Re Great Boulder Resources Ltd; Ex parte Great Boulder Resources Ltd - [2023] WASC 258

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE GREAT BOULDER RESOURCES LTD; EX PARTE GREAT BOULDER RESOURCES LTD [2023] WASC 258
CORAM:   LUNDBERG J
HEARD:   11 JULY 2023
DELIVERED          :   13 JULY 2023
FILE NO/S:   COR 111 of 2023
MATTER:   IN THE MATTER OF GREAT BOULDER RESOURCES LTD

EX PARTE
GREAT BOULDER RESOURCES LTD
Plaintiff

Catchwords:

Corporations Law - Securities - Single failure to lodge a cleansing notice in accordance with s 708A(5) and s 708A(6) of the Corporations Act 2001 (Cth) - Incorrect reliance on the cleansing prospectus exemption in s 708A(11) of the Corporations Act 2011 (Cth) based on legal advice - Application for orders extending time pursuant to s 1322(4) of the Corporations Act 2001 (Cth) to lodge a cleansing notice - Application for declaratory relief to validate trading in securities issued without a cleansing notice - Orders sought to relieve sellers from civil liability - Plaintiff and sellers acted honestly - Whether substantial injustice caused - Application granted

Legislation:

Corporations Act 2001 (Cth), s 708A(1), s 708A(5), s 708A(6), s 708A(11), s 1322(4) and s 1322(6)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

Ms B S Giles

Solicitors:

Plaintiff

Blackwall Legal LLP

Cases referred to in decision:

An v Joo [2019] NSWSC 39
Caeneus Minerals Ltd; in the matter of Caeneus Minerals Ltd [2018] FCA 560
Canon Australia Pty Ltd, in the matter of Cannon Australia Pty Ltd [2023] FCA 281
Clancy Exploration Limited, in the matter of Clancy Exploration Limited [2018] FCA 569
DAC Finance (NSW/Qld) Pty Ltd and other companies [2020] NSWSC 182
Diona Pty Ltd, in the matter of Diona Pty Ltd [2022] FCA 1215
Elderslie Finance Corp Ltd v Australian Securities Commission [1993] WASC 465; (1993) 11 ACSR 157
Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960
Gangemi v Osborne [2009] VSCA 297
In the matter of Weebit Nano Limited [2023] NSWSC 43
Kimberley College Ltd v Davis, in the matter of Kimberley College Ltd [2018] FCA 1102
Re Argent Minerals Ltd; Ex parte Argent Minerals Ltd [2023]WASC 34
Re Azure Minerals Ltd [2013] FCA 63
Re Barrick Middle East Pty Limited [2023] WASC 122
Re Bellavista Resources Limited; Ex parte Bellavista Resources Limited [2023] WASC 40
Re Charter Hall Limited [2007] FCA 1316
Re Classic Minerals Ltd [2018] FCA 2039
Re Compaction Systems Pty Ltd & The Companies Act [1976] 2 NSWLR 477
Re Elemental Minerals Limited [2010] FCA 687
Re European Lithium Limited [2017] FCA 894
Re Golden Gate Petroleum Ltd [2010] FCA 40
Re ICandy Interactive Limited [2018] FCA 533
Re Jaxsta Ltd [2018] WASC 390
Re Murray River Organics Ltd [2019] FCA 1432; (2019) 138 ACSR 365
Re Sprintex Ltd [2022] WASC 188
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357
Re Yandal Resources Ltd [2022] WASC 338
Silver Lake Resources Limited, in the matter of Silver Lake Resources Limited [2012] FCA 32; (2012) 87 ACSR 436
Sprint Energy Limited; in the matter of Sprint Energy Limited [2012] FCA 1354
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396

Table of Contents

A. Introduction and summary

B. The Application

Material before the court

Factual background

Notice to ASIC and the ASX

C. Legislative framework

Sections 707 and 708A

Section 1322

D. Relevant principles

E. Disposition

Standing

Order 1 (extension of time)

Order 2 (deeming order)

Order 3 (offers of shares not invalid)

Order 4 (sellers relieved from civil liability)

Residual discretion

F. Orders

ATTACHMENT A

ATTACHMENT B

LUNDBERG J:

A. Introduction and summary

These reasons relate to an urgent application filed by the plaintiff company on 10 July 2023 (Application),[1] which was heard on the afternoon of 11 July 2023. Ms B S Giles appeared as counsel for the plaintiff at the hearing. The application sought orders under s 1322(4) of the Corporations Act 2001 (Cth) (Act)[2] extending the period of time prescribed by s 708A(6)(a) for the giving of a notice under s 708A(5)(e) (typically referred to within the market as a cleansing notice) and for related validating orders, and for relief from liability arising from the plaintiff's failure to have issued such a notice.
[1] Originating process dated 10 July 2023.
[2] Unless otherwise indicated, all references to statutory provisions are to provisions of the Corporations Act 2001 (Cth).
At the conclusion of the hearing, I indicated I was satisfied that orders should be made, largely in accordance with the plaintiff's minute of proposed orders dated 10 July 2023 and indicated that I would publish brief reasons.

