In the Matter of Alara Uranium Limited
[2007] FCA 724
•9 May 2007 (Orders); 14 May 2007 (Publication of Reasons)
FEDERAL COURT OF AUSTRALIA
In the Matter of Alara Uranium Limited [2007] FCA 724
CORPORATIONS – extension of time for compliance with requirements of Corporations Act 2001 (Cth) – failure to lodge application for admission to quotation for securities on the Australian Stock Exchange Ltd- non- compliance with requirements of s 723 of the Corporations Act – application under s 1322 for an extension of time to lodge the application – minor delay – no prejudice – application granted
Corporations Act 2001 (Cth)
Re Insurance Australia Group Ltd (2003) 128 FCR 581 cited
Re Wave Capital Ltd (2003) 47 ACSR 418 cited
Re Tony Barlow Australia Ltd (2005) 53 ACSR 1 cited
In the Matter of Geopacific Resources NL (2007) 25 ACLC 226 citedIN THE MATTER OF ALARA URANIUM LIMITED (ABN 27 122 892 719)
WAD 82 OF 2007FRENCH J
DATE OF ORDERS: 9 MAY 2007
DATE OF PUBLICATION OF REASONS: 14 MAY 2007
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD 82 OF 2007
IN THE MATTER OF ALARA URANIUM LIMITED
(ABN 27 122 892 719)
Plaintiff
JUDGE:
FRENCH J
DATE OF ORDER:
9 MAY 2007
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The period of seven days for making an application for the advancement of the Plaintiff’s shares to quotation, referred to in paragraph 723(3)(a) and in sub-paragraph 724(1)(b)(i) of the Corporations Act 2001 (Cth), in respect of the Prospectus of the Plaintiff dated 3 April 2007 and lodged with the Australian Securities and Investments Commission (“ASIC”) be extended to and include 11 April 2007.
2.Upon service of this Order on the ASIC, ASIC will include such Order on its database.
3.The Plaintiff and all other interested parties including ASIC have liberty to apply to revoke or vary Order 1 above.
4.The costs of the application are not to be met out of company funds.
5.There be liberty to the company to apply for variation or revocation of the last mentioned order within seven 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
WAD 82 OF 2007
IN THE MATTER OF ALARA URANIUM LIMITED
(ABN 27 122 892 719)
Plaintiff
JUDGE:
FRENCH J
DATE OF PUBLICATION OF REASONS:
14 MAY 2007
PLACE:
PERTH
REASONS FOR JUDGMENT
Introduction
On 3 April 2007 Alara Uranium Ltd (Alara) issued a prospectus inviting applications for a total of 24 million shares at an issue price of 25 cents each with a view to raising $6 million.
The provisions of the Corporations Act 2001 (Cth) (the Act) require, in effect, that an application for official quotation on the Australian Stock Exchange (ASX) be lodged with the ASX within seven days of the date of issue of a prospectus. Because of a failure by the company secretary to appreciate the seriousness of this requirement, the application was lodged a day late. The company applied to this Court for an extension of time under s 1322 of the Act. I made an order extending time on 9 May 2007. I now publish my reasons for so doing.
Factual Background
Alara was incorporated on 6 December 2006 as an unlisted public company. It is not yet admitted to the Official List of the ASX nor are its securities quoted on the ASX. Since its incorporation the company has acquired shares in three companies that have interests in mining tenements in Peru, the Northern Territory and Western Australia. It has also lodged a prospectus with the Australian Securities and Investments Commission (ASIC) with a view to raising funds to conduct an exploration programme on its uranium resource projects, to advance the commercial prospects of its resource projects and to seek additional uranium mining opportunities in Australia and overseas.
The current directors of the company are Peter Wallace, Robert J Foti and David C Foti. According to the company records held by ASIC, the company currently has two secretaries, Robert Foti and Victor Poh Hong Ho. The company does not yet have its own premises. Its registered office is at care of Charles Foti Business Services in Osborne Park in Western Australia. Upon completion of the various share sale agreements and the share issue for which the prospectus has been lodged the existing directors of the company intend to resign. The following proposed directors will be appointed thereafter:
(a) Dr John Stephenson – proposed Non-Executive Chairman
(b) Mr H Shanker Madan – proposed Managing Director; and
(c) Mr Farooq Khan – proposed Executive DirectorOn 3 April 2007 the company issued a prospectus bearing that date inviting the public to subscribe for securities. The prospectus invites applications for a total of 24 million shares at an issue price of 25 cents per share with a view to raising $6 million. All shares issued pursuant to the prospectus are to be issued as fully paid ordinary shares and to rank equally in all respects with shares already on issue. The company reserves the right under the prospectus to accept over-subscriptions of up to $4 million through the issue of up to a further 16 million shares at an issue price of 25 cents per share. On that basis the maximum amount which may be raised under the prospectus is $10 million through the issue of a total of 40 million shares. The minimum subscription is 16 million shares to raise $4 million. The subscription list opened on 11 April 2007 and was to remain open until 5 pm WST on 8 May 2007. The directors of the company extended the closing time by 24 hours.
