JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: CHRISTIE -v- MASTORES [2016] WADC 137
CORAM: SWEENEY DCJ
HEARD: 16-17 SEPTEMBER 2015
DELIVERED : 13 SEPTEMBER 2016
FILE NO/S: CIVO 244 of 2013
BETWEEN: NICHOLAS IAN CHRISTIE
Plaintiff
AND
JUSTIN PETER MASTORES
Defendant
Catchwords:
Misleading or deceptive conduct - Silence or non-disclosure - Expired prospectus - Section 725 Corporations Act - Section 1325 Corporations Act - No jurisdiction to make orders pursuant to s 1325 Corporations Act - Section 708(8) Corporations Act - Sophisticated investor
Legislation:
Corporations Act 2001 (Cth) s 708(8), s 725, s 1041H, s 1325
District Court of Western Australia Act 1969 s 55
Result:
Award of damages to plaintiff
Representation:
Counsel:
Plaintiff: Mr R J Price
Defendant: Mr T J Porter
Solicitors:
Plaintiff: Focused Legal
Defendant: Consult Solicitors
Case(s) referred to in judgment(s):
Henville v Walker [2001] HCA 52
Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) [2006] NSWCA 282
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568
Argy v Blunts (1990) 26 FCR 112; (1990) 94 ALR 719
Australian Securities and Investments Commission v Narain [2008] FCAFC 120; (2008) 169 FCR 211
Bonnington Castings Ltd v Wardlaw [1956] AC 613
Browne v Dunn (1893) 6 R 67
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Caffey v Leatt-Hayter [No 3] [2013] WASC 348
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
Commonwealth Bank v Mehta (1991) 23 NSWLR 84
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Gould v Vaggelas (1985) 157 CLR 215
Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546; (1988) 79 ALR 83
Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553
HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653
IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470
Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR 46-048
Kenny & Good v MGICA (1992) 199 CLR 413
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239
Miller & Associates Insurance Broking Pty Ltd v BMW [2010] HCA 31; (2010) 241 CLR 357
Morellini v Adams [2011] WASCA 84
Murcia &…
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- AGLC
- Christie v Mastores [2016] WADC 137
- Case
- [2016] WADC 137
- Decision Date
CaseChat Overview and Summary
The court examined the statutory framework provided by sections 725 and 727 of the Corporations Act. Section 725(3) sets out the options available to a company when dealing with applications received after the expiry of a disclosure document, while s 727(3) mandates a waiting period after the lodgement of a new prospectus with ASIC before accepting applications or issuing securities. The court found that the company had the discretion to choose between the options provided in s 725(3) but was not required to inform the investor of these options or allow them to choose. However, the company's choice must be exercised lawfully and in compliance with the broader statutory requirements.
The court concluded that the company's conduct did not amount to misleading or deceptive conduct. The company had complied with the statutory requirements by providing the plaintiff with a new prospectus and an opportunity to withdraw their application. The court held that there was no obligation on the company to inform the plaintiff of the options available under s 725(3) or to allow them to choose between those options. The court also found that the company's conduct did not contravene the prohibition on misleading or deceptive conduct as the plaintiff had not been misled or deceived by the company's actions.
The court further held that there was no jurisdiction to make orders pursuant to s 1325 of the Corporations Act, as the court could not compel the company to provide the plaintiff with a new prospectus and an opportunity to withdraw their application. The court found that the company had complied with its obligations under s 725(3) by providing the plaintiff with a new prospectus and an opportunity to withdraw their application. The court also held that the plaintiff, as a sophisticated investor, was not entitled to rely on the protections provided by s 708(8) of the Corporations Act.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Finally, it is necessary to set out s 725 of the Act in full. It is quite critical to this case. It provides:Expiration of disclosure document(1)If a person offers securities under a disclosure document and the disclosure document passes its expiry date, the person must deal with applications for the securities under the document in accordance with subsections (2) and (3).(1A)An offence based on subsection (1) is an offence of strict liability.(2)If an application is received on or before the expiry date, the person may issue or transfer securities to the applicant.(3)If an application is received after the expiry date, the person must either:(a)return any money received by the person from the applicant; or(b)give the applicant:(i)a new disclosure document; and(ii)1 month to withdraw their application and be repaid; or(c)issue or transfer the securities to the applicant and give them:(i)a new disclosure document; and(ii)1 month to withdraw their application and be repaid If the application is received on the expiry date, the company may issue the securities to the investor. If the application is received after the expiry date, that is not fatal to the investor's application to invest in notes. It does not prevent a company from receiving applications to invest in its notes, nor in dealing with those applications. The company has choices as to how it will deal with such applications and must follow one of the procedures set out. It may simply give the applicant his money back. Alternatively, it may hold his money and send him the new prospectus, giving him a month to consider the new prospectus and decide whether he still wants to invest. The third option is to issue him his notes immediately but be prepared to refund him his money if, on consideration of the new prospectus, he reconsiders his investment. The section does not expressly oblige a company to inform the investor of these three options, nor to give him the choice, but the company itself must follow one of the three options. Its choice in which option to choose, however, is limited by its ability to follow that option lawfully. Section 725(3)(b) and s 725(3)(c) contemplate a new prospectus being available to be given to the applicant. And s 725 does not stand in a vacuum. It needs to be read with s 727(3), which provides that the company must not accept any application for non‑quoted securities, nor issue or transfer any such securities, until the period of seven days after lodgement of the prospectus with ASIC has elapsed. It also needs to be read with s 722, which provides that all application money must be held on trust until either the securities are issued or transferred, or the money is returned. Section 725 does not expressly or impliedly dispense with or relax those requirements purely because a prospectus has expired, and nor would one expect it to. Section 725(3)(c) is a curious section to a legal mind, in that, even if there is a new prospectus, lodged with ASIC for more than seven days, the section contemplates issuing securities to an investor on the strength of an offer that has not yet been disclosed to him, which seems contrary to the general scheme of disclosure contained in Chapter 6D. It was put to the defendant in cross‑examination that it would be 'fanciful' to suggest that the plaintiff made an application for notes under Prospectus No 8 because there was no Prospectus No 8 at the time he applied, which seems a sensible enough proposition, yet s 725(3)(c) does contemplate an investor being issued with securities prior to seeing the relevant prospectus, subject however to being able to demand a refund.