B. The Application

Material before the court

The plaintiff read four affidavits on the hearing of the Application, in support of the orders sought. The primary affidavit was sworn by the Managing Director of the plaintiff, Mr Andrew George Paterson, dated 10 July 2023 (Director's Affidavit). Mr Moncrieff, who is a senior legal practitioner, swore an affidavit dated 10 July 2023 explaining his role in the matter (Practitioner's Affidavit). Two further affidavits of a procedural nature were sworn by Ms Giles, dated 10 and 11 July 2023. Ms Giles' affidavits deposed to service of the relevant court documents on both ASIC and the ASX (First Giles Affidavit and Second Giles Affidavit).
The plaintiff also filed a detailed outline of submissions dated 10 July 2023 (Plaintiff's Submissions), which were further developed by counsel during the hearing.

Factual background

The following factual narrative is drawn from the Director's Affidavit and the Practitioner's Affidavit, and is uncontentious.
The Application effectively seeks curative orders to remedy a failure by the plaintiff to lodge a cleansing Notice with the ASX in respect of 18,000,000 shares in the plaintiff, which were issued by the plaintiff on 23 March 2023 (Placement Shares). The plaintiff was obliged by s 708A(5)(e) and s 708A(6)(a) to lodge a cleansing notice within five business days of the issue. In general terms, the giving of such a notice to a market operator is a requirement for an exemption from the general obligation to provide disclosure under Chapter 6D in relation to the on-sale of securities.
The plaintiff explains in support of the application that a cleansing notice could have been given by the plaintiff (i.e. it was eligible to do so pursuant to s 708A(5)). However, a decision was made by the plaintiff not to issue a cleansing notice on the basis of legal advice received from the legal practitioner concerned, regarding the application of the exemption in s 708A(11).[3] That legal advice was subsequently discovered to be incorrect, or at least not fulsome, in the sense that the Practitioner had not alerted the plaintiff to the additional timing requirement which features in s 708A(11)(b)(ii), as explained later in these reasons.[4] The plaintiff has candidly explained the circumstances on affidavit.
[3] Director's Affidavit, [37] – [41]; Practitioner's Affidavit, [9] – [14].
[4] Practitioner's Affidavit, [15] – [23].
To put this issue in context, I note the plaintiff had commenced a capital raising in March 2023, which comprised a placement of shares to sophisticated and professional investors (which are the Placement Shares) and a non-renounceable pro rata rights issue to existing shareholders, along with an offer for the shortfall (which is referred to as the Entitlement Offer). The plaintiff engaged appropriately qualified and licensed joint lead managers to conduct the capital raising, and had sought legal advice from a reputable and experienced lawyer.
Importantly, in the context of this Application, the plaintiff had issued a prospectus as part of the Entitlement Offer (Prospectus). The Prospectus was issued on 16 March 2023. The offers under the Prospectus opened on 27 March 2023 and closed on 14 April 2023.
The plaintiff issued the Placement Shares on 23 March 2023 and applied for their quotation on 24 March 2023.[5] The plaintiff (wrongly) believed that the Prospectus satisfied its disclosure obligations with respect to the Placement Shares pursuant to s 708A(11) and as a consequence the plaintiff did not issue a Cleansing notice within five business days of issuing the Placement Shares.[6] This is evident from the plaintiff's Appendix 3B which was issued to the ASX on 16 March 2023.[7] The plaintiff's Appendix 3B stipulated that any on-sale of the Placement Shares within 12 months would comply with the secondary sale provisions in s 707(3). It states as follows:
7F.3 Any on-sale of the securities proposed to be issued within 12 months of their date of issue will comply with the secondary sale provisions in sections 707(3) and 1012C(6) of the Corporations Act by virtue of:
· the publication of a disclosure document or PDS for the securities proposed to be issued.[8]
[5] Director's Affidavit, [16] – [18], [37] – [39], AGP3 and AGP9.
[6] Director's Affidavit, [37] – [41]; Practitioner's Affidavit, [9] – [14].
[7] The Appendix 3B was required to be lodged by the plaintiff in accordance with ASX Listing Rule 3.10.3.
[8] Director's Affidavit, [22] and AGP4. The disclosure document is the Prospectus dated 16 March 2023.
The Appendix 3B does not specifically assert that the plaintiff was relying on the exemption in s 708A(11), but nothing appears to turn on this for the purposes of the present Application.
The reason the Prospectus did not meet the requirements of s 708A(11) was that the plaintiff had issued the Placement Shares before the offer under the Prospectus opened (which is required in order to have the benefit of s 708A(11)(b)(ii)). This is the feature of s 708A(11) which was not drawn to the attention of the plaintiff by the Practitioner. The simple diagram in Attachment B to these reasons highlights the timing issues.
The plaintiff became aware of this misapprehension on 6 July 2023 and also then appreciated it was likely the Placement Shares had been on-sold since they were issued on 23 March 2023.[9] The plaintiff understood, at this juncture, that the plaintiff was prima facie non-compliant with the exemption under s 708A(5) and that the sale offer in respect of the Placement Shares might contravene s 707(3) (unless made in accordance with another statutory exemption under the Act).
[9] Director's Affidavit, [55] – [61]; and Practitioner's Affidavit, [24] – [27].
Having appreciated these issues, the plaintiff sought a voluntary suspension of the trading of its shares, then issued a cleansing notice with respect to the Placement Shares. These steps were undertaken on 10 July 2023.[10] The present Application was also filed, seeking curative orders.
[10] Director's Affidavit, [65], [74], AGP12 and AGP13.
As noted above, the plaintiff submits that it is likely that some of the Placement Shares have been on-sold since they were issued on 23 March 2023. The plaintiff has identified at least one shareholder who received the Placement Shares and on-sold some of them, but anticipates that other recipients of the Placement Shares may also have done this. In the time available, the plaintiff says that it is not possible to be more precise about these matters, which I accept.[11]
[11] Director's Affidavit, [57] – [61], AGP10.
The plaintiff's submissions highlight the technical nature of the discrepancy which has given rise to the necessity for the present Application. The plaintiff explains in its submissions that the Prospectus in question was for an offer of continuously quoted securities (i.e. shares) of the same class as the Placement Shares. The Prospectus was issued in accordance with the requirements of s 713. Hypothetically, if the Placement Shares had been issued:
(a)immediately before the date of the Prospectus (16 March 2023); or
(b)after the date the offers made under the Prospectus were open for acceptance (27 March 2023),
instead of on 23 March 2023, the Prospectus would have satisfied the requirements of s 708A(11) and served to cleanse the issue of the Placement Shares. In either of those circumstances, the plaintiff would not have been required to give a cleansing notice for the issue of the Placement Shares, by reason of either s 708A(11)(b)(i) or s 708A(11)(b)(ii).
The plaintiff accordingly approached the court to obtain urgent relief to address the foregoing issue.

