Re Delecta Ltd - [2022] WASC 163

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE DELECTA LTD; EX PARTE DELECTA LTD [2022] WASC 163
CORAM:   HILL J
HEARD:   11 APRIL 2022
DELIVERED          :   11 APRIL 2022
PUBLISHED           :   10 MAY 2022
FILE NO/S:   COR 63 of 2022
MATTER:   IN THE MATTER OF DELECTA LTD (ACN 009 147 924)

EX PARTE
DELECTA LTD
Plaintiff

Catchwords:

Corporations law - Securities - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice or prospectus - Seven 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, s 727(1), s 1322(4)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

M F Holler

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 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) 47 ACSR 418
Weinstock v Beck (2013) 251 CLR 396

HILL J:

The plaintiff, Delecta Limited (Delecta), by way of originating process filed 4 April 2022, seeks relief under s 1322(4)(a) of the Corporations Act 2001 (Cth) (Act) relating to a number of contraventions of s 707(3) and s 727(1) of the Act. The contraventions occurred as a result of sales of shares in the plaintiff between 11 October 2018 and 2 November 2021, without a valid cleansing notice or cleansing prospectus having been lodged.
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, at the conclusion of the hearing on 11 April 2022, I made orders granting the relief sought and stated that I would publish written reasons for my decision. These are those reasons.

Reporting requirements under Part 6D.2 of the 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…

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 Delecta Ltd

Details

AGLC: Re Delecta Ltd [2022] WASC 163
Case: [2022] WASC 163
Decision Date

CaseChat Overview and Summary

Delecta Limited (Delecta) sought relief under s 1322(4)(a) of the Corporations Act 2001 (Cth) for contraventions of s 707(3) and s 727(1) of the Act due to sales of shares between 11 October 2018 and 2 November 2021 without a valid cleansing notice or prospectus. The court was required to determine whether it should grant the relief sought under s 1322 of the Act, and whether the pre-conditions in s 1322(6) were satisfied. The court considered the nature of the contravention, whether there was honest action or inadvertence, and whether making the orders would cause substantial injustice to any person.

The court found that the failure to lodge a cleansing prospectus was caused by inadvertence rather than deliberate disregard of obligations. The court was satisfied that the act was of a procedural nature, that the persons concerned acted honestly, and that making the orders would not cause substantial injustice. The court considered the prompt action taken by Delecta to remedy the error, and found no evidence of substantial misconduct or oppression of minority shareholder interests. The court granted the relief sought, declaring the offers for sale or sale of the quoted securities not invalid. The court also made no order as to costs, finding that the risk of a personal costs order should not deter directors or officers from bringing an application before the court.

The court granted Delecta's application and declared that any offer for sale or sale of the quoted securities, during the relevant period, is not invalid due to the failure to issue a cleansing notice or prospectus and the sellers' consequent failure to comply with s 707(3) and s 727(1) of the Act. The court found that the failure was inadvertent, the act was procedural in nature, and making the orders would not cause substantial injustice. The court also found that there was no evidence of substantial misconduct or oppression of minority shareholder interests. The court made no order as to costs, finding that the risk of a personal costs order should not deter directors or officers from bringing an application before the court.

Orders