Re Corazon Mining Ltd
[2024] WASC 451
•29 NOVEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE CORAZON MINING LTD; EX PARTE CORAZON MINING LTD [2024] WASC 451
CORAM: HILL J
HEARD: 20 NOVEMBER 2024
DELIVERED : 20 NOVEMBER 2024
PUBLISHED : 29 NOVEMBER 2024
FILE NO/S: COR 180 of 2024
MATTER: IN THE MATTER OF CORAZON MINING LTD
EX PARTE
CORAZON MINING LTD
Plaintiff
Catchwords:
Corporations law - Securities - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice - Two instances of defective cleansing notices being issued - Where no blatant or flagrant disregard of obligations - Where no substantial injustice if orders made - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 707, s 708A, s 1322
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | M F Holler |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Cases referred to in decision:
Re Caeneus Minerals Ltd [2018] FCA 560
Re Classic Minerals Ltd [2018] FCA 2039
Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174
Re Nanoveu Ltd; Ex Parte Nanoveu Ltd [2024] WASC 329
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
By originating process dated 18 November 2024, the plaintiff, Corazon Mining Ltd (Company), seeks orders under s 1322(4)(a) of the Corporations Act 2001 (Cth) (Act) arising out of a defect in two cleansing notices that were issued on 22 September 2021 and 25 June 2024 (Cleansing Notices). The defect was the failure to refer to s 674A of the Act, as required by s 708A(6)(d)(ii) of the Act. The plaintiff seeks declarations that, notwithstanding this defect, the Cleansing Notices were effective when given and that any offer for sale or sale of shares issued pursuant to the share issues the subject of the Cleansing Notices, during the period after their respective issues, are not invalid.
In support of the application, the plaintiff has read three affidavits: an affidavit of William Robert Orr, the company secretary of the plaintiff, filed 18 November 2024; and two affidavits of Anna Barningham Prior, a solicitor employed by Steinepreis Paganin, the solicitors for the plaintiff, both filed 19 November 2024.
The plaintiff is a listed Australian-based mining exploration company with projects in both Canada and Australia. As at 18 November 2024, the plaintiff had approximately 668 million shares on issue, more than 2,300 shareholders, and a market capitalisation of approximately $2.67 million.[1]
[1] Affidavit of William Robert Orr filed 18 November 2024 [12] - [13].
On 13 November 2024, during a due diligence that was being undertaken on a separate matter, Mr Orr identified the issue with the Cleansing Notices. He immediately spoke to solicitors from Steinepreis Paganin in relation to the issue and sought advice.
As a result of that advice:
(a)on 18 November 2024, a request was made that the plaintiff be placed in a trading halt;[2]
(b)Mr Orr has reviewed all previous share issues that had been undertaken over the last seven years; and
(c)this application was filed and listed for hearing.
[2] Affidavit of William Robert Orr filed 18 November 2024 [28].
Mr Orr's evidence is that the irregularity in the Cleansing Notices occurred because he re-used a previous cleansing notice as a template, which was issued prior to the amendment of the Act (introducing the requirement to verify compliance with s 674A of the Act) on 14 August 2021.[3]
[3] Affidavit of William Robert Orr filed 18 November 2024 [20] - [21]; Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth).
At the time each of the Cleansing Notices were issued, both Mr Orr and the board of the Company confirmed that the plaintiff was in compliance with s 674, s 708A(7), and s 708A(8) of the Act.[4] As a consequence, Mr Orr believes that the Company was also in compliance with s 674A of the Act.[5]
[4] Affidavit of William Robert Orr filed 18 November 2024 [30] - [33], 'WO-08', 'WO-09'.
[5] Affidavit of William Robert Orr filed 18 November 2024 [34].
Fundraising disclosures
Part 6D.2 of the Act imposes disclosure obligations on corporations in relation to rights issues and the issue and sale of securities.
Pursuant to s 708A of the Act, in certain circumstances, disclosure obligations can be satisfied by the lodgment of either a cleansing notice or a prospectus.[6]
[6] Corporations Act 2001 (Cth) s 708A(5).
A notice that is issued by the company is required to comply with s 708A(6) of the Act. This includes a requirement that the notice state that as at the date of the notice, the body is in compliance with s 674 and s 674A of the Act, which are the continuous disclosure obligations imposed under the Act.
Power under s 1322 of the Act to grant the relief sought
In this case, the plaintiff seeks orders under s 1322 of the Act.
In considering an application under s 1322 of the Act, the principles are well-known and can be summarised as follows:[7]
(a)the prescriptive requirements of the wording in s 1322(4) and the pre‑conditions in s 1322(6) of the Act need to be satisfied;[8]
(b)even where this is the case, the court retains a discretion under s 1322(4) of the Act as to whether it makes the orders sought;
(c)the broad powers that are granted to the court under s 1322 of the Act 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;[9]
(d)limitations to the broad powers in s 1322 of the Act will not be readily implied.[10] This is because the section is remedial in character and should be applied broadly; and
(e)where the court makes orders under s 1322(4)(a) of the Act, conditions can be imposed and the court may also make such consequential and ancillary orders as it thinks fit.
[7] Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174 [20] (Gilmour J).
[8] Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43] (French CJ), [53] (Hayne, Crennan and Kiefel JJ), [64] (Gageler J).
