Premier Pacific Pharmaceutical Industries Ltd v Australian Stock Exchange Ltd
[1995] FCA 422
•26 JUNE 1995
CATCHWORDS
CORPORATIONS - issue of prospectus which stated that an application would be made for quotation of the securities on the ASX - undertaking given to comply with the requirements of the ASX - whether an undertaking can or should be given in respect of a requirement the fulfilment of which is not within the control of the directors - whether distinction to be drawn between a "condition" and "requirement" - whether undertaking given satisfied s.1031(7) of the Corporations Law - whether ASX had power to accept or reject the undertaking - construction of s.1031 Corporations Law - meaning of "undertake", "requirements", "condition".
Corporations Law - s.1031, s.1084(6)
Brolga Minerals Ltd v Stock Exchange of Perth Ltd (1971-1979) Australian Securities Law Cases ¶75-007, case no. 85,164, noted 47 ALJ 337
Cody v J.H. Nelson Pty Ltd (1947) 74 CLR 629
Meer v London Borough of Tower Hamlets [2988] IRLR 399
Perera v Civil Service Commission (No. 2) [1983] ICR 428
Quadling v Robinson (1976) 137 CLR 192
PREMIER PACIFIC PHARMACEUTICAL INDUSTRIES LIMITED
v AUSTRALIAN STOCK EXCHANGE LIMITED and ABN AMRO BANK N\V
NG 275 of 1995
Davies, Beaumont & Burchett JJ.
26 June 1995
Sydney
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No G 275 of 1995
)
GENERAL DIVISION )
On appeal from a judgment of a single judge of the Federal Court of Australia
BETWEEN: PREMIER PACIFIC PHARMACEUTICAL INDUSTRIES LIMITED
(ARBN 066 346 889)
Appellant
AND: AUSTRALIAN STOCK EXCHANGE LIMITED
(ACN 008 624 691)
First Respondent
ABN AMRO BANK N/V
(ACN 008 583 551)
Second Respondent
Coram: Davies, Beaumont & Burchett JJ.
Date: 26 June 1995
Place: Sydney
MINUTES OF ORDER
THE COURT ORDERS THAT:
The appeal be dismissed with costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No G 275 of 1995
)
GENERAL DIVISION )
On appeal from a judgment of a single judge of the Federal Court of Australia
BETWEEN: PREMIER PACIFIC PHARMACEUTICAL INDUSTRIES LIMITED
(ARBN 066 346 889)
Appellant
AND: AUSTRALIAN STOCK EXCHANGE LIMITED
(ACN 008 624 691)
First Respondent
ABN AMRO BANK N\V
(ACN 008 583 551)
Second Respondent
Coram: Davies, Beaumont & Burchett JJ.
Date: 26 June 1995
Place: Sydney
REASONS FOR JUDGMENT
Davies J: This is an appeal from a judgment of a single judge of the Court, Gummow J, in which his Honour held that the first respondent, the Australian Stock Exchange Limited ("ASX") had not granted permission for securities, the subject of a prospectus issued by the appellant, Premier Pacific Pharmaceutical Industries Limited ("Premier Pacific") to be listed on its stock market within the period applicable for the purposes
of s.1031(1)(b) of the Corporations Law, that is to say, by 21 March 1995. His Honour dismissed an application for a declaration that, for the purposes of s.1031(7) of the Corporations Law, a form of undertaking given by the directors of Premier Pacific to the ASX on 21 March 1995 undertook to comply with the requirements specified by the ASX for permission for the securities to be listed for quotation. Premier Pacific has appealed from that judgment. The trial Judge also dismissed a cross-claim brought by the second respondent, ABN Amro Bank N\V ("Amro Bank"), which sought a declaration that the Amro Bank was entitled to a refund by Premier Pacific of the sum of $40m, being application moneys paid to Premier Pacific in respect of the subject securities. There is no appeal from that dismissal.
Section 1031 of the Corporations Law provides, inter alia:-
"1031(1) Subject to this section, where a prospectus in relation to securities of a corporation states that application has been or will be made to a securities exchange, whether in Australia or elsewhere, for permission for the securities to be listed for quotation on the stock market of that securities exchange and:
(a)the permission is not applied in the form for the time being required by that securities exchange on or before the third day on which that securities exchange is open after the date of issue of the prospectus; or
(b)the permission is not granted before the end of 6 weeks after the date of issue of the prospectus or such longer period, not exceeding 12 weeks, after the date of issue as is, within those 6 weeks, notified to the applicant by or on behalf of the securities exchange;
any allotment or issue, whenever made, on an application pursuant to the prospectus, or any sale, whenever made, pursuant to the prospectus, as the case requires, is void and the corporation shall repay, in accordance with the provisions of this section, any money received by it pursuant to the prospectus.
...
(7) Where a securities exchange has, within the period applicable under paragraph (1)(b), granted permission subject to compliance with any requirements specified by the securities exchange, permission shall be deemed to have been granted by the securities exchange if the directors of the corporation have given to the securities
exchange an undertaking in writing to comply with the requirements of the securities exchange."
On 30 November 1994, the directors of Premier Pacific signed a prospectus in relation to an offer of 40 million ordinary shares of 20 cents each in the share capital of Premier Pacific, to be issued at a price of $1 each. On 1 December 1994, a copy of the prospectus was lodged with and registered by the Australian Securities Commission ("the Commission"). A supplementary prospectus was lodged with the Commission on 28 December 1994 and a further supplementary prospectus was lodged on 5 January 1995. The prospectus provided inter alia:-
"2.7 Listing
Application will be made to the ASX not later than three business days after the date of issue of this Prospectus for Premier Pacific to be admitted to the Official List of the ASX and for official quotation of Premier Pacific's Shares.