Notice to ASIC and the ASX

There was no appearance at the hearing on behalf of ASIC or the ASX. Both regulatory bodies had been given advance, albeit very short, notice of the hearing.
The position adopted by the ASX was that its supervisory remit is to monitor and enforce compliance with the ASX Listing Rules, which does not extend to monitoring and enforcing compliance with the Corporations Act. Accordingly, the ASX indicated it was not in a position to comment on the matters raised by the plaintiff or to support or oppose the application, and it did not intend to appear at the hearing.[12]
[12] Second Giles Affidavit, BSG1.
For its part, ASIC stated in its communication to the plaintiff's solicitors that it neither supported nor opposed the relief sought and did not intend to appear at the hearing of matter.[13]
[13] Second Giles Affidavit, BSG2.
I was thus satisfied on the affidavit material that both ASIC and the ASX were given proper notice of the Application.

C. Legislative framework

Sections 707 and 708A

It is appropriate to summarise the relevant statutory framework for this application by commencing at s 707, which is headed 'Sale offers that need disclosure'. The manner in which the legislative framework is engaged in the present matter will already be apparent from the factual background I have set out. Section 707 provides that an offer of securities for sale (in the 12 months following their issue) requires disclosure if the securities were issued without disclosure and either:
(a)the company that issued the securities did so for the purpose that they be further disposed of; or
(b)the person acquiring the securities did so for the purpose of further disposing of them.
Section 707 relevantly states as follows:
707 Sale offers that need disclosure
Only some sales need disclosure
(1)An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5).
Off market sale by controller
(2)An offer of a body's securities for sale needs disclosure to investors under this Part if:
(a)the person making the offer controls the body; and
(b)either:
(i)the securities are not quoted; or
(ii)although the securities are quoted, they are not offered for sale in the ordinary course of trading on a relevant financial market;
and section 708 does not say otherwise.
Sale amounting to indirect issue
(3)An offer of a body's securities for sale within 12 months after their issue needs disclosure to investors under this Part if:
(a)the body issued the securities without disclosure to investors under this Part; and
(b) either:
(i)the body issued the securities with the purpose of the person to whom they were issued selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or
(ii)the person to whom the securities were issued acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them;
and section 708 or 708A does not say otherwise.
The purpose test in subsection (3)
(4)For the purposes of subsection (3):
(a)securities are taken to be:
(i)issued with the purpose referred to in subparagraph (3)(b)(i); or
(ii)acquired with the purpose referred to in subparagraph (3)(b)(ii);
if there are reasonable grounds for concluding that the securities were issued or acquired with that purpose (whether or not there may have been other purposes for the issue or acquisition); and
(b)without limiting paragraph (a), securities are taken to be:
(i)issued with the purpose referred to in subparagraph (3)(b)(i); or
(ii)acquired with the purpose referred to in subparagraph (3)(b)(ii);
if any of the securities are subsequently sold, or offered for sale, within 12 months after issue, unless it is proved that the circumstances of the issue and the subsequent sale or offer are not such as to give rise to reasonable grounds for concluding that the securities were issued or acquired with that purpose.
Section 707 is directed to and sets out anti-avoidance provisions. The purpose of the provision is to prevent the policy of Chapter 6D being circumvented by the issue of securities to a party to whom disclosure is not required (under s 708 or s 708AA) and that party then offering those securities for sale to investors without disclosure: Re Golden Gate Petroleum Ltd [2010] FCA 40 [27] (McKerracher J).
There are various exemptions in the Act to the disclosure requirements in s 707, found in ss 708, 708AA or 708A. Section 708A creates three exemptions from the disclosure requirements, which are referred to in the legislation as 'case 1', 'case 2' and 'case 3' (and which are described in ss 708A(5), 708A(11) and 708A(12) respectively).
Section 708A(1) states as follows:
708A Sale offers that do not need disclosure
Sale offers to which this section applies
(1)This section applies to an offer (the sale offer) of a body's securities (the relevant securities) for sale by a person if:
(a)but for subsection (5), (11) or (12), disclosure to investors under this Part would be required by subsection 707(3) for the sale offer; and
(b)the securities were not issued by the body with the purpose referred to in subparagraph 707(3)(b)(i); and
(c)a determination under subsection (2) was not in force in relation to the body at the time when the relevant securities were issued.
The exemption commonly relied upon by listed companies is found in s 708A(5). This provision relevantly states that disclosure in respect of a sale offer of securities (as those terms are defined) is not required if:
(a)the criteria set out in ss 708A(5)(a) to (d) are met; and
(b)under s 708A(5)(e)(i) the body gives to the ASX (which is the relevant market operator) a cleansing notice that complies with s 708A(6) before the sale offer is made which includes the requirement to give the notice within five business days after the day on which the relevant securities were issued by the body.
Section 708A(5) and (6) state as follows:
Sale offer of quoted securities—case 1
(5)The sale offer does not need disclosure to investors under this Part if:
(a)the relevant securities are in a class of securities that were quoted securities at all times in the 3 months before the day on which the relevant securities were issued; and
(b)trading in that class of securities on a prescribed financial market on which they were quoted was not suspended for more than a total of 5 days during the shorter of the period during which the class of securities were quoted, and the period of 12 months before the day on which the relevant securities were issued; and
(c)no exemption under section 111AS or 111AT covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and
(d)no order under section 340 or 341 covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and
(e) either:
(i)if this section applies because of subsection (1)—the body gives the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made; or
(ii)if this section applies because of subsection (1A)—both the body, and the controller, give the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made.
(6)A notice complies with this subsection if the notice:
(a)is given within 5 business days after the day on which the relevant securities were issued by the body; and
(b)states that the body issued the relevant securities without disclosure to investors under this Part; and
(c)states that the notice is being given under paragraph (5)(e); and
(d)states that, as at the date of the notice, the body has complied with:
(i)the provisions of Chapter 2M as they apply to the body; and
(ii)sections 674 and 674A; and
(e)sets out any information that is excluded information as at the date of the notice (see subsections (7) and (8)).

