Re AXP Energy Ltd - [2021] WASC 418

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE AXP ENERGY LTD; EX PARTE AXP ENERGY LTD [2021] WASC 418
CORAM:   HILL J
HEARD:   15 OCTOBER 2021
DELIVERED          :   15 OCTOBER 2021
PUBLISHED           :   25 NOVEMBER 2021
FILE NO/S:   COR 169 of 2021
MATTER:   IN THE MATTER OF AXP ENERGY LTD

EX PARTE
AXP ENERGY LTD
Plaintiff

Catchwords:

Corporations - Application for orders under s 1322(4)(a) of Corporations Act 2001 (Cth) - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice or prospectus - 17 instances of securities being issued without a valid cleansing notice - Where no blatant or flagrant disregard of obligations - Where no substantial injustice if orders made - Application granted

Legislation:

Corporations Act 2001 (Cth), s 707, 708A, s 727, s 1322

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

M F Holler & D Hird

Solicitors:

Plaintiff

Steinepreis Paganin

Cases referred to in decision:

Re Bellevue Gold Ltd [2021] WASC 80
Re Caeneus Minerals Ltd [2018] FCA 560
Re Classic Minerals Ltd [2018] FCA 2039
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22
Re Golden Gate Petroleum Ltd [2010] FCA 40; (2010) 77 ACSR 17
Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174
Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369
Re Strike Energy Ltd [2012] FCA 725
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Weinstock v Beck (2013) 251 CLR 396

HILL J:

On 20 September 2021, the plaintiff, AXP Energy Limited (AXP), filed an originating process seeking curative orders under s 1322(4) of the Corporations Act 2001 (Cth) (Act) relating to contraventions of s 708A(6), s 708A(11), s 707(3) and s 727(1) of the Act. The contraventions occurred as a result of share sales following 17 separate instances of shares being issued between 19 March 2013 and 15 October 2021 without a valid cleansing notice or prospectus (Share Issues).
Despite the large number of instances where shares were issued without a valid cleansing notice or cleansing prospectus, AXP has provided a frank and detailed explanation as to the circumstances surrounding these share issues. On the basis of the evidence before me, I was and am satisfied that the failures were caused by inadvertence rather than any deliberate disregard of the plaintiff's obligations.
In light of the urgency with which the application was brought, I made orders at the conclusion of the hearing on 15 October 2021 granting the relief sought and said that I would subsequently publish reasons for my decision. These are the reasons for my decision.

Part 6D.2 of the Corporations Act

Part 6D.2 of the Act imposes disclosure obligations in relation to the issue and sale of shares. In certain circumstances, these obligations can be satisfied by lodging what is commonly referred to as a cleansing notice or a prospectus.[1] If disclosure has not been made by the issuer and the shares are on-sold within 12 months, the party to whom the shares are issued may be obliged to make disclosure.[2]
[1] Corporations Act 2001 (Cth) s 708A(5).
[2] Corporations Act 2001 (Cth) s 707(3). See also ReGolden Gate Petroleum Ltd [2010] FCA 40; (2010) 77 ACSR 17.
The cleansing notice exception can only be relied upon if the preconditions in s 708A(5) of the Act are met.
The cleansing prospectus exception applies where a prospectus is lodged on or after the date that shares are issued but before the day on which a sale offer is made.[3] Where this occurs, the disclosure requirements for offers and sales of that class of securities are met from that date.
[3] Corporations Act 2001 (Cth) s 708A(11).

