial, and in the latter part of November 1999 the 2003 options had a market value ten times their issue price. It beggars belief that they would not have formed views upon the value to Rupert of taking up 2003 options. The Master's finding, effectively that it would not have made any difference if Imperial had acted as Rupert now says it should have, can not be assailed.

The result 23 It is not necessary to consider whether the second respondent was involved in any contravention: the claim against him had its own problems. In my opinion, the appeal should be dismissed with costs. 24 SANTOW JA: OVERVIEW This is a claim concerning an underwritten issue of new unlisted options ("the July 2003 options") offered under a prospectus. It is brought against the issuer Imperial One Limited ("Imperial") for misleading and deceptive conduct, based upon what Imperial failed to do rather than what it did. 25 That claim is made under the applicable statutory provision (s52 of the Trade Practices Act 1974 (Cth) or s995 of the Corporations Act). These options were so offered to those who were registered as holders of options expiring 30 September 1999 ("the September 1999 options"). The offering was on very favourable terms, namely, 2/10ths of a cent per option compared to a price between September 1999 to January 2000 of around two to three cents per option, spiking in February 2000 at around ten cents per option (Blue, 546-8). However, the appellant company Rupert Company Limited ("Rupert") complains about the loss it suffered from having missed out. It was not at the time of the offer a registered holder but claims to have been entitled to be. As against the holder, it was so entitled, but, it appears, not against Imperial. Rupert contends that it suffered loss by reason of misleading and deceptive conduct on the part of Imperial. This was because Imperial failed to do that which was necessary to enable Rupert to take up those options, when it assisted others in a comparable position to do so. Rupert throughout employed stockbroker Hartley Poynton (John Wardman) to act on its behalf. 26 The actual registered holders holding on behalf of Rupert did receive a Prospectus. But they did not, for whatever reason, take up their entitlement either, so that it eventually went to the underwriters. The offer was, according to the acceptance form, available for acceptance by not only registered holders but also those who had "lodged a valid transfer" (that only occurred so far as the appellant was concerned after the September 1999 options expired) or "otherwise being entitled as at that time to be registered as Option-holder in the Company". 27 Rupert claims damages from the issuer, Imperial, for alleged misleading and deceptive conduct by it. Rupert also claims against Imperial's company secretary David Hughes by reason of what is said to be the latter's knowing involvement in that conduct. This was said to be essentially conduct (a) in failing to advise Rupert about the availability to it of the Prospectus enabling it to participate in the option issue, and/or (b) in failing to provide a special personalised acceptance form enabling Rupert to take up the offer. It was put by Rupert on appeal that it was not entitled to accept the offer under the Prospectus unless it was provided with such a special personalised acceptance form; that it should have been, as others in like position were so assisted, as I explain. The respondent took issue with what it said was a shift in the way the appellant now put its case. This was in contending on appeal that Rupert was not otherwise entitled to accept the Prospectus offer and had no right in law to be sent a prospectus and entitlement form for the July 2003 options. 28 The two registered holders holding September 1999 options on behalf of Rupert were a British Virgin Islands company New Golden Trade and Investments Ltd ("NGTI") as to 2,200,000 options and Imperial Mining (Fiji) Limited ("Fiji") as to 300,000 options; in aggregate 2,500,000 September 1999 options. According to Rupert, Imperial was aware of Rupert's beneficial ownership of these September 1999 options, prior to their expiry. 29 That conduct complained of was said to be in sharp contrast to what was done by Imperial for a group of other investors in a like position to Rupert (Messrs Alfred Lai, Anthony Hope, Clement Wong and Geoff Northcote). They were, according to the appellant, likewise strictly ineligible to participate in the offering yet were allowed to do so. They were provided with personalised share acceptance forms enabling them to take up their allocation of July 2003 options. Whereas, what Rupert claimed as its prospective entitlement, was instead taken up by the underwriters, to their substantial advantage and Rupert's consequent loss. That argument seemed to depend on this proposition. A party not entitled to participate in an issue was nonetheless entitled to complain if someone else in a similar position were permitted to participate. One difficulty in this appeal was explaining why; particularly as those so assisted actually asked for that assistance. 30 If the appellant succeeds, this Court is asked to quantify damages rather than remit the matter back. There is agreement that damages would not exceed $60,000 plus interest. There is dispute as to whether damages should be discounted to take account of: (a) how many July 2003 options Rupert would have sold, and (b) when Rupert would have sold the July 2003 options. 31 Master Harrison in her judgment at trial concluded that, even if there were misleading and deceptive conduct within the relevant statute, it was not such as to have misled Rupert, acting through its principal beneficial shareholder, Robert McLennan, nor his broker, Mr Wardman. Nor was it such as to have led to its loss, there being no reliance on the relevant conduct. Master Harrison concluded that each of Mr McLennan and Mr Wardman must be taken to have been aware of the Prospectus and the proposed issue, so as to have been able in sufficient time to get registered as an option holder, or ask for the Prospectus or cause NGTI and Fiji to take up their allocations. They did none of these things when they could have, as Master Harrison found, have caused Rupert to act decisively and in time to obtain the opportunity to take up the July 2003 options. It was only when the July 2003 options had gone up further in value that it reached the point where, belatedly, they chose to act having earlier, according to the trial judge, been more interested in trading in Imperial's shares. Master Harrison concluded that there could therefore be no causal connection between Rupert's failure to obtain the July 2003 options with its consequent loss and the alleged conduct of the respondents. 32 There is an issue as to whether any contravention for misleading and deceptive conduct, if made out, is of s52 of the Trade Practices Act or s995 of the Corporations Act. However, it was recognised that nothing hangs on that, as s995 is concededly capable of application. 33 What follows is an essentially uncontroversial statement of salient facts, supplemented by reference to findings of the trial judge and some observations that I make as to those findings.