The plaintiff submits, and I accept, that it met the criteria to issue a cleansing notice.
A further relevant exemption is found in s 708A(11), referred to as the cleansing prospectus or concurrent prospectus exemption. Section 708A(11) states as follows:
Sale offer of quoted securities—case 2
(11)The sale offer does not need disclosure to investors under this Part if:
(a)the relevant securities are in a class of securities that are quoted securities of the body; and
(b)either:
(i)a prospectus is lodged with ASIC on or after the day on which the relevant securities were issued but before the day on which the sale offer is made; or
(ii)a prospectus is lodged with ASIC before the day on which the relevant securities are issued and offers of securities that have been made under the prospectus are still open for acceptance on the day on which the relevant securities were issued; and
(c)the prospectus is for an offer of securities issued by the body that are in the same class of securities as the relevant securities.
The broad policy underlying s 708A appears to be that no further disclosure will be required where investors have the benefit of information comparable to or otherwise available in a prospectus: Re Golden Gate Petroleum [36] (McKerracher J). As to the cleansing prospectus exemption in s 708A(11), this provision recognises that investors may receive relevant information through a prospectus, although not issued pursuant to the specific placement, but that nonetheless relate to the same class of securities as the placement: Re Golden Gate Petroleum [27] (McKerracher J).

Section 1322

The foregoing provisions impose important disclosure obligations which relevantly bound the plaintiff at the time the Placement Shares were issued. I turn now to s 1322, which empowers the court to make orders avoiding the effects of irregularities, extending time and relieving from civil liability. The plaintiff relies on the power in s 1322(4)(a), (4)(c) and (4)(d), in seeking its relief. The relevant parts of s 1322(4) and (6) are extracted below:
(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.