Factual Background

In support of its application, AXP relied on six affidavits: an affidavit of Robert Lees, the company secretary of AXP, filed 20 September 2021; an affidavit of Samuel Jarvis, a non-executive director of AXP, filed 22 September 2021; a second affidavit of Mr Lees filed 13 October 2021; an affidavit of Stuart Middleton, a non-executive director of AXP, filed 13 October 2021; a second affidavit of Mr Jarvis filed 13 October 2021; and an affidavit of Dominic Hird, a solicitor at Steinepreis Paganin, AXP's solicitors, filed 15 October 2021.
The plaintiff is an Australian public company whose securities are listed on the Australian Securities Exchange (ASX). AXP is an oil and gas production company with its headquarters in Florence, Colorado in the United States of America. Its primary operations are based in Kentucky, Illinois, Indiana and Colorado.[4] As at 20 September 2021, AXP had 4,678,512,520 fully paid ordinary shares on issue, 3,206 shareholders and a market capitalisation of approximately $32,749,587.64.[5]
[4] First affidavit of Robert Lees filed 20 September 2021 [11].
[5] First affidavit of Robert Lees filed 20 September 2021 [12].
On 5 September 2018, AXP announced it had completed a placement to raise $3.75 million (2018 Placement).[6] On 14 November 2018, AXP issued 257,551,594 shares as the second tranche of the 2018 Placement (2018 Placement Shares).[7] Mr Lees' evidence is that in his rush to issue an Appendix 3B for the quotation of the 2018 Placement Shares, he inadvertently failed to lodge a cleansing notice.[8]
[6] First affidavit of Robert Lees filed 20 September 2021 [19], '5'.
[7] First affidavit of Robert Lees filed 20 September 2021 [20].
[8] First affidavit of Robert Lees filed 20 September 2021 [21].
On 26 March 2019, AXP announced its intention to issue 395,171,998 shares to raise $5.1 million (2019 Placement).[9] On 1 April 2019, AXP issued 318,251,953 shares as the first tranche of the placement (T1 2019 Placement Shares) and at the same time issued a cleansing notice.[10] Mr Lees' evidence is that in his rush to issue the Appendix 3B and cleansing notice, he failed to consider the appropriate timing for lodging the cleansing notice. As a result, the cleansing notice was lodged on 29 March 2019 although the shares were not issued until 1 April 2019. Consequently, the cleansing notice was ineffective because it was not lodged within five days after their issue but was instead lodged before they were issued.[11]
[9] First affidavit of Robert Lees filed 20 September 2021, '8'.
[10] First affidavit of Robert Lees filed 20 September 2021 [24].
[11] First affidavit of Robert Lees filed 20 September 2021 [25].
On 21 May 2019, AXP issued 67,188,217 shares as the second tranche of the 2019 Placement (T2 2019 Placement Shares). Mr Lees deposed that he inadvertently failed to lodge a cleansing notice in respect of these shares.[12]
[12] First affidavit of Robert Lees filed 20 September 2021 [26] - [27], '10'.
On 21 December 2020, AXP issued 599,999,999 shares to raise $1.8 million (2020 Placement Shares).[13] As at that date, AXP had been suspended from trading for more than five days in the previous 12 months and, as such, was not entitled to issue a cleansing notice pursuant to s 708A(5)(e) of the Act. Mr Lees was aware this was the case and instructed AXP's solicitors to prepare a cleansing prospectus.
[13] First affidavit of Robert Lees filed 20 September 2021 [29], '12'.
The cleansing prospectus was not lodged until 23 December 2020 (December Cleansing Prospectus). Mr Lees deposed this was an inadvertent oversight as the December Cleansing Prospectus would only cleanse the 2020 Placement Shares if an offer under the December Cleansing Prospectus was open for acceptance when the 2020 Placement Shares were issued.[14] Between 21 December 2020 and 23 December 2020, there was trading in the 2020 Placement Shares.[15]
[14] First affidavit of Robert Lees filed 20 September 2021 [30].
[15] First affidavit of Robert Lees filed 20 September 2021 [31].
On 25 January 2021, Mr Lees received an option exercise form from a shareholder and on 29 January 2021, AXP issued 3,333,333 shares (2021 Shares).[16] In his rush to issue the Appendix 2A for these shares, Mr Lees failed to consider the secondary sale restrictions which applied to the 2021 Shares. Mr Lees' evidence was that although he was aware AXP had been suspended for more than five days in the previous 12 months and could not issue a cleansing notice, he did not arrange for the preparation of a cleansing prospectus.[17]
[16] First affidavit of Robert Lees filed 20 September 2021 [33].
[17] First affidavit of Robert Lees filed 20 September 2021 [34] - [35].