SALIENT FACTS 34 The plaintiff company and now appellant Rupert is a company incorporated in Fiji. Mr Ian Mitchell, a Sydney solicitor, is one of its two directors. The two shareholders, one of whom is also the other director of Rupert, are residents of Fiji. The two shareholders hold their shares on trust for Robert McLennan, a resident of Sydney. Mr McLennan also has a residence in Fiji. Mr Mitchell at all times in acting as a director of Rupert, acted in accordance with the instructions of Mr McLennan. 35 The first defendant and now respondent Imperial has undergone a number of previous name changes. It is a listed Australian company with interests in the period from 1996 in mineral exploration and since late 1999, technology. Imperial was formerly known as Jason Mining NL. The directors of Imperial at the relevant times were Messrs Bruce McLeod, David Sutton, Kevin Torpey and Anthony Hope. Mr McLeod had a number of different roles. These were in particular chairman of Imperial, director of its associated company Imperial Mining (Fiji) NL ("Fiji") chief executive and shareholder in Hudson Investment Group Limited, parent of underwriter of the July 2003 option issue and agent for the original principal allottee of the September 1999 options, a British Virgin Islands company New Golden Trade & investments Limited ("NGTI"). 36 Imperial has not only had shares listed on the Australian Stock Exchange ("ASX"), but from time to time has issued options to acquire shares, some of which have been listed on ASX. It also had issued the unlisted options (the September 1999 options) which expired on 30 September 1999. 37 The second defendant, David Hughes, was at all times during the period the company secretary of Imperial. 38 On 19 April 1996, an agreement was entered into between a number of parties including Messrs Clement Wong, Bruce McLeod, Alfred Lai, Robert McLennan and Rupert, which concerned the settlement of various disputes. Pursuant to that agreement and in return for various releases, NGTI agreed to transfer 2.2 million shares and 2.2 million options in Imperial to Rupert, and Fiji agreed to transfer 300,000 options in Imperial to Mr McLennan or his nominee. Mr McLennan decided that these options should be transferred to Rupert. These transfers could not take effect immediately because the shares and the options were required to be held in escrow for two years pursuant to the ASX Listing Rules. The reason for this is not relevant to the present proceedings. 39 On 21 May 1996 Imperial issued Share and Option Certificates to NGTI and Fiji. These included a certificate for the 2.2 million options (the September 1999 options) to be transferred from NGTI to Rupert, the 2.2 million shares to be transferred from NGTI to Rupert and a certificate for the options to be transferred from Fiji to Rupert. Each of these options were the unlisted September 1999 options. These option and share certificates were held in escrow by ANZ from mid 1996 until mid 1998, as explained below. 40 On 8 July 1996, the minutes of a meeting of the directors of Fiji recorded the transfer of these Imperial September 1999 options to Messrs Geoff Northcote, Clement Wong, Alfred Lai, Tony Hope, Bruce McLeod, Robert McLennan and Project and General Finance Limited. 41 On 16 October 1996, Rupert had been provided with executed memoranda of transfers for the 2.2 million shares, the 2.2 million options and the 300,000 options, together with other documents required by the April 1996 agreement. These documents included irrevocable directions to ANZ requiring it to deliver up the original certificates being held by it in escrow to Rupert's then solicitors, Casula and Kelso. 42 In mid 1998, when the escrow period expired, the original share and option certificates were delivered by the ANZ Bank to Imperial. By way of letter dated 9 July 1998, Imperial forwarded the share certificates and option certificates to Rupert's solicitors (Casula & Kelso) noting they already had the transfers. 43 In early August 1999, Robert McLennan made contact with John Wardman, a Senior Investment Advisor with Hartley Poynton, an investment advisory firm and stockbroker located in Sydney. Mr McLennan told Mr Wardman that he wanted to sell some of Rupert's shares and options in Imperial. 44 Ian Mitchell, on Mr McLennan's instructions, confirmed Rupert's instructions by letters to Mr Wardman on 3, 4 and 6 August 1999, that he was to sell 700,000 shares and 2.5 million options held by Rupert in Imperial. 45 On or about 6 August 1999, the share and option certificates and the executed transfers were provided to Ian Mitchell and duly stamped, the stamp duty being of nominal amount. Mr Mitchell then provided these documents to Mr Wardman. 46 On 9 August 1999, John Wardman sold a parcel of 300,000 Imperial shares for Rupert on ASX as per his instructions. He also sold 220,393 listed Imperial options, in the erroneous belief that the options held by Rupert were listed option. On 11 August 1999 the same number of options were purchased to cancel the trade. 47 Mr Wardman telephoned David Hughes, secretary of Imperial, shortly after 6 August 1999 enquiring about the procedure for transferring the options. Mr Hughes told Mr Wardman that the transfers would be registered if the transfers and certificates were sent to him. I observe that Mr Wardman failed to do so before the September 1999 options expired on 30 September 1999. There is no evidence that Robert McLennan sought to bring this about before that date. After that date there was nothing to transfer any more. 48 At about this time in mid-August, John Wardman contacted both Robert McLennan and Ian Mitchell to advise them that the options held by Rupert were not tradeable. Mr Mitchell then rang Mr Hughes to enquire about the options. Mr Hughes told him that he should wait because "something" was about to happen to the options. Mr Hughes did not tell Mr Mitchell what that "something" was to be. 49 Following his conversation with Mr Hughes prior to 24 August 1999, Mr Mitchell played no further role in relation to the Rupert shares or options until 6 December 1999, other than to send a letter to Imperial on 6 October 1999. Mr Mitchell said that he was not instructed by Mr McLennan to do anything further in relation to registration of the shares or options, and that he understood all matters associated with the shares and the options were being arranged directly by Mr McLennan with Mr Wardman during this time. Mr Mitchell received no information about Imperial during this period, nor did he seek to inform himself about any such matters during this period. 50 On 13 August 1999, John Wardman sold 134,405 Imperial shares for Rupert. 51 On 16 August 1999, Mr Wardman sold 65,595 Imperial shares for Rupert. 52 On 24 August 1999 at 10.33 am Imperial issued an announcement to the market about a proposed placement and option issue to existing 1999 option holders. The announcement said as to this (blue, 369) that "[T]he directors also propose to offer 1990 Option-holders, subject to shareholder approval, an offer of options on the same terms and conditions as the recent 2003 Options issued."

