Spectur Limited, in the matter of Spectur Limited [2019] FCA 867

COLVIN J: 1 Spectur is a listed public company. It issued shares on each of three dates in 2018 and also on 8 April 2019 (Share Issues). At the time of issue it did not give a notice under s 708A(5) of the Corporations Act 2001 (Cth). A notice of that kind is commonly referred to as a cleansing notice. There is no statutory requirement to issue such a notice. Its significance is that, if issued, such a notice allows shares that are quoted securities to be on-sold without further compliance with the disclosure requirements in Part 6D.2. The nature of the legislative scheme for disclosure in relation to an offer of securities was summarised by McKerracher J in Sprint Energy Limited, in the matter of Sprint Energy Limited [2012] FCA 1354 at [17]-[22]. 2 If an issuer of shares does not issue a valid cleansing notice or a prospectus at the time of issue of shares then there is a prospect that the party to whom the shares are issued must itself cause such disclosure if it wishes to on-sell those shares within 12 months and a prospect of a contravention of the Corporations Act if such disclosure does not occur. 3 A cleansing notice can only be issued if it complies with the requirements of s 708A(6). It provides that the notice must (a) be given within five business days of issue of the shares; (b) state that the shares were issued without disclosure; (c) state that the notice is being given under s 708A(5); (d) state that, as at the date of the notice, the company has complied with certain requirements of the Corporations Act; and (e) set out any information that is 'excluded information' as described in s 708A(7) and (8). 4 It is common for a cleansing notice to be given if it can be given. In this case, Ms Foreman, the company secretary of Spectur has deposed, in effect, to the fact that she was not aware that she should have provided a cleansing notice when the Share Issues took place. I take this to mean that she was not aware of the common practice of issuing cleansing notices so that the parties to whom the shares were issued could on-sell the shares without undertaking disclosure as required by Part 6D.2. 5 Ms Foreman discovered her error on or around 28 May 2018 when undertaking an internal due diligence review as part of potential fundraising by Spectur. She immediately sought advice and notified ASX Limited. Spectur is admitted to the official list of ASX. 6 By reason that the shares the subject of the Share Issues in 2018 were held in escrow they have not been traded. The fourth of the Share Issues which occurred on 8 April 2019 was to Mr Darren Cooper, the Chairman of Spectur. He has not traded the shares. Further, when the issue concerning the cleansing notices was identified by Ms Foreman steps were taken for Mr Cooper to enter into a deed by which he covenanted not to dispose of, or offer to dispose of, the shares until the earlier of (a) the date on which the need for disclosure before there was an on-sale of the shares ceased to apply; or (b) 12 months after the issue of the shares (being the date when such a requirement came to an end in respect of an ordinary on-sale of the shares). 7 The affidavit of Ms Foreman deposes to the view that Spectur was in a position to have given cleansing notices when each of the Share Issues occurred. In particular, she deposes to the view that there was no 'excluded information' at the time of the Share Issues and that is the position at present. 8 In the above circumstances, Spectur seeks orders pursuant to s 1322(4)(d) extending the period for giving the cleansing notices. Section 1322(6) provides that such orders shall not be made unless the Court is satisfied no substantial injustice has been or is likely to be caused to any person. Otherwise, the discretion conferred is unfettered: In the matter of National Roads and Motorists' Association Ltd [2003] FCAFC 206 at [21]. 9 The Australian Securities and Investments Commission has been informed of the application. It neither supports nor opposes the making of the orders sought. ASX adopts the same position. 10 I am satisfied that there could be no substantial injustice if the orders extending the period were made by the Court. I am also satisfied that a proper basis has been shown for the Court to exercise its power to extend the period for issuing the cleansing notices. The cleansing notices could have been issued at the time and there has been no trading in the shares since the Share Issues. Spectur proposes that there be orders allowing any interested person to apply to vary or discharge the orders within 28 days. Out of an abundance of caution I will make such an order. 11 Spectur also sought orders to the effect that when cleansing notices are issued in accordance with the orders extending time that the notices be deemed to take effect as if they had been given within the period of five business days specified in s 708A(6)(a). The effect of such an order would be to go further than extend the period after the time for compliance had passed (which is a possibility that is expressly contemplated by s 1322(4)(d)). It would give the cleansing notice retrospective operation. 12 The Court has power to make orders that are consequential upon or ancillary to an order extending the period for doing an act, matter or thing under the Corporations Act. There may be circumstances in which a period may be extended to a date which has already passed by the time of the application so as to bring an act that has occurred outside a period specified by the Corporations Act within the specified period. In such a case, there may be an ancillary order to the effect that the act which had already occurred was to take effect as if performed when time had been extended. However, the proposed order would go further and give a future act retrospective effect. In particular, it would seek to authorise the service of cleansing notices with retrospective effect. It is an order which would make the extension of the period of time unnecessary. As indicated in the course of submissions in support of the application I am not presently persuaded that such an order would be within the scope of s 1322(4)(d) or the power to make consequential or ancillary orders. In those circumstances, counsel for Spectur did not press for the making of those additional orders. 13 So, upon the making of orders extending the period for the issue of the cleansing notices the time when the other requirements of s 708A(6) must be met will be the time of issue of the cleansing notices (which will be in the next two business days). 14 Spectur invites the Court to make no order as to costs on the application. There is no reason disclosed by the affidavit in support of the application to consider the making of an order for costs against any particular person. I make no order as to costs. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.