On 10 September 2021, Mr Lees received various queries from the ASX relating to the cleansing of these share issues (collectively Initial Share Issues).[18] Immediately upon being made aware of the issue, Mr Lees informed Mr Jarvis, a non-executive director of AXP, and sought legal advice from AXP's solicitors.[19]
[18] First affidavit of Robert Lees filed 20 September 2021 [36].
[19] First affidavit of Robert Lees filed 20 September 2021 [37] - [38].
On 15 September 2021, AXP's solicitors wrote to the ASX and ASIC to notify them of the plaintiff's failure to properly cleanse the Initial Share Issues and to inform them of AXP's intention to apply to this court for relief under s 1322 of the Act.[20] This was the subject of an ASX announcement on 16 September 2021.[21]
[20] First affidavit of Robert Lees filed 20 September 2021 [47].
[21] First affidavit of Samuel Jarvis filed 22 September 2021 [11], '2'.
On 20 September 2021, AXP notified the recipients of the Initial Share Issues of its failure to lodge valid cleansing notices and prospectuses and of AXP's intention to apply to this court for relief.[22] On the same date, AXP issued cleansing notices in respect of the 2018 Placement Shares and the T2 2019 Placement Shares.[23]
[22] First affidavit of Robert Lees filed 20 September 2021 [46].
[23] First affidavit of Robert Lees filed 20 September 2021 [41] - [42], '16' - '17'.
After receiving a query from ASIC relating to the cleansing of three further instances of share issues, on 22 September 2021, Mr Lees identified 12 further instances where AXP had failed to issue a cleansing notice or prospectus (Further Share Issues).[24] Immediately after being made aware of this issue, Mr Lees sought further advice from AXP's solicitors.[25]
[24] Second affidavit of Robert Lees filed 13 October 2021 [9] - [10], [14] - [20].
[25] Second affidavit of Robert Lees filed 13 October 2021 [9] - [22].
On 23 September 2021, AXP's solicitors requested the hearing of this application, which was scheduled to take place that day, be adjourned to allow AXP time to consider the further queries they had received from ASIC.
Specifically, the Further Share Issues were as follows:
(a)on 19 March 2013, AXP issued 14,533,750 shares in accordance with an executive performance rights plan (Employee Share Plan) (March 2013 Shares).[26] A cleansing notice was issued on the same date in relation to only 4,050,000 shares;[27]
[26] Second affidavit of Robert Lees filed 13 October 2021 [23].
[27] Second affidavit of Robert Lees filed 13 October 2021 [24].
(b)on 9 April 2013, AXP announced it had received firm commitments for 91,937,500 shares to raise $1.471 million (2013 Placement) and intended to launch a share purchase plan (SPP) to raise up to $8 million (2013 SPP) (together, the 2013 Capital Raising).[28] On 15 April 2013, AXP applied for the quotation of 84,587,500 shares, being the 2013 Placement Shares, and lodged a cleansing notice in respect of those shares.[29] On 13 May 2013, AXP announced it had closed the 2013 SPP, having raised an additional $1.5 million. On 20 May 2013, AXP applied for the quotation of 11,687,500 shares (2013 SPP Shares) but failed to issue a cleansing notice or a cleansing prospectus in respect of the 2013 SPP Shares;[30]
[28] Second affidavit of Robert Lees filed 13 October 2021 [27], '8'.
[29] Second affidavit of Robert Lees filed 13 October 2021 [28], '9'.
[30] Second affidavit of Robert Lees filed 13 October 2021 [30] - [32], '11' - '12'.
(c)on 10 December 2013, AXP issued 7,925,000 shares under the Employee Share Plan but did not issue a cleansing notice or cleansing prospectus in respect of the shares;[31]
(d)on 12 May 2014, AXP announced a SPP (2014 SPP). On 6 June 2014, it announced it had closed the 2014 SPP.[32] On 10 June 2014, AXP applied for the quotation of 435,045,900 shares (2014 SPP Shares) but did not issue a cleansing notice or cleansing prospectus in relation to those shares;[33]
(e)on 3 December 2014, AXP applied for the quotation of 64,900,000 shares in relation to a placement but did not issue a cleansing notice or cleansing prospectus for these shares;[34]
(f)on 14 January 2015, AXP issued 4,745,000 shares under an Employee Share Plan but did not lodge a cleansing notice or cleansing prospectus in respect of the shares;[35]
