Sprintex Limited [No 2]
[2025] WASC 15
•21 JANUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SPRINTEX LIMITED [No 2] [2025] WASC 15
CORAM: LUNDBERG J
HEARD: 18 NOVEMBER 2024
DELIVERED : 21 JANUARY 2025
FILE NO/S: COR 178 of 2024
MATTER: IN THE MATTER OF SPRINTEX LIMITED
EX PARTE
SPRINTEX LIMITED
Plaintiff
Catchwords:
Corporations - Application for curative orders under s 1322(4) of the Corporations Act 2001 (Cth) - Failure by plaintiff to lodge annual reports as required by time frame in s 319(3)(a) - Notices issued by plaintiff under s 708(5)(e) stated that the plaintiff had complied with ch 2M when it had not - Various share issues undertaken by the plaintiff requiring validation as a result - Refusal by former company secretary and chief financial officer to provide affidavit evidence in support of plaintiff's application
Corporations - Application for curative orders under s 1322(4) of the Corporations Act 2001 (Cth) - Failure by plaintiff to issue cleansing notices under s 708A(5)(e) or cleansing prospectuses under s 708A(11) in respect of multiple share issues over a 4 month period - Appropriate for relief to be granted - Turn on own facts
Corporations - Whether usual costs orders should be made - Whether costs of the proceeding should be borne by shareholders - Importance of regulatory compliance and protection of the interests of shareholders - Relevance of prior contraventions of the Corporations Act, both at the plaintiff company and another entity - Relevance of failure to develop and implement compliance protocols - Nature of costs orders to be made - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 254E, s 319, s 706, s 707, s 708,s 708AA, s 708A, s 727, s 1322
Result:
Orders made pursuant to s 1322(4)(a) and s 1322(4)(d) of the Corporations Act 2001 (Cth) as set out in Attachment C to the reasons.
Directions to be made as to costs.
Category: B
Representation:
Counsel:
| Plaintiff | : | M Holler |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Case(s) referred to in decision(s):
Caeneus Minerals Ltd; in the matter of Caeneus Minerals Ltd [2018] FCA 560.
DAC Finance (NSW/Qld) Pty Ltd and other companies [2020] NSWSC 182.
Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960.
Ex parte Imdex Ltd [2020] WASC 298.
Ex parte Kaiser Reef Limited [2024] WASC 397.
Ex parte New Century Resources Ltd [2021] WASC 86.
Ex parte Re Omni Bridgeway Ltd [2024] WASC 133.
Ex parte Spenda Ltd [2023] WASC 351.
Re Barrick Middle East Pty Limited; Ex parte Barrick Middle East Pty Ltd [2023] WASC 122.
Re Bellevue Gold Ltd [2021] WASC 80.
Re Cyprium Metals Ltd; Ex parte Cyprium Metals Ltd [2022] WASC 241.
Re Force Commodities Ltd [2019] FCA 1815; (2019) 140 ACSR 408.
Re Golden Gate Petroleum Ltd [2010] FCA 40.
Re iCandy Interactive Limited [2018] FCA 533.
Re Jaxsta Ltd [2018] WASC 390.
Re Metalicity Ltd [2020] WASC 387.
Re Murray River Organics Ltd [2019] FCA 931; (2019) 138 ACSR 365.
Re Nanoveu Ltd; Ex parte Nanoveu Ltd [2024] WASC 329.
Re Novonix Ltd [2019] FCA 2198; (2019) 141 ACSR 636.
Re Poseidon Nickel Ltd [2018] FCA 1063; (2018) 129 ACSR 57.
Re Queensland Bauxite Ltd [2018] FCA 2113; (2018) 364 ALR 661.
Re Sprintex Ltd; Ex parte 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.
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396.
Table of Contents
A. Summary
B. The Application
C. Materials relied upon by the plaintiff
Submissions
Affidavit evidence
Admissibility issues
D. The position of ASIC and the ASX
E. Legislative framework
Chapter 2M of the Act
Part 6D.2 of the Act
Section 1322 of the Act
F. Relevant principles
G. Factual background to the Application
Failure to lodge the 2023 annual report within the reporting period
Failure to lodge the 2024 annual report within the reporting period
Consequences of the above failures
Failure to issue cleansing notices
H. Further factual context
Sprintex Limited contraventions in February 2022
Nanoveu Ltd contraventions in January and June 2023
No affidavit sworn by Mr van Uffelen in the present proceedings
I. Disposition
Primary findings
Standing
Order 1
Orders 2(a) and 2(b)
Order 3
Order 4
Residual discretion
J. Costs
K. Conclusion and orders
ATTACHMENT A Shares issued between 1 February 2024 and 10 July 2024
ATTACHMENT B Shares issued between 8 September 2023 and 22 December 2023
ATTACHMENT C Orders made on 18 November 2024
ATTACHMENT D Visual Chronology of Contraventions and Hearings
LUNDBERG J:
A. Summary
The jurisdiction established by s 1322(4) of the Corporations Act 2001 (Cth)[1] contemplates that there may be instances of non-compliance with the legislation and facilitates the validation of non-compliance in certain circumstances.[2] That particular provision, and other similar provisions within the legislation:
…may be taken to 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 to the public interest in compliance with the law: Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 [29] per French J (as his Honour then was).
[1] Unless otherwise indicated, references to statutory provisions in these reasons are to provisions of the Corporations Act 2001 (Cth) (the Act).
[2] Caeneus Minerals Ltd; in the matter of Caeneus Minerals Ltd [2018] FCA 560 [33] (Banks-Smith J).
Each year, this Court deals with numerous applications for curative orders, arising from a broad range of circumstances. Those circumstances include failures by listed entities to lodge documents such as annual reports and half year reports in the timely manner required by ch 2M of the legislation, and failures to comply with the fundraising disclosure requirements in ch 6D. The Federal Court of Australia also receives many applications from listed entities for remedial orders under s 1322.
Indeed, in 2019, McKerracher J was driven to comment on the significant volume of those applications in the WA Registry of that Court. His Honour observed:[3]
The need for this volume of such applications is surprising. Each such application occasions costs to a company, cost probably borne by shareholders who would reasonably be entitled to anticipate regulatory compliance.
[3] Re Force Commodities Ltd [2019] FCA 1815; (2019) 140 ACSR 408 [59] (McKerracher J).
The majority of these applications are conducted as urgent ex parte hearings, typically where the corporate and market regulators have had limited time to review and comment on the relief which is sought. The urgency is largely driven by the reality that trading in the applicant's shares will have been halted pending the resolution of the issue.
The present reasons concern an urgent application brought by the plaintiff, Sprintex Limited. The company is a listed entity which specialises in the engineering, research, product development and manufacturing of ultra high-speed electric motors and clean air compressors.[4] In November 2024, the plaintiff filed an application relief in connection with contraventions of the financial records and fundraising disclosure provisions. Upon identifying these contraventions, the plaintiff sought a trading halt, which led to a suspension of trading in its shares. It then urgently applied to this Court for curative orders pursuant to s 1322(4).[5] The application was heard ex parte.
[4] As of 14 March 2024, the company had a market capitalisation of approximately $31.6m, with 781 shareholders.
[5] Originating process filed 13 November 2024 (Application).
The plaintiff's Application was heard on 18 November 2024. There was no appearance by any other party at the hearing, including by either of the relevant regulators, the Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX). That said, I accept those bodies had been given limited time to review the court papers.
Given the urgency of the Application, and the fact the plaintiff's shares were in a trading halt, it was appropriate for the Court to form a relatively prompt assessment as to whether the relief ought be granted. I indicated I was satisfied the relief sought by the plaintiff should be granted and made orders accordingly. The orders made on 18 November 2024 are set out in Attachment C to these reasons. My reasons for making those orders are detailed below.
