JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE POWER MINERALS LTD; EX PARTE POWER MINERALS LTD [2024] WASC 121
CORAM: HILL J
HEARD: 8 MARCH 2024
DELIVERED : 8 MARCH 2024
PUBLISHED : 11 APRIL 2024
FILE NO/S: COR 27 of 2024
MATTER: IN THE MATTER OF POWER MINERALS LTD
EX PARTE
POWER MINERALS LTD
Plaintiff
Catchwords:
Corporations law - Securities - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice - 61 instances of securities being issued without a valid cleansing notice - 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 Holler |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Cases referred to in decision:
Blaze Asset Pty Ltd v Target Energy Ltd [2009] FCA 698; (2009) 177 FCR 488
Re Elemental Minerals Ltd (2010) 79 ACSR 277
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22
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 Imdex Ltd [2020] WASC 298
Re Jaxsta Ltd; Ex parte Jaxsta Ltd [2018] WASC 390
Re Poseidon Nickel Ltd [2018] FCA 1063; (2018) 129 ACSR 57
Re Strike Energy Ltd [2012] FCA 725
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Re Westpac Banking Corporation (2004) 53 ACSR 288
HILL J:
On 1 March 2024, the plaintiff, Power Minerals Limited (ACN 101 714 989) (Power Minerals), filed an originating process seeking orders under s 1322(4)(d), s 1322(4)(a) and s 254E of the Corporations Act 2001 (Cth) (Act) relating to contraventions of s 707(3) of the Act. The contraventions occurred as a result of 61 separate instances of shares being issued between 4 April 2018 and 27 December 2023 (Share Issues) without a valid cleansing notice, pursuant to s 708A(5)(e) and s 708A(6) of the Act.
At the hearing, Power Minerals sought orders under s 1322(4) of the Act extending the timeframe under which a cleansing notice may be lodged pursuant to s 708A(5) of the Act and validating any offers or sales of shares in respect of the Share Issues.
Despite the number of instances where shares were issued without a valid cleansing notice, Power Minerals has provided a frank and detailed explanation as to the circumstances surrounding each of the share issues. On the basis of the evidence before me, I was and am satisfied that the failure was caused by inadvertence rather than any deliberate disregard of the plaintiff's obligations under the Act.
In light of the urgency with which the application was brought, I made orders at the conclusion of…
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- AGLC
- Re Power Minerals Ltd [2024] WASC 121
- Case
- [2024] WASC 121
- Decision Date
CaseChat Overview and Summary
The court was tasked with determining whether the conditions set out in section 1322(6)(a) of the Act were satisfied, which would allow the court to validate the share issues despite the procedural lapses. The primary legal issue was whether the failure to lodge the cleansing notices was essentially procedural, and whether it was just and equitable to grant the relief sought by the applicant. The court considered whether the absence of a cleansing notice was due to honest inadvertence and whether granting the relief would cause substantial injustice.
The court found that the failure to lodge the cleansing notices was essentially of a procedural nature, and that there was no evidence of blatant or flagrant disregard of the company's obligations. The court also concluded that it would be just and equitable to grant the relief to protect the interests of current shareholders and ensure the integrity of future trading in the company's shares. The court accepted that the failure to lodge the notices was due to inadvertence, and that the directors had delegated compliance responsibilities appropriately. Consequently, the court granted the relief sought by the applicant.
The court ordered that the 61 share issues in question be validated, and that the necessary declarations be made to that effect. The court's decision was based on the finding that the failure to lodge the cleansing notices was honest and inadvertent, and that granting the relief would not cause substantial injustice.
Orders
Orders of the court
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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
Power Minerals submitted that each of the pre-conditions in s 1322(6)(a) of the Act was satisfied, but noted that only one need be met.[24][24] Plaintiff's submissions [45]. See also Re Westpac Banking Corporation (2004) 53 ACSR 288 [27]. Turning first to the pre-condition in s 1322(6)(a)(i) of the Act, I am satisfied that the act, namely the failure to lodge a cleansing notice, is essentially of a procedural nature.[25][25] Re Strike Energy Ltd [2012] FCA 725 [15]; Re Elemental Minerals Ltd (2010) 79 ACSR 277 [36] - [39]. Second, looking to the pre-condition in s 1322(6)(a)(ii) of the Act, Banks-Smith J in Re ICandy Interactive Ltd undertook a comprehensive review of the relevant principles in respect of whether there is no failure of the persons concerned or the company to act honestly.[26] Relevantly, Banks-Smith J considered that:[26] Re ICandy Interactive Ltd [2018] FCA 533; (2018) 125 ACSR 369 [54] - [104].(a)when determining whether someone has acted honestly for the purposes of s 1322, the courts look to absence of evidence of dishonesty and prompt action to remedy the error;[27](b)the concept of acting honestly can embrace:[28] (i)inadvertence or failure to turn one's mind to an issue;(ii)active but incorrect consideration of a legal issue; (iii)failure to consider an issue at all; or(iv)failure to understand or appreciate the significance of non-compliance; and(c)when testing for honesty, the authorities reveal that the courts look at the company itself, the directors, the company secretary and others as may be concerned.[29][27] Re ICandy Interactive Ltd [54], [106] - [107].[28]Re ICandy Interactive Ltd [55].[29] Re ICandy Interactive Ltd [60] - [104]. In this case, I find that the actions of Ms Sayers in failing to lodge the cleansing notices (described at 29 to 61 of the annexure to the orders) as required by s 708A(5)(e) of the Act were honest and inadvertent. In relation to the remaining share issues, there is no direct evidence in respect of why the failure occurred. However, from the evidence before the court that cleansing notices were issued in respect of other share issues undertaken at similar times, I infer that the failure to lodge cleansing notices was due to inadvertence. I am also satisfied, in the circumstances of the case, that it would be just and equitable to make the orders sought. For the reasons set out above, I consider that it would be just and equitable to grant relief to the extent necessary to reasonably protect the interests of current shareholders and for the integrity of future trading in the plaintiff's shares. Despite the number of share issues that are the subject of these proceedings, I accept this is not a case where there has been a failure by the directors of Power Minerals to take an active interest in the company's compliance with the Act or to properly define the roles of company officers. I accept that the directors of Power Minerals delegated responsibility for compliance to the managing director from 2007 to 25 November 2021, and subsequently to the company secretary.