I observe that there was still time thereafter to register the transfers of the September 1999 options before they expired on 30 September 1999. It would be expected that Mr Wardman, as broker with responsibility for these securities, would either have been aware of that announcement or at least had ready means to find out. That was an inference drawn by Master Harrison in relation to the prospectus ([43-5], [66], [83-5] quoted below) and ought equally to be applicable to this public announcement. 53 On 27 August 1999, Mr Wardman sold a further 200,000 Imperial shares for Rupert. 54 On 30 September 1999 the September 1999 options expired, still with the transfers unregistered. 55 As at 30 September 1999, the Option Register in respect of the September 1999 options showed only two entities registered as holders of those options namely NGTI and Fiji. 56 On 6 October 1999 Mr Mitchell sent a letter to Imperial on behalf of Rupert directing that further correspondence in relation to its holdings in Imperial be sent to John Wardman. That letter was signed by Ian Mitchell, as company secretary. It concluded as follows: "Mr Wardman is further authorised to collect any re-issued certificates and notices in relation to this Company's holding of shares and options in Imperial Mining."

Mr Mitchell was asked by Mr McLennan to send that letter to Imperial, but they had no discussion about the registration of the transfers for the September 1999 options, or the expiry of these options. 57 On 8 October 1999, Imperial issued an announcement to ASX enclosing a Notice of General Meeting for 9 November 1999 and Explanatory Note. One of the resolutions to be proposed at that meeting was for the issue of the July 2003 options to the holders of the September 1999 options. Mr Wardman says that he did not receive a copy of that notice of meeting, until he made a request for it on 22 October 1999. Master Harrison rejected this claim, holding that when he did receive it: "29 … Wardman probably sent this document to McLennan (t 111.5). Wardman does not know whether he read it or not (t 118.5, 120.45) but he presumed that he knew that the meeting was on when he delivered the letter (t 121.25)."

The Master then later stated explicitly her finding that Mr Wardman knew the meeting was on [emphasis added]: "33 On this same day, namely 9 November 1999, Wardman, whom I find knew the meeting was on , wrote to Imperial …" [emphasis added] 58 On 8 October 1999, Imperial sent to ASX and released to the market an Appendix 3B Announcement in relation to the July 2003 options. That announcement included details of the issue of the July 2003 options to the existing September 1999 option-holders. Item 13 of that announcement includes the statement that the "record date to determine entitlements" was the "1999 Option expiry date" being 30 September 1999. 59 On 13 October 1999, Imperial sent to ASX and released to the market a letter in the following terms: "Please be advised that none of the 17,900,000 unquoted options exercisable at 20 cents prior to 30 September 1999 were exercised by their expiry date and as a consequence have lapsed." 60 On 8 November 1999, Imperial entered into an underwriting agreement with Hudson Securities Pty Limited, pursuant to which Hudson Securities agreed to acquire any shortfall in the offer of the July 2003 options. 61 The General Meeting of Imperial took place on 9 November 1999. 62 Resolution 6 passed at the General Meeting on 9 November 1999 was in the following terms: "That the allotment and issue by the company of 45,997,511 Options at an issue price of $0.002 each exercisable at 20c prior to 31 July 2003 to the non-related holders of existing Options expiring 30 September 1999 and 31 October 1999 on a one for one basis is hereby approved." 63 The Explanatory Notes to the Notice of Meeting in relation to resolution 6 provided further information about the September 1999 options as follows: "Directors are seeking shareholders approval to place up to 51,322,511 "2003 Options" on a one for one basis to holders of the following unexercised 1999 Options at their respective expiry date: .17,900,000 options exercisable at 20 cents prior to 30 September 1999 ...

The Company will issue a prospectus in accordance with the requirements under the Corporations Law as soon practical after 31 October 1999. The "2003 Options" will be issued and allotted in accordance with the prospectus, such date to be no later than one month after the date of the meeting. It is proposed that the issue of the "2003 Options" will be underwritten by Hudson Securities Pty Limited for a fee of $5,132.25." 64 On 9 November 1999 also, John Wardman sent a letter to Imperial enclosing the stamped transfers and certificates for Rupert's September 1999 options, together with a copy of the letter from Rupert to Imperial dated 6 October 1999 which permitted Mr Wardman to collect copies of any re-issued option certificates. It required that the secretary "Kindly process the above transfers and advice … when certificates are available for collection". By process, it clearly meant register Rupert as holder of the (now expired) September 1999 options. That never happened. 65 On 17 November 1999 Imperial issued a prospectus for the July 2003 options. A copy of that prospectus was sent to ASX for release to the market. No Prospectus was sent to Rupert, or to Mr Wardman. Notwithstanding this fact, Master Harrison concluded that both Rupert and Mr Wardman did in fact have knowledge of the Prospectus, her findings at [43] to [45] extracted below: "[43] Both Wardman and McLennan claim not to have received the Imperial prospectus. Yet during cross-examination, it was put to Wardman that he was aware of the prospectus on 17 November 1999 or thereafter in November 1999 to which he replied: "that could be the case, yes" (transcript p 129.24-27). Additionally, Wardman was unable to rule out the possibility that the prospectus was available to him to retrieve from the ASX information system and that he could of reviewed it by that means: transcript p128.53-57. Failing that, he admitted that, at the least, the existence of the prospectus was disclosed through the ASX information system.