Mr Victor Ho, a co-secretary of the company, caused a copy of the prospectus to be lodged with ASIC on 3 April 2007. He also provided ASIC with a signed copy of the Offer Information Sheet signed by Mr Robert Foti and a cheque for $2,010 in payment of ASIC’s fees. By an email of 3 April 2007 to Mr Ben Donovan, an ASX adviser, Mr Ho forwarded to him an internet link to the prospectus and a link to the company’s “Offer List Entry” document lodged with ASIC. The company proposes to issue shares pursuant to the prospectus on Wednesday, 16 May 2007.
The current board of the company and the proposed directors delegated to Mr Ho responsibility for the finalisation, lodgment and processing of the prospectus and the application to the ASX for Official Quotation of the securities with the company on the ASX and the admission of the company to the Official List of the ASX. According to the prospectus the application for the Official Quotation of new shares being offered pursuant to the prospectus would be made to the ASX within seven days after the date of the prospectus.
In the event, Mr Ho was a day late in lodging the application for Official Quotation. In his affidavit, sworn on 26 April 2007, he said that this was the first occasion that he had responsibility for the preparation of an application for the quotation of securities and the admission of a company to the Official List of the ASX. He had previously prepared an application for quotation of shares issued under a prospectus in circumstances where a company had asked for its securities to be readmitted to quotation on the ASX after a change of activities and a period of ASX suspension. He was aware that the quotation application had to be lodged within seven days of the date of the prospectus. He said, however, that he was not aware of the severe consequences, arising under ss 723 and 724 of the Act, from failing to lodge a quotation application within seven days of lodgment of a prospectus. He says that had he known of the consequences of non-compliance he would have ensured that he had obtained the approval of the directors necessary for a quotation application to be lodged at the ASX prior to the close of business on Tuesday, 10 April 2007.
Mr Ho began preparation of the quotation application on 5 April 2007 together with supporting information in the form of annexures. He was aware on 5 April that the director and co-company secretary, Mr Robert Foti would be on leave until Tuesday 10 April. Friday 6 April 2007 and Monday 9 April 2007 were public holidays, being part of the Easter break. He did not work during the Easter holiday long weekend. In the weeks leading up to the lodgment of the prospectus on 3 April 2007 he had worked very long hours to complete all matters relating to the prospectus and ensuring its lodgment on 3 April 2007. In the days immediately after the lodgment of the prospectus his priority was coordinating its timely printing and despatch to approximately 1,500 “Eligible Strike Shareholders” and despatch of a letter of notice of the prospectus to approximately 1,600 “Strike Shareholders” who were not “Eligible Strike Shareholders”.
On Tuesday, 10 April 2007 Mr Ho recommenced work on the quotation application. He circulated a draft by email to the directors. He completed the application and assembled all the necessary annexures on Wednesday, 11 April 2007. On the same day he emailed a circulatory resolution of directors to seek their approval of the draft quotation application. On Wednesday, 11 April 2007, he sent the signed quotation application by email to the ASX. On the same day he sent by courier, a hard copy of the application and the annexures. The hard copy documents were delivered at 4.10 pm.
Mr Ho said that because of his inadvertence and lack of knowledge of the strict consequences of the Act, Alara failed to make the quotation application to the ASX within seven days and did not do so until 11 April 2007, one day after the due date. He said that his failure to file a quotation application within time was “… not in any way a deliberate disregard of the statutory requirements”. He otherwise endeavoured to lodge the quotation application as promptly as possible given that the Easter public holidays fell during the seven day period after the lodgment of the prospectus.
By email on 19 April 2007, Mr Donovan at the ASX advised Mr Ho that the prospectus was dated 3 April 2007 but was not lodged with the ASX until 11 April 2007. He informed Mr Ho that the ASX Rules required a quotation application to be lodged within seven days of the date of the prospectus.
