Ashburton Minerals Limited (ACN 008 894 442)

Case •

[2005] FCA 512

•

15 FEBRUARY 2005

FEDERAL COURT OF AUSTRALIA

Ashburton Minerals Limited (ACN 008 894 442) [2005] FCA 512

CORPORATIONS – application for validation of share issue where innocent breach of requirements of Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth) ss 254E, 254E(1), 723, 723(2), 723(3)(a), 724, 741

Re Golden Gate Petroleum Ltd (ACN 090 074 785) (2004) 22 ACLC 1,292 cited

IN THE MATTER OF ASHBURTON MINERALS LTD (ACN 008 894 442)
WAD 24 OF 2005

LEE J
15 FEBRUARY 2005
PERTH 

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD24 OF 2005

IN THE MATTER OF ASHBURTON MINERALS LIMITED (ACN 008 894 442)

ASHBURTON MINERALS LIMITED
(ACN 008 894 442)
APPLICANT

JUDGE:

LEE J

DATE OF ORDER:

15 FEBRUARY 2005

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.The time for service and hearing of the Application filed on 10 February 2005 be abridged.

2.The period of seven days referred to in section 723(3)(a) and in sub-section 724(1)(b)(i) of the Corporations Act (“the Act”) in respect of the Prospectus of the Company lodged with the Australian Securities and Investment Commission (“ASIC”) and dated 21 January 2005 (“Prospectus”) be extended to and include 1 February 2005.

3.Pursuant to section 254E(1) of the Act, the issue of the 6,900,000 shares issued by the Applicant on 2 February 2005 pursuant to the Prospectus, be validated and confirmed.

4.The Applicant lodge a copy of these orders with the ASIC for the purposes of and pursuant to section 254E(2) forthwith.

5.Upon service of this Order on the ASIC, the ASIC will include such Order on its database.

6.The Applicant and all other interested parties including the ASIC have liberty to apply to revoke or vary the orders above within 28 days.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD24 OF 2005

IN THE MATTER OF ASHBURTON MINERALS LIMITED (ACN 008 894 442)

ASHBURTON MINERALS LIMITED
(ACN 008 894 442)
APPLICANT

JUDGE:

LEE J

DATE:

15 FEBRUARY 2005

PLACE:

PERTH

REASONS FOR JUDGMENT

  1. This is an application for remedial orders under s 254E of the Corporations Act 2001 (Cth) (“the Act”).

  2. The applicant was incorporated in the state of Western Australia on 1 June 1979.  The applicant has been admitted to the official list of the Australian Stock Exchange Limited (“ASX”) and the securities of the applicant are quoted on the ASX market.  The principal activity of the applicant has been exploring for mineral deposits.  In recent years it has sought to mine and produce gold.  In August 2003 the applicant purchased a disused gold mine and gold ore treatment plant in Queensland with a view to recommencing operations.  Due to the low grade of the ore, the applicant proposed to use an extraction process that required lower capital and operating costs, namely heap-leaching of the oxide ore (“the heap-leaching project”).  The applicant also obtained, through a subsidiary, the right to treat a large quantity of gold-tailing sands in Brazil (“the gold-tailings treatment project”).

  3. On 21 January 2005 the applicant issued a prospectus offering up to 6,900,000 shares at an issue price of 14 cents per share, together with a free attaching option for every two shares allotted, exercisable at 20 cents each on or before 31 January 2006.  Pursuant to rule 7.1 of the ASX Listing Rules the offer was made without shareholder approval and a broker was appointed to manage the offer and place the shares.  The aim of the prospectus was to raise up to $966,000 to finance further exploration; to develop the gold-tailings treatment project; to carry out feasibility studies for the heap-leaching project; to provide working capital and to meet the costs of the offer.  The prospectus stated that the applicant would make application to the ASX within 7 days from the date of the prospectus for official quotation of the shares.  No application was to be made for official quotation of the options.

  4. The prospectus closed fully subscribed on the 28 January 2005. On 1 February 2005 an application for admission to quotation of the shares to be issued under the prospectus was lodged with the ASX. Pursuant to s 723(2) of the Act an application to have securities admitted to quotation on the ASX market was required to be lodged “within 7 days after” the date of the prospectus (i.e. 28 January 2005). An affidavit sworn by the secretary of the applicant deposed that the failure of the company to comply with that requirement occurred by reason of a mistaken but honest belief that the admission to quotation was required to be lodged on 4 February 2005, being seven days from the closing date of the prospectus.

  5. On 2 February 2005 the applicant issued shares subscribed pursuant to the prospectus.   On 3 February 2005 the shares were quoted on the ASX and were able to be traded on the ASX market.  No details have been provided of trading in the shares.

  6. The failure of the applicant to comply with the Act came to the attention of the managing director of the applicant on 4 February 2005, and solicitors for the applicant were instructed to make an application under s 254E(1) of the Act to rectify the error.

  7. The Australian Securities and Investment Commission (“ASIC”) was given notice of the application.  It does not oppose the orders sought by the applicant.  At the hearing counsel for the applicant informed the Court that the ASX also had been given notice of the application and that the ASX did not oppose the orders.

  8. Prior to the commencement of these proceedings the applicant, through its solicitors, made an approach to ASIC requesting exercise of the power vested in ASIC by s 741 of the Act to exempt a person from a provision of Chapter 6D of the Act. It appears that ASIC considered that it did not have the power to extend the seven-day period in s 723(3)(a) of the Act once the securities had been issued. It is unnecessary to examine the correctness of that assumption.