...
2.8Conditions Precedent
Allotment is conditional upon the following:
.The admission of Premier Pacific to the Official List of the ASX and the granting of permission for all of the Shares to be listed for quotation; and
.The minimum subscription being received."
On 22 February 1995, the Commission, acting pursuant to its powers under s.1084(6) of the Corporations Law, declared that the provisions of Pt 7.12 of the Corporations Law had application in relation to Premier Pacific and the prospectus as if s.1031(1) of the Corporations Law were varied or modified by omitting the text of para (b) thereof and inserting:-
"(b)the permission is not granted before the end of 15 weeks after the date of issue of the prospectus."
The effect of this declaration was that, if permission for the securities to be listed for quotation on the Stock Market of the ASX was not granted before the end of 15 weeks after the date of issue of the prospectus, any allotment or issue made on an application lodged pursuant to the prospectus would be void. It is agreed that the 15 weeks expired on, but included, 21 March 1995.
On 16 January 1995, the ASX wrote to Premier Pacific inter alia:-
"I advise that ASX has resolved as follows:
1.Premier Pacific Pharmaceutical Industries Limited (the `Company') be admitted to the Official List of Australian Stock Exchange Limited (`ASX') subject to Notification and Compliance with the Conditions.
2.Notification means actual notification by the Company to Australian Stock Exchange Limited (`ASX') that:
(a)the offer of shares in the Company under the prospectus dated 30 November 1994 (the `Prospectus') has closed and that there has been no material adverse change within the meaning of section 1024E (6) of the Corporations Law as at the time of notification, or
(b)ABN Amro Australia Hoare Govett Limited (the `Underwriter') has agreed to apply for, and pay for, any shares returned to the Company pursuant to section 1024E (5) of the Corporations Law provided that it has not exercised its rights to terminate its obligation to underwrite the issue,
and is not satisfied by undertakings to notify.
3.Compliance with the Conditions means compliance with the following conditions:
3.1...
3.2there being at least 500 shareholders, each with a parcel of shares having a value of at least $2,000;
3.3completion of the allotment of 40,000,000 ordinary shares of 20 cents each fully paid at an issue price of $1.00;
...
3.8provision of an undertaking under seal by the Company that:
(a)all its financial reports will comply with Australian Accounting Standards;
..."
The relevant condition with which this appeal is concerned is condition 3.2. However, I have set out the other clauses as being illustrative of the type of matter which was contained in the letter of 16 January 1995 and which would be likely to be found in conditional permissions of this type.
An affidavit by Mr G.B. Robertson, solicitor for Premier Pacific, deposed as to a meeting he and others held with officers of the ASX, including Mr B. Grieve, on 17 March 1995. Mr Robertson deposed that Mr Grieve said:-
"The Exchange would need to be satisfied that any undertaking given by the Directors of the Applicant was one capable of performance and satisfactory to the Exchange.
You should be aware of an ASX Guidance Note dated September 1994 entitled `Overseas Companies', and in particular as to the statements set out in that Note as to Shareholder Spread.
200 to 250 Australian resident applicants would probably be sufficient for the purposes of the Exchange."
On 21 March 1995, the directors of Premier Pacific wrote to the ASX in the following terms:-
"We hereby undertake to the Exchange:
1.to ensure that within 90 days of the date of this letter the Company will have received at least 500 valid applications from third parties of which at least 250 applicants will have residency in Australia by:
(a)relying upon Tianjin Northern International Trust and Investment Corporation (`NORITIC') as an applicant, under the Company's recently closed offer, for 600,000 shares in the Company to assign its rights as applicants to a company (`SPV') of which the directors of
the Company are its directors and the shareholders of SPV are the Company's Australian resident directors;
(b)relying upon an undertaking of Tianjin Industrial and Commercial Pharmaceutical Holdings Limited (`TICPHL') to ensure that the present rights of each of the approximately 435 applicants (who are employees of the Company or of one or more of its subsidiaries) be assigned to SPV;
(c)relying upon an undertaking executed by Hambros Equities Limited contemporaneously with this letter;
(d)assisting SPV to offer all these rights, so assigned, under a fresh prospectus, and issued by SPV;
(e)ensuring that the prospectus referred to in paragraph (d) refers to, or incorporates the relevant contents of, amongst other things:
(i)the Company's Prospectus dated 30th November 1994;
(ii)the Company's two supplementary prospectuses to that prospectus; and
(iii)all such other information required to be included in it under the Corporations Law; and
(f)by assisting Hambros Equities Limited, NORITIC and TICPHL to fulfil their undertakings to us.
2.to, on the Company having received the valid applications as contemplated by paragraph 1, promptly satisfy in fact each of the conditions set out in paragraph 3 of the Exchange's letter dated 16th January 1995 to our Australian solicitors, Kemp Strang & Chippindall, which are not as at the time of delivery of this letter to the Exchange satisfied in fact.
These undertakings are supported by the following written undertakings to the Company appended to this letter.