[44] McLennan stated that he may have first seen the prospectus early in 2000 (transcript p 40.31-34) and that he believed Wardman had not seen it prior to 30 November 1999. In cross-examination, McLennan gave the impression that he was almost disinterested in the affairs of Imperial (transcript p 37-42) but this was not the case. Wardman, acting at McLennan's behest, conducted significant trade in Imperial through August of 1999 to February 2000. McLennan must have watched Imperial's stock prices closely. For example, the purchase of 80,000 shares at 8.8c each on 19 November 1999 by McLennan on behalf of Rupert was the first time he actually bought Imperial stock: transcript p 41.33-36. Prior to that date, McLennan had only sold Imperial stock. It is significant that this occurred soon after the Imperial general meeting on 9 November 1999 and the issue of the prospectus on 17 November 1999. On 1 December 2000, McLennan sold the parcel of 80,000 shares for 9.5c each: Ex A p336. By buying shares at the time of the Imperial general meeting and the issue of the prospectus, and then selling immediately after the close of the prospectus on 30 November 1999, McLennan was able to make a small but tidy profit: transcript p42.50-52. This activity is consistent with him being aware of the options offer.

[45] I find, on the balance of probabilities, that Wardman knew about the prospectus and its contents and probably informed McLennan of it. He may well have obtained a copy of it. If Wardman did not obtain a copy of the prospectus, he had the knowledge of its existence and the means to act to secure a copy of it. A copy of the entitlement and acceptance form which was attached and Wardman with his experience would have expected to find such a document attached to the prospectus." 66 I should, for completeness quote [83] and [85] of Master Harrison's judgment: "[83] As previously stated, it is my view that Wardman and McLennan paid close attention to Imperial's affairs at this time and that on the balance of probabilities Wardman had seen Imperial's prospectus, and was aware of its contents. McLennan knew of the offer either by means of his regular contact with Wardman or by his own research. McLennan's trading in Imperial is consistent with his being appraised of the options offer. Given this information, either Wardman or McLennan could have taken steps to obtain the prospectus with attached entitlement form and press ahead with efforts to ensure their interests were protected. Instead, between 17 November 1999 and the expiration of the offer on 30 November 1999 they did nothing. At the same time, Messrs Lai, Hope, Wong and Northcote, took active steps to transfer and register their options, albeit that they were ably assisted in this endeavour by McLeod.

[85] From the telephone conversations that the second defendant, Hughes, had with Mitchell on 6 December 1999, it is apparent that Hughes was aware of the plaintiff's interest, but the offer to take up the 2003 options had already expired as of 30 November 1999. As of 9 November 1999, Wardman on behalf of the plaintiff had lodged options certificates and standard transfers with stamp duty paid. However, almost 3 months earlier Mr Hughes had told Wardman what he had to do to register the options prior to the expiry date. After that he did not make any further contact with Hughes until he left messages for him on 29 November 1999 and 1 December 1999; the day before and the day after the offer closed. His actions on behalf of Rupert were too little and too late." 67 The closing date of the offer was 30 November 1999. The prospectus stated the offer price at 2 cents per option, as follows: "Pursuant to the Prospectus the Company is offering one new 2003 Option for every Unquoted Option and 1999 Option held as at 30 September 1999 and 31 October 1999 respectively at an issue price of $0.002 per new 2003 Option, payable in full on application, to raise up to $102,645.02 before the costs of the Issue." 68 On 19 November 1999, Mr Wardman purchased 80,000 Imperial shares on behalf of Rupert. 69 On or about 30 November 1999, options were issued to Messrs Lai, Wong, Hope and Northcote in the number according to the Fiji minutes. 70 On 1 December 1999, Mr Wardman sold 80,000 Imperial shares for Rupert. 71 The "Unquoted Option" was a reference to the options expiring on 30 September 1999. The prospectus also defines "Acceptance Form" as meaning the acceptance form attached to the prospectus. That form contains the following statement of acceptance: "I/We, being registered as the holder of Unquoted Options and/or 1999 Options as at 30 September 1999 and 31 October 1999 respectively or having lodged a valid transfer or otherwise being entitled as at that time to be registered as Option holder in the Company HEREBY ACCEPT the undermentioned new IMP Options at $0.002 per share" 72 Mr Wardman's electronic diary records that he apparently made a call to Imperial and left a message at 15.02 on 29 November. It also records that he made a follow up call on 1 December 1999 and was told that Mr Hughes would call him back. Master Harrison's finding concerning the unreliability of his electronic diary is found at [65] which should be read with her conclusion as to why he had not registered the September 1999 options prior to their expiry date (at [66]. I quote these below: "[65] There were also irreconcilable inconsistencies in Wardman's electronic diary entries. For instance, it was clear from client transactions printed out by Hartley Poynton, Wardman's employer, that he had conducted a sale and buyback of Imperial options after he received clearance from the company's Perth office between 9 and 12 August 1999. However, Wardman's diary recorded this as occurring on 24 August 1999. When it was put to him that his diary was unreliable and that he had corrected it at some stage after the events in question Wardman had no satisfactory explanation: transcript pp 70.25-71.57. Other details had also either been deleted from (transcript p72.43-46) or added to Wardman's electronic diary entries (transcript pp 75, 78-9) and for these inconsistencies he either had no explanation or could only affirm that an alteration had in fact been made (transcript p 74.14-34).