D. Relevant principles

The following summary of the relevant principles is largely taken from my decisions in Re Bellavista Resources Limited; Ex parte Bellavista Resources Limited [2023] WASC 40 [36] – [47] and Re Barrick Middle East Pty Limited [2023] WASC 122 [16] – [21].
The principles applicable to s 1322(4) are well known and need not be thoroughly restated for the purposes of this Application. I refer to and endorse the summary of those principles recently drawn together by Hill J in Re Sprintex Ltd [2022] WASC 188 [22], by Strk J in Re Yandal Resources Ltd [2022] WASC 338 [74] ‑ [75], and the recent decision of Stewart J in Canon Australia Pty Ltd, in the matter of Cannon Australia Pty Ltd [2023] FCA 281 [3] (Stewart J). Those principles emerge from the leading authorities in this area including the decision of French J (as his Honour then was) in Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29] ‑ [31] and the High Court's decision in Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43], [53] and [64].
Those principles may be summarised as follows:
(a) the prescriptive requirements of the wording in s 1322(4) and the preconditions in s 1322(6) need to be satisfied;
(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;
(d) limitations to the broad powers in s 1322 will not be readily implied. Section 1322 is remedial in character and should be applied broadly;
(e) the court can make orders under s 1322(4)(d) 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) or (c) notwithstanding that the contravention or failure concerned resulted in the commission of an offence.
A precondition to an order under s 1322(4)(c) is that the person to be relieved from civil liability acted honestly. In determining whether a person has acted honestly, the court looks to an absence of evidence of dishonesty. The concept of acting honestly can embrace:
(a)an inadvertence or failure to turn one's mind to the relevant issue;
(b)an active, but incorrect, consideration of a legal issue as well as failure to consider the issue at all; and
(c)the failure to understand or appreciate the significance of noncompliance: Diona Pty Ltd, in the matter of Diona Pty Ltd [2022] FCA 1215 [20] (Cheeseman J)
Prior to making an order under s 1322(4)(a), (c) or (d), the Court must be satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c). I refer to the following exposition of this concept, by Anderson J in Re Murray River Organics Ltd [2019] FCA 1432; (2019) 138 ACSR 365 [35] ‑ [38]:
[35] The court must not make any order under s 1322 unless it is satisfied that no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c) of the Act; Kimberley College Ltd v Davis, in the matter of Kimberley College Ltd [2018] FCA 1102 at [28]. There are two aspects to this requirement:
(a) the expression 'has been' invites an inquiry as to the effect of the irregularity sought to be cured; and
(b) the expression 'likely to be' draws attention to the effect of the proposed order: An v Joo [2019] NSWSC 39 at [34].
[36] A degree of prejudice to a person or persons may be outweighed if the overwhelming weight of justice is in favour of making the order: Elderslie Finance Corp Ltd v Australian Securities Commission [1993] WASC 465; (1993) 11 ACSR 157 (Elderslie Finance) at 160; An v Joo [2019] NSWSC 39 at [35].
[37] The reference to 'substantial injustice' in s 1322(6)(c) is to a real and not insubstantial or theoretical prejudice: Elderslie Finance at 160. Whether there is real injustice requires a weighing of any prejudice if the order is made against the prejudice which would be suffered by the corporation and its directors and officers if an order was not made: Gangemi v Osborne [2009] VSCA 297 at [62], citing Re Compaction Systems Pty Ltd & The Companies Act [1976] 2 NSWLR 477 at 493; see also AHEPA NSW at [25].
[38] One mechanism by which the court may ensure that an order under s 1322(4) does not cause substantial injustice is to make an ancillary order permitting any interested person who may suffer substantial injustice to apply within a set period of time to vary or dissolve the s 1322(4) order: see Sprint Energy at [51]; Clancy Exploration Limited, in the matter of Clancy Exploration Limited [2018] FCA 569 at [36].
In essence, the question whether the making of the orders sought will cause any person substantial injustice directs attention to the interests of (at least) the creditors and shareholders of the company: DAC Finance (NSW/Qld) Pty Ltd and other companies [2020] NSWSC 182 [46] (Gleeson J).
The court of course retains a residual discretion even if the preconditions to s 1322(4) CA are satisfied: Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357 [35] (Vaughan J); and Re Murray River Organics Ltd [39]. Satisfaction of the conditions in s 1322(6)(b) CA and s 1322(6)(c) are therefore necessary but not sufficient to ensure a favourable exercise of the discretion in s 1322(4)(c) and (d).
As summarised in Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960, factors which have previously been considered as relevant to the exercise of the discretion include the general objects and purposes of the relevant statutory provision within the Act, and the public interest in ensuring compliance with the Act and the interests of all parties affected. Additionally, the promptness of any action taken to remedy the error, and whether ASIC opposes the application are relevant matters to consider.

E. Disposition

Standing

I accept the plaintiff is an interested person with sufficient standing to seek the relief in the originating process, as required by s 1322(4). In my view, the plaintiff is the natural party to seek the type of relief in question, as the relief is centrally focused on the issued securities of the plaintiff company and the validity of offers for, or sales of, a large parcel of those securities. The plaintiff has standing even though it is seeking relief for the benefit of its shareholders and others, and not as to any potential liability on its part or that of its directors: Re ICandy Interactive Limited [2018] FCA 533 [46] (Banks-Smith J); and Sprint Energy Limited; in the matter of Sprint Energy Limited [2012] FCA 1354 [40] (McKerracher J).

Order 1 (extension of time)