.an undertaking dated 10th March 1995 by NORITIC,
.an undertaking dated 21st March 1995 by Tianjin Industrial and Commercial Pharmaceutical Holdings Limited; and
.an undertaking dated 21st March 1995, executed contemporaneously with this undertaking, by Hambros Equities Limited." (emphasis added)
The trial Judge held that this letter did not constitute "an undertaking in writing to comply with the requirements of the securities exchange.", for the purposes of s.1031(7), for the reason that the requirement in para 3.2 of the letter of 16
January that there be at least 500 shareholders each with a parcel of shares of the value of at least $2,000 and the further requirement orally communicated by Mr Grieve at the meeting of 17 March 1995 that, of the 500 shareholders, 200 to 250 should be Australian residents, were matters the performance of which was not within the power of the directors giving the undertaking. His Honour held that s.1031(7) did not deem permission to have been granted in respect of a requirement, the fulfilment of which was not within the directors' control. Such a requirement, his Honour held, was not susceptible to an undertaking by the directors to comply.
It is unnecessary to rule finally upon that issue in this appeal. One can readily appreciate the force of the factors which led his Honour to this conclusion. Nevertheless, an implication which limits or affects the operation of a statutory provision should not be drawn unless it is necessary to do so to give effect to the intent and object of the provisions. As Dixon J. said in Cody v. J.H. Nelson Pty Ltd (1947) 74 CLR 629 at 647, "... words although general should be understood in their primary and natural significance unless there are sufficient indications of some other meaning." The implication which the trial Judge drew, namely that the matter the subject of the undertaking must be a matter within the control of the corporation and therefore of the directors, could indeed tend to be uncertain in its operation. It should be noted, moreover, that analogous provisions have appeared in the Companies Code and Companies Acts of the States since at least 1961, when the equivalent provision in New South Wales was s.44(8). There appears to have been no reported case in which such an implication was drawn.
I prefer to deal with the present appeal on the footing that the directors' letter of 21 March 1995 was not an undertaking such as was contemplated by s.1031(7). It was a conditional or qualified undertaking.
The letter of 21 March 1995 inserted a time period, 90 days from the date of the letter, which was not a time span contemplated by s.1031(b) of the law or by the variation thereof constituted by the declaration of the Commission of 22 February 1995. The letter was further qualified by the reference to receiving at least 500 valid applications by the means set out in clauses (a), (b), (c), (d), (e) and (f) of paragraph 1. Many of these means were very qualified indeed. The words "by ... relying upon" and "by ... assisting" and "by ... ensuring" are words of hope and expectation, not of undertaking.
Nor do the terms of paragraph 2 of the letter constitute an unqualified undertaking. Paragraph 2 commences by stating the condition precedent, "on the Company having received the valid applications as contemplated by paragraph 1." What was given by the letter of 21 March 1995 was a limited and conditional undertaking.
The directors' undertaking was thus in several different aspects a heavily qualified one and the outcome was most uncertain. I need not deal with or describe in detail the steps which were proposed in clauses (a) to (f) of paragraph 1, but it is worth noting that a new company, "SPV", was to be formed, there was to be an
assignment of rights to that company and SPV was to offer those rights, under a fresh prospectus, to the public, all these matters to take place within a 90 day period.
Section 1031 is expressed in simple terms which may, in particular circumstances, not correlate well with the complex negotiations which sometimes occur between the ASX and companies wishing to have their securities listed. The arrangements between applicant companies and the ASX are contractual in nature. See Brolga Minerals Ltd v Stock Exchange of Perth Ltd (1971-1979) Australian Securities Law Cases ¶75-007, case no. 85,164, noted 47 ALJ 337. The ASX, acting in accordance with its rules, may impose such requirements as it sees fit, may require undertakings to be given and may reject undertakings if they are deemed not sufficient by the ASX. Ultimately, it is for the ASX, acting in accordance with its rules and in the exercise of its powers, to determine whether or not securities will be listed. Section 1031 does not attempt to regulate all these matters and does not impose any statutory obligation upon the ASX to list securities, even when an undertaking in accordance with the terms of s.1031(7) is given.
Nevertheless, companies seeking listing and the ASX itself, must recognise that s.1031 provides an important safeguard for investors and that Parliament has set down a time frame in s.1031(1)(b) which, if not varied by the Commission, must be complied with. If that time frame is not complied with, any allotment under the prospectus will be void. Section 1031(2) provides that the application moneys shall then be repaid "as soon as practicable without interest", and if they are not repaid within the 14 day period specified in 1031(2)(b), the directors become jointly and
severally liable to repay the moneys with interest. It may be noted that, under s.51 of the Corporations Act 1948 (UK), a predecessor to s.1031, there was no provision for an undertaking to comply with a conditional permission. Permission to list was to be granted or refused within the periods of 3 and 6 weeks specified in s.51(1). See Buckley on The Companies Acts, 12th ed., 122-4.
Section 1031(7) contemplates that, within the specified time span, the ASX may grant permission "subject to compliance with any requirements" which it specifies. The sub-section then provides for the giving of an undertaking. The ASX should state its requirements with precision, so that its requirements can be accepted and an undertaking given. For their part, companies seeking to list must appreciate that an undertaking given for the purposes of s.1031(7) must be a simple, unqualified, unconditional undertaking. The undertaking must accept and match the requirements specified by the ASX. A non-identical purported acceptance will not serve the purpose. The position is similar to that of an acceptance under contractual principles. Gibbs J gave an illustration of a non-identical acceptance when he said in Quadling v Robinson (1976) 137 CLR 192 at 201, ".... if the grantee of an option sets out his own erroneous understanding of the option and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option".
In the present case, there was plainly no undertaking given by the directors to comply with the requirements specified by the ASX. The directors laid down their own conditions and purported to impose them upon the ASX. The letter of 21 March 1995 was not an undertaking for the purposes of s.1031(7).