[66] Importantly, when Wardman was asked why he had not registered the 30 September 1999 options prior to their expiry date when told to by Hughes at that time he said: "I am not sure, I don't have an answer for that. But the options as I say at that time at 30 September 1999 were worthless because you would not pay 20 cents to turn them into a share": transcript p102.41-44. It is my view that Wardman therefore made a conscious commercial decision on the basis of apparent worthlessness of the options as of August and September 1999 not to register the options. Earlier, I made a finding that Wardman was aware of the issue of the prospectus. He would have known that this prospectus contained details of Imperial's proposal to issue July 2003 options and that the application form to obtain those options was attached to the prospectus." 73 I observe that from 24 August 1999, when Imperial made its announcement about a proposed placement and option issue to existing September 1999 option-holders, it could no longer be said that the September 1999 options were worthless, and Mr Wardman should have known this. 74 On 6 December 1999 Mr Hughes had telephone discussions with both Mr Wardman and Mr Mitchell about the July 2003 options. 75 After Mr Wardman has spoken to Mr Hughes, he had a discussion with Mr Mitchell. He told Mr Mitchell that he was having difficulty in obtaining the July 2003 options. This was the first conversation between Mr Wardman and Mr Hughes about Rupert's shares or options in Imperial since August 1999. Mr Mitchell decided to contact Mr Hughes directly. Mr Mitchell says that Mr Hughes told him to send a strong letter to Imperial so that the matter could be taken up with the underwriter. According to Mr Mitchell, Mr Hughes said that Imperial did not mind, but that the underwriter was claiming an entitlement to the options. 76 After his conversation with Mr Hughes on 6 December 1999, Mr Mitchell rang Mr Wardman and told him about that conversation. He asked Mr Wardman to send him "the paperwork" in relation to the matter, so that he could draft a letter to Imperial as Mr Hughes had suggested. Mr Mitchell wrote to Imperial on 29 February 2000. Mr Mitchell agreed it was likely that he wrote that letter immediately after receipt of "the paperwork" from Mr Wardman. That is, Mr Wardman did not forward "the paperwork" to Mr Mitchell until shortly before 29 February 2000. 77 On 6 December 1999 also Mr Hughes sent a letter to Hudson Securities Pty Limited, the underwriter in respect of the July 2003 options, giving notice of the shortfall and seeking payment of that shortfall for the issue of options from Hudson Securities Pty Limited. Hudson Securities in turn gave notice of the shortfall to three sub-underwriters, Semeta Pty Limited, Eastern and Pacific Capital Pty Limited and Imperial Investments Pty Limited. 78 On 8 December 1999, Imperial wrote to National Registry Services Pty Limited about the registration of the options to be taken up under the underwriting arrangements. 79 On 9 December 1999, Imperial sent a letter to ASX for release to the market stating details of the placement of the July 2003 options. That letter recorded that Imperial had received valid acceptances for 52.03% of the total placement, and that the underwriter had taken up all the shortfall of the issue. 80 Mr Wardman's electronic diary records (but see earlier finding, which is not challenged, as to its lack of reliability) that he made a series of telephone calls to Imperial on 17, 20, 22 and 30 December 1999 and 5 January 2000 and left messages for Mr Hughes to call him. 81 On 11 January 2000, Mr Wardman had a telephone conversation with Mr Hughes to the following effect: Wardman: "What is going on? I have not heard from you regarding the 2003 options for my client Rupert Company?"

Hughes: "You'll have to send a strong letter to the Company (meaning the First Defendants [Imperial]) re: the entitlement and the matter can be resolved. The Company is aware of the situation." 82 Mr Wardman did not send a letter to Imperial about the options until 10 February 2000. Attached to the letter was a cheque for $12,500 to acquire 2.5 million options. The amount of this cheque should only have been for $5,000 if it was tendered in accordance with the Prospectus for the July 2003 options. The cheque was written on Mr Wardman's personal account. The amount of the cheque was incorrect. Imperial returned the cheque to Mr Wardman, and no options were issued to Rupert. 83 On 18 February 2000, Mr Wardman sold 30,000 Imperial shares. 84 On 19 February 2000, Mr McLennan sent a facsimile authorising Mr Wardman to "sell enough Imperial shares" to cover certain bills which he had. 85 On 20 February 2000, Mr McLennan sent a facsimile to Mr Wardman as follows: "John, Contrary to my fax 19/2/2000 DON'T sell any Imperial shares until discussing with me. There was a recommendation to buy Imperial by RIVKIN on Friday so let us wait and see if there is further increase." 86 On 23 February 2000, Mr Wardman sold 100,000 Imperial shares on behalf of Rupert. 87 On 29 February 2000 Mr Mitchell sent a letter to Imperial demanding the allotment an issue of 2.5 million July 2003 options to Rupert. The letter threatened the commencement of legal proceedings within 10 days. Imperial did not respond to that letter and a follow-up letter was sent by Mr Mitchell to Imperial on 11 April 2000. Imperial responded to that letter by a letter of 27 April 2000. Further correspondence then passed between Mr Mitchell and Imperial in relation to the take up of the options. Proceedings were commenced by Rupert on 12 February 2001. 88 The Imperial option entitlement and acceptance forms issued to Messrs Lai, Wong, Hope and Northcote were, according to Mr McLeod's evidence genuine documents printed by Imperial and not by Fiji (Black, 228.22-.26). I should note Master Harrison concluded concerning Mr McLeod that he "was not an impressive witness but his evidence withstood cross-examination" (at [69]). Relevantly at [72] she says this: "[72] Importantly, when Mr McLeod was asked in cross-examination how his colleagues, Messrs Lai, Hope, Wong and Northcote were offered options even though they were not registered either at 30 September 1999 or 30 November 1999, and were therefore in the same position as Rupert, he could not provide a satisfactory explanation: transcript pp 177, 183, 194, 222. His explanation, which was not discredited, was that Lai, Hope, Wong and Northcote approached him."