(g)on 11 April 2016, AXP announced a renounceable rights issue (2016 Rights Issue) and placement of shares (April 2016 Placement).[36] On 15 April 2016, AXP lodged an entitlement issue prospectus (April 2016 Prospectus) with the offer being open from 15 April 2016 to 6 May 2016. AXP applied for the quotation of 37,586,973 shares on the same day by lodging an Appendix 3B (April 2016 Placement Shares).[37] The Appendix 3B stated, in error, that the April 2016 Placement Shares were issued on 14 April 2016, prior to the opening of the offer in the April 2016 Prospectus. Mr Lees' evidence was that the April 2016 Placement Shares were issued on 18 April 2016 and, as such, were cleansed by the April 2016 Prospectus.[38] On 13 May 2016, AXP announced the 2016 Rights Issue had closed on 6 May 2016.[39] On 24 May 2016, AXP issued and applied for the quotation of 6,348,718 shares (24 May 2016 Shares).[40] Mr Lees deposed that in his rush to issue the Appendix 3B, he inadvertently failed to consider the secondary sale restrictions applying to the 24 May 2016 Shares;[41]
(h)on 10 June 2016, AXP announced it had received firm commitments for 242,857,000 shares to raise $1.7 million (June 2016 Placement).[42] On 17 June 2016, Mr Lees arranged for 200,500,000 shares to be issued as the first tranche of the June 2016 Placement (T1 June 2016 Placement Shares).[43] Mr Lees' evidence is that in his rush to issue the Appendix 3B, he inadvertently failed to consider the secondary sale restrictions for these shares;[44]
(i)on 26 August 2016, subsequent to the issue of the T1 June 2016 Placement Shares, AXP issued and arranged for the quotation of 42,914,142 shares as the second tranche of the June 2016 Placement (T2 June 2016 Placement Shares).[45] In his rush to issue the Appendix 3B in respect of the shares, Mr Lees again inadvertently failed to consider the secondary sale restrictions for the T2 June 2016 Placement Shares;[46]
(j)on 5 July 2017, AXP issued 2,395,000 shares to Clairault Investments Pty Ltd.[47] Mr Lees deposed that in his rush to issue the Appendix 3B on 6 July 2017, he inadvertently failed to consider the secondary sale restrictions for these shares;[48]
(k)on 11 July 2017, AXP announced it had received firm commitments to raise $1.978 million (July 2017 Placement).[49] On 19 July 2017, Mr Lees arranged for the issue and quotation of 48,900,000 shares as the first tranche of the July 2017 Placement (T1 July 2017 Placement Shares). Mr Lees' evidence is that, in his rush to issue the Appendix 3B, he failed to consider the secondary sale restrictions for the T1 July 2017 Placement Shares;[50]
(l)on 29 August 2017, AXP arranged for the issue and quotation of 59,350,000 shares as the second tranche of the July 2017 Placement (T2 July 2017 Placement Shares).[51] Mr Lees' evidence is that in his rush to issue the Appendix 3B, he inadvertently failed to consider the secondary sale restrictions for the T2 July 2017 Placement Shares.[52]
[31] Second affidavit of Robert Lees filed 13 October 2021 [34] - [35], '13'.
[32] Second affidavit of Robert Lees filed 13 October 2021 [37] - [39], '14' - '16'.
[33] Second affidavit of Robert Lees filed 13 October 2021 [40] - [41], '17'.
[34] Second affidavit of Robert Lees filed 13 October 2021 [44] - [45], '19'.
[35] Second affidavit of Robert Lees filed 13 October 2021 [48] - [49], '21'.
[36] Second affidavit of Robert Lees filed 13 October 2021 [51], '22'.
[37] Second affidavit of Robert Lees filed 13 October 2021 [52] - [53], '23' - '24'.
[38] Second affidavit of Robert Lees filed 13 October 2021 [54].
[39] Second affidavit of Robert Lees filed 13 October 2021 [55], '25'.
[40] Second affidavit of Robert Lees filed 13 October 2021 [56], '26'.
[41] Second affidavit of Robert Lees filed 13 October 2021 [57].
[42] Second affidavit of Robert Lees filed 13 October 2021 [59], '28'.
[43] Second affidavit of Robert Lees filed 13 October 2021 [60].
[44] Second affidavit of Robert Lees filed 13 October 2021 [61] - [62], '29'.
[45] Second affidavit of Robert Lees filed 13 October 2021 [63], '30'.
[46] Second affidavit of Robert Lees filed 13 October 2021 [64].
[47] Second affidavit of Robert Lees filed 13 October 2021 [65] - [66], '32'.
[48] Second affidavit of Robert Lees filed 13 October 2021 [68].
[49] Second affidavit of Robert Lees filed 13 October 2021 [71], '35'.
[50] Second affidavit of Robert Lees filed 13 October 2021 [72] - [73], '36'.
[51] Second affidavit of Robert Lees filed 13 October 2021 [74] - [75], '37'.
[52] Second affidavit of Robert Lees filed 13 October 2021 [64].
AXP is not aware of any other instances of non-compliance with ch 6D of the Act in the period since 1 January 2013.
After being made aware of its failure to properly cleanse the Further Share Issues, AXP instructed its share registry to notify all recipients of the Further Share Issues to inform them of these issues and of its intention to apply to this court for curative relief.[53]
[53] Second affidavit of Robert Lees filed 13 October 2021 [80], '38'.
On 12 October 2021, AXP's solicitors wrote to this court to request the matter be listed for hearing. The matter came on for hearing on 15 October 2021.

