FEDERAL COURT OF AUSTRALIA
EHR Resources Ltd, in the matter of EHR Resources Ltd [2018] FCA 997
File number: WAD 273 of 2018 Judge: COLVIN J Date of judgment: 28 June 2018 Catchwords: CORPORATIONS - application for orders that trading in shares following a failure to comply with disclosure obligations was not invalid and orders relieving sellers from civil liability pursuant to s 1322(4) - where admitted contraventions of s 707(3) and s 727 as to disclosure - where cleansing notice under s 708A(5)(e) was insufficient disclosure because trading in shares suspended for more than five days in previous 12 months - contraventions due to honest error which had been explained - cleansing prospectus subsequently issued - application allowed Legislation: Corporations Act 2001 (Cth) ss 707(3), 708(8), 708A(5)(e), 1332(4), 1332(6), Part 6D.2 Cases cited: ICandy Interactive Limited, in the matter of ICandy Interactive Limited [2018] FCA 533
Re Wave Capital Ltd [2003] FCA 969
Re Golden Gate Petroleum Ltd [2010] FCA 40
Date of hearing: 28 June 2018 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 18 Counsel for the Plaintiff: Ms VA Bennett Solicitor for the Plaintiff: K&L Gates
Table of Corrections 29 June 2018 At [9](6) the figure '55' in the first line has been amended to correctly state '59'. ORDERS
WAD 273 of 2018 IN THE MATTER OF EHR RESOURCES LTD (ACN 160 017 390)
BETWEEN: EHR RESOURCES LTD (ACN 160 017 390)
Plaintiff
JUDGE:
COLVIN J
DATE OF ORDER:
28 JUNE 2018
THE COURT ORDERS THAT:
1.Pursuant to s 1322(4)(a) of the Corporations Act 2001 (Cth), it is declared that any offer for sale or sale of the quoted securities, being 19,500,000 ordinary shares in the plaintiff, during the period after the date of their issue on 18 April 2018 until 20 June 2018 is not invalid by reason of:
(a)the failure of notices, purportedly issued pursuant to s 708A(5)(e) of the Corporations Act, to exempt the seller from the obligation of disclosure under the Corporations Act; and
(b)the seller's consequent failure to comply with s 707(3) and s 727(1) of the Corporations Act.
2.Pursuant to s 1322(4)(a) of the Corporations Act, it is declared that any offer for sale or sale of the quoted securities, being 1,611,111 ordinary shares in the plaintiff, during the period after the date of their issue on 15 June 2018 until 20 June 2018 is not invalid by reason of:
(a)the failure of notices, purportedly issued pursuant to s 708A(5)(e) of the Corporations Act, to exempt the seller from the obligation of disclosure under the Corporations Act; and
(b)the seller's consequent failure to comply with s 707(3) and s 727(1) of the Corporations Act.
3.Pursuant to s 1322(4) of the Corporations Act, any seller referred to in orders 1 and 2 above be relieved from any civil…
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- Re EHR Resources Ltd [2018] FCA 997
- Case
- [2018] FCA 997
- Decision Date
CaseChat Overview and Summary
The court had to decide whether the share sales were valid and if the sellers could be relieved from civil liability. Key issues included the adequacy of the cleansing notice, the nature of the errors, and the effect of the subsequent cleansing prospectus. The court also considered whether the sellers had acted honestly and whether the company and its officers had mitigated the consequences of the errors.
The court held that the errors were honest and that the subsequent issuance of a cleansing prospectus addressed the disclosure deficiencies. Given the circumstances, the court found that the sellers should not be held liable for the contraventions. Consequently, the court declared the share sales valid and relieved the sellers from civil liability under section 1322(4) of the Corporations Act. The court ordered the publication of these findings and granted a 28-day period for any aggrieved party to apply to vary or discharge the orders.
These orders aim to validate the share sales and provide relief to the sellers from civil liability, ensuring that the company can continue its operations without the burden of past disclosure errors. The court's decision balances the need for compliance with the Corporations Act and the practicalities of addressing honest mistakes in a corporate setting.
Orders
Orders of the court
1. Pursuant to s 1322(4)(a) of the Corporations Act 2001 (Cth), it is declared that any offer for sale or sale of the quoted securities, being 19,500,000 ordinary shares in the plaintiff, during the period after the date of their issue on 18 April 2018 until 20 June 2018 is not invalid by reason of:
(a) the failure of notices, purportedly issued pursuant to s 708A(5)(e) of the Corporations Act, to exempt the seller from the obligation of disclosure under the Corporations Act; and
(b) the seller's consequent failure to comply with s 707(3) and s 727(1) of the Corporations Act.
2. Pursuant to s 1322(4)(a) of the Corporations Act, it is declared that any offer for sale or sale of the quoted securities, being 1,611,111 ordinary shares in the plaintiff, during the period after the date of their issue on 15 June 2018 until 20 June 2018 is not invalid by reason of:
(a) the failure of notices, purportedly issued pursuant to s 708A(5)(e) of the Corporations Act, to exempt the seller from the obligation of disclosure under the Corporations Act; and
(b) the seller's consequent failure to comply with s 707(3) and s 727(1) of the Corporations Act.
3. Pursuant to s 1322(4) of the Corporations Act, any seller referred to in orders 1 and 2 above be relieved from any civil liability arising out of their contravention of s 707(3) and s 727(1) of the Corporations Act.
4. A sealed copy of these orders be served on the Australian Securities and Investment Commission (ASIC) and ASX Limited (ACN 008 624 691) (ASX) within two business days of the date of these orders.
5. A sealed copy of these orders be given to each person named in the schedule which is annexure SJS12 to the affidavit of Sarah Jayne Smith sworn 21 June 2018 within two business days of the date of these orders.
6. As soon as practicable, the plaintiff is to publish an announcement to the ASX in which a copy of these orders is included, and place a copy of these orders on its own website to remain there for at least 28 days.
7. For a period of 28 days from the publication of these orders on the ASX or plaintiff's websites, any person who claims to have suffered substantial injustice or is likely to suffer substantial injustice by the making of any or all of these orders has liberty to apply to vary or discharge them.
8. There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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