DISPOSITION OF APPEAL 89 The foregoing statement of salient facts provides the necessary underpinning for these conclusions: (a) The September 1999 options having come out of escrow by July 1998 and Rupert having from about 6 August 1999 in its possession signed transfer forms duly stamped with the two relevant option certificates, it was in a position to become their registered holder. All Rupert had to do was lodge these documents with Imperial, for so long as the September 1999 options were still in existence, as Rupert must have known; (b) Rupert in fact lodged the relevant stamped transfers with the option certificates only after the September 1999 options had expired, namely, after 30 September 1999 on 9 November 1999, there being then nothing to register as the options had expired; (c) Pursuant to the Prospectus, the relevant record date for determining entitlement was in the case of the September 1999 options 30 September 1999, the offer being for such options "held as at 30 September 1999" (Blue, 410), with the offer closing on 30 November 1999 unless varied (Blue, 429); (d) Though the offer was made to those holding September 1999 options as at 30 September 1999, the entitlement and acceptance form provided as follows: "I/We, being registered as the holder of Unquoted Options and/or 1999 Options as at 30 September 1999 and 31 October 1999 respectively or having lodged a valid transfer or otherwise being entitled as at that time to be registered as Option holder in the Company HEREBY ACCEPT the undermentioned new IMP Options at $0.002 per share" (e) It follows that although the Prospectus did not render Rupert an offeree, the terms of the entitlement in the acceptance form would have permitted Rupert to accept before the relevant options offered on the basis of "otherwise being entitled as at that time [30 September 1999] to be registered as Option-holder in the Company". This is provided it did what was required to enable such registration, namely lodging the relevant stamped transfers and option certificates, but Rupert failed to do this until too late, at a time when the options had expired; (f) The Prospectus closed on 30 November 1999 with Rupert failing either to lodge the stamped transfers and certificates before the options expired or, to request a Prospectus and acceptance form. Accordingly Rupert was not entitled to an allotment of the new July 2003 options when on 10 February 2000 it enclosed a cheque and sought that such options be allotted to it, through Mr Wardman of Hartley Poynton. 90 I should here deal with a question which briefly occupied the Master at [74-5]. It has some bearing on the context in which misleading and deceptive conduct must be assessed, namely the nature of any interest Rupert had in the relevant options not only vis a vis the two registered holders Fiji and NGTI, but also the issuer Imperial. Master Harrison cites Green v Crusader Oil NL & Anor (1986) 10 ACLR 120 where Young J at 124-5 briefly addressed that question: "It may be that some equitable property is created by the option, but essentially an option is a claim in contract against a company. As such it is a legal chose in action and the way in which it can be transferred or acquired is pursuant to s12 of the Conveyancing Act 1919 … it is put that there is a sufficient acquisition of the options if someone obtains the beneficial or equitable title in the option or an arrangement or an understanding that the options are to be dealt with at their behest. I do not think this is right. Indeed, I have great difficulty in conceptualising some beneficial title in a legal chose in action of this nature." 91 At [75] Master Harrison concludes that: "options, without registration, convey no title and give their holder no claim against their issuer". She concluded that this would be the end of the appellant's case, were it not for the treatment of Messrs Lai, Hope, Wong and Northcote, it being submitted by the appellant that while they were in a similar position to the appellant they in fact received options in Imperial. 92 The question of title is however more complex than that. First, the constituent documents of Imperial throw no light at all upon the question of whether registration is essential to any entitlement vis a vis the company Imperial. Section 170 of the Corporations Act requires a register of option-holders to be maintained, while subs 4 requires the company to change the register "to reflect the transfer of an option". But this is "only if the person transferring the option gives the company ….. written notice of the transfer". 93 No written notice of the transfers from NGTI and Fiji to Rupert was given to Imperial till too late. What the evidence does indicate is that Imperial was aware generally of Rupert's interest in the relevant September 1999 options through Mr McLeod, certainly vis a vis the 300,000 options held by Fiji. This is because Mr McLeod was a common director of both Fiji and Imperial. That awareness must have extended to all of the September 1999 options by around mid-1998 including those held by NGTI. That can be inferred from the fact that, by letter dated 9 July 1998, Imperial forwarded the relevant share certificates and option certificates after the securities came out of escrow to Rupert's solicitors, noting that they already had the transfers. Moreover, Imperial were not on notice as to any other change in beneficial entitlement as would have substituted some other beneficial owner for Rupert. 94 From this it follows that, as between Rupert on the one hand and NGTI and Fiji on the other, the latter held the September 1999 options on trust for Rupert at the time of the offer under Imperial's Prospectus. Even were it in doubt as to whether Imperial had notice of the assignment giving rise to that beneficial entitlement in Rupert that probably makes no difference. An option has been treated as at least a contingent debt, for purposes of schemes of arrangement though the reasoning is not beyond doubt as I observed in Re Tempo Securities Ltd (1997) 25 ACSR 528. It can be taken as now settled that the giving of written notice to a debtor is not essential to the validity of an equitable assignment of such a presently existing legal chose in action; see the discussion in Meagher Gummow and Lehane's "Equity Doctrines and Remedies" (Butterworths 2002) 4th ed at 6-435 as well as earlier at 6-430 and the authorities there cited. That is in contradistinction to the requirements for a legal assignment of a chose in action laid down by s12 of the Conveyancing Act 1919 (NSW) which does require written notice. 