The power under s 1322 of the Act to grant the relief sought

Section 1322 relevantly provides:
(4) 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:
(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
(b)an order directing the rectification of any register kept by ASIC under this Act;
(c)an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(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.
...
(6) The Court must not make an order under this section unless it is satisfied:
(a)in the case of an order referred to in paragraph (4)(a):
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii)that it is just and equitable that the order be made; and
(b)in the case of an order referred to in paragraph (4)(c) - that the person subject to the civil liability concerned acted honestly; and
(c)in every case - that no substantial injustice has been or is likely to be caused to any person.

In considering an application under s 1322 of the Act, the essential principles are:[54]
(a)the prescriptive requirements of the wording in s 1322(4) and the pre-conditions in s 1322(6) need to be satisfied;[55]
(b)the court retains a discretion under s 1322(4) as to whether it makes the orders sought;
(c)the broad powers reflect a legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law;[56]
(d)limitations to the broad powers in s 1322 will not be readily implied.[57] Section 1322 is remedial in character and should be applied broadly;
(e)the court can make orders under s 1322(4)(a) on conditions and also make such consequential and ancillary orders as it thinks fit; and
(f)an order can be made under s 1322(4)(a) notwithstanding that the contravention or failure concerned resulted in the commission of an offence.[58]
[54] Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174 [20].
[55] Weinstock v Beck (2013) 251 CLR 396 [43], [53] and [64].
[56] Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29].
[57] Weinstock v Beck [43], [55] - [56], [60], [64].
[58] Corporations Act2001 (Cth) s 1322(5).

Disposition

Application by an 'interested person'

I accept the plaintiff is an interested person who may seek relief, as required by s 1322(4) of the Act.[59]

Position of ASX and ASIC

[59] Re Wave Capital Ltd [29].

