Isignthis Limited v ASX Limited

Case [2020] FCA 567

FEDERAL COURT OF AUSTRALIA

Isignthis Limited v ASX Limited [2020] FCA 567

File number: VID 1315 of 2019
Judge: DAVIES J
Date of judgment: 30 April 2020
Catchwords: PRACTICE AND PROCEDURE – interlocutory injunctions – where applicant seeks to restrain publication of statement of reasons and issuing of directions by Australian market licensee – whether serious question to be tried – no serious question to be tried in respect of validity of ASX Listing Rule 18.8 – no serious question to be tried in respect of alleged breach of good faith and/or reasonableness by Australian market licensee – balance of convenience weighs against granting injunctions sought – interlocutory relief refused
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), ss 13, 31 and 33

Corporations Act 2001 (Cth), Parts 7.2 and 7.2A, ss 761A, 792A, 792B(2)(c), 792C(1), 792D(1), 793B(2), 793C, 798F, 798G, 798J, 1101B

Corporations Amendment (Financial Markets Supervision) Act 2010

Cases cited:

Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57

Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd [2015] HCA 7; 255 CLR 352

Beecham Group Limited v Bristol Laboratories Pty Ltd [1968] HCA 1; 118 CLR 618

Bradto Pty Ltd v State of Victoria; Tymbook Pty Ltd v State of Victoria [2006] VSCA 89; 15 VR 65

Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; 161 CLR 148

FAI Insurances Ltd & Anor v Pioneer Concrete Services Ltd & Ors (No 2) (1986) 10 ACLR 801

Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760

Date of hearing: 16 April 2020
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 52
Counsel for the Applicant: Mr P Collinson QC with Mr J Mereine
Solicitor for the Applicant: HWL Ebsworth Lawyers
Counsel for the Respondent: Ms C Button QC with Mr B Lim
Solicitor for the Respondent: Herbert Smith Freehills

ORDERS

VID 1315 of 2019
BETWEEN:

ISIGNTHIS LIMITED (ACN 075 419 715)

Applicant
AND:

ASX LIMITED (ACN 008 624 691)

Respondent

JUDGE:

DAVIES J

DATE OF ORDER:

30 APRIL 2020

THE COURT ORDERS THAT:

1.The applicant’s interlocutory application dated 12 March 2020 be dismissed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

DAVIES J:

INTRODUCTION

  1. The applicant (ISX) is a listed company on the Australian Securities Exchange.  Trading in its shares on the Australian Securities Exchange was suspended by the respondent (ASX), acting under ASX Listing Rule 17.3, on 2 October 2019 and the suspension is continuing.  On 4 December 2019, ISX commenced this proceeding against ASX seeking an order that the suspension be lifted and its shares be reinstated for quotation on the Australian Securities Exchange upon the claims that: (1) ASX failed to accord procedural fairness to ISX and breached its implied obligation to act in good faith and/or honestly and fairly…

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AGLC
Isignthis Limited v ASX Limited [2020] FCA 567
Case
[2020] FCA 567
Decision Date

CaseChat Overview and Summary

In the case of Isignthis Limited v ASX Limited, the applicant sought to restrain the defendant, ASX Limited, from publishing a statement of reasons and issuing certain directions as part of its regulatory process. The Federal Court was tasked with determining whether there was a serious question to be tried regarding the validity of ASX Listing Rule 18.8 and the alleged breach of good faith and/or reasonableness by ASX. Additionally, the court had to assess the balance of convenience to decide whether interlocutory injunctions should be granted.

The court found that there was no serious question to be tried regarding the validity of ASX Listing Rule 18.8, as the applicant had not provided sufficient evidence to challenge the rule's validity. Similarly, the court found no serious question to be tried concerning the alleged breach of good faith and/or reasonableness by ASX, as the applicant had not demonstrated any substantial wrongdoing by ASX. Furthermore, the court considered the balance of convenience, which weighed against granting the injunctions sought by the applicant. Consequently, the court refused to grant the interlocutory relief.

