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Re Buddy Technologies Ltd

Re Buddy Technologies Ltd

Case [2022] WASC 98 3 March 2022

Contract Formation

Declaratory Relief

Unconscionable Conduct

Inadvertence

Corporate Law & Governance

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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE BUDDY TECHNOLOGIES LTD; EX PARTE BUDDY TECHNOLOGIES LTD [2022] WASC 98
CORAM:   HILL J
HEARD:   3 MARCH 2022
DELIVERED          :   3 MARCH 2022
PUBLISHED           :   22 MARCH 2022
FILE NO/S:   COR 40 of 2022
MATTER:   IN THE MATTER OF BUDDY TECHNOLOGIES LTD

EX PARTE
BUDDY TECHNOLOGIES LTD
Plaintiff

Catchwords:

Corporations law - Securities - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice or prospectus – Several instances of securities being issued without a valid cleansing prospectus - Where no blatant or flagrant disregard of obligations - Where no substantial injustice if orders made - Application granted

Legislation:

Corporations Act 2001 (Cth), s 707(3), s 708A(11), s 1322(4)

Result:

Application allowed

Category: B

Representation:

Counsel:

Plaintiff

Mr N J Wallwork

Solicitors:

Plaintiff

Thomson Geer - Perth

Case(s) referred to in decision(s):

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] HCA 14; (2013) 251 CLR 396

HILL J:

On 1 March 2022, the plaintiff, Buddy Technologies Limited (Buddy Technologies), filed an originating process seeking orders under s 1322(4)(a) of the Corporations Act 2001 (Cth) (Act) relating to a number of contraventions of s 707(3) of the Act. The contraventions occurred as a result of sales of shares in the plaintiff between 1 April 2021 and 31 January 2022, without a valid cleansing notice or cleansing prospectus having been lodged.
All of the shares the subject of the application were issued under an employee incentive plan. In issuing the shares, the plaintiff relied on ASIC Class Order CO 14/100 (Class Order). Subsequently, the plaintiff became aware that it was not eligible to rely on the Class Order as trading in its shares had been suspended for more than five days in the preceding 12 months.
Buddy Technologies has provided a frank and detailed explanation as to the circumstances in which this occurred. On the basis of the evidence before me, I was and am satisfied that the failure to lodge a cleansing prospectus was 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 3 March 2022 granting the relief sought and said that I would subsequently publish reasons for my decision. These are the reasons for my decision.

Reporting Requirements under Part 6D.2 of the Corporations Act

Part 6D.2 of the Act…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Buddy Technologies Ltd

Details

AGLC: Re Buddy Technologies Ltd [2022] WASC 98
Case: [2022] WASC 98
Decision Date

CaseChat Overview and Summary

In the case of Re Buddy Technologies Ltd, Buddy Technologies sought relief under the Corporations Act 2001 (Cth) to validate trading in shares issued without a valid cleansing notice or prospectus. The issue arose from sales of shares between 1 April 2021 and 31 January 2022, during which Buddy Technologies failed to lodge a cleansing prospectus due to being ineligible for a Class Order that exempted certain disclosure obligations. The ineligibility stemmed from the suspension of trading in the company's shares for more than five days in the preceding 12 months. Despite this oversight, Buddy Technologies acted promptly once the issue was identified and sought relief to validate the shares and avoid potential voidability of the sales.

The legal issues before the court included whether the plaintiff was an interested person under s 1322(4) of the Act, if the pre-conditions for relief under s 1322(6) were met, and whether substantial injustice would result from granting the relief. The court considered the principles for granting relief under s 1322, noting the broad discretion available and the legislative intent to avoid unnecessary liability from honest errors or inadvertence. The court also had to determine if the plaintiff's failure to lodge a cleansing prospectus was inadvertent and not a deliberate disregard of its obligations.

Hill J held that Buddy Technologies was an interested person eligible to seek relief and that the pre-conditions for relief under s 1322(6) were met. The failure to lodge a cleansing prospectus was found to be inadvertent rather than a deliberate disregard, and no substantial injustice would result from granting the relief. The court emphasised the prompt action taken by Buddy Technologies once the issue was identified and the lack of evidence of any substantial misconduct or flagrant disregard of obligations. Consequently, the court granted the relief sought, declaring that the sales of the shares were not invalid due to the failure to lodge a cleansing prospectus. The court also noted the importance of ensuring that no substantial injustice would be caused to any party and the appropriateness of providing an opportunity for interested parties to object to the orders within 28 days.

Orders