Importantly, there were some distinctive features of this matter not typically seen in applications which come before this Court, which prompted me to reserve the costs of the application. Having reflected on the evidence and those distinctive features, and notwithstanding the forceful submissions to the contrary advanced on behalf of the plaintiff by its counsel, I consider the appropriate order to make is that the costs of the application not be met out of company funds, with liberty to apply granted to the plaintiff and each of the officers of the plaintiff who held office at the time of the contraventions. My reasons for making these orders are set out under heading J below.
B. The Application
The plaintiff's Application raised three matters in respect of which curative orders were sought.
First, the plaintiff lodged its annual reports for the financial years ended 30 June 2023 and 30 June 2024 with ASIC outside the timeframe required under ch 2M and s 319(3)(a). The two annual reports ought to have been lodged by 30 September 2023 and by 30 September 2024 respectively, but were in fact lodged on 4 October 2023 and 16 October 2024. The delays in this regard were thus relatively short.
Second, and allied to the first matter, when the plaintiff offered for sale shares in the company over the period from 1 February 2024 to 10 July 2024, on some 13 occasions, it issued notices under s 708(5)(e) which stated that the plaintiff had complied with ch 2M, when it had not. The occasions on which the shares were offered for sale are listed in Attachment A to these reasons.
Third, and separately to the above matters, on 11 occasions between 8 September 2023 and 22 December 2023, the plaintiff failed to issue valid notices pursuant to s 708A(5)(e) or prospectuses under s 708A(11), prior to the issue of fully paid ordinary shares in the plaintiff. The occasions on which the shares were issued are listed in Attachment B to these reasons.
The precise orders sought by the plaintiff are found in the amended minute of proposed orders dated 15 November 2024. As is apparent from those orders, the plaintiff did not seek orders relieving the directors, other officers, or the plaintiff itself from liability arising from the plaintiff's failures to have complied with the statutory requirements.[6] The decision not to seek those orders was a prudent one given the broader context of this matter, which I will now address.
[6] PS [7].
C. Materials relied upon by the plaintiff
Submissions
The plaintiff filed a detailed outline of submissions dated
15 November 2024 which was of considerable assistance to the Court.
Affidavit evidence
The plaintiff formally read three affidavits in support of the Application, and relied on two additional affidavits which had been sworn in earlier proceedings.
First, the plaintiff relied on the affidavit affirmed by Steven James Apedaile on 14 November 2024 (Apedaile Affidavit). Mr Apedaile is the executive chairman of the plaintiff and a director of the company. He has been a non-executive director since April 2021, and the chairman since November 2021. He was appointed as the executive chairman on 1 July 2024.
Second, the plaintiff relied on the affidavit sworn by John Bell on 14 November 2024 (Bell Affidavit). Mr Bell was appointed as the chief financial officer and company secretary of the plaintiff on 17 October 2024, having replaced Mr Michael van Uffelen. Mr Bell was thus not the company secretary during the period in which the various failures which are the subject of this proceeding occurred. Mr van Uffelen's position with the plaintiff was terminated on 17 October 2024. Mr Apedaile has sworn that the plaintiff's board decided to terminate Mr van Uffelen's roles because of his failures to 'maintain proper accounting records and ensure the accuracy of the Plaintiff's financial accounts'.[7]
[7] Apedaile Affidavit [16].
Third, the plaintiff relied on the affidavit sworn by a solicitor for the plaintiff, Nicola Maree Krinos, which was sworn on the morning of the hearing, 18 November 2024 (Krinos Affidavit).
In addition, counsel directed my attention to affidavits which had been filed in the earlier proceedings before Hill J in 2022. As already noted, those proceedings had been brought by the plaintiff seeking curative orders for earlier instances of non-compliance. I refer to the affidavit of Mr Apedaile filed in that proceeding, which was sworn on
6 April 2022 (the 2022 Apedaile Affidavit), and the affidavit of
Mr van Uffelen sworn on 6 April 2022 (the 2022 van Uffelen Affidavit).
Admissibility issues
At the hearing of the matter, I raised with counsel my concern as to the admissibility of certain opinions expressed by Mr Apedaile in his affidavit (at [39(a)] to [39(c)]).
In those paragraphs, Mr Apedaile purported to express opinions that the failures in this case were inadvertent and an oversight by the then company secretary and chief financial officer, Mr van Uffelen. Following the interchange, counsel indicated that those portions of the affidavit were not pressed and I accordingly disregarded the matters expressed in those paragraphs.[8]
[8] ts 29.
D. The position of ASIC and the ASX
The Application and the supporting papers were served by the plaintiff on both ASIC and the ASX, although they were afforded limited time to review the plaintiff's Application documents given the urgency of the matter.
A delegate of the ASIC confirmed in writing that, having considered the Application, the ASIC neither supported nor opposed the Application and did not intend to appear at the hearing of the matter.[9] Given the limited time the ASIC had to review the materials, a request was made to permit the delegate a period of 28 days to object to any orders made. The correspondence from the ASIC also formally reserved its right to take:[10]
…any other regulatory action that it may consider appropriate in relation to the Plaintiff's conduct or the conduct of its subsidiaries, including past conduct or future conduct and including, but not limited to the Plaintiff's or its subsidiaries' financial reporting obligations under Part 2M.3 of the Act and the Plaintiff's disclosure obligations under Chapter 6D of the Act.
[9] Letter to Steinepreis Paganin from K Qadar at the ASIC dated 18 November 2024.
[10] Letter to Steinepreis Paganin from K Qadar at the ASIC dated 18 November 2024.
The ASX confirmed in writing it was not in a position to comment on the matters in the Application or to support (or oppose) the Application.[11]
[11] Letter to Steinepreis Paganin from N Mullen at the ASX dated 18 November 2024.
E. Legislative framework
Chapter 2M of the Act
Chapter 2M of the Act is headed 'Financial Reports and Audit'. As set out in ch 2M, all companies must keep financial records and some must prepare financial reports. Part 2M.3 of ch 2M sets out the provisions dealing with 'Financial and Sustainability Reporting'. Division 5 thereof deals with the subject of 'Lodging reports with ASIC' (and consists of s 319 to s 322).
Section 319(1) requires a company that has to prepare or obtain a report for a financial year under div 1, to lodge the report with ASIC. A failure to do so is an offence of strict liability: s 319(1A). The time for lodgement is set out in s 319(3)(a) in respect of a disclosing entity, such as the plaintiff. The time period is 3 months after the end of the financial year.
Part 6D.2 of the Act
When securities are issued or sold, pt 6D.2 sets out whether disclosure is required to investors and, if so, what form of disclosure is required. The relevant legislative regime was summarised by Banks-Smith J in Re iCandy Interactive Limited.[12]
[12] Re iCandy Interactive Limited [2018] FCA 533 [6] - [13] (Banks-Smith J).
Where securities are issued, s 706 provides that disclosure to investors is required, unless s 708 or s 708AA say otherwise.
Where securities are sold, s 707 sets out when disclosure to investors is required. Section 707 is headed 'Sale offers that need disclosure'. 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 is directed to and sets out anti-avoidance provisions. The purpose of the provision is to prevent the policy of ch 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.[13]
[13] 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 s 708, s 708AA or s 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 s 708A(5), s 708A(11) and s 708A(12) respectively).
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.
A further relevant exemption is found in s 708A(11), referred to as the cleansing prospectus or concurrent prospectus exemption.
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.[14] 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.[15]
[14] Re Golden Gate Petroleum [36] (McKerracher J).
[15] Re Golden Gate Petroleum [27] (McKerracher J).
As explained in the plaintiff's submission, in accordance with the statutory regime, a cleansing notice or cleansing prospectus can be used in situations where the original issue of securities did not require disclosure, but an on-sale of those securities within 12 months does require disclosure. The effect of the cleansing notice or cleansing prospectus is to 'cleanse' any subsequent sales of securities by shareholders within 12 months of issue.