95 Here the written notice that was ultimately given occurred only after the options had expired. It was thus too late to convert the assignment to a legal one. I would however conclude that the assignment in the present case was effective in equity. While the company was not bound to alter the register to reflect its effect in the absence of written notice, there was no impediment to Imperial recognising that equitable position of which it had at least informal notice. Mr Castle, counsel for Imperial, submitted that as at 30 September 1999 Imperial did not know whether anything had happened to the 2.2 million September 1999 options between NGTI and Rupert in the period from 16 October 1996. But even if true, that does not detract from the fact that the only disposition in equity of which it did have notice was the position which Imperial had in fact facilitated. This was when it sent the relevant option certificates on 9 July 1998 to Rupert's solicitors; see T, 34.45 of appeal transcript. 96 The foregoing analysis allows a more precise consideration of the rights of Rupert under the Imperial Prospectus. First, as I have earlier concluded, it is clear beyond doubt that the offer in that Prospectus was made solely to those who were registered as option-holders in the Company. In no sense could it be said that Rupert was an offeree. However, that still leaves the question whether, contrary to the submissions made by Mr Graham, QC for the appellant, Rupert was nonetheless entitled to accept the offer contained in the Prospectus, though not an offeree, pursuant to the earlier quoted terms of the attached "entitlement and acceptance form". 97 The question as I have earlier stated is whether Rupert was within its concluding words; that is, someone who, though not having lodged a valid transfer, is "otherwise …. entitled as at that time [30 September 1999] to be registered as Option-holder in the Company". 98 The answer to whether Rupert as beneficial but not legal owner could accept the offer depends upon whether the word "entitled" in the acceptance form means entitled as against Imperial, or entitled merely as against the equitable assignor to Rupert. I consider it means the former. An entitlement as against Imperial presupposes that Imperial is obliged to change the register to reflect the transfer of the option. But as I have said, s170(4) makes clear that that obligation only arises upon Rupert giving written notice of the transfer and Rupert neglected to do this until too late. It follows Rupert had no entitlement as against Imperial to be so registered. 99 This lead to what became the principal contention of Rupert on appeal. Rupert started from the premise that it was not entitled to accept the Prospectus offer as an offeree, nor was it entitled under the entitlement and acceptance form to accept the offer. From this it was said to follow that the favourable treatment accorded to Messrs Lai and others who were in a like position to Rupert established that Imperial's conduct in denying that treatment to Rupert was misleading and deceptive. Essentially the submission of Rupert was that it is misleading and deceptive to hold out to the world that there is a constraint upon acceptance, yet to say in effect to those like Mr Lai who were preferred, "don't worry about the constraint, just send in the special acceptance form we'll supply you and you'll get your new options", without extending that to Rupert (and presumably others in like case). Yet this ignores the fact that had Rupert bestirred itself to get registered in time, knowing as it did of the Prospectus if not directly then through Mr Wardman, it would have needed no such dispensation and could have accepted the Prospectus offer. Likewise if Rupert had bestirred itself it could have instructed NGTI and Fiji to accept the Prospectus offer, doing so on Rupert's behalf. Finally, there was nothing to stop Rupert asking for the treatment that Mr Lai and the others received whether it knew about it or not. One should bear in mind that on Mr McLeod's evidence, Mr Lai and others had initiated the request; see below. 100 Instead what Rupert did was to send in the signed transfers and option certificates well after the September 1999 options had expired, on 9 November 1999, seeking registration. Based on that step, the appellant on appeal crystallised its complaint in these terms. Lodgement of the stamp transfers and option certificates was eloquent of a desire to receive the benefit of the offer under the Prospectus. Yet instead of Imperial pointing out that it would not be processing those transfers, the September 1999 options having by now expired, it appears nothing was said. In contrast, Messrs Lai and others had earlier been sent, it appears at their initiative, acceptance forms enabling them to accept, though they were in a like position to Rupert. 101 Here it is necessary to look more closely at what transpired with Messrs Lai and others. 102 In an affidavit sworn 9 December 2002 Mr McLeod deposed to having had discussions with Messrs Lai, Hope, Wong and Northcote shortly after a general meeting of members of the respondent, Imperial One Limited, held on 9 November 1999 and was the meeting which authorised the issue of the July 2003 options at 2/10ths of a cent per option. He swore that they approached him asking to the following effect: "I hold 500,000 options in Imperial Fiji that expired on 30 September 1999. However, they are still in the name of Imperial Fiji and as I have not lodged the transfer of options forms and Option Certificates with Imperial One Limited (sic) I want to take up the forthcoming offers to issue 2003 options on a one for one basis to those holders of 30 September 1999 options. As my options are in Imperial Fiji's name I won't be getting a copy of the prospectus or the application form. How can I take up the options?" (affidavit para 9) (1 Blue, 106). 103 Mr McLeod deposed that he responded: "You will need to send me, care of Imperial Fiji, a cheque in the sum of your entitlement. The cheque should be in the name of Imperial One Limited (sic) and be with me no later than 30 November 1999. Imperial Fiji will then complete the application forms on your behalf and request that the options be issued in your name." (affidavit para 10) (1 Blue, 106) 104 Mr McLeod swore to the fact that a directors' meeting of Imperial Mining (Fiji) NL was held on 11 November 1999 at which the following minute was recorded against the heading "Option Issue" (Blue, 108): "Mr McLeod tabled a Notice of Meeting and Explanatory Notes of Imperial Mining NL whereby an offer of new options is to be made to the Company. Mr McLeod noted that if any of the 3.9 m original options holders had not transferred their options they should be protected if they wished to take the new Option Offer. On this basis it was AGREED that if the original options holders contacted the Company notifying it that they had not transferred the original options into their names and that they wished to take up the new options the Company would approach Imperial to ensure that this would take place.