Counsel for Premier Pacific submitted that the letter of 21 March 1995 was drawn in the terms in which it read because Mr Grieve had advised the meeting on 17 March 1995 that the ASX would need to be satisfied that any undertaking given by the directors was one capable of performance and was satisfactory to the ASX. He relied upon the affidavit of Mr Robertson who deposed that the letter of 21 March 1995 was not intended to be a conditional undertaking and was drawn as it was because of Mr Grieve's comments. Mr Robertson deposed that an undertaking in the form annexed to his affidavit could equally have been given. However, that form was similarly qualified in the substance of its terms and would not have satisfied s.1031(7). What s.1031(7) requires is a straightforward, unqualified undertaking. Any explanations contained in a letter of undertaking as to how the undertaking will be fulfilled are likely to be read as imposing qualifications upon the letter.
There was, I think, some misunderstanding by Mr Grieve and also some misunderstanding in some of the arguments put below to the trial Judge as to the effect of s.1031(7). An undertaking given for the purpose of that provision serves only as an undertaking for the purposes of that provision. The undertaking has to match the requirements specified by the securities exchange. But if it does so, it is not for the securities exchange to accept or reject the terms of the undertaking. If an undertaking is given which satisfies the statutory provisions, s.1031(7) will operate to deem the relevant permission to have been granted.
An undertaking given under s.1031(7) is a different matter from an undertaking required by the securities exchange for its own purposes. In its letter of 16 January
1995, the ASX required that there be notification of the matters set out in sub-paragraphs 2 (a) and (b) and expressly specified that "Notification .... is not satisfied by undertakings to notify.". That requirement was a specified requirement for the purposes of s.1031(7). To be effective, the undertaking given by the directors for the purposes of s.1031(7) had to encompass the giving of those notifications, if they had not already been given.
There may be room for debate as to the width of the word "requirements" in s.1031(7). Some of the matters set out in the letter of 16 January 1995 may perhaps be described as mere requirements whereas others may be described as conditions precedent or conditions subsequent. In my opinion, the term "requirements" in s.1031(7) should be given a wide meaning so as to encompass all those matters which a securities exchange may require to be met before the exchange will list the securities. The term "requirements" is a wide term and it is used in s.1031(7) in that way, not attracting the technical overtones which are sometimes attached to the word "condition". The term refers to all those matters which the securities exchange specifies as being required to be attended to before the exchange will list the securities.
Although, in the present appeal, I do not wish to decide whether the trial Judge was correct in his view that an undertaking for the purposes of s.1031(7) could not have been given with respect to a requirement such as that contained in para 3.2 of the letter of 16 January 1995, I am nevertheless of the view that it would be contrary to the spirit and intention of s.1031(7) for an undertaking to be given with
respect to a requirement such as that contained in para 3.2 unless the corporation had, by the time of the giving of the undertaking, already received and was in a position to act on applications for securities the allotment of which would meet the requirement. I note in this respect that s.1031(8) provides that:- "A director of a corporation shall not contravene an undertaking given by the directors of the corporation as mentioned in subsection (7)".
These provisions do not contemplate that an undertaking will be given based on the mere hope or even a confident expectation that the undertaking will be fulfilled. It was against the spirit of the provisions and, if the trial Judge be correct in his interpretation, contrary to s.1031(7) as properly interpreted. The directors of Premier Pacific should not have given an undertaking in relation to the matters raised in para 3.2 of the letter of 16 January 1995 and the additional requirement as to 200 - 250 Australian residents mentioned by Mr Grieve on 17 March 1995, at a time when the corporation did not have in hand applications which would permit the directors to fulfil the requirement by the mere making of allotments. Responsible directors, properly advised, would not have done so, and no doubt that is why the so-called undertaking was so heavily qualified.
Section 1031(7) has in mind an undertaking to fulfil the requirements of the securities exchange. Directors ought not to give such an undertaking unless satisfaction of the requirements of the ASX is within the power of the directors when the undertaking is given. A securities exchange formulates its rules in the public interest and to ensure orderly dealing in securities. It is essential in the public interest
that, in the issue of securities to be listed on the exchange, directors act responsibly and that the requirements of the exchange are complied with.
In the appeal, an issue was raised as to whether the directors intended by their letter of 21 March 1995 to satisfy the requirement as to the prescribed number of shareholders each having a parcel of shares having "a value of at least $2,000". An argument was put that, having regard to the transactions which were proposed in the letter of 21 March 1995, further details of which had been given to the ASX, this would not occur. Having regard to my findings on the principal issue, I need not consider this point.
For the reasons I have given, I would dismiss the appeal with costs.
I certify that this and the 13 preceding pages
are a true copy of the reasons for judgment herein
of the Honourable Justice Davies.
Associate:
Date: 26 June 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 275 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
BETWEEN:PREMIER PACIFIC PHARMACEUTICAL INDUSTRIES LIMITED
Appellant
AND:AUSTRALIAN STOCK EXCHANGE LIMITED
First respondent
ABN AMRO BANK N/V
Second respondent
CORAM: DAVIES, BEAUMONT AND BURCHETT JJ
DATE: 26 JUNE 1995
REASONS FOR JUDGMENT
BEAUMONT J.