Section 1322 of the Act
The power of the Court to make orders avoiding the effects of irregularities, extending time and relieving from civil liability is set out in s 1322. The plaintiff relies on the power in s 1322(4)(a) 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.
F. Relevant principles
The principles applicable to the operation and scope of s 1322(4) are well known and need not be thoroughly restated for the purposes of this matter. Those principles, insofar as they relate to s 1322(4)(d) CA, may be summarised as follows:[16]
(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)(d) notwithstanding that the contravention or failure concerned resulted in the commission of an offence.
[16] Re Wave Capital Ltd [29] – [31]; Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [43], [53] and [64]. See the summary and additional authorities collected in Re Barrick Middle East Pty Limited; Ex parte Barrick Middle East Pty Ltd [2023] WASC 122
One precondition to an order under s 1322(4)(a) is that the person concerned in or a party to the contravention 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.[17]
[17] Re iCandy Interactive Limited [54] - [104] (Banks-Smith J)..
Prior to making an order under s 1322(4)(a) or s 1322(4)(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 statements of Anderson J in Re Murray River Organics Ltd:[18]
[18] Re Murray River Organics Ltd[2019] FCA 931; (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) 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.[19]
[19] 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) are satisfied: Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2);[20] and Re Murray River Organics Ltd [39]. Satisfaction of the conditions in s 1322(6)(a) and s 1322(6)(c) are therefore necessary but not sufficient to ensure a favourable exercise of the discretion in s 1322(4)(a) and (d).
[20] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd (No 2) [2018] WASC 357 [35] (Vaughan J).
As summarised in Entertainment Publications of Australia Pty Ltd v ASIC,[21] factors which have previously been considered as relevant to the exercise of the discretion include:
(a) the general objects and purposes of the relevant statutory provision within the Act;
(b) the public interest in ensuring compliance with the Act and the interests of all parties affected;
(c) the promptness of any action taken to remedy the error; and
(d) whether ASIC opposes the Application.
[21] Entertainment Publications of Australia Pty Ltd v ASIC [2022] FCA 960.
Historically, orders have been made under s 1322(4) to extend time for the lodgment of financial reports with ASIC.
G. Factual background to the Application
Failure to lodge the 2023 annual report within the reporting period
Pursuant to s 319(3)(a), the plaintiff was obliged to lodge its annual report for the financial year ended on 30 June 2023 by 30 September 2023. This did not occur. The plaintiff lodged the annual report on 14 October 2023.
The plaintiff has explained, through Mr Apedaile, that the delay was primarily due to discussions with the plaintiff's external auditors, to ensure all disclosures in the annual report were fully accurate and in compliance with relevant accounting standards and regulations.[22]
[22] Apedaile Affidavit [52].
The failure in this regard occurred during the period Mr van Uffelen held the roles of chief financial officer and company secretary. It is apparent that Mr van Uffelen was primarily responsible for the preparation and coordination of the annual report for the financial year which ended on 30 June 2023. As noted earlier, Mr van Uffelen has not sworn an affidavit to explain the failure.
Failure to lodge the 2024 annual report within the reporting period
Pursuant to s 319(3)(a), the plaintiff was obliged to lodge its annual report for the financial year ended on 30 June 2024 by 30 September 2024. This did not occur. The plaintiff lodged the annual report on 16 October 2023.
The plaintiff has explained, again through Mr Apedaile, that the delay was due to a number of discrepancies and errors in the plaintiff's accounting records picked up by the appointed external auditors. These matters necessitated substantial rectifications and corrections to bring the financial records in compliance with regulatory standards.[23]
[23] Apedaile Affidavit [53].
Mr Apedaile has explained that Mr van Uffelen had a more limited role in attending to the annual report for the year ended on 30 June 2024.[24] However, he deposes that the delay was the result of Mr van Uffelen's failure to maintain proper accounting records which resulted in numerous discrepancies and errors in the 'Plaintiff's accounting records that necessitated substantial rectifications and corrections prior to lodgement of the FY24 Annual Report'.[25]
Consequences of the above failures
[24] Apedaile Affidavit [54].
[25] Apedaile Affidavit [55].
The plaintiff issued shares on some 13 occasions between 1 February 2024 and 10 July 2024, and on each occasion it also issued notices under s 708(5)(e). These share issues are identified in Attachment A. The notices stated that the plaintiff had complied with the provisions of ch 2M of the Act.
By reason of the above delays in compliance with s 319(3)(a) CA, the statements in the notices to this effect were not correct.
Failure to issue cleansing notices
Separately to the above matters, the plaintiff failed to issue valid notices pursuant to s 708A(5)(e) (commonly known as cleansing notices) during the required periods, or to issue prospectuses under s 708A(11) (commonly known as cleansing prospectuses) prior to the issue of fully paid shares in the plaintiff.
The 11 instances where this occurred are detailed in Attachment B. The share issues occurred between 8 September 2023 and 22 December 2023.
Mr Apedaile has sworn that Mr van Uffelen, through until 17 October 2024, was primary responsible for compliance matters including the issuing of cleansing notices.[26] Mr Apedaile did not have any personal involvement in the share issues or the issuing of cleaning notices. Mr Apedaile has deposed that he queried Mr van Uffelen on a number of occasions as to whether he had validly issued the shares, including these particular shares, and received an affirmative response.[27] Mr Apedaile raised this query given the previous failures on the part of Mr van Uffelen to comply with the legislative requirements.[28]
[26] Apedaile Affidavit [40].
[27] Apedaile Affidavit [41].
[28] Apedaile Affidavit [41].
By way of further context, other than two of the share issues, each of the share issues identified in Attachment B related to shares issued on the conversion of convertible notes issued on 23 June 2023.[29] The two exceptions are:
(a)the shares issued on 8 September 2023, which were comprised of shares issued on conversion of convertible notes as well as shares issued to directors of the plaintiff following approval obtained from the plaintiff's shareholders at a general meeting on 4 September 2023; and
(b)the shares issued on 12 September 2023, which were comprised of shares issued to a substantial shareholder under a private placement and further shares to a director of the plaintiff following approval obtained from the plaintiff's shareholders at the same general meeting.[30]
[29] Apedaile Affidavit [28] – [30].
[30] Apedaile Affidavit [29].
As to these two share issues, the plaintiff submits that it inadvertently overlooked that the cleansing offer contained in the prospectus dated 19 July 2023 had closed on 31 August 2023, and thus a fresh cleansing notice or notices were required.[31] This submission was based upon portions of Mr Apedaile's affidavit which were not pressed by counsel, as earlier noted. Nonetheless, counsel submitted that the inference was open to be drawn having regard to the facts otherwise adduced by the plaintiff on the application.
[31] PS [35].
H. Further factual context
The plaintiff has quite properly drawn the attention of the Court to the instances in 2022 of prior non-compliance by the plaintiff with the requirements of the legislation. Those matters were the subject of the proceedings before Hill J.
The plaintiff has also drawn the Court's attention to the instances of non-compliance by another ASX-listed entity, Nanoveu Ltd, in which Mr van Uffelen was involved. Whilst working for the plaintiff, Mr van Uffelen also served as the chief financial officer and company secretary of that other listed entity. To be clear, the fact that a company secretary might simultaneously act in that role for more than one company is not unusual, in my experience.
I will summarise these matters below, commencing with matter heard by Hill J. A visual chronology of the contraventions relevant to this matter is set out in Attachment D to these reasons.