In conclusion, the Federal Court dismissed the applicant's interlocutory application, finding no basis for granting the injunctions sought against the defendant. The court's decision was based on the lack of a serious question to be tried regarding the validity of ASX Listing Rule 18.8 and the alleged breach of good faith and/or reasonableness by ASX, as well as the balance of convenience which favoured the defendant. The applicant's interlocutory application dated 12 March 2020 was dismissed, and the orders were entered in accordance with Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The applicant’s interlocutory application dated 12 March 2020 be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The “balance of convenience” consideration requires an assessment of “whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted”: Beecham at 623. That is, the Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party which fails to establish its right at trial, or in failing to grant an injunction to a party which succeeds at trial: Bradto Pty Ltd v State of Victoria; Tymbook Pty Ltd v State of Victoria [2006] VSCA 89; 15 VR 65 at 73 [35]. BACKGROUND The following background is taken from the affidavit of Mr Moran and is not subject to a suppression order. After the suspension of ISX’s shares, ASX commenced an investigative process to determine whether ISX was complying with the Listing Rules. That process involved the issue of four query letters to ISX pursuant to Listing Rule 18.7. The first query letter issued on 2 October 2019, with ISX’s response received on 10 October 2019. ASX released the correspondence to the market on 11 October 2019. The first query letter was an initial list of questions focused on eliciting information regarding ISX’s customer groups, with a particular focus on those customers engaged in cryptocurrency related activities, which was an area of general focus for ASX, and the revenue derived by ISX from those customer groups. The second query letter issued on 15 October 2019, with ISX’s response received on 25 October 2019. ASX released that correspondence to the market on 28 October 2019. The second query letter focused on eliciting information about a spike in ISX’s review in the June half of 2018, coinciding with the cut-off date for the achievement of revenue milestones for the conversion of ISX performance shares into ordinary shares. The third query letter issued on 31 October 2019, with ISX’s response received on 15 November 2019. ASX released this correspondence to the market on 18 November 2019. The third query letter sought to elicit information that would explain the relationship between ISX’s revenue in the June half of 2018 and four contracts, and the nature of those four contracts. The fourth query letter issued on 22 November 2019, with ISX’s response received on 26 November 2019. ASX also released this correspondence to the market on 5 December 2019. The fourth query letter was focused on information that had not been provided by ISX in response to the previous three letters or that was incomplete or otherwise required further information. Having gathered information by way of the four query letters, ASX formed the view that ISX may not be in compliance with the Listing Rules. On 6 December 2019, ASX provided its draft “findings” to ISX for ISX’s comment. ISX provided extensive comments and, amongst other things, objected to ASX making and publishing “findings” (ISX response). ASX took ISX’s comments into account and provided a revised document on 26 February 2020, which it styled “draft reasons”, and invited ISX to make further representations on the content of those draft reasons. The draft reasons contain three directions that ASX “in accordance with Listing Rule 18.8” will give to ISX to do certain things, being the directions which ISX seeks to enjoin ASX from making by the grant of the interlocutory injunction. Mr Moran deposed that the directions were tailored to facilitate ISX’s compliance with Listing Rule 3.1 and to ensure its ongoing compliance. The directions would require ISX to disclose certain matters to the market, appoint an independent expert to review its policies and processes regarding compliance with Listing Rule 3.1, and include information about income it derives from customers in certain sectors in the quarterly activity report it gives to ASX under Listing Rule 4.7C. ISX did not make any further representations to ASX in respect of the draft reasons and on 13 March 2020, ASX finalised its conclusions and produced a final statement of reasons (final reasons) recording the reasons for the continuation of the suspension of ISX’s shares. The final reasons did not include the three directions that ASX intends to give ISX because ISX had by then filed its application for interlocutory injunctive relief seeking to enjoin ASX from making the proposed directions under Listing Rule 18.8.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

ISX did not separately address the giving of directions from the publication of the statement of reasons, arguing that the directions are not separate from the reasons. I accept ASX’s submission, however, that the two matters should be considered separately on the question of balance of convenience, albeit that the statement of reasons provides the explanation for the directions sought to be given by ASX. ISX did not seek to identify any prejudice that would be occasioned by it if an injunction were refused with respect to restraining ASX from giving the directions, aside from its challenge to the statement of reasons. In the circumstances, had it been necessary to decide, there would have been no warrant on the balance of convenience consideration to grant the injunction with respect to the directions that ASX proposes to give ISX. CONCLUSION The application for interlocutory injunctive relief is refused.

Ratio Decidendi

Legal Principle Established

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