INTRODUCTION
Section 1031(1) of the Corporations Law ("the Law") provides:
"1031(1)Subject to this section, where a prospectus in relation to securities of a corporation states that application has been or will be made to a securities exchange, whether in Australia or elsewhere, for permission for the securities to be listed for quotation on the stock market of that securities exchange and:
(a)the permission is not applied for in the form for the time being required by that securities exchange on or before the third day on which that securities exchange is open after the date of issue of the prospectus; or
(b)the permission is not granted before the end of 6 weeks after the date of issue of the prospectus or such longer period, not exceeding 12 weeks, after the date of issue as is, within those 6 weeks, notified to the applicant by or on behalf of the securities exchange;
any allotment or issue, whenever made, on an application pursuant to the prospectus, or any sale, whenever made, pursuant to the prospectus, as the case requires, is void and the responsible person shall repay, in accordance with the following provisions of this section, any money received by it pursuant to the prospectus." (Emphasis added)
By instrument dated 22 February 1995, the Australian Securities Commission ("the ASC") declared that the provisions of Part 7.12 of the Law have effect for present purposes as if s.1031(1) were varied by omitting para.(b) above, and inserting:
"(b)the permission is not granted before the end of 15 weeks after the date of issue of the prospectus." (Emphasis added)
The time limit in s.1031(1)(b) is to be read subject to s.1031(7) of the Law as follows:
"1031(7)Where a securities exchange has, within the period applicable under paragraph (1)(b), granted permission subject to compliance with any requirements specified by the securities exchange, permission shall be deemed to have been granted by the securities exchange if the directors of the corporation referred to in subsection (1) have given to the securities exchange an undertaking in writing to comply with the requirements of the securities exchange." (Emphasis added)
Mention should also be made here of s.1031(8):
"(8)A director of a corporation shall not contravene an undertaking given by the directors of the corporation as mentioned in subsection (7)."
An application was made to the Court by the appellant, Premier Pacific Pharmaceutical Industries Limited, for a declaratory order that, for the purposes of s.1031(7), a form of undertaking dated 21 March 1995 given by the appellant's directors satisfied the requirements of the first respondent ("the ASX") for the admission of the appellant to the Offical List of the ASX. A Judge of the Court (Gummow J.) refused that relief. The appellant now appeals from that judgment.
BACKGROUND
There was no dispute about the background.
The appellant, which was incorporated in Bermuda, holds an 80% interest in two Sino-foreign equity joint ventures established in the PRC. Both joint ventures own enterprises which are engaged in the manufacturing and wholesaling of pharmaceuticals in the PRC. ABN Amro Bank N/V, the second respondent, is the ultimate parent company of ABN Amro Australia Hoare Govett Limited, which is the underwriter to the offer by the appellant of 40m ordinary shares of $A0.20 each in the authorised share capital of the appellant which are proposed to be offered for issue at a price of $A1 each.
On 30 November 1994, the directors of the appellant
signed a prospectus in relation to the offer. The prospectus stated (para.2.7) that application would be made to the ASX not later than three business days after the date of issue of the prospectus for the appellant to be admitted to the Official List of the ASX and for official quotation of the appellant's shares. It was further stated (para.2.8) that allotment was conditional upon such admission and quotation, and upon receipt of the minimum subscription.
The Foreword to the ASX Listing rules states that -
"The Exchange in its absolute discretion (without
qualification whatsoever) may accept or reject any application for admission to the Official List and has absolute discretion in administering the Listing Rules and in so doing looks to companies to comply with the spirit as well as the letter of those Listing Rules".
Under Section 1 of the ASX Listing Rules ("Prerequisites for admission to the Official List"), para.(3)(b) states, inter alia, that:
"A company seeking Official Quotation of shares may be considered for admission to the Official List if-
(1) the issue price of each share for which Official Quotation is sought is at least 20 cents;
(ii) there are at least 500 shareholders each with a parcel of shares having a value of at least
$2,000;
..."
It is common ground that the effect of para.2.7 of the prospectus was to attract s.1031(1) of the Law; and that s.1031(1)(a) of the Law had been complied with. The issue was
whether s.1031(1)(b) had been satisfied.
On 1 December 1994, the appellant lodged, and registered, a copy of the prospectus with the ASC. On 28 December 1994 and 5 January 1995, supplementary prospectuses were lodged.
By letter dated 16 January 1995, which is central to the questions which arose in the proceeding, the ASX notified the appellant's solicitors that it had resolved to admit the appellant to its Official List, "subject to Notification and Compliance with the Conditions". (Emphasis added.) Para.3 of the letter stated that compliance with the Conditions meant compliance with the conditions there specified. The Condition which was in issue in the litigation was that contained in para. 3.2 -
"[T]here being at least 500 shareholders, each with a parcel of shares having a value of at least $2,000".
As has been noted, on 22 February 1995 the ASC, acting pursuant to its power under s.1084(6) of the Law, declared that the provisions of Part 7.12 of the Law had effect in relation to the appellant, and the prospectus, as if s.1031(1)(b) of the Law had been modified so as to read "the permission is not granted before the end of 15 weeks after the date of issue of the prospectus". The 15 week period expired on 21 March 1995.
On 23 February 1995, the second respondent lodged an application with the appellant for 40m shares together with the sum of $A40m.
On 7 March 1995, the appellant's solicitors wrote to the ASX (a) enclosing correspondence and documents with the object of satisfying the requirements noted in the ASX letter of 16 January; and (b) explaining how the appellant proposed to satisfy the remaining conditions of listing.
On 10 March 1995, the ASX wrote to the appellant's solicitors stating:
"In order for the Company to satisfy the conditions of listing as set out in our letter to you of 16 January 1995, it must confirm that the conditions have in fact been met and provide the relevant confirmation and/or documentation requested. ASX cannot confirm that the conditions have been satisfied until they have been met.It is not sufficient that the Company states what it intends to do, rather it must comply with the condition in order to satisfy ASX's requirements".