Sprintex Limited contraventions in February 2022
On 6 April 2022, the plaintiff brought proceedings before this Court seeking curative orders under s 1322. The contraventions related to s 708A(11), s 707(3) and s 727(1), which occurred following the issue of shares by the plaintiff on 9 February 2022. Those shares were issued without the prior lodgment of a cleansing prospectus pursuant to s 708A.[32]
[32] Re Sprintex Ltd; Ex parte Sprintex Ltd [2022] WASC 188 [1] and [16] (Hill J).
Hill J granted the relief sought by the plaintiff in that case. Her Honour accepted that the contraventions were inadvertent, in that the plaintiff had inadvertently overlooked the fact that an earlier cleansing prospectus, under which the company purported to issue the relevant shares on 9 February 2022, had in fact closed on 13 December 2021. Her Honour's reasons include the following salient passages:
[15] On 9 February 2022, the plaintiff issued a further 6,666,670 shares as part of the 2021 Placement (9 February shares). Mr van Uffelen's evidence was that, in issuing these shares, he overlooked the fact that the offer in the First Cleansing Prospectus had closed on 13 December 2021.
[16]On 24 March 2022, Mr van Uffelen received a call from the ASX regarding the 9 February shares. He investigated the issue and discovered he had inadvertently failed to ensure the 9 February shares had been properly cleansed. On discovering the error, Mr van Uffelen informed the plaintiff's managing director and contacted the plaintiff's solicitors to obtain legal advice.
…
[30]In this case, the plaintiff inadvertently overlooked that the First Cleansing Prospectus, under which it purported to issue the 9 February shares, closed on 13 December 2021. As a result, these shares were issued without a valid cleansing prospectus. I accept that this occurred as a result of an error on behalf of Sprintex's company secretary. I find that the error in failing to lodge a cleansing prospectus, as required by s 708A(11) of the Act, was honest and inadvertent.
[31]I also accept that this is not a case where there has been a failure of the directors of Sprintex to take an active interest in the company's compliance with the Act or to properly define roles of company officers. I accept that Sprintex's directors relied on the company secretary for compliance matters, such as the issue of cleansing prospectuses.
[32]I am also satisfied that it would be just and equitable to make the orders sought. Section 1322(6)(a)(iii) gives the court a wide discretion in exercising its powers under s 1322 of the Act.
In the affidavit sworn by Mr van Uffelen for the purposes of the proceedings before Hill J, Mr van Uffelen deposed as follows:
[41]As I stated at paragraph 27 above, the failure to cleanse the Uncleansed 9 February 2022 Share Issue was inadvertent by overlooking that the cleansing offer in the First Cleansing Prospectus had closed and is not representative of a lack of understanding of the requirements of the Corporations Act. However, given my failures to properly cleanse the Plaintiff's Uncleansed 9 February 2022 Share Issue I appreciate the need for me to further educate myself to ensure that this does not occur again.
[42]Accordingly with the assistance of the Plaintiff's external legal advisors, I am in the process of developing a protocol for the issue of securities which takes into account the various instances of non-compliance by the Plaintiff with the secondary sale provisions.
[43] This protocol will consider whether the Securities have been issued under a disclosure document or with disclosure relief. In situations where the Securities have not been issued under a disclosure document or with disclosure relief, the protocol will consider whether a valid cleansing notice or cleansing prospectus is required. Further the protocol will also consider whether there is the possibility of on-sale of the Securities within twelve months of the date of issue and whether the Securities are being issued to a person who does not require disclosure.
[44] Further if I have any doubts or queries concerning any requirement associated with the future issues of securities, I will ensure that the Plaintiff seeks external legal advice to ensure than all disclosure requirements are complied with.
Similarly, Mr Apedaile explained in his affidavit presented to the Court on that earlier application that a protocol was being developed for the issue of securities, which takes into account the various instances of non-compliance by the plaintiff with the secondary sale provisions.[33]
[33] 2022 Apedaile Affidavit [20].
As matters transpired, it appears no protocol was prepared by
Mr van Uffelen, and the contraventions were unfortunately repeated.
Nanoveu Ltd contraventions in January and June 2023
The reasons of Strk J in Re Nanoveu Ltd; Ex parte Nanoveu Ltd record that Mr van Uffelen was the chief financial officer and company secretary of the entity in that case from 14 February 2018 to 15 June 2023, and was replaced by another person once the non-compliance matters were identified.
The non-compliance matters in that case were summarised by
Strk J, as follows:
[1]By this proceeding, Nanoveu Limited sought curative orders pursuant to s 1322 of the Corporations Act2001 (Cth), arising from the failure to lodge cleansing notices for three issues of fully paid ordinary shares in Nanoveu; and the late lodgement of the half year financial report, half year directors' report and auditor's report for Nanoveu for the half year ending 30 June 2023.
The share issues which had been the subject of the above proceedings occurred on 27 January 2023, 30 January 2023, and 20 June 2023.[34] The half year reports which had been due for lodgement on 13 September 2023 were not lodged by the plaintiff until 4 December 2023, some 82 days late.[35]
[34] Re Nanoveu Ltd; Ex parte Nanoveu Ltd [2024] WASC 329 [5] (Strk J).
[35] Re Nanoveu Ltd; Ex parte Nanoveu Ltd [42] (Strk J).
Strk J noted in her reasons that the applicant had filed evidence to explain how it would address these issues and assist future compliance with the legislative requirements.[36] Her Honour summarised these matters as follows:
[36] Re Nanoveu Ltd; Ex parte Nanoveu Ltd [46] (Strk J).
[46]As was noted on behalf of Nanoveu, in order to address these issues and assist future compliance with the Corporations Act, Nanoveu had:
(a) adopted a protocol for the handover of duties of the Chief Financial Officer and Company Secretary in the event that the existing Chief Financial Officer and Company Secretary were to be replaced or was unable to act;
(b) adopted a protocol/checklist to determine whether securities had been issued under a disclosure document or with disclosure relief and, if not, whether a cleansing notice or cleansing prospectus was required;
(c) created a central register to track securities which had been issued and/or were to be issued;
(d) created an action register to record all capital issue information, to be reviewed at the end of each reporting period;
(e)implemented a document management system to store all of Nanoveu's corporate documents;
(f) allocated responsibility to two of Nanoveu's directors (Dr David Pevcic and Mr Michael Winlo) for keeping Ms Haydari updated as to Nanoveu's activities.
[47] In his affidavit, Mr Chong expressed his commitment to ensuring the protocols described above at [46(a)] and [46(b)] were promulgated and followed within Nanoveu. Further, Mr Chong deposed that it was planned that Nanoveu would establish a risk committee to prevent and resolve any risks identified within Nanoveu's operations; and to the extent required, additional resources and support would be provided to Ms Haydari.
[48]As to the steps taken to ensure future compliance with respect to the lodgement of its accounts, Nanoveu was taking steps to:
(a) establish an audit committee to assist Nanoveu's board to monitor significant matters affecting financial reporting and compliance; and
(b) develop accounting protocols (with respect to which it intended to seek advice from an independent accounting practice).
Protocols and steps of this nature are, of course, naturally prudent and appropriate to be implemented in order to assist with regulatory compliance. I infer for present purposes that Mr van Uffelen was aware from his involvement in the proceedings brought by the plaintiff before Strk J, even though had left that business, that the applicant in that case had proposed to the Court the implementation of these protocols and steps.
No affidavit sworn by Mr van Uffelen in the present proceedings
As I have earlier noted, Mr van Uffelen has not sworn an affidavit to explain the non-compliance instances in the present matter. This is despite an express request to him from the plaintiff on 13 November 2024.
Mr van Uffelen had requested that his fees (or half of them) be paid before he would provide any affidavit. The plaintiff has adduced a series of WhatsApp messages which were exchanged by Mr Apedaile and Mr van Uffelen, as set out below. They do not make happy reading.[37] The messages were exchanged on and around 13 November 2024.
[37] Apedaile Affidavit [22] – [23], Attachment SJA-01.