  9. The relevant provisions of Chapter 6D are ss 723 and 724 of the Act which read as follows:

    “723(1)If an offer of securities needs a disclosure document, the securities may only be issued or transferred in response to an application form.  The securities may only be issued or transferred if the person issuing or transferring them has reasonable grounds to believe that:

    (a)the form was included in, or accompanied by:

    (i)the disclosure document; or

    (ii)if subsection 721(2) allows a profile statement to be used – the prospectus or the profile statement;

    when the form was distributed by the person issuing or transferring the securities; or

    (b)the form was copied, or directly derived, by the person making the application from a form referred to in paragraph (a).

    (2)If a disclosure document for an offer of securities states that the securities will not be issued or transferred unless:

    (a)applications for a minimum number of the securities are received; or

    (b)a minimum amount is raised;

    the person making the offer must not issue or transfer any of the securities until that condition is satisfied.  For the purpose of working out whether the condition has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.

    (3)If a disclosure document for an offer of securities states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and:

    (a)an application for the admission of the securities to quotation is not made within 7 days after the date of the disclosure document; or

    (b)the securities are not admitted to quotation within 3 months after the date of the disclosure document;

    then:

    (c)an issue or transfer of securities in response to an application made under the disclosure document is void; and

    (d)the person offering the securities must return the money received by the person from the applicants as soon as practicable.

    (4)Strict liability offences.  An offence based on subsection (1), (2) or (3) is an offence of strict liability.

    724(1)If a person offers securities under a disclosure document and: 

    (a)the disclosure document states that the securities will not be issued or transferred unless:

    (i)applications for a minimum number of t he securities are received; or

    (ii)a minimum amount raised;

    and that condition is not satisfied within 4 months after the date of the disclosure document; or

    (b)the disclosure document states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and: 

    (i)an application for the admission to quotation is not made within 7 days after the date of the disclosure document; or

    (ii)the securities are not admitted to quotation within 3 months after the date of the disclosure document; or

    (c)the person becomes aware that:

    (i)the disclosure document contains a misleading or deceptive statement; or

    (ii)there is an omission from the disclosure document of information required by section 710, 711, 712, 713, 714 or 715;

    that is materially adverse from the point of view of an investor; or

    (d)the person becomes aware of a new circumstance that:

    (i)has arisen since the disclosure document was lodged; and

    (ii)would have been required by section 710, 711, 712, 713, 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged; and

    (iii)is materially adverse from the point of view of an investor;

    the person must deal under subsection (2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities.  For the purpose of working out whether a condition referred to in paragraph (a) has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities. 

    (1A)An offence based on subsection (1) is an offence of strict liability.

    (2)The person must either:

    (a)repay the money received by the person from the applicants; or

    (b)give the applicants:

    (i)the documents required by subsection (3); and

    (ii)1 month to withdraw their application and be repaid; or

    (c)issue or transfer the securities to the applicants and give them;

    (i)the documents required by subsection (3); and

    (ii)1 month to withdraw their application and be repaid.

    (3)The documents to be given are set out in the following table:

Documents to be given
Circumstances Documents

1

 the sole disclosure document is a prospectus

a supplementary or replacement prospectus that corrects the deficiency or changes the terms of the offer
2 the disclosure documents are a prospectus and a profile statement and subsection (1) applies to the prospectus

a statement that sets out the changes needed to the prospectus to correct the deficiency or change the terms of offer;
and
a statement that the person is entitled to a copy of the prospectus free of charge
3

the disclosure documents are a prospectus and a profile statement and subsection (1) applies to the profile statement
Note that item 2 and this item may both apply to the offer.

 a supplementary or replacement profile statement that corrects the deficiency or changes the terms of the offer
4 the disclosure document is an offer information statement

a supplementary or replacement offer information statement that corrects the deficiency or changes the terms of the offer

”

  1. The relevant provisions under which the orders are sought read as follows:

    “254E(1)On application by a company, a shareholder, creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if:

    (a)     the issue is or may be invalid for any reason; or

    (b)     the terms of the issue are inconsistent with or not authorised by:

    (i)    this Act; or

    (ii)   another law of a State or Territory; or

    (iii)  the company’s constitution (if any).

    (2)On lodgment of a copy of the order with ASIC, the order has effect from the time of the purported issue.”

  2. As stated above, notwithstanding the failure to lodge the application for official quotation within the seven-day time limit, the securities were “admitted to quotation within 3 months after the date of the disclosure document”. In that respect the overall purpose of s 723 of the Act was fulfilled. (See: Re Golden Gate Petroleum Ltd(ACN 090 074 785) (2004) 22 ACLC 1,292).

  3. It is apparent that a lack of clarity in the foregoing provisions of the Act is causing innocent acts of non-compliance by corporations. This application is one of a number in which the Court has been asked to provide relief from such a breach of the Act. The applications involve an unnecessary waste of resources.

  4. As discussed in Golden Gate, it is hard to conceive that it is intended that “void” means other than “voidable” in circumstances where the ultimate requirements of the Act are met.

  5. I am prepared to make the orders in the terms of the amended minute.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

Associate:

Dated:             29 April 2005  

Counsel for the Applicant: MF Gerus
Solicitor for the Applicant: Blakiston & Crabb
Date of Hearing: 15 February 2005
Date of Judgment: 15 February 2005
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