Order 1 is sought pursuant to s 1322(4)(d). The plaintiff seeks an extension of time of the period of five business days referred to in s 708A(6)(a), through until 10 July 2023. As the Placement Shares were issued on 23 March 2023, the effective extension which is sought is over three months.
The preconditions to the making of Order 1 are that the court must be satisfied the order is in relation to an 'act, matter or thing', and that no substantial injustice has been or is likely to be caused to any person, as expressly stated in s 1322(6)(c). This second precondition is to be approached in the manner explained at [45] below.
It is established that the sale or offer for sale of securities in contravention of s 707(3) are each an 'act, matter or thing' for which relief can be granted under s 1322(4): Re European Lithium Limited [2017] FCA 894 [40] (Barker J); and Re Sprint Energy Limited [41] (McKerracher J). This precondition was therefore satisfied.
It is appropriate to approach the extension of time aspect of the Application in the manner described by Vaughan J in Re Jaxsta Ltd [2018] WASC 390 [41]. That is, to first determine whether, having regard to the circumstances of the case and the general objects of the Act, it is appropriate to make an order extending the period and, if those circumstances are demonstrated, to then address the substantial prejudice question.[14]
[14] See also the authorities collected in Re Yandal Resources [106] (Strk J).
The circumstances of the present case provide a compelling basis for the extension, in my view. It is rather plain that the plaintiff relied on legal advice which did not fully explain the timing requirements inherent in s 708A(11). I have described these circumstances more fully below at [61]. The legal advice was the genesis of the failure. It may readily be inferred that, had the advice been more fulsome, the plaintiff would have accepted the advice and delayed the issue of the Placement Shares until after 27 March 2023. Further, the overall conduct of the plaintiff here provides no basis to think that the objects of the Act would be undermined by the extension which is sought. This company has no relevant history of non-compliance and has approached the present failure in a forthright and candid manner.
Similarly, I was satisfied that no substantial injustice has been caused to any person by reason of the contravention, or is likely to be caused by reason of the proposed order. The concept of 'substantial injustice' contemplates a measure of real injustice as opposed to insubstantial or theoretical injustice: Re Azure Minerals Limited [20]. A degree of prejudice to a person may be outweighed if the overwhelming weight of justice is in favour of making the order.
The plaintiff correctly submits that, to evaluate this issue, courts have frequently looked to whether a company could have given a cleansing notice (in the sense of being eligible to do so) and, in this regard, whether there was any 'excluded information' (as that term is defined in s 708A(7)) which should have been disclosed with the cleansing notice by virtue of s 708(6)(e): Re Azure Minerals Limited [13]; and Re Charter Hall Limited [2007] FCA 1316 [4]-[5]. The evident basis for this approach is to ensure that there was no information that a buyer or seller of the shares ought to have had, or would have improved their position if it had been obtained.
The plaintiff submits, and I accept, that it was in a position to give cleansing notices to the ASX when it issued the Placement Shares and there was no 'excluded information' which should have been published with the cleansing notices.[15] This is a strong pointer to the absence of substantial injustice in this circumstance.
[15] Director's Affidavit, [71] – [73].
Further, the relative timing of the company's Prospectus must be borne in mind. As the Prospectus was lodged before the issue of the Placement Shares and had not closed for acceptances of offers for shares under the Prospectus (indeed, it had not yet opened), at the time the Placement Shares were issued, the market for shares in the plaintiff was effectively informed that any information in relation to the plaintiff which had previously been excluded from a continuous disclosure notice in accordance with the listing rules of the ASX had in fact been disclosed to the ASX.
I accept therefore that, at the time the Placement Shares were issued, the market for shares in the plaintiff had been informed, by way of the Prospectus, that there was no information which had previously been excluded from a continuous disclosure notice in accordance with the listing rules of the ASX.
In weighing the issue of prejudice, I also recognise that the order sought is in the interests of the shareholders of the plaintiff who have received shares through the placement, and who have on-sold their shares. Those shareholders face the risk that they may otherwise be exposed to claims against them in respect of the validation of their shares. Putting the issue more broadly, it remains important that shares in listed entities can be freely traded by all investors upon their quotation, without the prospect of infringing s 707(3).
Finally, on the question of substantial injustice, it is typical for the court to make an ancillary order permitting any interested person who may suffer substantial injustice to apply within a set period of time to vary or dissolve the s 1322(4) order. I have referred to this order earlier in these reasons. I propose to make such an order here – see Order 6 in Attachment A. The making of such an order operates to ameliorate any prejudice which might otherwise be suffered by a particular entity or person.
Accordingly, subject to the residual discretion to which I will return later, I accepted that the preconditions to the extension of time sought by Order 1 had been satisfied and the order should be made.

Order 2 (deeming order)

The plaintiff sought a declaration that the notice which the plaintiff gave to the ASX on 10 July 2023, being a notice under s 708A(5)(e) in respect of the Placement Shares, be deemed to take effect as if it had been given to the ASX on 23 March 2023. I accept that a deeming order such as this is often viewed as a corollary of the extension of time order in circumstances where the relevant shares have been on-sold: Re Yandal Resources [121(c)]. Such an order may be in the nature of a 'consequential or ancillary order', coming within the scope of the chaussette to s 1322(4), although such an order does not appear to strictly be necessary given the operative effect of the extension order.[16]
[16] A matter on which Black J has recently commented: In the matter of Weebit Nano Limited [2023] NSWSC 43 [16] (Black J).
Accordingly, as I accepted Order 1 should be made, it followed that I would accept that Order 2 should also be made, subject to the exercise of the residual discretion.