Person
WhatsApp Message
Apedaile
Mark Foster just called me
Disaster !!!!!! You did to us same as NVU[38]
No cleansing notices when 180 did their conversions[39]
We have to go into suspension and get court date
van Uffelen
I am sure these were all lodged
Apedaile
According to Mark you missed some
van Uffelen
Which ones
Apedaile
He will send me schedule
van Uffelen
Steve, I am not sending anything further until pay at least half of my fee
Apedaile
Jay never got your email either so frankly we don't believe you sent it[40]
van Uffelen
Check your junk mail. I sent it from my Hotmail address
Apedaile
We both checked and no email
Apedaile
Mark Foster says you missed a number of cleansing notices You will have to Do an Affidavit
Apedaile
Note trading halt. Suspension on Friday. Hoping court date Monday
You will need to do an affidavit similar to one you did on NVU
van Uffelen
You had better pay my invoice. I will only swear the affidavit after being paid.
[38] This is a reference to Nanoveu Ltd.
[39] The reference to '180' is a reference to the name of a shareholder of the plaintiff.
[40] I understand this message (and the following two messages) are referring to whether or not the plaintiff had received a copy of the invoice from Mr van Uffelen.
The above exchanges require some additional observations on my part, as follows:
1.The first point to note is that the person identified as Mr Foster is an external solicitor. So it appears it was an external solicitor, not Mr van Uffelen himself, who identified the cleansing notice deficiency. Similarly, it was not Mr van Uffelen who identified the non-compliances which occurred in 2022. It was a representative of the ASX who drew those non-compliances to his attention.[41]
2.The exchanges confirm that Mr Apedaile was aware of the matters in which Mr van Uffelen was involved concerning Nanoveu Ltd (referred to as 'NVU' in the messages). Indeed, Mr Apedaile has sworn that it was because of the previous failures on Mr van Uffelen's part in the past that caused
Mr Apedaile to raise queries with him as to whether he had validly issued shares on behalf of the company.
3.The plaintiff invited me to place some store in Mr van Uffelen's initial response that he was 'sure' the necessary notices had been lodged. I will address this below. I am not persuaded I should place any weight on this comment, in all the circumstances.
4.The messages refer to Mr van Uffelen's refusal to assist the plaintiff until at least half his fees are paid, or perhaps all of his fees are paid. The first message on the issue requires half the fees to be paid, but the later message appears to refer to the whole of the invoice being paid.
5.There is a clear request in the messages from Mr Apedaile for Mr van Uffelen to provide an affidavit for the purposes of the application to this Court. Of course, Mr van Uffelen would have been well aware from his experience in addressing matters at Nanoveu Ltd and at Sprintex Limited that, as the company secretary at the relevant time, it would be highly desirable that he provide an affidavit in support of any application to the Court.
[41] Re Sprintex Ltd; Ex parte Sprintex Ltd [16] (Hill J).
Disposition
Primary findings
Before I address the relief which was sought by the plaintiff, it is necessary to set out my findings on the affidavit evidence, including as to the role of Mr van Uffelen, only to the extent that it is necessary to dispose of the Application. The primary findings are as follows:
1.The obligation to ensure the plaintiff's annual reports were lodged by the required time, and the impact of a failure to do so on the accuracy of cleansing notices issued under s 708A(5)(e), were matters within the scope of Mr van Uffelen's duties. This is not surprising given he was the company secretary and chief financial officer over the relevant period.
2.Further, the plaintiff's compliance with its statutory obligations in relation to the issue of shares generally were matters within the scope of Mr van Uffelen's duties.
3.Accordingly, the contraventions in respect of which the plaintiff sought curative orders were all matters in respect of which Mr van Uffelen was best placed to provide an explanation to the Court. No affidavit was sworn by Mr van Uffelen and so there was no direct explanation of these matters from the officer responsible for these matters of compliance. I certainly accept the explanation which has been given by the plaintiff as to the absence of any sworn material from Mr van Uffelen and recognise that a request was made to have him provide an affidavit. Mr van Uffelen's refusal is nonetheless unacceptable.
4.I did not consider the absence of Mr van Uffelen's evidence left the Court in a position where there was an absence of evidence to support the Application. The Court had received affidavit evidence from Mr Bell and Mr Apedaile which provided sufficient information to explain the circumstances. I also accept it was open for the Court to draw inferences from the available facts, without hearing directly from Mr van Uffelen.
5.I accept that Mr Apedaile did not have any personal involvement in the share issues or the issuing of cleaning notices. I have no reason to doubt that Mr Apedaile queried Mr van Uffelen on a number of occasions as to whether he had validly issued the shares, including these particular shares, and received an affirmative response.
6.I find that Mr Apedaile was aware of the previous failures on the part of Mr van Uffelen to comply with the legislative requirements, at both Sprintex Limited and Nanoveu Ltd. I note Mr Apedaile took a more active role in the compliance obligations of the plaintiff after the hearing before Hill J in April 2022.
7.The Court was informed by the plaintiff in April 2022 that a protocol for the issue of securities would be prepared, taking into account the instances of non-compliance by the plaintiff with the secondary sale provisions. Yet, no such protocol was established (until recently).
8.I do not give any weight to the initial response from Mr van Uffelen to Mr Apedaile, by way of his WhatsApp message, that he was 'sure' the necessary cleansing notices had been lodged. Given the prior non-compliance incidents at Sprintex Limited and at Nanoveu Ltd, and in the absence of any affidavit evidence from Mr van Uffelen to explain matters, I do not accept that this initial response should be taken as a sign of confidence on the part of Mr van Uffelen that he genuinely understood there had been compliance with the relevant obligations (and that the necessary notices had been lodged).
At the time of sending his message to Mr Apedaile, Mr van Uffelen would have been well aware he had previously failed to issue numerous cleansing notices, in his roles at Sprintex Limited and at Nanoveu Ltd, which had required curative orders from this Court. I do not know to what extent Mr van Uffelen had any degree of introspection about these matters. But in the circumstances, it seems to me more likely that his response - 'I am sure these were all lodged' – reflects an unearned overconfidence rather than an accurate assessment to the executive chairman of the company.
Of course, this is an issue which Mr van Uffelen may have explained in some other way, but he did not take up the opportunity to do so.
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.[42]
Order 1
[42] Re iCandy Interactive Limited [46] (Banks-Smith J); and Sprint Energy Limited; in the matter of Sprint Energy Limited [40] (McKerracher J).
The first order sought by the plaintiff was to extend time for the lodgement of the annual reports for the financial years ended on 30 June 2023 and 30 June 2024. The extension was for the period from the statutory deadline through to 4 October 2023 and 17 October 2024 respectively. The order is sought pursuant to s 1322(4)(d).
The first precondition to the making of the order is that it is in relation to an 'act, matter or thing' within the meaning of s 1322(4)(d). I am satisfied the lodgment of annual reports as required by the legislation is an 'act, matter or thing'. The second precondition is that no substantial injustice has been or is likely to be caused to any person, as required by s 1322(6)(c).
It is appropriate to approach the extension of time application in the manner described by Vaughan J (as his Honour then was) in Re Jaxsta Ltd.[43] 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.
[43] Re Jaxsta Ltd [2018] WASC 390 [41].[41].
The circumstances presented by the plaintiff on this Application were sufficient to provide a proper basis for the extensions which were sought, in relation to the lodgment of the annual reports.
The affidavit evidence of Mr Apedaile explained that a significant amount of work had been undertaken in the period between 7 August 2024 to 17 October 2024, in respect of the disclosure and the finalisation of the annual report for the 2024 financial year. That work was undertaken to ensure an accurate and compliant annual report could be prepared.