As has been noted, the last day of the period within which the ASX could grant permission or be taken to have granted permission (so as not to trigger the operation of sub-s. 1031(1), i.e. to render the issue void and oblige the appellant to repay moneys received), was 21 March 1995. On that date a letter was signed by the appellant's directors and addressed to the ASX which included an instrument purporting to be an undertaking to comply with the requirements of the
ASX as set out in para 3.2 of the letter of 16 January. The letter stated:"We hereby undertake to the Exchange:
to ensure that within 90 days of the date of this letter, the company will have received at least 500 valid applications from third parties of which at least 250 applicants will have residency in Australia by:
(a)relying upon Tianjin Northern International Trust and Investment Corporation ("NORITIC") as an applicant, under the company's recently closed offer, for 60,000 shares in the Company, to assign its rights as applicants to a company ("SPV") of which the directors of the company are its directors and the shareholders of SPV are the Company's Australian resident directors:
(b)relying upon an undertaking of Tianjin Industrial and Commercial Pharmaceutical Holdings Limited ("TICPHL") to ensure that the present rights of each of the approximately 435 applicants (who are employees of the company or of one or more of its subsidiaries) be assigned to SPV;
(c)relying upon an undertaking executed by Hambros Equities Limited contemporaneously with this letter;
(d)assisting SPV to offer all these rights, so assigned, under a fresh prospectus, and issued by SPV;
(e)ensuring that the prospectus referred to in paragraph (d) refers to, or incorporates the relevant contents of, amongst other things:
(i) the Company's Prospectus dated
30th November 1994
(ii) the Company's two supplementary
prospectuses to that prospectus; and
(iii)all such other information required
to be included in it under the
Corporations Law; and
(f)by assisting Hambros Equities Limited, NORITIC and TICPHL to fulfil their undertakings to us.
to, on the Company having received the valid applications as contemplated by paragraph 1, promptly satisfy in fact each of the conditions set out in paragraph 3 of the Exchange's letter dated 16th January 1995 to our Australian solicitors, Kemp Strang & Chippindall, which are not as at the time of delivery of this letter to the exchange satisfied in fact".
These undertakings are supported by the following written undertakings to the company appended to this letter.
*an undertaking dated 10th March 1995 by NORITIC
*an undertaking dated 21st March 1995 by TICPHL; and
*an undertaking dated 21st March 1995, executed contemporaneously with this undertaking, by Hambros Equities Limited".
The undertakings appended to the letter were expressed as follows:
(1)"T0: Premier Pacific Pharmaceutical Industries Limited
We, TIAMJIN NORTHERN INTERNATIONAL TRUST AND INVESTMENT CORPORATION undertake to transfer such number of shares in Piemier [sic] Pacific Pharmaceutical Industries Limited (the `Company') that we may be allotted to such number of unrelated persons as to enable the Company to satisfy any requirement of Australian Stock Exchange Limited (the `Exchange') as to the minimum number of shareholders each holding a minimum of 2,000 shares in the Company for the Company's admission to the Exchange's Official List."
(2)To The Directors
Premier Pacific Pharmaceutical Industries Limited
...
We undertake to each of you to assist you in your undertaking to the Australian Stock Exchange to ensure that within 90 days of the date of your letter to the Exchange on this matter, the Company will have at least 500 registered shareholders of
whom 250 are resident in Australia by, amongst other things, procuring that the present rights of each of the approximately 435 applicants who are employees of the Company and its subsidiaries be assigned to a special purpose company (`SPV') for the purpose that their rights be offered, pursuant to a fresh prospectus of SPV to such number of persons as is necessary to ensure that the Directors of Company fulfil their undertakings to the Exchange.
Yours faithfully,
TIANJIN INDUSTRIAL AND COMMERCIAL PHARMACEUTICAL HOLDINGS LIMITED"
(3)To PREMIER PACIFIC PHARMACEUTICALS INDUSTRIES LIMITED
"We undertake to each of you to assist you in achieving your compliance with your undertaking to the Australian Stock Exchange of even date (copy attached) by, on our part:
(a)accepting an appointment as sponsoring broker for the proposed issue by SPV; and
(b)using our best endeavours to obtain the minimum number of valid applications referred to in your said undertaking.
Yours faithfully,
HAMBROS EQUITIES LIMITED"
THE REASONING AT FIRST INSTANCE
Relevantly, the issue for determination by the learned primary Judge was whether the letter of 21 March constituted a written undertaking by the directors of the appellant to comply with the "requirements" of the ASX as set out in para 3.2 of its letter of 16 January, i.e. that there be at least 500 shareholders each with a parcel of shares having a value of at least $2,000, so that, by dint of the provisions of s.1031(7), permission was deemed to have been granted by the ASX within the period stipulated by s.1031(1)(b).
Gummow J. held that this question could only be answered appropriately after addressing the threshold question whether the requirement in para 3.2 was susceptible of an undertaking in writing by the directors to comply with it. This question depended on the proper construction of s.1031(7).
His Honour held that a distinction was to be drawn between (a) the requirements, the satisfaction of which were within the control of the corporation; and (b) those requirements which were beyond such control, either because they were at the disposition of third parties who were free to act independently of the corporation, or because they were the product of events or conditions within the reach of no individual, corporation or government agency. Gummow J. said:
"... the second part of the sub-section does not contemplate that permission shall be deemed to have been granted within time if directors have given undertakings to comply thereafter, but which they cannot perform. The result is that a condition might be a requirement to be met within the period applicable under para. 1031(1)(b), but be of such a nature that it is not susceptible of an undertaking by the directors which has the effect of deeming a grant of permission within that time".