The ASX indicated it was not in a position to comment on the matter and did not intend to appear at the hearing.[60] ASIC indicated it neither supports nor opposes the application and did not intend to appear at the hearing of the matter.[61]

Orders under s 1322(4)(a)

[60] Affidavit of Dominic Hird filed 15 October 2021 [6], '4'.

[61] Affidavit of Dominic Hird filed 15 October 2021 [9], '7'.

The plaintiff seeks a declaration under s 1322(4)(a) of the Act that any offer for sale or sale of the quoted securities, during the period between 19 March 2013 and 29 January 2021 (inclusive), during the period after their respective dates of issue to the date of the next cleansing prospectus issued by the plaintiff (inclusive), is not invalid, by reason of:
(a)the failure of the plaintiff to issue a cleansing notice pursuant to s 708A(6) of the Act or to issue a cleansing prospectus pursuant to s 708A(11) of the Act to exempt the sellers from the obligation of disclosure under the Act; or
(b)the sellers' consequent failure to comply with ss 707(3) and 727(1) of the Act.
I note that:
(a)the proposed validation orders are framed in a declaratory form;
(b)the act, matter or thing is the offer and sale of securities;
(c)the contravention is the offering of securities for sale or sales without proper disclosure in contravention of s 707(3) of the Act.[62]

Pre-conditions in s 1322(6)(a)

[62] See Re Caeneus Minerals Ltd [2018] FCA 560[39] - [40]; Re Classic Minerals Ltd [2018] FCA 2039 [35] - [36].

The plaintiff submitted that, while only one of the pre-conditions in s 1322(6)(a) of the Act needs to be satisfied, each of the preconditions was satisfied.
I am satisfied the pre-condition in s 1322(6)(a)(i) is satisfied in that the act, namely the failure to lodge a cleansing notice or a cleansing prospectus, is essentially of a procedural nature.[63]
[63] Re Strike Energy Ltd [2012] FCA 725 [15].
Turning to the pre-condition in s 1322(6)(a)(ii), in Re ICandy Interactive Ltd, Banks-Smith J undertook a comprehensive review of the relevant principles in respect of whether there is no failure of the persons concerned or the company to act honestly.[64] Relevantly, Banks-Smith J considered that:
[64] Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369 [54] - [104].
(a)when determining whether someone has acted honestly for the purposes of s 1322, the courts look to absence of evidence of dishonesty and prompt action to remedy the error;[65]
(b)the concept of acting honestly can embrace:[66]
(i)inadvertence or failure to turn one's mind to an issue;
(ii)active but incorrect consideration of a legal issue;
(iii)failure to consider an issue at all; or
(iv)failure to understand or appreciate the significance of non-compliance; and
(c)when testing for honesty, the authorities reveal the courts look at the company itself, the directors, the company secretary and others as may be concerned.[67]
[65] Re ICandy Interactive Ltd [54], [106] - [107].
[66] Re ICandy Interactive Ltd [55].
[67] Re ICandy Interactive Ltd [60] - [104].
In this case, errors have occurred in AXP failing to lodge cleansing notices or cleansing prospectuses for the shares issued between 19 March 2013 and 29 January 2021. On the basis of Mr Lees' evidence, which I accept, these errors have occurred inadvertently in failing to consider whether a cleansing notice or prospectus was required to be lodged or seeking legal advice as to whether this was required, rather than any deliberate disregard by AXP or its officers of the obligations under ch 6D of the Act.
I also accept this is not a case where there has been a failure of AXP's directors to take an active interest in the company's compliance with the Act or to properly define roles of company officers. I accept that AXP's directors delegated this responsibility to the company secretary.
I am also satisfied it would be just and equitable to make the orders sought. Section 1322(6)(a)(iii) gives the court a wide discretion in exercising its powers under s 1322 of the Act.[68]

No substantial injustice (s 1322(6)(c))

[68] Re Bellevue Gold Ltd [2021] WASC 80 [64] and the authorities cited therein.