Further, Mr Apedaile has explained that the delay in lodgement of the annual report for the 2023 financial year was due to the additional work needed to be undertaken by Mr Apedaile and the plaintiff’s external auditors. Again, this work was required to ensure an accurate and compliant annual report could be prepared.
I accept the plaintiff has given a full and frank explanation of the circumstances, and there is no evidence of any dishonesty in this regard. I also note the extensions of time required are relatively short.
As to the question of prejudice, I accepted the submission of the plaintiff that there was no reason to believe that any person had suffered or was likely to suffer substantial prejudice or injustice by the making of an extension order. In particular, the plaintiff observed that its shares were suspended from trading during the whole period commencing from the date each annual report was required to be lodged and the actual date of lodgement of that annual report. Accordingly, there was no possibility that shares had been traded on the ASX at a time when investment decisions may have been impaired or affected by the absence of the Annual Reports.
I accordingly accepted that the requirements for the making of order 1 were satisfied and it was appropriate to make such an order, in relation to the lodgment of the 2023 and 2024 annual reports.
Orders 2(a) and 2(b)
The second set of orders sought related to the cleansing notices issued by the plaintiff during the period between 5 February 2024 and 10 July 2024 (inclusive), which are set out in Attachment A to these reasons.
The orders sought are that the cleansing notices given under s 708A(5)(e) were effective when given, and not invalid in circumstances where those notices stated that the plaintiff had complied with its ch 2M obligations, when in fact the plaintiff had not so complied. Orders of this nature have been made by this Court in several instance, as identified by the plaintiff in its submissions.[44]
[44] Including Re Bellevue Gold Ltd [2021] WASC 80; Ex parte New Century Resources Ltd [2021] WASC 86;Ex parte Spenda Ltd [2023] WASC 351; Ex parte Re Omni Bridgeway Ltd [2024] WASC 133 and Ex parte Kaiser Reef Limited [2024] WASC 397.
A further order was sought by the plaintiff, being order 2(b), in order to remove any uncertainty as to the validity of the title to the shares issued by the plaintiff, so as to enable them to be offered for further sale. As explained in the plaintiff's submissions, such an order is sought for the benefit of shareholders. If orders are not granted then the integrity of future dealings in the shares by current holders may be called into question.[45]
[45] As explained in Re Poseidon Nickel Ltd [2018] FCA 1063; (2018) 129 ACSR 57.
In the circumstances, it was appropriate to make the orders sought by the plaintiff pursuant to s 1322(4)(a), consequential upon making the order 1 to extend the time for the lodgment of the annual reports. The precondition to the making of the orders are found in s 1322(6)(a) and s 1322(6)(c). The second of these, that there is no substantial prejudice and no substantial prejudice is likely to be caused to any person, is readily satisfied, and indeed, the making of the order is designed to alleviate any potential prejudice. As to the first precondition, I accept there is no evidence of a failure to act dishonestly in any respect and so the terms of s 1322(6)(a)(ii) are satisfied.
Order 3
The third order sought by the plaintiff was to extend the period of five business days for the issue of a cleansing notice referred to in s 708A(6)(a) to 14 November 2024 in respect of the various share issues set out in Attachment B to these reasons. Those share issues occurred between 8 September 2023 and 22 December 2023. There were 11 separate occasions on which shares were issued by the plaintiff over this period. The order was sought pursuant to s 1322(4)(d).
The officer within the plaintiff responsible for issuing cleansing notices was the company secretary, Mr van Uffelen. Although I had no evidence from him on the Application, I was nonetheless satisfied on the available evidence that the order sought should be made in the circumstances. The features of the case which were emphasised by the plaintiff in its submissions, and the force of which I accepted, are set out below.
First, the chronology of events demonstrated that the plaintiff acted promptly to inform investors of its failure to issue a cleansing notice, to place the company's shares into a trading halt and to bring this Application to the Court to remedy the irregularity. I accept that prompt action of this nature is a relevant factor for the Court to consider in exercising the discretion to grant relief under s 1322(4).
Second, I accepted that, in the absence of an extension, there were adverse consequences for the plaintiff and its shareholders. In particular, unless orders are made by the Court, the plaintiff’s shares would continue to be suspended from trading which would deny the shareholders of the plaintiff the opportunity to trade their shares. I accept that would be prejudicial to all of the plaintiff’s shareholders.
Third, the shareholders who purchased shares on market after 8 September 2023 may well have purchased some shares from these share issues. As any such sales will have occurred without disclosure, I accepted the potential that these transactions were void or voidable creating title issues for these parties. That is an outcome which should be avoided in the circumstances.
Fourth, the regime proposed by the plaintiff would involve each of the recipients of these share issues being notified of the error.
Fifth, I accepted that, as a result of inadvertence on the part of the company, the required cleansing notices were not lodged. The failure was not due to any deliberate act or reckless disregard. Once the issue was appreciated by the plaintiff's solicitors, all parties concerned appear to have acted rather promptly to resolve the issue through this Application to the Court, which lends support to the notion that the error was an inadvertent one which the plaintiff was keen to rectify. That said, it was obviously concerning that similar issues had occurred under the watch of Mr van Uffelen in both this company and another entity, and Mr van Uffelen had not provided a sworn explanation of the matter to assist the Court.
Sixth, I recognise the plaintiff has taken steps since the contraventions to ensure that the potential for there to be future non-compliance is mitigated. Such steps are well overdue.
Order 4
The fourth order sought by the plaintiff is in the nature of a deeming order, pursuant to s 1322(4)(a), that any offer for sale or sale of the relevant chares identified in Attachment B to these reasons not be invalid by reason of failures to comply with the legislation. The order makes reference to failures on the part of the plaintiff to issues notices in compliance with s 708A(5)(e) and s 708A(6) (which would exempt sellers from the obligation of disclosure), and the sellers' consequent failures to comply with s 707(3).
The plaintiff placed reliance[46] on the approach adopted by the Court in Re Cyprium Metals Ltd; Ex parte Cyprium Metals Ltd[47] and Ex parte Imdex Ltd.[48] I was satisfied the order was appropriate, having regard to those authorities, because there is evidence that the relevant shares have been on-sold, or at the very least it cannot be discounted that this had occurred, and the cleansing notice has now been lodged (it was lodged on 14 November 2024). Further, as indicated in those earlier authorities, the making of the deeming order is in effect a corollary to the order granting the extensions.
Residual discretion
[46] PS [66].
[47] Re Cyprium Metals Ltd; Ex parte Cyprium Metals Ltd [2022] WASC 241.
[48] Ex parte Imdex Ltd [2020] WASC 298.
The plaintiff submitted there were no discretionary reasons to withhold the relief which was sought, in the exercise of the Court's residual discretion.[49] The conduct was said to be inadvertent and based on an honest oversight of the company secretary.
[49] PS [68] - [69].
I had given careful thought to whether the circumstances might provide a foundation for a conclusion that the residual discretion should be exercised to decline the relief sought. The conduct here might not have involved a flagrant disregard of the legislation, or any dishonesty, but it was bordering on reckless. I have in mind here the decision by the plaintiff to leave its corporate secretarial function in the hands of Mr van Uffelen, without proper controls in place, given the prior contraventions on his part, both at this company and at another listed entity, and without ensuring that the protocols spoken of in 2022 were actually in place.
Further, as I have said more than once, the decision by Mr van Uffelen to refrain from providing affidavit evidence caused me some concern.
Ultimately, the direct evidence and the inferences which can be drawn therefrom, demonstrated that the failures were inadvertent and not deliberate. I therefore concluded that there was an absence of evidence demonstrating dishonesty in this case and I found the conduct of the plaintiff and its officers has not occasioned any substantial injustice, and was not likely to.
Accordingly, I considered there were no matters which would have justified the exercise of the residual discretion to decline to grant the relief sought, and so granted that relief.