Order 3 (offers of shares not invalid)

I turn now to Order 3. The order was sought pursuant to s 1322(4)(a). The plaintiff sought an order declaring that any offer for or sale of the Placement Shares during the period on or after 23 March 2023 up to and including the date of these orders is not invalid by reason of any failure of a notice under s 708A(5)(e) to exempt the sellers from the obligation of disclosure under the Act, or any sellers' consequent failure to comply with s 707(3).
The preconditions to the making of Order 3 are that the court must be satisfied the order is in relation to an 'act, matter or thing' (which I have already addressed), that one of the three criteria in s 1322(6)(a) is satisfied, and that no substantial injustice has been or is likely to be caused to any person (which I have already addressed).
As to the first criterion in s 1322(6)(a), whether the act, matter or thing was essentially of a procedural nature, the plaintiff properly identifies in its submissions the competing authorities on this point. Counsel for the plaintiff describes there being 'divergent views' on the issue. For my part, I have some difficulty concluding that the failure to issue a cleansing notice is a 'procedural' defect, as is submitted by the plaintiff.[17] While I accept the plaintiff was eligible to issue a cleansing notice at the relevant time, the obligation to issue a cleansing notice is an important requirement within the legislative disclosure scheme. In the absence of fulsome argument on the issue and without the benefit of a contradictor on this Application, I would prefer to refrain from expressing a concluded view on this issue (unless it had been necessary to decide this Application, which is not the case).
[17] Plaintiff's Submissions, [30] – [33], referring to Re Sprint Energy [42] and Re Golden Gate [46] in the one camp, and Re Azure Minerals Ltd [2013] FCA 63 [16], Re Elemental Minerals Limited [2010] FCA 687 [36]-[39], Re Argent Minerals Ltd; Ex parte Argent Minerals Ltd [2023]WASC 34 [39], and Re Yandal Resources Ltd [82] in the opposing camp.

At the conclusion of the hearing on 11 July 2023, I was comfortably satisfied that both the second and third criteria in s 1322(6)(a) were demonstrated in the present circumstances (and satisfaction of only one of these is required).
As to the second criterion, I was satisfied that the persons concerned in, or party to, the failure acted honestly. I reach this conclusion for the following reasons:
(a)The genesis of the failure in question was the legal advice given by the practitioner. He has deposed that he gave legal advice by telephone to the plaintiff that it did not need to lodge a cleansing notice with respect to the Placement Shares because the issue of those shares would happen after the Prospectus had been lodged.[18]
(b)By an oversight, the practitioner did not advise the plaintiff that, for the Prospectus to satisfy the disclosure obligations with respect to the Placement Shares, the Placement Shares would have to be issued after the offers under the Prospectus had opened.[19] The concept of 'acting honestly' can include an active, but incorrect consideration of a legal issue: Re Golden Gate [47]; and Re ICandy [55].
(c)The practitioner has further deposed that, when the matter was raised with him via a representative of one of the joint lead managers to the capital raising, he realised the oversight in his advice to the plaintiff. Quite properly, he then took immediate steps to rectify the issue.[20] The practitioner attributes the oversight to nothing more than a momentary lapse of concentration, which I accept.[21]
(d)It is apparent that the plaintiff's decision not to lodge a cleansing notice with the ASX was based on the practitioner's advice.[22] I accept this was the case. Once the company became aware of the failure, it also took immediate steps to rectify the issue.[23]
(e)The practitioner incorrectly addressed the legal issue arising under s 708A(11). There is no indication he acted with any dishonesty or wilful intention. Importantly, both the practitioner and the company acted expeditiously and prudently to remedy the non-compliance once the issue emerged. This is also not a case in which the issue or its rectification was identified or prompted by any governmental or regulatory body.
[18] Practitioner's Affidavit, [9].
[19] Practitioner's Affidavit, [11].
[20] Practitioner's Affidavit, [24].
[21] Practitioner's Affidavit, [23].
[22] Director's Affidavit, [50] – [54].
[23] Director's Affidavit, [56] – [70].
As to the third criterion, I was satisfied that it was just and equitable that the order be made. In support of the satisfaction of this criterion, the plaintiff drew my attention to the decision in Re Classic Minerals Ltd [2018] FCA 2039. In that matter, the company had failed to lodge a cleansing notice on 26 occasions and the recipients of the affected shares had on-sold them. The court determined that making the orders requested was just and equitable for the purposes of a 1322(6)(a)(iii) on the basis that the honesty limb in s 1322(6)(a)(ii) was satisfied, and there was no substantial injustice (in accordance with s 1322(6)(c)). The merits of the relief sought are far more compelling in the present circumstances than in Re Classic Minerals Ltd.
The final precondition to the making of Order 3 is that no substantial injustice has been or is likely to be caused to any person, as indicated in s 1322(6)(c). I have addressed this issue above. As I have indicated, the evidence before the court demonstrates that no substantial injustice has been caused to any person by reason of the failure, nor is it likely to be caused through the making of the order which is sought.
Accordingly, subject to the residual discretion, I accepted that the preconditions to the declaration sought by Order 3 had been satisfied and the order should be made.