I have considered the persons and classes of persons who may be impacted by the making of these orders.
First, the shareholders who were issued the impugned shares. The prejudice to them is that the sales of the impugned shares may be void or voidable for want of compliance with the statutory requirements.
Second, those people who purchased the shares may have re-sold the impugned shares themselves. Any further sales of these shares will also have occurred without the requisite disclosure under pt 6D.2 of the Act.
I find there is no basis for inferring that substantial injustice has been or is likely to be caused to any person by the making of the proposed orders.
I accept that if the orders sought are not made, there may be substantial injustice to the plaintiff as the offers and sales of the shares may be void or voidable which could give rise to some commercial uncertainty and expense for the company as it must remain involved in problems caused by void or voidable offers and sales of its shares. I also accept there may be substantial injustice to the other ordinary shareholders of the plaintiff, as they may not be able to trade their shares on an open market if the ASX does not lift the current suspension from trading.
It is usual in cases such as these to provide an opportunity for shareholders or other parties to raise a complaint about the proposed orders. The usual timeframe is that there be liberty to apply within 28 days from the date of the orders. I accept this is an appropriate timeframe in this case.

No other discretionary reason to withhold relief

Notwithstanding the number of instances of contravention that have been identified by AXP, I accept and find there is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or the company's constitution so as to warrant refusal of the relief sought.[69]
[69] Re Wave Capital Ltd [29].
There is nothing in the evidence before me that suggests any minority shareholder interest might be oppressed or any other interest might be affected. I am satisfied that all shareholders impacted by the contravention as well as the ASX and ASIC have been notified of AXP's contravention of the Act and given notice of this hearing.[70] No shareholder or either regulator has sought to intervene in the hearing or given notice they want to be heard on the application.
[70] First affidavit of Robert Lees filed 20 September 2021 [46], '19'; Second affidavit of Robert Lees filed 13 October 2021 [80], '38'.
In exercising the discretion to grant relief under s 1322(4) of the Act, a relevant factor is the promptness with which the plaintiff has sought to remedy the irregularity once it has been identified.[71] In this case, on 10 September 2021, AXP was made aware of its failure to comply with its obligations under ch 6D of the Act in relation to the Initial Share Issues after receiving a query from the ASX relating to the cleansing of various share issues since 14 November 2018.[72] Immediately upon being made aware of this issue, the plaintiff sought legal advice and wrote to this court on 15 September 2021 to request an urgent hearing of the application. On 22 September 2021, AXP was made aware of its failure to comply with ch 6D of the Act in relation to the Further Share Issues and immediately sought further legal advice.[73] Following the completion of these investigations, the matter was brought on for hearing on 15 October 2021. I accept that AXP acted diligently in relation to the issues that were drawn to its attention.

Conclusion

[71] Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22 [60].

[72] First affidavit of Robert Lees filed 20 September 2021 [36].

[73] Second affidavit of Robert Lees filed 13 October 2021 [9] - [22].

For the following reasons, I was and am satisfied that in the circumstances of this case, relief should be granted in the terms sought by AXP. First, the evidence before me is that a number of the shares in the Initial Share Issues and the Further Share issues have been traded.[74] It cannot be discounted that there have been resales of these shares. In these circumstances, I consider it is appropriate to make the orders sought to remove any question as to title in the shares of the plaintiff. Second, at the time the application came on for hearing, cleansing notices and prospectuses had been lodged in respect of each of the impugned share issues. Third, I am satisfied that the conduct of AXP in failing to lodge the cleansing notices and cleansing prospectuses required under the Act was inadvertent and not in blatant disregard of its obligations under the Act. I do not consider that public policy will be undermined by granting the relief sought.
[74] First affidavit of Robert Lees filed 20 September 2021 [44]; Second affidavit of Robert Lees filed 13 October 2021 [78].

Orders

For these reasons, at the conclusion of the hearing, I made orders in the form annexed to these reasons as 'Annexure A'.

'Annexure A'

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
HW
Research Associate to the Honourable Justice Hill
25 NOVEMBER 2021