In refusing the relief sought, Gummow J. held that the requirement set out in para. 3.2 was not susceptible of an undertaking by the directors which, by virtue of s.1031(7), had the effect of deeming a grant of permission from the ASX,
because the purported "undertaking" would be, in truth, only a promise, the performance of which was not within the power of the directors giving the undertaking.
CONCLUSIONS ON THE APPEAL
In the construction of s.1031(7), regard should be had both to its evident purpose and to its context.
As Gummow J. pointed out, the evident purpose of s.1031(1) is to protect investors who subscribe for securities on the footing that they will be quoted on an exchange, by ensuring that listing will take place promptly and that subscription moneys will not be tied up by delay in listing (see the Cohen Report (Cmd. 6659 (U.K. 1945) para.23; Recommendation III(b) (p.19); see also Note by Professor Baxt - "Companies - Stock Exchanges - Listing Requirements - Obligation to Accept Applications for Listing" (1973) 47 ALJ 337).
Section 1031(7) is part of that scheme, and its objective must be the same.
So far as context is concerned, as has been seen, the giving of a valid undertaking will have the important consequence, or effect, that the unconditional listing permission of the ASX will thereupon be treated as granted.
This would tend in favour of an interpretation of s.1031(7) which delivers, within reasonable limits, a degree of certainty of outcome.
The relevant matter for present consideration is para.3.2 of the 16 January letter which, it will be recalled, was there described as one of several "conditions". In my opinion, for reasons to be given shortly, para.3.2 was accurately described as a "condition"; that is, it was an event that had to occur before listing were granted. At the same time, para.3.2 was not a "requirement" imposed upon the appellant in the sense that the appellant was not thereby obliged, or required, to subscribe for the shares itself. Such a "requirement" could not lawfully be imposed, and it is at least doubtful whether the appellant could have been "required" to cause others to subscribe for shares in its own capital.
At the same time, it was quite legitimate to stipulate that the event of subscriptions in the nominated value be a condition of listing. This would not "require" the appellant, or its directors, to do anything. It would merely nominate the occurrence of that event as one of the things to happen if listing were to occur: Listing was dependent on that event happening, that is, "conditional" in that respect.
What then is meant, in this connection, by the phrase "an undertaking in writing to comply with the requirements of the securities exchange" in s.1031(7)?
The ordinary meanings of "undertake" include the following:
"2.To take on oneself by formal promise or agreement; lay oneself under obligation to perform or execute.
3.to warrant or guarantee (fol. by a clause)."
(Macquarie Dictionary, 2nd ed.)
The dictionary definition of "comply with" is -
"... to act in accordance with (wishes, commands, requirements, conditions, etc.)"
(Macquarie Dictionary, 2nd ed.)
The relevant Macquarie Dictionary meanings of "require" are -
"2. to call on authoritatively, order, or enjoin (a person etc.) to do something: (e.g.) to require an agent to account for money spent" ...
to call for or exact as obligatory: (e.g.) the law requires annual income-tax returns.
6.To place under an obligation or necessity ...
8.to make demand; impose obligation or need: (e.g.) to do as the law requires."
The primary Macquarie meaning of "requirement" is -
"1.that which is required; a thing demanded or obligatory."
In the absence of any indication that the phrase in s.1031(7) ("undertaking in writing (by the directors) to comply with the requirements of the ... exchange") was intended to have any special or technical meaning, or to be a term of art, in my opinion, its ordinary meaning was intended. That is to say (spelling the language out), the words in question meant (so far as concerns the directors) this -
"laying oneself under written obligation to perform in accordance with the obligations imposed upon the appellant by the ASX."
In my opinion, this statement is different, both in form and in substance, from a statement stipulating that the listing is to be "conditional" upon some event.
The relevant Dictionary (Macquarie) meanings of "condition" are -
"7.A circumstance indispensable to some result; a prerequisite; that on which something else is contingent.
8.Something demanded as an essential part of an agreement.
9.Law. (a). a stipulation in a contract making some liability contingent on the happening of a future uncertain event. ... (b). the event."
The ordinary meaning of "on condition that" is -
"if;provided that."
(It will be recalled that para.3(b) of Section 1 of the ASX Listing Rules stated that a company may be considered for admission to the Official List "if" there are at least 500 shareholders each with shares (issued at 20c.) having a value of at least $2,000).
As has been seen, the ASX letter dated 16 January 1995 spoke, generally, of compliance with "conditions" (para.1). The specific "conditions" were stated in para.3,
including para.3.2 in the terms already set out. Para.3.8, to take one other "condition", was, relevantly, in these terms:
"3.8[P]rovision of an undertaking under seal by the Company that:
(a)all its financial reports will comply with Australian Accounting Standards; ..."
(Emphasis added)
At the end of the letter, reference was made to the provisions of s.1031, and, in particular, to the 12 week period specified in s.1031(1)(b). The appellant was informed that it "may wish to apply to the [ASC] for an extension of this period to enable the Company to comply with the Conditions as an alternative to the directors giving an undertaking to ASX".
In my opinion, the ASX letter did not clearly distinguish between "requirements" within the meaning of s.1031(7) and "conditions". As I have said, the distinction is a real one in the present context. In my view, para.3.2 was, in truth, a "condition"; its occurrence was not, as Gummow J. held, a matter which the appellant, or its directors, could reasonably be expected to guarantee: either the event would happen or it would not. Para. 3.2 could, for instance, be contrasted with para.3.8; the latter was a true "requirement", and accordingly, its performance lay within the competence of the appellant, or its directors, so that the directors could undertake to comply with it.