J. Costs
In the summary to these reasons I indicated it was appropriate to make certain orders as to costs, having regard to the distinctive features of this case. Given those features, I am persuaded that an order should be made that the costs of the Application not be met out of company funds, with liberty to apply granted to the plaintiff and each of the officers of the plaintiff who held office at the time of the contraventions.
Those persons are Mr Steven James Apedaile (a director and the executive chairman), Mr Jude Benedict Upton (the managing director and chief executive officer) and Mr Li Chen (a non-executive director), who were the directors during the relevant period, and Mr Michael Scott van Uffelen, who was the company secretary during the same period, but has since been terminated. Those persons will have liberty to apply on the question of costs, should they wish to do so.
Each of them will require an opportunity to be heard before any costs orders may be made by the Court against them, bearing in mind only the plaintiff itself was formally represented at the hearing in November 2024. The Court has undoubted power to make costs orders in respect of a non-party.
Before I set out the distinctive features of the case which warrant the above costs orders, it is necessary to first say something about the applicable principles.
First, it should be accepted that it is usual on applications such as this for the Court to make no order as to costs, in the context of the broad judicial discretion which the Court has to order costs. The making of a costs order other than this should only be done in unusual circumstances. That precise point was made by Hill J in Re Metalicity Ltd.[50] Counsel for the plaintiff made forceful submissions to the effect that that approach should be followed in this case. It was submitted that where there was no failure of the persons or company concerned to act honestly, it would only be in the most unusual circumstances that an order for costs would be made against officers of the company.[51] I do not accept that a finding of dishonesty is the pivotal criterion when exercising the costs discretion in applications such as the present one.
[50] Re Metalicity Ltd [2020] WASC 387 [62] (Hill J).
[51] PS [70].
Second, in a number of instances, judges in this Court and in the Federal Court have reflected on whether to exercise the costs discretion to make a particular costs order. In doing so, it has been recognised on occasions that the costs of such applications are likely to be borne by shareholders who would reasonably be entitled to anticipate regulatory compliance. Ultimately, in many of these instances, the Court has given weight to the countervailing concerns.[52]
[52] Re Poseidon Nickel Ltd [90] - [92] (Colvin J); Re Queensland Bauxite Ltd [2018] FCA 2113; (2018) 364 ALR 661 [56] - [57] (McKerracher J); Re Force Commodities Ltd [58] (McKerracher J); Re Novonix Ltd [2019] FCA 2198; (2019) 141 ACSR 636 [43] (Jackson J); Re Cyprium Metals Ltd; Ex parte Cyprium Metals Ltd [98] - [99] (Strk J).
Third, the countervailing concerns recognised in several decisions include that the risk of a personal costs order should not impact the decision of past or present officers of the company to investigate matters or bring an application before the Court. This point was made by the plaintiff in the present case.[53] I accept that is a relevant consideration. Further, the costs to the plaintiff of an inquiry as to who should bear the costs of any application may be disproportionate to any benefit obtained. I also accept this is a relevant consideration. More generally, it is sometimes observed that an applicant company is in a good position to consider the appropriate course in relation to costs.[54]
[53] PS [70].
[54] Re Poseidon Nickel Ltd [90] - [92] (Colvin J).
I therefore accept that these considerations are relevant to the exercise of the Court's discretion as to whether to order that the costs of an application such as this be borne by a party or person other than the company itself. They are considerations explained by Banks-Smith J in iCandy Interactive Limited, a case in which her Honour carefully considered whether to make a specific costs order, but ultimately declined to do so on the facts of that case.
Her Honour held:[55]
[131]A difficulty with making a costs order as in Wave Capital is that it is not clear where the obligation to pay the costs would ultimately lie. Whilst I have the power to order that a third party meet the costs of an application, I would be reluctant to do so without representation or submissions on the part of the party considered liable to bear such costs. In this case, it is not clear that the costs should be met by, for example, Mr Lau, albeit that he appears to have played the principal role in the share issues. There is some dispute as to whether he validly assumed that Mr Love would ensure shares would not be traded and such dispute may well affect whether it is proper for Mr Lau to be ordered to pay all of the costs of the application personally.
[132]I have considered whether I should allow for Mr Lau to be heard with respect to the question of costs. However, it seems to me that in this case, the ongoing costs to the company of an enquiry into who should bear the costs of the application may well be disproportionate to the outcome.
[133]Bearing in mind that the company itself through counsel made strident submissions that no such order should be made against the directors, I will not on this occasion make an order similar to that made in Wave Capital. However, the potential for a costs order against directors or other officers in such an application is real and is a matter which should be considered by counsel representing the company, noting that the interests of the company and the directors as to costs are not necessarily aligned.
[134]On this occasion I will make no order as to costs.
[55] iCandy Interactive Limited [131] - [134].
It appears that, in iCandy Interactive Limited, the issue of costs was raised by ASIC. The regulator queried whether it might be appropriate in that case, taking into account the conduct of the directors, to make a costs order analogous to that made by French J in Re Wave Capital Limited.[56]As noted, her Honour declined to make an order other than the usual order.
[56] iCandy Interactive Limited [125].
Fourth, as the foregoing discussion indicates, there is a notable authority in which an adverse costs order has been made in a proceeding seeking remedial orders under s 1322(4). That decision was delivered more than two decades ago.
In Re Wave Capital Limited, French J granted relief to an applicant pursuant to s 1322(4), accepting the absence of substantial injustice and that the directors had moved promptly to seek advice and rectify the issue. However, his Honour concluded that the responsibility for the relevant non-compliance rested with the directors and the company secretary personally. His Honour made the following observations in this regard, explaining the particular relevance of the specific (but unkept) promise in the relevant prospectus:[57]
[32]I am of the opinion however that this is a case in which responsibility for the error rests with the directors and/or the company secretary personally. Clause 2.12 of the Prospectus specifically promises that the relevant application for quotation would be made within the statutory time period. It is surprising that the company secretary overlooked the requirement and that members of the board, including a partner of the company's solicitors, which have acted for the company in bringing this application, had no mechanism for checking that statutory requirements were being complied with. In the circumstances it would be unfair and inappropriate for the newly raised capital of the company to be expended on this application to the detriment, however minor, of the new shareholders. In the circumstances I propose to make an ancillary order that the costs of bringing this application not be paid out of company funds. I will, however, allow the applicant seven days within which to make an application by way of written submission to vary the last mentioned order if it wishes to do so.
[57] Re Wave Capital Limited [32] (French J).
So, although the application for relief in that case was successful, his Honour made an ancillary order that the costs of bringing the application not be paid out of company funds. Contemporary academic commentary on the decision described this as a 'sting in the tail'.[58]
[58] A Adams and A Hargovan, 'Taking corporate governance seriously during fundraising: Exposure to personal liability for cost orders' (2004) C&SLJ 336.
Fifth, it is therefore necessary in applications such as the present, before the costs discretion may be exercised in other than the usual manner, for there to be some unusual or distinctive feature of the case which justifies such a departure. In Re Wave Capital Limited, the failure by the directors to honour the specific promise in the relevant prospectus was a sufficiently distinctive aspect of the case which justified the order being made.
As to the distinctive features of the present matter, they are as follows:
(a)First, there are numerous instances in which contraventions of the Corporations Act have been demonstrated in the present case involving the plaintiff. There are two failures to lodge annual reports by the required time period and 13 instances of share issues being impacted as a result. Additionally, there were 11 separate occasions on which shares were issued in contravention of the legislative requirements of the Corporations Act, over a period of some four months
(b)Second, the plaintiff had previously sought curative orders from this Court pursuant to s 1322, relating to failures to comply with the fundraising disclosure requirements of the Corporations Act. Those orders were sought, and granted by Hill J, in April 2022.[59] As between 2022 and 2024, the composition of the Board was unchanged and the same person occupied the role of the chief financial officer and company secretary throughout.
