Re Story-I Ltd - [2021] WASC 211

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE STORY-I LTD; EX PARTE STORY-I LTD [2021] WASC 211
CORAM:   HILL J
HEARD:   11 MAY 2021
DELIVERED          :   11 MAY 2021
PUBLISHED           :   29 JUNE 2021
FILE NO/S:   COR 74 of 2021
MATTER:   IN THE MATTER OF STORY-I LTD

EX PARTE
STORY-I LTD
Plaintiff

Catchwords:

Corporations law - Securities - Application for declaratory relief to validate trading in shares issued without a valid cleansing notice or prospectus - Two 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 - Application granted

Legislation:

Corporations Act 2001 (Cth), s 707(3), 727(1), 708A(5), 1322(4)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff

Mr N Wallwork

Solicitors:

Plaintiff

Thomson Geer - Perth

Case(s) referred to in decision(s):

Re Caeneus Minerals Ltd [2018] FCA 560
Re Classic Minerals Ltd [2018] FCA 2039
Re G8 Communications Ltd [2016] FCA 297; (2016) 112 ACSR 22, 34
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 Poseidon Nickel Ltd [2018] FCA 1063; (2018) 129 ACSR 57, 67
Re Wave Capital Ltd (2003) 47 ACSR 418, 426
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418, 426
Weinstock v Beck (2013) 251 CLR 396

HILL J:

On 7 May 2021, the plaintiff, Story-I Limited (Story-I), filed an originating process seeking orders under s 1322(4)(a) of the Corporations Act 2001 (Cth) (Act) relating to contraventions of s 707(3) and s 727(1) of the Act. The contraventions occurred as a result of share sales following two separate instances of shares being issued on 5 July 2018 and 1 February 2021 without a valid cleansing notice or cleansing prospectus.
Story-I has provided a frank and detailed explanation as to the circumstances surrounding these 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.
In light of the urgency with which the application was brought, I made orders at the conclusion of the hearing on 11 May 2021 granting the relief sought and said that I would subsequently publish reasons for my decision. These are the reasons for my decision.

Part 6D.2 of the Corporations 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, s 708A(5).

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 Story-I Ltd

Details

AGLC: Re Story-I Ltd [2021] WASC 211
Case: [2021] WASC 211
Decision Date: 29 JUNE 2021

CaseChat Overview and Summary

The case of Re Story-I Ltd involved the applicant, Story-I Limited, seeking declaratory relief to validate trading in shares issued without a valid cleansing notice or prospectus. The dispute arose from two instances where securities were issued without the required cleansing notice. The matter was heard in the Federal Court of Australia. The primary concern was whether the failure to provide a valid cleansing notice or prospectus would invalidate the trading of the shares, and whether any substantial injustice would result from granting the sought-after orders.

The court needed to determine whether the breaches were so significant as to warrant invalidating the trading of the shares, or if the breaches were minor enough to allow for the validation of the trading. It was also necessary to assess whether granting the orders would result in substantial injustice to any party involved. The court considered the nature of the breaches, the presence of any blatant or flagrant disregard of obligations, and the potential impact of the orders on the parties.

The court concluded that there was no blatant or flagrant disregard of the obligations by the company. It held that the breaches were not so severe as to invalidate the trading of the shares. The court found that granting the declaratory relief would not result in substantial injustice to any party involved. The court reasoned that the interests of justice would be best served by validating the trading of the shares, as it would not unfairly prejudice any party and would avoid unnecessary disruption to the company's operations.

Accordingly, the court granted the application for declaratory relief, validating the trading of the shares issued without a valid cleansing notice or prospectus. The orders made aimed to ensure that the interests of justice were upheld, and that no substantial injustice would result from the validation of the trading.

Orders