Order 4 (sellers relieved from civil liability)

That leaves the fourth substantive order which was sought by the plaintiff. Order 4 was sought pursuant to s 1322(4)(c). The order is to the effect that any sellers of the Placement Shares are relieved from any civil liability arising out of any contravention of s 707(3) and s 727(1). Such an order is commonly made in cases of this kind: In the matter of Weebit Nano Limited [2023] NSWSC 43 [18] (Black J); and Caeneus Minerals Ltd; in the matter of Caeneus Minerals Ltd [2018] FCA 560 [57] (Banks-Smith J).
The preconditions to the making of Order 4 are that the court must be satisfied the persons subject to the civil liability acted honestly (s 1322(6)(b)) and that no substantial injustice has been or is likely to be caused to any person (s 1322(6)(c)).
I have addressed the absence of substantial injustice already. I will now address the issue of honesty, which falls for consideration by reference to the honesty of the sellers of the Placement Shares rather than the honesty of those involved in the failure.
An aspect of this matter which grounds an inference of honesty on the part of the sellers (in addition to the absence of any evidence of dishonesty) is found in the terms of the Appendix 3B issued by the plaintiff some days prior to the issue of the Placement Shares. I have referred to this earlier in these reasons. The Appendix 3B represented to the recipients of the Placement Shares that the on-sale of those securities would comply with the secondary sale provisions in s 707(3) and s 1012C(6), and that this compliance arose by virtue of the publication of the Prospectus which was issued by the plaintiff.
In both Re Classic Minerals Ltd [43] and Re Sprint Energy Limited [53], the Court noted that the vendor shareholders had access to an Appendix 3B which contained warranties that disclosure obligations had been addressed. The plaintiff submitted that the Appendix 3B relied upon in those cases is similar to the Appendix 3B lodged by the plaintiff on 16 March 2023.[24] In Re Classic Minerals Ltd, Banks-Smith J concluded at [43] that:
There is no suggestion any of the vendor shareholders acted other than honestly. They had access to the Appendix 3B which contained warranties that disclosure obligations had been addressed. In such cases it is open to the court to readily infer that the shareholders have acted honestly in on-selling the shares: Silver Lake Resources Limited, in the matter of Silver Lake Resources Limited [2012] FCA 32; (2012) 87 ACSR 436 at [23] (Siopis J).
[24] Plaintiff's submissions, [46].
There are two points to observe in relation to the Appendix 3B argument which require some brief comment.
The first point is that, so far as I can discern, the warranties which were relied upon in Re Sprint Energy Limited, as well as in Silver Lake Resources Limited,[25] appear to have been in a form which is different to the Appendix 3B which is in evidence before me.[26] The form which is in evidence is in the nature of a printout of a document completed online, which contains selected answers to standard questions. The form includes a secondary sale compliance statement on the last of the five pages, under the heading 'Part 7F – Further Information'. I have extracted this statement at [10] above. The statement is not described as a warranty. In contrast, the secondary sale compliance statement in the appendices referred to in Silver Lake Resources Limited and Re Sprint Energy Limited were prefaced with the words 'We warrant the following to the ASX', which I infer was the required language in the older versions of the ASX forms.
[25] I cannot discern from the reasons in Re Classic Minerals Ltd whether the same form or language was employed in that case.
[26] Director's Affidavit, AGP4 (pg 80).
The second point is that the secondary sale compliance statement in the plaintiff's Appendix 3B does not expressly refer to s 708A(11). The statement which has been included is a general reference to the publication of a 'disclosure document'.
In totality, I do not consider these two points reduce the force of the plaintiff's submission concerning the effect of the statement in the Appendix 3B which was lodged on 16 March 2023. The absence of warranty-style language is a point of distinction relative to the two earlier cases I have mentioned above. Nonetheless, I consider there was relevant and clear statement by the plaintiff to the market that there had been compliance with the secondary sale provisions in the Act, and this is so whether or not there was a specific reference to it being a warranty or to the cleansing prospectus exemption in s 708A(11).
In this case, I have very limited evidence before me as to the conduct of the recipients of the Placement Shares. Indeed, it is not entirely clear who those persons might be. What is apparent, though, is that the sellers acquired the shares on the strength of the statement made by the plaintiff, which was honestly made at the time, that the on-sale of those securities would comply with the secondary sale provisions in the Act. The recipients would thus understandably have approached the receipt of the shares on the basis that on-sale of those shares was permitted. That has been the assumed understanding of the recipients over the past three months - an understanding upon which they have reasonably relied in dealing with these securities.
I was thus satisfied that I could infer that the vendor shareholders have acted honestly for the purposes of granting relief from civil liability pursuant to s 1322(4)(c).

Residual discretion

I earlier mentioned the residual discretion. I was satisfied there were no circumstances present in this case that would otherwise justify refusing to make the orders sought, having found the preconditions to s 1322(4) were satisfied. In particular, I did not consider public policy would be undermined by the making of the orders and there was no suggestion here that the plaintiff's conduct involved any blatant disregard of the provisions of the Act. I was satisfied that the plaintiff moved promptly to correct the failure once it became apparent. Further, there was no opposition to the relief from ASIC.
Accordingly, I was satisfied in the circumstances of this case that the relief should be granted.

F. Orders

For the reasons set out above, I was satisfied at the hearing on 11 July 2023 that the Application should be granted. The final orders made are set out in Attachment A to these reasons.

ATTACHMENT A

ORDERS MADE ON 11 JULY 2023

ATTACHMENT B

DIAGRAM SHOWING RELATIVE TIMING OF EVENTS

I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Michael Lundberg
13 JULY 2023