Helios Energy Ltd, in the matter of Helios Energy Ltd [2017] FCA 840
File number:
WAD 278 of 2017
Judge:
GILMOUR J
Date of judgment:
24 July 2017
Catchwords:
CORPORATIONS – securities – whether the time period for admitting securities to quotation on the Australian Securities Exchange may be extended and securities already issued be validated and confirmed – consideration of the legislative scheme for fundraising and curative orders in the Corporations Act 2001 (Cth) (‘Act’) – consideration of the statutory requirements for extension of time pursuant to ss 1322(4)(d) and 1322(6) of the Act and for validation of shares already issued pursuant to ss 254E and 1322(4)(a) of the Act.
IN THE MATTER OF HELIOS ENERGY LTD ACN 143 932 110
HELIOS ENERGY LTD
Plaintiff
JUDGE:
GILMOUR J
DATE OF ORDER:
11 JULY 2017
THE COURT ORDERS THAT:
1.Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) (Corporations Act), the period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the Australian Securities Exchange (ASX) of securities of the Plaintiff issued pursuant to the Prospectus lodged on 16 February 2017, and supplementary prospectus of 17 March 2017, be extended to 19 July 2017.
2.Subject to the Plaintiff’s securities being admitted to quotation by the ASX by 19 July 2017, pursuant to ss 254E and 1322(4)(a) of the Corporations Act, the issue of securities by the Plaintiff pursuant to the Prospectus (including all previously issued securities) is validated and confirmed.
3.The Plaintiff forthwith:
(a)lodge a copy of these orders with the Australian Securities and Investments Commission (ASIC); and
(b)make an announcement to the ASX disclosing the terms of these orders.
4.The Plaintiff and all other interested parties, including ASIC, have liberty to apply to revoke or vary those orders upon first giving 72 hours’…
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.
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AGLC
Re Helios Energy Ltd [2017] FCA 840
Case
[2017] FCA 840
Decision Date
CaseChat Overview and Summary
In the matter of Helios Energy Ltd, the plaintiff sought relief from the Federal Court of Australia to extend the time for admitting securities to quotation on the Australian Securities Exchange and to validate securities already issued. The dispute arose because the plaintiff had issued securities pursuant to a prospectus but had failed to meet the time limit for admitting the securities to quotation as required by the prospectus and relevant statutory provisions. The plaintiff applied for a curative order under the Corporations Act 2001 (Cth) to extend the time for admission and validate the securities already issued.
The court had to determine whether it could make the orders sought under sections 1322(4)(a) and 1322(4)(d) of the Corporations Act. The plaintiff argued that the orders were warranted to avoid unnecessary injustice, as the failure to extend the time for admission or validate the securities would result in significant expense, delay, and inconvenience. The court considered the statutory scheme for fundraising and curative orders and the principles applicable when making such orders.
The court found that the plaintiff had acted promptly and properly in seeking relief and that the interests of numerous stakeholders were fairly dealt with. The court concluded that curative orders ought to be made to allow the plaintiff to extend the time for admission to quotation and to validate the securities already issued. The court stayed the operation of the orders to allow shareholders who had not yet received written communication about the orders to approach the court to vary or revoke the orders.
The court made orders extending the time for admission to quotation to 19 July 2017, validating the issue of securities by the plaintiff, requiring the plaintiff to lodge a copy of the orders with ASIC and make an announcement to the ASX, and granting liberty to apply to revoke or vary the orders. The operation of the orders was stayed until 10:00AM on Wednesday 5 July 2017.
Orders
Orders of the court
1. Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) (Corporations Act), the period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the Australian Securities Exchange (ASX) of securities of the Plaintiff issued pursuant to the Prospectus lodged on 16 February 2017, and supplementary prospectus of 17 March 2017, be extended to 19 July 2017.
2. Subject to the Plaintiff’s securities being admitted to quotation by the ASX by 19 July 2017, pursuant to ss 254E and 1322(4)(a) of the Corporations Act, the issue of securities by the Plaintiff pursuant to the Prospectus (including all previously issued securities) is validated and confirmed.