[9] Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418, 426 [29] (French J).
[10] Weinstock v Beck [43] (French CJ), [55] - [56] (Hayne, Crennan, & Kiefel JJ), [60], [64] (Gageler J).
Should the orders sought by the plaintiff be made?
Application by an 'interested person'
I accept that the plaintiff is an interested person who may seek relief under s 1322(4) of the Act.[11]
Position of ASX and ASIC
[11] Re Caeneus Minerals Ltd [2018] FCA 560 [38] (Banks-Smith J); Re Classic Minerals Ltd [2018] FCA 2039 [34] (Banks-Smith J).
On the evidence before me, I accept that the plaintiff's solicitors have written to both the Australian Securities and Investments Commission (ASIC) as well as the Australian Securities Exchange (ASX), advising them of this application, and that both have informed the Company that they neither support nor oppose the application and do not intend to appear at the hearing today.[12]
Form of orders sought under s 1322(4)(a) of the Act
[12] Second affidavit of Anna Barningham Prior filed 19 November 2024, 'AP-5', 'AP-6'.
The declarations sought by the plaintiff under s 1322(4)(a) of the Act satisfy the prescriptive requirements of the Act, in that they are framed in a declaratory form, they identify the act, matter, or thing, and clearly identify the alleged contraventions of the Act.
Preconditions in s 1322(6)(a) of the Act
While it is necessary for only one of these preconditions to be satisfied, the plaintiff submitted (which I accept) that all of the preconditions have been satisfied in this case.[13]
[13] Plaintiff's outline of submissions filed 19 November 2024 [27] - [28].
Firstly, as has been previously acknowledged by many courts, the act of issuing a cleansing notice is an act of a procedural nature.[14]
[14] Re Nanoveu Ltd; Ex Parte Nanoveu Ltd [2024] WASC 329 [70] (Strk J).
Mr Orr's evidence is that in reusing a previous cleansing notice to draft the Cleansing Notices that were issued in September 2021 and June 2024, he simply did not turn his mind to consider the legislative changes that had occurred in August 2021 that required the plaintiff to confirm it had complied with s 674A of the Act.[15] I accept Mr Orr's evidence that the error was inadvertent and that there is no evidence of dishonest conduct by any of the persons concerned, the Company, or its directors and officers.
[15] Affidavit of William Robert Orr filed 18 November 2024 [20] - [21].
Given these findings, I am satisfied that the precondition in s 1322(6)(a)(ii) of the Act is satisfied. I also satisfied that on the evidence before me, it would be just and equitable to make the orders sought.
In considering whether there would be any substantial injustice if the orders are made as required by s 1322(6)(c) of the Act, I consider the classes of persons who may be impacted by these orders.
First, those people who have bought and sold shares since 22 September 2021. Mr Orr's evidence is that since these two share issues, there has been trading in the shares within the 12-month period following their issue.[16] As a consequence, if these orders are not made, there may be prejudice to these shareholders, given the potential uncertainty as to whether these transactions selling the shares may be void or voidable.
[16] Affidavit of William Robert Orr filed 18 November 2024, 'WO-01' p 23.
Second, the shareholders of the Company. The plaintiff's failure to comply with the relevant provisions of the Act has caused the Company to be required to enter into a trading halt. If orders are not made by the court and the trading halt is not lifted, the plaintiff's shareholders will not have the benefit of an active market for their shares.
Third, I accept that if the orders sought by the plaintiff are not made, there may in fact be substantial injustice to the Company, as any offer and subsequent sale of shares may be void or voidable, which will give rise to commercial uncertainty and expense for the Company as it may remain involved in the problems that have been caused by this issue.
I find there is no basis for inferring that any substantial injustice has been, or is likely to be, caused to any person by the making of these proposed orders.
Is there any discretionary reason to withhold relief?
I accept and find that there is no evidence of substantial misconduct, wrongdoing or flagrant disregard of the Act or the Company's constitution which would warrant the exercise of discretion to refuse the relief that has been sought.[17]
[17] Re Wave Capital Ltd [29] (French J).
There is nothing before me that suggests any minority interest might be oppressed or that any other interest is or could be affected by the orders sought.
I am satisfied that all shareholders have been given notice of the issue and of today's hearing, as well as the ASX and ASIC. No one has sought to be heard or to intervene in the hearing today.
For the following reasons, I accept it is appropriate to grant relief in the terms sought by the plaintiff.
First, the plaintiff has sought to remedy the irregularity promptly by taking steps to review its books and records to identify any other issues with the Company's share issues. They have sought legal advice and brought this application all within approximately one week.
Second, the plaintiff's submission occurred as a matter of inadvertence and oversight, and not a deliberate breach of its obligations of compliance.
Third, the orders that are sought address a past act and not a future act.
It is usual in cases such as this to provide an opportunity for shareholders and other parties to raise any complaint about the proposed orders. The usual period is that there be liberty to apply within 28 days, which is the proposed timeframe sought by the plaintiff in its minute of proposed orders.
Finally, it is my view that public policy will not be undermined by granting the relief sought by the plaintiff.
Conclusion
For these reasons, I am satisfied that it is appropriate in all of the circumstances to make orders in terms of the minute of proposed orders filed 18 November 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
29 NOVEMBER 2024
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