On 4 April 2007 Mr Ho had received a letter bearing that date from ASIC to the company extending the exposure period for the prospectus from seven to nine days because of the Easter holiday. Mr Donovan pointed out to Mr Ho, on 20 April 2007, that ASIC’s letter of extension was not relevant to, and had no impact on, the time for lodgment of a quotation application under s 723(3) of the Act. Mr Ho immediately contacted a partner in the firm of Blakiston & Crabb, Solicitors, to obtain advice and assistance in relation to whether ASIC would grant relief. He was informed on the same day by a Mr Cardaci, that the ASX Listing Rules required the quotation application to be lodged within seven days of the date of lodgment of the prospectus. On 23 April 2007, Mr Ho gave detailed instructions to Blakiston & Crabb who brought on this application.
As at 7 May 2007 1,899 applications for shares under the prospectus had been received. The total number of shares applied for was 69,656,133. The total application monies received was $17,414,033.25. The proposed issue is therefore substantially oversubscribed.
The company seeks an extension of time under s 1322 of the Act for the lodgment of the application for quotation.
Statutory Framework
Section 723(3) of the Act provides:
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.
Section 724(1) provides:
If a person offers securities under a disclosure document and:
…
(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;
…
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….
Section 724(2) provides:
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.
The power of the Court to make orders avoiding the effects of irregularities is conferred by s 1322. Section 1322(4) provides:
Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
…
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
Whether time should be extended
Section 723 of the Act does not impose an obligation to lodge a quotation application within seven days of the date of a prospectus. Strictly speaking, read with s 724, it simply attaches certain consequences to the failure to do so. Nevertheless, s 1322(4)(d) has been construed as authorising an extension of the seven day period specified in s 723(3)(b): Re Insurance Australia Group Ltd (2003) 128 FCR 581 at [26]-[29]; Re Wave Capital Ltd (2003) 47 ACSR 418 at [30]; Re Tony Barlow Australia Ltd (2005) 53 ACSR 1 at [20]-[21]; In the Matter of Geopacific Resources NL (2007) 25 ACLC 226 [16].
Section 1322 confers a power which is to be exercised having regard to the purposes of the Act and any other relevant statutes. It is a remedial power to be given a liberal construction. It expresses a legislative policy that the law should not impose unnecessary liability or inconvenience nor invalidate transactions because of failure to comply with procedural requirements when such failure is the result of honest error or inadvertence which can be remedied by an extension of time without prejudice to third parties. It is of course necessary to bear in mind in exercising the discretion under s 1322 that there is a public interest in compliance with the procedural requirements of the Act. Reckless or deliberate disregard of its provisions or treatment of them as mere guidelines, will attract an unsympathetic response when application is made to avoid the consequences of non-compliance.
In this case the delay was very short. The quotation application was lodged one day late. There appears to have been no prejudice to any actual or potential investor. The time limited by s 723(3)(b) for the admission of the company’s securities to quotation which is three months after the date of the prospectus, would not be affected by the proposed extension. The adverse impact on the company by refusing the extension would include wasted and additional costs. It would, in my opinion, be out of all proportion to the relatively minor delay which has occurred in this case.
It is a matter of some concern that Mr Ho was aware of the seven day time limit but did not seem to think another day would really matter. His approach was not so much a case of inadvertence as a kind of “she’ll be right” approach. Ordinarily non-compliance based on a risk assessment that the company could somehow avoid its consequences, would be a factor weighing heavily in the balance against an extension. I have no doubt that Mr Ho and his fellow officers in the company have learnt a useful lesson from what has occurred.
Both ASIC and the ASX were given notice by the plaintiff of the application. Both indicated that they would not be attending at the hearing of the application.
Having regard to the circumstances outlined above, I consider it appropriate to grant the extension. However, I do not consider that the company’s funds should be diminished to any extent, however small, by the costs of the application. I will direct that the costs of the application are not to be met out of company funds. There will, however, be liberty to apply for a variation or revocation of that order as the plaintiff has not had an opportunity to be heard on that question.
Conclusion
For the above reasons the order extending time for the company to lodge its application for official quotation will be granted.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate:
Dated: 14 May 2007
Counsel for the Plaintiff: Mr M Gerus Solicitor for the Plaintiff: Blakiston & Crabb Date of Hearing: 8 May 2007 Date of Order:
Date of Publication of Reasons:9 May 2007
14 May 2007
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