3. The Plaintiff forthwith:
(a) lodge a copy of these orders with the Australian Securities and Investments Commission (ASIC); and
(b) make an announcement to the ASX disclosing the terms of these orders.
4. The Plaintiff and all other interested parties, including ASIC, have liberty to apply to revoke or vary those orders upon first giving 72 hours’ prior written notice.
5. The operation of Orders 1 and 2 be stayed and those orders are not to come into effect until 10:00AM on Wednesday 5 July 2017.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The application was not opposed. Background The following background is adopted from the applicants written submissions. The Prospectus of 16 February 2017, as supplemented on 17 March 2017, contained various offers of securities seeking to raise a minimum of $12,000,000 and a maximum of $18,880,000. The funds were for use in connection with the plaintiff's acquisition of interests in two oil and gas projects in Texas, USA. The Prospectus contained a minimum subscription condition and stated that the securities would be admitted for quotation on a financial market. Accordingly, the time limits for satisfaction of those conditions in ss 723(3)(b) and 724(1)(b)(ii) were applicable. Relevantly, on 7 April 2017, the plaintiff issued 650,000,000 shares and 216,666,675 new options pursuant to some (but not all) of the offers contained in the Prospectus. In the week prior to the last day for admission to quotation under the Prospectus (being 16 May 2017), the plaintiff had completed the essential steps necessary for the Prospectus, other than to satisfy ASX requirements for a suitable spread of securities holders. Accordingly, at that time the plaintiff could not satisfy the requirement of admitting the securities for quotation by 16 May 2017, as required under the Prospectus and ss 723(3)(b) and 724(1)(b)(ii). After consultation with the ASX, the plaintiff identified a need to extend the period for admission to quotation to satisfy the ASX conditions for admission of the securities to quotation. The plaintiff's director and its corporate legal advisors considered that a "refresh document" could be issued, under a relatively new legislative instrument, the ASIC Corporations (Minimum Subscription and Quotation Conditions) Instrument 2016/70 (Cth) (LI2016/70). Steps were taken to do so with the intended effect that the period for admission to quotation under ss 723(3)(b) and 724(1)(b)(ii) would be extended. The plaintiff prepared and lodged the second supplementary prospectus or “refresh document” on 15 May 2017. On 29 May 2017, ASIC raised with the plaintiff that the relief in LI2016/70 was not available to the plaintiff to extend the period for admission to quotation. This was because the plaintiff had issued securities pursuant to some of the offers in the Prospectus and LI2016/70 only applies to a prospectus where no securities have been issued. The effect of there being no valid extension of the period for admission to quotation on 15 May 2017 under a "refresh document" under LI2016/70 was that the last date for admission to quotation has passed. Accordingly, absent a curative order, all securities issued under the Prospectus are invalid and the applicants' funds must be returned. This, I accept, could cause substantial injustice if not remedied: the plaintiff would need to refund money and re-start a capital raising process with considerable expense, delay and inconvenience. By these proceedings relief is sought in order to allow the plaintiff to validate securities already issued under the Prospectus, and to extend the time for admission to quotation, so as to allow the completion of a capital raising by issue of remaining securities under the Prospectus.The evidence
Evidence
Evidence Before The Court