The offer of new options closed (sic) on 30 November 1999. If any of the original option holders did approach the Company to enable their new options to be taken up the Company would only do this on the condition that the funds to pay for the options were received by the Company (with a cheque made out in the name of Imperial) on or before 30 November 1999." (affidavit para 8 and annexure A) (1 Blue, 105 and 108) 105 The appellant challenges the genuineness of this minute and I shall return to that shortly. 106 Mr McLeod proceeded to depose as follows: "Following these telephone conversations I then caused application forms to be completed on behalf of Mr Alfred Lai, Mr Anthony Hope, Mr Clement Wong and Mr Geoff Northcote …" (affidavit para 12) (1 Blue, 106) 107 The particular entitlement and acceptance forms were ones which were prepared by the respondent, Imperial, in the names of Messrs A Lai, Anthony Ronald Hope, Clement Wong and G Northcote. It nominated their respective entitlements as arising from their holdings of 500,000 unquoted September 1999 options each (Exhibit A 2 Blue, 429-431, Annexure B to the affidavit of B W McLeod sworn 9 December 2002 1 Blue, 109-112, transcript 2 Black, 228H-L, 223A-N, 234H-K, 235A-B, 236C-Q, 237W-238P, 254B-J). The options in which they apparently had a beneficial interest were in fact held by Fiji (see also Exhibit A 2, Blue 454-467 and 469). 108 Master Harrison did not enter into any detailed analysis of the foregoing matters. This was as I have earlier explained, decided on the simple basis of failure to establish reliance and causation. I consider that that conclusion was well open. Indeed it is reinforced by the fact that, in the case of Messrs Lai and others, it was according to Mr McLeod's evidence they who took the initiative in seeking to have application forms. They did so notwithstanding that the options were in Fiji's name. Mr McLeod agreed to that course. There was nothing to stop Rupert asking for the same treatment and it is clear that Rupert did not. I have earlier recorded Master Harrison's findings. They concluded that Rupert must have been aware both of the offer and of the Prospectus such that it was not in any way precluded from seeking the same dispensation. Equally it could have had NGTI and Fiji simply apply for the options, passing them on to Rupert. It chose to do none of these things. Whether this was because Rupert was simply careless, or at first under-estimated the potential value of the July 2003 options, preferring to trade in Imperial shares (see judgment at [86]), really does not matter. It chose for whatever reason to sit on its hands, till too late. 109 As to whether the minute of Fiji's directors' meeting held on 11 November 1999 was not genuine, in the sense of recording matters that had not occurred, that, even if true, would not establish the appellant's case. The suggestion of it not being genuine was in part based upon the use of the past tense "closed". This when in fact the meeting purported to be on 11 November 1999 before closure of the offer on 30 November 1999. It was also based upon a suggestion that the final paragraph of the minute, which I have not quoted, was really connected with the first part of the minute dealing with the sale of the company Fiji, which I have likewise not quoted, suggesting that the quoted portion was added later. 110 I would not be prepared to draw an inference that the minute was not genuine based upon these textual indications. While they may go some way to suggest that, inference of fraud requires stricter proof. But, as I have said, in the end nothing turns on that. 111 Finally, much was made of the fact that the July 2003 options were issued on very favourable terms, namely 2/10ths of a cent per option compared to a price between September 1999 to January 2000 of around two to three cents per option, spiking in February 2000 at around 10 cents per option (Blue, 546-8). From this, it is asserted that there could be no reason why Rupert, if aware of the availability of participating in the offer, would have held back from doing so and simply been content to carry out the share trades in the shares in Imperial to which earlier reference is made (under Salient Facts above). 112 Master Harrison concluded (at [86]) that "it was only when the value of options recognisably increased as of February 2000 that Wardman and McLennan focused their attention on securing the registration of the options by threatening legal action". 113 Whether indeed Rupert through Messrs McLennan and Wardman thus missed out on a valuable opportunity is not ultimately to the point. The question remains whether that opportunity was missed because of their own inaction, when sufficiently informed to be able "to act decisively" so as to obtain the same opportunity as Messrs Lai and others. There was no obligation on Imperial, certainly in circumstances where Mr Wardman and Mr McLennan paid close attention to Imperial's affairs, to contact them or Rupert about an opportunity to take up an offer they must have known about and which was self-evidently favourable. It is true that by lodging on 9 November 1999 the option certificates and stamp transfers, Rupert was signalling that it thought that this was all it needed then to do to take advantage of the offer under the Prospectus. It appears they were not disabused of that by Imperial. However, that Messrs McLennan and Wardman, both sophisticated investors, may conceivably have overlooked the fact that the September 1999 options had expired, is of no consequence. It is certainly not sufficient to establish that by silence on that matter, Imperial was acting in a misleading and deceptive manner. If Messrs Wardman and McLennan were astray or in error in the course they took, they had only themselves to blame as they were not led astray by Imperial. Here, in the words of Lockhart J in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No. 1) (1988) 79 ALR 83 at 95, this is not a case where "the circumstances give rise to an obligation to disclose relevant facts". Or as was held in Semrani v Manoun [2001] NSWCA 337 at [59], inactivity or silence will only be actionable where there was a reasonable expectation of action or disclosure. There could be none such here. 114 I have since had the advantage of reading in draft the reasons for judgment of Giles JA. I agree with his conclusion that a claim for misleading conduct lacks merit, certainly to the extent it is based on a submission that an illicit arrangement not offered to Rupert was offered to others namely Messrs Lai, Hope, Wong and Northcote. Like Giles JA I decline to conclude that the arrangement was illicit but, if it was, failing to offer it with the attendant effects of disadvantaging the underwriters, should not give rise to a successful claim for misleading conduct.

OVERALL CONCLUSION 115 I would conclude that first, there was no misleading or deceptive conduct thus also exculpating Mr Hughes. But even if there were, it was not such as was relied upon by the appellant so as to have caused the appellant any loss. In those circumstances, it is unnecessary to consider the question of damages. It follows that there could be no contravention by either Imperial or Mr Hughes of either s52 of the Trade Practices Act, were that applicable, or s995 of the Corporations Act. Though nothing hangs on it, I would conclude that the latter is the applicable provision, for the reasons put by the respondent in its written submissions, which I quote below: "The 2003 Options are plainly a "financial product" within the meaning of s.12BAA of the Australian Securities and Investments Commission Act 2001. The first respondent was also a person who provides a "financial service" in relation to any conduct in which it engaged in connection with the issuing of the 2003 Options. Such conduct comprises a "dealing" in a financial product for the purposes of sub-s.12BAB(1)(b) and (7), or alternatively is a service that is otherwise supplied in relation to a financial product within sub-s.12BAB(1)(g)."

ORDERS 116 I consider that it should be ordered as follows: 1. The appeal fails. 2. The appellant to pay the respondents' costs. 117 McCLELLAN J: I agree with Giles JA. *********

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