(c)Third, the company secretary and chief financial officer of the plaintiff, who bore the responsibility for fundraising disclosure compliance within the plaintiff, was directly involved in subsequent contraventions in similar roles he held in another listed entity, being Nanoveu Ltd. Those contraventions occurred in January 2023 and June 2023, and were the subject of an application to Strk J for curative orders in March 2024, which her Honour granted.[60]
(d)Fourth, the affidavit evidence presented to the Court in support of the relief obtained in April 2022 explained that the plaintiff understood the need for corporate governance education and proposed the development of a protocol to accompany the issue of securities in the future.[61] That is a common refrain from many plaintiffs when seeking curative orders under s 1322. Such prophylactic measures are, to be frank, the bare minimum which ought be expected from a corporate governance perspective.
As matters transpired, in this particular case, it appears that the less than lofty ambition that a protocol would be prepared proved beyond the resources of the plaintiff, and no such protocol was ever prepared. It is also doubtful, given the course of events, that proper corporate governance education was undertaken.
It seems that only once faced with its second series of contraventions, and now appreciating the full implications of Mr van Uffelen's conduct at Nanoveu Ltd, has the plaintiff finally committed to the task of completing the necessary processes for the implementation of the protocols which were spoken of in 2022.
(e)Fifth, it is apparent that at least one of the directors of the plaintiff was aware that the company secretary and chief financial officer of Sprintex Limited had been responsible for contraventions of fundraising disclosure obligations at Nanoveu Ltd. Those contraventions had come to light by no later than 19 March 2024, which was the date of the hearing before Strk J.
(f)Sixth, at least ten of the contraventions which were the subject of the plaintiff's present Application to this Court occurred after 19 March 2024, and are closely similar in nature to the contraventions which occurred at Nanoveu Ltd, and similar in nature to the contraventions which occurred within the plaintiff itself in early 2022.
[59] Re Sprintex Ltd; Ex parte Sprintex Ltd (Hill J).
[60] Re Nanoveu Ltd; Ex parte Nanoveu Ltd (Strk J).
[61] Similarly, in the proceedings before Strk J, Nanoveu Ltd explained that it had adopted a protocol and checklist to address its disclosure requirements, and created registers to track certain matters concerning share issues. The Court does not know whether these protocols, checklists and registers were followed or maintained, but trusts that they were.
In the face of the foregoing, and despite a request to do so from the plaintiff's executive chairman, the company secretary and chief financial officer of the plaintiff refused to provide an affidavit explaining to the Court the full circumstances of the present contraventions, except on the condition that his outstanding fees (or part of them) be paid by the plaintiff. That request was refused by the plaintiff. I should record Mr Apedaile's sworn statement that the plaintiff disputes the fees allegedly outstanding to Mr van Uffelen.[62]
[62] Apedaile affidavit [24].
The refusal by the plaintiff to pay those disputed fees, as a condition attached to the provision of an affidavit, was understandable. That condition should not have been imposed. Given the broader circumstances, in which numerous instances of non-compliance have occurred across two listed companies, this Court would naturally expect that an officer in the position of this company secretary ought be prepared to provide appropriate assistance to ensure the Court is fully apprised of relevant information to consider the curative orders which are sought, whether or not his fees have been paid.[63] The two matters should not be elided. The broader interests of the company and its shareholders lean heavily in favour of officers of the company (including former officers) giving appropriate focus to their statutory and fiduciary duties, in my respectful view.
[63] In the proceedings before Hill J and Strk J, Mr van Uffelen swore an affidavit in support of the applications for curative orders sought by the plaintiff and by Nanoveu Ltd. At the time of the proceeding before Strk J, Mr van Uffelen had ceased to be employed by the applicant entity, but nonetheless swore an affidavit to explain the circumstances of the contraventions which had occurred whilst he was the company secretary.
Accordingly, it was regrettably necessary for the present application to be dealt with by the Court in the absence of any sworn explanation of the circumstances from the person who undoubtedly had responsibility for discharging the relevant obligations.
The features of the application referred to above at [119] above are more than sufficient to persuade me to depart from the usual approach, and to afford the relevant officers (former and current) of the plaintiff, including the former company secretary, Mr van Uffelen, the opportunity to be heard on the question of costs.
I appreciate that this step may require the directors, and Mr van Uffelen, to obtain separate legal representation.
I appreciate that additional costs may be incurred in this process.
Nonetheless, the circumstances of the case require that this process be followed, in my respectful view, particularly given the broader importance of regulatory compliance by public listed companies and the protection of the interests of shareholders in such companies.
K. Conclusion and orders
For the foregoing reasons, I made the orders sought in the Application. The specific orders made by the Court on 18 November 2024 are set out in Attachment C to these reasons (excluding the annexures which are referred to within those orders).
As to the costs of the proceeding, I will now order as follows:
1.The costs of the proceeding are not to be met by the funds of the plaintiff.
2.The following persons shall have liberty to apply on the question of costs, including liberty to vary or revoke order 1 above, such liberty to be exercised within 21 days of the date of these orders:
(a)Mr Steven James Apedaile;
(b)Mr Jude Benedict Upton;
(c)Mr Li Chen; and
(d)Mr Michael Scott van Uffelen.
3.Within 7 days of these orders, the plaintiff is directed by the Court to serve a copy of these orders and the Court's decision dated 21 January 2025 on each of the persons identified in order 2 above.
ATTACHMENT A
Shares issued between 1 February 2024 and 10 July 2024
| Column A | Column B | Column C | Column D |
| Issue No. | Number of shares issued | Date of issue | Date of Cleansing Notice |
| 1 | 5,500,000 | 10/07/2024 | 10/07/2024 |
| 2 | 8,500,000 | 5/07/2024 | 5/07/2024 |
| 3 | 4,500,000 | 25/06/2024 | 26/06/2024 |
| 4 | 32,640,000 | 17/06/2024 | 17/06/2024 |
| 5 | 10,850,000 | 22/04/2024 | 22/04/2024 |
| 6 | 2,485,089 | 18/04/2024 | 18/04/2024 |
| 7 | 4,568,891 | 11/04/2024 | 12/04/2024 |
| 8 | 6,269,592 | 4/04/2024 | 4/04/2024 |
| 9 | 2,448,980 | 28/03/2024 | 28/03/2024 |
| 10 | 2,372,130 | 20/03/2024 | 21/03/2024 |
| 11 | 4,961,538 | 14/03/2024 | 14/03/2024 |
| 12 | 911,079 | 11/03/2024 | 12/03/2024 |
| 13 | 45,355,191 | 1/02/2024 | 5/02/2024 |
| Column A | Column B | Column C |
| Issue No. | Number of shares issued | Date of issue |
| 14 | 8,066,170 | 22/12/2023 |
| 15 | 28,251,599 | 7/12/2023 |
| 16 | 13,948,498 | 29/11/2023 |
| 17 | 13,658,232 | 22/11/2023 |
| 18 | 8,981,300 | 15/11/2023 |
| 19 | 2,358,490 | 8/11/2023 |
| 20 | 4,158,321 | 25/10/2023 |
| 21 | 10,033,288[64] | 5/10/2023 |
| 22 | 4,246,028 | 21/09/2023 |
| 23 | 22,222,222 | 12/09/2023 |
| 24 | 6,149,046 | 8/09/2023 |
[64] As corrected by counsel during the hearing: ts 2.
ATTACHMENT B
Shares issued between 8 September 2023 and 22 December 2023
ATTACHMENT C
Orders made on 18 November 2024
ATTACHMENT D
Visual Chronology of Contraventions and Hearings
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LM
Associate to the Honourable Justice Lundberg
21 JANUARY 2025
3
26
1