By these proceedings relief is sought in order to allow the plaintiff to validate securities already issued under the Prospectus, and to extend the time for admission to quotation, so as to allow the completion of a capital raising by issue of remaining securities under the Prospectus.The evidence The plaintiff relies on the following evidence:(a)the affidavits of Mr Garry Christian Steinepreis sworn on 16 June 2017 (First Steinepreis affidavit) and 23 June 2017 (Second Steinepreis affidavit);(b)the affidavits of Mr Jonathan Heath Stuart Murray sworn on 22 June 2017 (First Murray affidavit) and 27 June 2017 (Second Murray affidavit); and(c)the affidavit of Ms Suzanne Thelma Zollo sworn on 23 June 2017 (Zollo affidavit).The legislative scheme for fundraising and curative orders The legislative scheme for fundraising for companies and curative orders has been recently summarised by McKerracher J in Solco Ltd, in the matter of Solco Ltd [2015] FCA 635, [15]–[19]. As the plaintiff has correctly identified, orders to extend the time for admission to quotation and validate and confirm issued shares were made in Solco, and have also been made by this Court in at least Re Wave Capital Ltd (2003) 47 ACSR 418, Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659, Taruga Gold Limited, in the matter of Taruga Gold Limited [2015] FCA 892 and Re G8 Communications Ltd (2016) 112 ACSR 22. The principles generally applicable on such an application under s 1322 are:(a)The prescriptive requirements of the wording in ss 1322(4)(a), 1322(4)(d) and the pre-conditions in 1322(6) need to be satisfied: Weinstock v Beck (2013) 251 CLR 396 at 416 [43], 419 [53] and 422-3 [64].(b)Satisfaction of any one of the conditions set out in s 1322(6)(a)(i) or s 1322(6)(a)(ii) or s 1322(6)(a)(iii) will meet the requirements of s 1322(6)(a): Weinstock, 403 [10].(c)The Court retains a discretion under ss 1322(4)(a) and 1322(4)(d) as to whether it makes the orders sought, as the statute uses the permissive "may".(d)These broad powers reflect a “broad 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”: Re Wave Capital at 426 [29] affirmed in Solco at [23].(e)Limitations to the broadly expressed powers in s 1322 will not be readily implied: Weinstock at 416 [43], 419-420 [55]-[56] and 422-3 [64].(f)The Court can make orders under ss 1322(4)(a) and 1322(4)(d) on conditions and also make such consequential and ancillary orders as it thinks fit: s 1322(4). (g)An order can be made under s 1322(4)(a) notwithstanding that the contravention or failure concerned resulted in the commission of an offence: s 1322(5). Similarly, s 254E provides the Court with a broad discretion to be exercised in all the circumstances of the case.
Decision
Reasons for decision
In the present case, the plaintiff was notified by ASIC about the inability to extend the period for quotation by use of the refresh prospectus on 29 May 2017. I find that the plaintiff has acted promptly and properly. It sought advice from counsel on 30 May 2017, which was provided on 1 June 2017, and then further advice was provided between Friday 2 June and Tuesday 6 June 2017. By 6 June 2017, the plaintiff's board had resolved to seek relief in these proceedings. The plaintiff commenced the proceedings by 19 June 2017 and obtained a listing within 10 days of filing. As I previously mentioned, the delay, by comparison, in Golden Gate was 10 months and, in Solco 8 months.Conclusion and orders sought I am satisfied for the above reasons that curative orders as sought ought to be made. I accept the submissions of the plaintiff that it has mistakenly sought to obtain an extension of the period for admission to quotation under a new legislative instrument. I also accept that the plaintiff has otherwise acted diligently and the interests of numerous stakeholders are fairly dealt with.Stay of Orders 1 and 2 It is likely that a number of shareholders in the Eastern States of Australia and overseas are unlikely to have received the written communication despatched on 23 June 2017 referred to at [24] above in these reasons. Those shareholders had, of course, received earlier notice from the plaintiff. This notice came in the form of:(1)the second supplementary prospectus lodged on 15 May 2017, which included notice of shareholders’ withdrawal rights for 1 month within the date of lodgement’(2)an announcement to the ASX; and(3)a letter sent to all applicants who had subscribed for securities under the Entitlement Offer and Shortfall by post on 22 June 2017. Nonetheless, I consider it appropriate to stay the operation of orders 1 and 2 until 10.00am on Wednesday 5 July 2017. This will give those shareholders time to approach the Court under the liberty to do so, granted by order 4, to vary or revoke any of the orders made.