It follows in my opinion that, whilst the subject matter of para.3.8 could have been dealt with by an undertaking given by the directors pursuant to s.1031(7), the subject matter of para.3.2 had a different status. As truly a "condition", rather than a "requirement" imposed upon the appellant, it was not capable of being made the subject of a personal undertaking by the directors which might be given under s.1031(7). It then follows that I would dismiss the appeal, with costs.
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.
Associate
Dated: 26 June 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) NG 275 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:PREMIER PACIFIC PHARMACEUTICAL INDUSTRIES LIMITED
Appellant
AND: AUSTRALIAN STOCK EXCHANGE LIMITED
First Respondent
ABN AMRO BANK NV
Second Respondent
CORAM: Davies, Beaumont and Burchett JJ.
PLACE: Sydney
DATE : 26 June 1995
REASONS FOR JUDGMENT
BURCHETT J.:
I agree with Davies J. that the document purporting to be "an undertaking in writing to comply with the requirements of the securities exchange", furnished by the appellant to the Australian Stock Exchange in this matter, was not in reality an undertaking within the meaning of s. 1,031(7) of the Corporations Law. I also agree with the reasoning which leads his Honour to that conclusion, on the basis that the qualified language in which the document is expressed necessarily denies it the character of an undertaking to comply with the requirement in question.
There are only some brief comments that I wish to add. The letter by which the Stock Exchange was said to have granted permission subject to compliance with requirements specified by it stated, when stripped of irrelevant matters, the following:
"... ASX has resolved as follows:
Premier Pacific Pharmaceutical Industries Limited ... be admitted to the Official List of Australian Stock Exchange Limited (`ASX') subject to ... Compliance with the Conditions."
The letter then set out a condition expressed in these terms:
"3.2there being at least 500 shareholders, each with a parcel of shares having a value of at least $2,000".
The question was raised whether this condition fell within the language of s. 1,031(7), referring to a case where a security exchange has "granted permission subject to compliance with any requirements specified by the securities exchange". It is only in such a case that "permission shall be deemed to have been granted by the securities exchange if the directors of the corporation have given to the securities exchange an undertaking in writing to comply with the requirements of the securities exchange".
Counsel distinguished between a requirement and a condition. In my opinion, it is extremely unlikely that Parliament intended to draw any such distinction. It cannot
have been thought desirable that the fate of investments which might be worth millions of dollars should depend upon a linguistic test of that kind. Parliament was concerned with the substance of the matter, and with providing a means by which directors, who had been granted permission qualified in the way expressed in the subsection, could turn that permission to account within the short time limit that might be available to them. The drafting of the subsection does not suggest that the word "requirements" was intended to describe something different from a condition. "Requirements" does not stand alone. It is part of the expression "permission subject to compliance with any requirements", an expression phrased so as to convey a condition. For the relevant meaning of the words "subject to", in such a context, is to express a condition. In the Shorter Oxford English Dictionary (3rd ed., 1980 reprint), the sense of "subject to", when used in this way, is given as "(d)ependent upon a certain correcting or modifying condition; conditional upon". So s. 1,031(7) sees a requirement as a condition of a permission. To tear the two concepts apart, in an attempt to distinguish between them, would be to tear apart the integrity of the drafting of the subsection itself. That drafting uses the very wide word "any", and does so in order to provide a remedy for the situation created by a grant of permission "subject to compliance with any requirements". The language should not be unnecessarily narrowed by the processes of interpretation, but should be allowed its natural scope.
It is interesting to notice that in a different context, where a requirement was not expressed as the subject of a condition, a similar meaning was conveyed by the use of the words "a requirement or condition". This was in s. 4(1) of the Race Relations Act 1976 (UK), which refers to discrimination by one person against another where "he applies to that other a requirement or condition". In Meer v. London Borough of Tower Hamlets [1988] IRLR 399, the Court of Appeal discussed the nature of "a requirement or condition" for the purposes of this legislation. Balcombe L.J., who delivered the leading judgment, said (at 402) that "a requirement or condition under [the section] is a must - something which has to be complied with". His Lordship did not suggest that the two words "requirement" and "condition" involved differing ideas, but treated them as expressing a composite meaning. He followed an earlier decision of the Court of Appeal, Perera v. Civil Service Commission (No. 2) [1983] I.C.R. 428, where the same construction of the provision had been adopted.
In my opinion, a more useful distinction, for the purposes of s. 1,031, is the distinction between a requirement compliance with which the directors can achieve, and a requirement compliance with which is ultimately dependent upon the actions of persons outside the directors' control. As Davies J. has pointed out, in the latter case, at least it can be said that the directors would not be acting properly if they purported to give an undertaking under the section. That
is simply because they would be promising what they could not be sure of being able to perform.
I agree that the appeal should be dismissed with costs.
I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.
Associate:
Date: 26 June 1995
Counsel for the Appellant: Mr J.J. Spigelman Q.C. with Mr S.T. White
Solicitors for the Appellant: Gilbert & Tobin
Counsel for the First Mr B.W. Rayment Q.C.
Respondent: with Mr G.K. Burton
Solicitor for the First Deborah Hambleton
Respondent:
Counsel for the Second Mr M.A. Pembroke with
Respondent: Mr M. Cohen
Solicitors for the Second Mallesons Stephen
Respondent: Jaques
Counsel for Australian Securities Mr G.C. Lindsay
Commission, which was given leave
to appear as amicus curiae:
Date of hearing: 26 May 1995
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